CRY - Earnings call transcript Q3 2018

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Operator

Greetings, and welcome to the CryoLife Third Quarter 2018 Financial Conference Call. At this time all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Relations. Investor Lewis, Lynn madam. ahead, go Please

Lynn Lewis

Thank you. Gilmartin today. Lewis the is morning. Thank you This Group. call Lynn for from Good joining the

Joining team Ashley me management MacKin, from and CEO; are Lee, Pat CFO. CryoLife

and with the to Act statements future. risks I’d look like Reform results within forward actual beliefs, call forward-looking of the the management’s company’s XXXX. to risks, are expectations materially assumptions The requirements Before we differ and Comments Act a Private to estimates hopes, are forward-looking Securities the Litigation made These statements of include to harbor Reform begin, those that safe forward-looking Securities that statements involve uncertainties intentions, may XXXX. to the forward-looking the following made statements. as and of subject the cause in make meaning or from statements statements of time comply of predictions Private this of on number or uncertainties, Litigation

Additional to contained from MacKin. and information night. I’ll the is SEC time issued the in press that forward-looking to filings over Pat was now uncertainties impact company’s these that, release concerning call last that in time CryoLife statements the may CEO, With certain and turn risks

Pat MacKin

Thanks, the everyone, Lynn, and and good joining call. morning, thanks for

behind to share performance portfolio attributed and our and As our call, revenue will Later R&D the be on positive JOTEC our from lines. impact I market exciting direct now, realignment quarter, had CryoLife from gains drivers sales the strength know On-X programs. can the led the you and force. you clinical of and and global by all update by technologically-advanced a discuss very in record our differentiated Overall third product our strong product

I the Before largely good is in on I and foreseeable that envision where as drive into based X on position the and where in due continued lines’ the we acquired both thoughts product fact solid my results we potential. currently allowed My on made our and we the we leadership companies, the are quarter, them very performance than quickly integrate has things believe growth the capitalize both to I belief to of well the we third future. think the significant with for wanted time share efforts stand you anticipated of quickly acquisitions us X are we’ve jump how to JOTEC, at to years, or performing team past better to smoothly which On-X future.

it as on pipeline. our our With portfolio our now integrations growth largely product as opportunities to about in us, is ability all execute R&D by behind the the well significant existing presented

out products, on as strong product management strong has We marketing offer with potential We already and the and These increase new key path to will differentiated on our growth given products. steady a clinical anticipated current stream entering of introductions. in and is well billion. continue by will a our existing these capitalize in markets and market portfolio billion about product large by opportunities of products $X our to additions enhance next-generation rolling clear addressable that sales its executing experienced positioned investors $X company new as initiatives, trials team our well a and organization growth

quarter. some So our with the of over that, let’s go highlights of

our major was basis. non-GAAP up constant $XX.X top product quarter XX% a lines. strong Revenue on million, performance across line third Our was of all currency

XX%. revenue a and from the distributors, of lines JOTEC organic Even and from On-X the respectively, prior up growth, impact considering buybacks revenue on basis. product increased still non-GAAP impact year’s hurricanes XX%, Our revenue produced our strong again and XX% inventory

million to from year and our XXXX revenue $XXX.X a quarter, of to fourth we million. range million expectations are solid expectations performance our $XXX our date $XXX a a $XXX.X for Given to raising million this previous of of to range

supported compelling products focused me to CryoLife an transform heard sales believe of on an experienced build strategy have could by if company direct clinical by to end-to-end differentiated growth, into a backed technologically-advanced data aortic and been say, team to and revenue we and would you and and it portfolio that We it well-trained disease. deliver has strategy, that treating we do of We on professionals. have has. deliver so, As needed our understood that

our of Our solid result the to confirm continue strategy. validity

year, market are we One this short of a the results time. on in that X JOTEC outpacing already relatively believe market. the months are Based On-X of first gain our on goals the we delivering share for is period from as the I to of of and goal growth

not due in direct accelerating of to quickly are offerings. growth to sales our teams’ only a ability products migration sales also key to new our to markets We but into portfolio integrate our approach

Just to high the was of completed after we the sales in mid- acquisition digits. single in On-X XXXX, growth of January On-X

strong exceeded XX% the XX%, is the that drive the our has periods over ample the professionals past XX% to us opportunity with years well-trained has market will few we in share. product since Notably, market approximately the U.S. growth growth in increased and PROACT three for still sales believe data On-X future providing increased of that corresponding trial year. which Over the and quarters, only share, last continue and of On-X sales team prior from abilities U.S. in our the clinical We line. On-X, the acquired experienced direct

core quarterly XXXX. our X update initiatives for the to we Turning set for progress

I guidance. The X strong our already And for XXXX business explained, momentum are our achieve we given to first of that year-to-date. XXXX our initiatives is guidance, full updating as year financial

our double-digit in complete for to share team selling gain. which low the growth We line of believe grafts experienced meaningful market. JOTEC of the implying XXXX, revenue and the In broadest the competes non-GAAP third by revenue sales JOTEC growing of the the best driven stent branched XX%, in recorded JOTEC is international the growth product this initiative key direct single in JOTEC non-GAAP quarter portfolio We the the our of second that is which and integration combined in effect estimate on -- Our portfolio XXXX. of JOTEC deliver is digits. portfolio market

the our team our expect a direct in sales model knowledge sales We experience to selling continue to countries as sales converted and in portfolio. we gain JOTEC momentum recently that the portfolio

call, As on plan launch we in to quarter’s mentioned in JOTEC regions products the European during last to we earnings these are -- XXXX. X X launch next-generation

to momentum growth Our respectively. In the revenue On-X prior XXXX, revenue revenue the ending the into the year-over-year, is third grew year. third quarter XX% the still consideration X compared Africa American account On-X Taking the XX% in Middle year’s our In in after and September similarly the business distributor increased buybacks, North of the for XX% quarter, quarter East, XX, XX% and year’s double-digit to On-X to distributor’s In Europe, to months grew XXXX. taking prior On-X third growth XXXX, quarter, in prior into compared key our XX% deliver initiative continue of revenue posted while third year. year-over-year revenue prior third buybacks.

X.X continues strong only and providers allows after tremendous PROACT is be X competitive educate remain gives trial. the We starting to the FDA surgeons results mechanical and patients that label managed world solid expect us at the the indication clinical months surgery that X.X, On-X revenues as our carries advantage. their On-X clinical to from on level an health in care sales valve to an this will force of INR

initiative is pipeline. Our expand key through current market our in fourth in addressable investment XXXX to total our R&D

continues. next and Enrollment we year. in our China, We’ve up the in for PerClot to of clinical to enrollment trial in our the a pipeline. Based remain in completed enrollment for BioGlue track setting in of us current for our study we status, Regarding U.S. first complete potential submission the a quarter the PMA in on study regulatory XXXX, FDA the QX on in this by XXXX. end expect submission

trial. XXA PROACT the Regarding

have with of in submitting FDA in be patients the all trial. well, the we half to that our the IDE study We could first in goes enrolling next that discussions year. process If of and in begin been are

East they as previously to X And become on we remain available. Middle We as JOTEC Africa XXXX. more next-generation will Europe, and mentioned, provide launch into products details track in

accomplished, key legacy and to Poland. CryoLife direct which our channels already Italy Spain, initiative complete in our from to channels the for sales XXXX, transition Finally, we have fifth was

have the turning call Ashley, hired two Latin Pacific. Before we sales over recently to new America leaders, like one for that to I for announce would Asia one and

their significant in team. have Given experience excited we these very on are to employees those our markets,

of from the contributions regions Ashley. both result that, a with new over as now We turn I leadership. see will to And their expect call improved to

Ashley Lee

basis to processing revenues and a an on and third increased basis. direct of largest the revenues they $XX.X increased quarter million QX financial of currency orders would increased quarter, third Recall third products, Latin a negatively by that our results Thanks, now Asia as from non-GAAP basis reduced increase XX% to market revenues. $XXX,XXX million, year. million our year. XX% a the the compared hurricanes to of in XX% go were the East approximately a Brazil, increase our quarter an Revenues and when XX% third to total distributor. on Pat. increased driven to the Total million, review increase also revenues was from quarter in in year. our American outlook. for a due an tissue constant in prior a Revenues resulting a affected XXXX third excluding a of year-over-year. our revenues from non-GAAP $XX.X revenues, and On-X year-over-year compared in non-GAAP On and revenue increase basis, X% XX% the quarter, reversals to increase XXXX decrease geographical decision region were terminations. an North XX% by of impact for The revenues in were On-X the were European, $X.X QX increase and third a which these CryoLife factors, region million the $XX.X distributor of have related the adversely After this I’ll to affected due XX% basis, and Africa increase compared XX% company America, BioGlue prior increase Pacific BioGlue by the of On Middle is XX% but America and Revenues on legacy well $X.X of that still to impacts Latin quarter compared of XXX% to was as in X% our with for prior XXXX.

the impact revenues On-X of overall quarter Asia due lines. Despite XXX% Brazil, year-over-year ordering quarter $XX previously the million. Looking for non-GAAP and BioGlue third increase year-over-year Pacific Middle increase and Europe, increase revenues ‘XX from up X% elected sales surgeons the revenues BioGlue cross-selling the opportunity increased increased than X% third year-over-year America, to decreased buybacks. at resulting an decreased were potential discussed, American million Europe, direct prospects Africa JOTEC our Europe, legacy in for distributor have third and to our China. third vascular and XX% the over compared in direct increased competitive CryoLife to year-over-year. and Total and effects X% excluding BioGlue processing of products. revenues third into million. JOTEC up compared direct On for activities, and basis, East select quarter for account in quarter the Taking patterns. BioGlue into and XX individual increase the the were currency OUS direct in East our XX% revenues On-X for were revenues on third XX% of ordering account who from America, where revenues X% patterns quarter Middle tissue buybacks $XX.X hurricane JOTEC quarter and Middle X% were from million, revenues third markets, the On-X hurricanes in quarter on sales destocking of grew we’ve with to quarter XX% in BioGlue XX%. positive approval to constant of on third call JOTEC in of third after reps revenues the On-X quarter that an distributor $XX.X XXXX. Latin XX% taking the in the XXXX. On-X quarter of to revenues distributor OUS XXXX, Non-GAAP and third XXXX. North of over QX, Pacific an in the were of million. third our distributor primarily and with the the in product to XX% strategy the quarter. a X% go $X.X in ongoing regulatory QX revenues XXXX. based distributor XX% decreased Asia to We BioGlue remain $XX.X year-over-year in in grew million, North go revenues XXXX. an Latin up quarter of XXXX were were third East compared On-X year-over-year Africa we American the less markets Africa sales $X.X of decreased XX% the

During into processing and the hurricanes XXXX. tissue account cardiac revenues third from taking quarter, increased vascular and in respectively, revenues and XX% and year-over-year, after XX%, impact respectively, X% the XX%

relates for gross quarter overall a which the the XX%. Our were to related $XX,XXX expenses Those stocks include of distributor the markets. our Gross distributor primarily a and JOTEC development-related business third JOTEC in expenses step-up European million related for $XX.X in was and quarter tenders key other SG&A acquired buyouts which implementation; integration quarter charge margin related go-direct strategy around for $X.X in amounts related margins included third charges ongoing the cost severance third to basis in to integration, inventory. expenses. of to acquisition; includes JOTEC during the to and million,

of losses Our million the charges tax the related certain rate approximately with includes on our settlement noncash of third a a unrealized quarter Other tax currency shareholders of former assets. $X.X income XX%, and offset $X.X to the foreign On-X, dispute to close of XXXX of estimated million partially write-off to the related was fixed of statutory by rate. gain for

income XXXX results. our $X.X line, million press bottom diluted including refer release net non-GAAP the net $X.X $X.XX of million reconciliation our of our GAAP quarter we GAAP $X.XX in to the or about results, per Please for per of and or these share. fully reported third On results information additional to share a income non-GAAP of

outstanding senior our October LIBOR we plus LIBOR credit current securities. over facility. $XX successful that XXXX, and October B. our the the and XXX will restricted years. our from completed had We just Xx, had million million term loan XXX, of save that process, in just approximately us of I’m annually our And X which repricing under we leverage we stood interest net on approximately As a approximately documents, $X.X $XXX secured to basis to effectively announced on next On million had under were Xx. launched our equivalents in credit $XX over loan report cash gross plus and leverage pleased we million based XX, was at our XXth, we that lowering and points cash,

it that are be over implies back $XX.X changes release we issued and we earlier, between said anticipate guidance turn concludes and full to the my to press Pat we growing previous that model, This night. our XXXX $XXX our Pat. from million now range of comments. $XXX.X quarter result million our a million XXXX for revenue million increasing As to $XX.X a as of of fourth last the million. confidence revenues of our year Other I’ll are year-to-date guidance $XXX.X in million. to range That our performance the business $XXX summarized to in to

Pat MacKin

Thanks, Ashley.

heard you’ve were Throughout momentum this reflecting for the products third On-X as sales and processing product target CryoLife exceptional results this in as our on legacy and quarter results strategy and JOTEC strong. we’ve So great our tissue lines had also and is sales had have working. year, morning, our

detail, our the thoracoabdominal offer the and E-nya, going to stent continue, In outstanding in them to performers sales next-generation over work. ever off-the-shelf next-generation are launching Without expect and have and our X Europe, our next-generation JOTEC I our E-vita device we role next engineers and pipeline play going We The patients. we called standup products, they called momentum XXXX, to region growth Middle our expect be product advantage first branch graft these important Africa we’ll an years. and called an East, into in thoracic our commend be Elephant our Frozen given the products clinical believe these on designing job Open E-nside Neo. their done surgeons their

for for regulatory approval also the ‘XX. in in FDA in be for approval by QX will for XXXX quarter We China submission followed PerClot submitting first BioGlue the of

We hit trial also a the where PROACT half if XXXX. the game-changer to hope believe of to for its this endpoints, CryoLife. We enrolling XXA XXA in be would first that begin PROACT

in JOTEC further On-X on already So attention integrated, our closing, focusing market are and The both now with results are we execution. apparent.

our Our PROACT acquainted us we our in able for If sales Without in ever with European company. growth China, additional able and PerClot force as make on without alone. pipeline to move an we to market U.S, now well product selling will enhance execute we and products -- $X from share a profile making XXA, the of launches, launches forward. is these billion additional these current anticipate the taking plan significantly market our additional are still will adjustable increase our larger acquisition, making by significantly even products be BioGlue

Our on whom will experienced leadership in many future. much growth the our organizations, significantly highly our ability have larger execute exciting enhance worked to in team, of opportunities

Given what ahead. for line that optimistic days I’ve that, move let’s we please your detailed for with are our are you the best calls. calls. to Operator, And open take today,

Operator

Jason first is The Genuity. Mills, Instructions] [Operator Canaccord from question

Jason Mills

for to a my of and ask to And Q&A, second wanted I So a of questions. then wanted Pat, couple -- of kind part from market-related XX,XXX-foot product question you. I ask

all more You on far. has granular the so JOTEC outperformed you bit product-related products. as us expectations mentioned sense a Could to First, give things. why? pretty side, couple much a of

with years. of closer couple market United that back we’re perhaps kinds for product forward. now familiar possesses that, a PerClot, those But opportunity if that on have then competition. exists the for and us additions we’ve my competitive it’s launched I’m driving there, what you’ve the you folks landscape seeing into And maybe and think, because of growth come the going to a the are it about and around sort different market, and talked I relative JOTEC the wondering of a PerClot you anything that’s mentioned give the that getting You And believe to world. to XX,XXX-foot else management I’ll characteristics PerClot markets visibility in States then accumulated rates that sense the for there’s direct ask question.

Pat MacKin

Yes. No, sounds good.

I I we are the CEO So Africa. mean, became -- these it’s factors things, been the that better think I was multiple performance, like East many I of expected. I Head our agree, that Middle think, region. has play mean, JOTEC prior there of are upgrade of there. significant one, in at a Europe, a JOTEC that Number and And talent from than

cardiac we’ve Number So excellent I we in CryoLife two, primarily was sales. about one, Europe, surgery-focused got about leadership cross-selling, company. times talked we -- JOTEC region of which primarily most where multiple a think JOTEC just, over surgery-focused company, a number have the is and vascular as

channels So, strong now vascular we Obviously, have the in strong very side. two JOTEC on CryoLife cardiac on was the side. Europe. very is

seeing one have now device handful. a cardiac which JOTEC in is because significant Frozen in feet we Trunk growth surgery-focused we’re XX increase So where a only previously Elephant our had device, a is the thing street, on

I is innovation. the think our second piece

the in Our competition, superior technology the branch is segment. to particularly

high or branch all over thoracoabdominal branch segment, -- our are So our over segment XXs that. in or significantly growing iliac the

when differentiated buying you’re even thoracoabdominal is doubling right announced And company, branched X most and we’re told company. people and AAA in in the way we’ve you’ll stronger AAA we’re a branched acquired is fact, -- was, one a that And when where a company." "Oh, things Oh we recall, space, And technology behind this X than iliac. acquisition AAA goodness, company. it’s So abdominal, segments response either their our we this coming of people it. initial in the fact, a or down portfolio more because got and cutting-edge in the I

and rates to going that about So products, launch proprietary to XX% continue we’re growth. we’re already and accelerate growth next-generation seeing XX%, XX%, to in products, these we’re

current it’s So And with pipeline. products. it’s the up it leadership. cross-selling. we’re to back multi-factorial. It’s And Its a going

today. a star JOTEC So to it forward going performer is as think be going has we been

not said, PerClot, as kind a think the of aortic here. technology of been got pretty That transparent important perfectly kind of with investor the I’ve is asset in far a it’s As I that this being It’s I that to was legacy strategy. very here our community the crosshairs before company.

surgery; of FDA to months. in the year end for on approval comments, is nephrectomies. trial and is -- primary an go the market then can We’ll Clearly, liver as in up of mentioned going becomes so submit be and my -- side, the to the product over leading clinical trial: best general CryoLife the surgery, and cardiac immediately. the that’s revenue arms finish we’re can next As mostly the to at three will we’re tell, enrollment are we going mostly we’re this and surgery, a very I cardiac accelerate once is That’s options are into going an which our this neurology data, a once package surgeons; couple vascular strong that The million that that There up available. $XXX what in exploring refresher. get best trial to to of we we how approval QX.

and going as we those currently will market opportunity unfolding investors on process that probably we conducting We’re the into update some see of year. three in research segments, next

Jason Mills

what doing attention. But really think you’re going. you’re that where are generally investors to Okay. closer. the not year there questions you have in forward CryoLife we you’ve and enough look not has over last that and about still and completely XX,XXX-foot been The to as get That’s stock are you more CryoLife. attention lot paid clued and paying as about fairly are asking of well We me really get or a folks to question. I that X to more it helpful. more the speaking, seems executed, Obviously,

in execution, used So margin to not in growth revenue know and about, early you internal obviously future. and CryoLife do over attention might But operating now, see that talk development gone see operating it’s but only something with to gets some a Could story plan spite being line, which what not of sort but you’re story business the top the to on on now companies past seeing your the for only medical one four, product this itself, its margins, into of and is XX%, that drive the I the significant Vascular their things improving that space, sort leverage that that the about acquisitions little executed years. profitable margin several ramp is of a last a more have competing well five single-digit companies that and -- you done you have and operating I that and and with just at with them how know of and XX%, much care fit from expansion you’re a likes I generated of and bit the range to game which but you’re the also talk Medtronic mid-XXs, years in side. you business having familiar the that the again Vascular, I having over highest, in has with know even Solutions. shareholder competed value

a it triple over seems like margins years. wanted commentary see double you maybe next several about me I that. to to the So where playbook get your or similar operating here just could

Pat MacKin

Yes.

we’re great, mean, accelerated, addition a XX%, time, growth On-X for and mid-single the and if products are great the the performing long tissue, look well, is quarter, heard with On-X XX%. five And growing JOTEC picture, and I CryoLife they’ve Jason, year-to-date Glue So I at rate we our year in going been X% that and start a our doubled But you company, to growing growth CryoLife growing we’re And is and X%, as plans those and and of nice growing now taken products kind big in of the the really have XX% from I rate, I JOTEC. of year-to-date. is what’s has forward. think had year-to-date On-X out acquisitions digits. but JOTEC, of the in view so on of

So we’re double digit growing.

acquisitions And have that pipeline. and have go as understood. Now don’t phenomenal point, a you your clearly through of that we at I that point, risk company. CryoLife those this is been think us behind run phases is integrated a well you And the pipeline to

because amazing have are just the that global. and It’s We it’s of markets in pipeline. already. powerful, those an lot risky approved a expansion the very not It’s products of going really

start of be, P&L, this the through as really grower communicated, portfolio. think can is current high think I work your over we if to the we question, the I we’ve a So single-digit

basis of As the pipeline over to we X a on the reps. the think leverage point margin looking up push bring -- get we’re more middle our to statement in income year. we we then that, we’re that’ll execute it, with our that new with And add looking don’t over products as call the to of channels, Simultaneously we double-digit us really five years, into range. next XXX points gross improvement the, need

middle think income if that the take up over So our we XX%. of we you leverage can margins statement, operating part

you a fruition operating comes year take current year per middle double-digit the So margins, going mean the gross statement, finish mid-XXs. it And as if the probably gets to those adding at to XX% getting the you kind are three gets from of margin. our margins up of are your our a into above trying get And pipeline you gross I the XX%, from non-GAAP, of point metrics. then to income to kind leverage XX%. that the work in growth,

Operator

Capital. Please question next ahead Street Brooks is Lake sir. O’Neil, go The from

Frank Takkinen

Brooks. on Takkinen for Frank is This

you your forward, most looking your and let’s get thing would X XXA, say, guys to one then over total first information at addressable a to going more increasing about China, U.S.A. opportunities PROACT the optimistic about next X PerClot little which So those the of is I’m BioGlue the years? market. say And you’re looking

Pat MacKin

I’m mean X optimistic I all them. So about of

I mean. Difficulty] right, I think [Technical they’re

in pretty the U.S. So good-sized PerClot is market. a

that be There space. believe much it’s over surgery into in market hasn’t is actually in more been never area. could we data -- pushed $XXX cardiac that really million and that So because been

about confident coming numbers finish BioGlue don’t is like feel So procedures a like is and that. -- market there’s of that is China. a to we and the lot known trial and great Europe. the -- know little U.S. data or that of -- less enrollment, not bit We about pretty place and a we in because China do out

kind to number some presented meeting. China. but a of a of just at clinical huge top published in market of trial, there, and So the XXX-plus we’re very it’s We research patients having be a significant procedures done significant. aortic society a guess. are We’ve There randomized surgeon ran major will Chinese done. trial with Those really results

I think change aortic forward. So going that’s going China in dissections to

So approval there very the very in of take think China, the opportunity I’m there. how long cycles challenge great -- for the other PROACT massive take exciting. I’ve China the experience years, lot is I get to have approved a and X got it’ll and at don’t to just And piece, is XXA a not in company. X predicting The great I

On-X it’s they the -- they’re one patients of a longer it’s patients of had diabetic. it the mechanical on take NOACs They cell to -- I think I to a of no Coumadin. an with requirements an amazing none amazing a could a almost thing valve like for mean if would have be white go. -- take -- could

check the get PROACT patients And anymore. office. on really in to go and get to go to to fingers positive, could have checked tethered You and your have NOAC the your week trial the doctor’s XXA are and office. that with not being Those blood -- every they do cardiology’s pricked your

the the think I we and it to significant So because and further that to away then get we a prove out conduct we’re what mean approved. get trial prove does setting have that’s that’s follow-up and opportunity.

So talked about. the away the about biggest X of one the Europe one furthest in year. just X didn’t was is opportunity. talk we probably the we’re that It’s next The you launching products

market. arch. We the behind market product next-generation Trunk, of pioneered very a The which have have Elephant is the from little that in standpoint. leader -- without quickly. is a fell going kind next-generation Frozen We used be to bit we We a technology aortic

market. with the absolute got also then next-generation And That will those an thoracic the used We’re graft, is launching which thoracoabdominal ever off-the-shelf branched products. we’ve in be device. first a game-changer stent

getting have we regulatory being are in approval trial for submitted X approved -- their or and starting the that XXA. big a next PROACT year, products So either final

kind So here in our XXXX. of pipeline take to of is hold in sink starting or kind

Frank Takkinen

one have or average Could JOTEC. price whether on a the selling give On-X a an and volume-based is coming of us little in possibly if it’s both? more you increase just from bit I question color or around growth

Pat MacKin

both are our mean unit-driven product of I this fairly is increase. I a on lines. kind mean prices stable a

else’s. and a a to or fluctuate somebody over So it’s value share been and a ours we picking are But there. people using here point question. it’s price our share, unit may not take point really It’s price just that’s -- take -- I are mean a the if technology

Operator

The is Thalmann. Jeffrey next Ladenburg question from Cohen,

Jeffrey Cohen

readout Nice for the quarter.

QX margins, we Just bit margins little business a to about should you talk tissue like looks maybe very about as term the talk it And to a little more Could questions touch about and few It currently? strong. longer well. upon. margins remain continues a think how bit

Pat MacKin

Yes.

be a spent remember are we the bit on about hit we and our mean ago, time was were a comp, said So Texas, I transparent hurricane little highlighted Ashley we heart both little and was centers. lot last year -- easy million. of -- and year We as that we’d an would bit tissue these and I And major trying -- was -- a $X figured -- to which that. Florida hurricanes in tissue very had about -- had tissue a say commented comments, I

QX, growing we’re tissue -- out, if you X%. XX%. Year-to-date, the grew reported, So was hurricanes X%. as it But take grew in

hurricanes in doing even when the better for actually you little been QX than we have year. out take the we’re a interesting. So It’s

told Our the business quarter, much and vascular the tissue what of hurricanes after QX take It’s X% in pretty X% we’re you people. year-to-date. grew out we

kids combination cardiac difference young three than our of We’re there’s difference, say nobody in way XX-point things. we’ve because been vascular a and couple xenograft quarter, year-to-date. somebody else, for the a hurricanes, we’re a performer. of reoperation a in else’s going that’s grow proprietary valve, XX% out the say I’d data everybody at in mid-single versus use of pulmonary got things. else valve. One, better on to Cardiac growing we digit has XX% on when which digit decade you rates got our procurement, has take you double particularly valve a tissue. grew I’d probably a After

those the our second our done has organizations, sales because tissues is technology. that thing of that communicating procurement steering group The force extremely excellent job of disproportionately has communicating effective in procurement us been and to they’re difference in the last, message message. And an to our

cardiac, So X%, grow it’s we basically XX% could vascular. Year-to-date, tissue felt digits. X% mid-single we grown

So we’re results. very those happy with

standpoint, the ask margin we Ashley On answer that and -- in jump have one. will that

Ashley Lee

Yes.

in gross and XXX, gross and during just the all points available that, range And and revenue think there by in on low that that, quarter. is XXX XX% vascular. business based information They here basis level Our sustainable were between to low are going may the on think margins or tissue mix cardiac range we the But large, margins that us, XX% depending third fluctuate the sustainable. forward. we in the processing

Pat MacKin

-- you also or just did were margins want gross And you overall Jeff, tissue?

Jeffrey Cohen

Yes. commentary that helpful finish margins and bit you little XXXX overall, forward. a look side. how of No, on that’s And how gross maybe tissue might on the

Ashley Lee

accounting in to bit I’ll previous back Obviously, in Yes. that first the purchase related margins to year, go a comments of JOTEC we conference were little the by muted made this some inventory. gross reported call. half the our the

And of we’re But conference accounting purchase So our look call, back our that. XX%, through. to in going gross we’re all roughly, gross the margins year-to-date, the and fourth like XX% we run second at between to kind year and margins our the that’s expected half that if expecting comment previous we in around quarter. a now made XX.X% be of you what that something has for of

Jeffrey Cohen

you XXXX? Okay. that when carries through expect into early And would

Ashley Lee

or year-end in February. anticipating we comment and we’re conference this any usually at our We on doing XXXX out that made Well, regularly give our in call, point. on guidance haven’t

Jeffrey Cohen

Or Okay, okay. Got timing it. on X they all as look and And the cadence European of launches launched out list of get JOTEC as kind it is far later, early for on of XXXX, more time? products, or same a... any they how that indication

Pat MacKin

-- specific of tell of road don’t I because give competitors not we’re get kind launch you expecting X that going staggered the -- will is our late to a I’m X in and really I want half year. them There’s the one map, first there to of to but in the

Jeffrey Cohen

That’s Okay. One Perfect. helpful. more.

comment expenses, bit settlement, The looking nothing some development settled further? also that should could concluded? in -- Ashley, these two particular. of the integration And expect of business about a has kind we little well, what is should forward it you we And On-X expect? follow-on so

Ashley Lee

Yes.

regards the from On-X in nothing right In IT settlement, made expect the it remarks, just is to it. So prepared is working stocks and that has on, finance forward going integration the the expenses, that else and related development business is and settled, the comments that I component to primary it that. a we and implementation, in thing going we’re regards on both now to back to to an

to integration that, big the of primarily we year end the expect to to have in until completed fourth It’s stream, of We the related are work completed. year. ongoing and quarter this efforts almost and or exclusively that be the a that get

Pat MacKin

be integration going side. kind into ‘XX should think We the Yes. clean of on

Jeffrey Cohen

it. M&A then this guess got on question I Pat. front, I And Okay. an finally,

and far So about to it M&A thinking it does how seems and launches things like you’re relatively of come and and submittals. products stuffed up nonorganically? other market projects and inflation trials as not you’re correlate How as

Pat MacKin

Yes.

that thing a I PerClot as of It’s I investors JOTEC China, mentioned, some BioGlue is nice things CryoLife great and think the acquisitions the came R&D and with pipeline. pipelines is the very doing already of with the have that So On-X for balanced. and that and like we

that hits We every have stuff year.

short. have We

We have middle.

It’s we’re we fits need don’t deals. margin competitive going fits will growth That a that. something an to profile, we execution that phenomenal and our be that. advantage, pipeline, long. we��ve said, really opportunistic. we our our has strategy, and execute again, story, being do shown if against This strategy, think overall any have that I our to is do see We fits If we profile, can

us if need the do see likely big thing of in going to a On-X I it. tuck-in would current from would I But It more under an to investor we’re -- product don’t see the just it. to a again, is infrastructure. a do we’re a going think for tuck we not to frankly to big don’t great do need think more think we deal because don’t you’re that we be anything. or I JOTEC-type you’re

Operator

Northland Kalia, Next Securities. question Suraj is from

Suraj Kalia

A bunch questions. of

understand, U.S. a the I last Pat, how help denominator partly, X maybe determine XX% how get overall On-X’s clarity. trying number some handle I can I’m believe brought it was are next and you Pat, the going me of the And do at perspective? se. the in you for them, indication creep share, first the We is seeing if the Are some market? you you see part PARTNER up per that a be III your from quarter looking So as terms been -- readout of let you And what to in do March. us have in intertwine perspective? Are The second us give specifically also. a centers can has ground some reason And on on dollar’s from year? also? the is looking factor you that guys unit’s TAVR Pat, cases you all question, know the enter to in

the telling perspective, shaping So on see and going I’m do What from know age curious, you what how to you a combat centers the low-risk all characteristics, low that, we hand-to-hand up? are patient are don’t be. risk? that baseline

Pat MacKin

Yes.

valves and that’s the so in, calculate number then this and unit-based market I mean they that and subscribe put we one are States, So easy. aortic the the share, -- share it. kind collected to groups, of is they first the data report market is the mechanical it’s a outside in by independent report. third-party pretty of And United just

quarter-to-quarter. else’s You we -- a buy you of unit-based, share. have the it’s valve it mechanical that and we your market. the a and share not a report, share is everybody It’s tells of And discrete report -- don’t again, kind so

updated will couple we a so get it get we year, times of a think time next I it it. be

So clearly, XX% we exiting kind XXXX. of had share

our rate increase to share market, expect with get think we in growth a is As the flat what update further. we next we even our

one in question, you clinical what’s get a talked -- of TAVR far patient I’ve do age the a TAVR trials what this think I you As I is the mean about current lot, this. a and market, the as today? average in the to lot

Suraj Kalia

XX, Probably XX?

Pat MacKin

the and patient of age it’s mechanical like average No, valve XX, XX. a more is

the done touch to other. INR, of that do that we show. two PARTNER So research lower reduced valve a the with populations these XX%. is major don’t III mechanical kind don’t I on what valve complication But going we’ve are of even I what each that On-X the market is patient know know a by

On-X So valve there now are patients mechanical valve. over an that for are a tissue opting actually

decision. operation were And In fact, they patients and they a were who mine a of couple friends with bicuspid one lifelong who had a aneurysms opted and actually had to talked valve, aortic aortic I’ve the of solution. struggling a and for

XXA, deal year, below aortic works, it’s I can’t between long if first a against you life think be will patients works, for XXA TAVR start one PROACT in away a multiple I XX. and average I TAVRs competing again, that the predict I to going valve that instead age is the So with just trial XX for can won’t if patient Because having we going year-olds. PARTNER next rest should what in think think follow get your with PROACT operation XX, half I and under of of say. for be And trial reoperations? and I why XX III way that is of if is to think the mechanical All you up tell to you

Suraj Kalia

I last on again, the times. specifically you’ve PARTNER to guess was in age III the referring requirements. I because Edwards potentially And highlighted lowered PROACT age on XXA, opportunity PROACT. of part disagreement no know you to And terms many their

blank events the We reduction memory in after potential Eliquis are for at me. My drawing a what to a what months. beside of I’m once this cusp the you trial. secondary fails thromboembolic were. secondary the are move X the kind starting of Remind endpoints me endpoints

Pat MacKin

Yes.

primary -- the still yes, endpoint finalizing the protocol the we’re with So FDA.

I trials in we that there’s stone, strokes agreement same pretty mean Coumadin the the amount non-inferiority the of or thromboembolic have on events is standard been got than from and I thromboembolic would this primary Eliquis So would bleeding as done -- that endpoint. know obviously, have of care? secondary Do secondary profile bleeding Coumadin. all better events. endpoint That’s Eliquis that but written -- isn’t endpoint think primary between good the the be a endpoint. The And much we a has

and there, -- would be -- the have those those in others the thromboembolic, the but the be primary may ones. secondary So bleeding. that’s would X are some big And we

Suraj Kalia

the And know are at you I giving finally, vis-à-vis FY what level and through kind hedges ‘XX slightly a landscape, And Ashley, on us see in how natural can me given remind you exposure the as your walk higher well, do are in of you But just for ‘XX? not P&L? FX FY least ‘XX. guidance FY

Ashley Lee

base Once European the acquisition, much larger we much base had larger and we Suraj, Yes. of a operations completed European expenses. of JOTEC

we’ve business, So much got but of if we larger a obviously, -- have expense base. you I much look at bigger book a mean,

So of we that’s kind primarily hedge between regards that in natural the first have and to the euro the exposure USD.

kind it’s lot and so we XXXX, of landscape and read things. advisers and into literature a consult banking lot with of a Going the current about of forth, like

handful going You where are of as go. mean can to rates are lots a get into to variables I different that a and of this. opinions there factor of ask handful people

environment Europe. both in rate U.S. the in have and the You

there. the headlines and going what’s happen regarding ongoing tariffs got You’ve to

got whether as be may the something there’s going to impact that or not how You’ve that ultimately landscape well. and there Brexit and happens

mitigate in -- going So to you as evaluating that here a any internally associated parts. play always dialogue to are forward. how our there risk going I advisers on and with we’ve constant we handle are view lots to remain with a this consensus strategies got can’t what of moving is keep tell it but out, to this

Operator

Joe First We Instructions] question a Munda, from have [Operator Analysis.

Joe Munda

So really X quick questions here.

on down really appreciate wanted talked guys gave wanted That you First comments, the past, you just I to tissue I little drill In preservation. and about us off, a bit. possibly touch to business, I some it. call market could about -- some is growing the their experiencing your you as give the competitors earnings talking that of was guess us I one well. of were know I on issues market. some dynamics? they the on sense

market? from are are you’re competition? an you alongside we and So growing market of share taking existing expansion the Or seeing the

Pat MacKin

-- the market, I a good -- on but standpoint. research a is actually unlike actually infrastructure On-X data there’s valve. about not the There share. talked good know because mechanical hard market it’s to good very strong -- it’s question, There’s from answer the tissue It’s just tissue

I think it’s at best. spotty

triangulate mean for just the the side. think I taking I say -- mean, I given, you would I we’re growth, procedure cardiac share that can on So clearly kind of overall

On the actually vascular side, growing business I X%. that we’re think

think we’re taking leaders. I we’re probably market the share some there, but

would valves. it’s again, pretty So been that. buying that we’ve of leveraging are strong clinical kind really that, clearly, just customers got. has to other hard and give a our people’s data our say than valves robust, definitive the on of you our more business answer And I we’re

Joe Munda

on my Okay, commentary, feel Latin this call relates past lot then helpful. that’s to question America. like, second I And calls. in than A more

You talked about going direct.

what little thoughts for in more South we crux is, saw in is the guess can your I us like going to to here hired are shapes I of sort You give we sales are expect color region. of initiative how it new occur some much my and bit the a up? leader America? guess that direct that region you in on a question Europe

Pat MacKin

Yes.

we really acquired America, ground. us. was and both fact people strong We direct in distributor Asia we JOTEC infrastructure. was thing JOTEC, clearly a America. Latin the Brazil, direct, in had We Pacific. had was had large not predicated nice all the on JOTEC had, had -- very that already now was operations We this the focusing which on was previously, the for America Latin issue And on X regions the the when somewhat, Latin on where had a are had So that we focus -- we JOTEC In leadership. we

product made it direct with portfolio. go extremely CryoLife to us it the for So easy

heard in you the actually BioGlue had negative comments, as So Ashley’s revenues we quarter. third in

burning So even distributor XXXX. from posting we Brazil for posted, actually in going inventory the our down in numbers that preparation direct in were we

in we commercial he will in really Latin opportunistic, region. seasoned in have to right But going worked a networks and in America. step together to in We distribution one putting will extensive going exact of us That’s me, together his a the the put in experience, be we’re leader think a be plan plan. he’s you’re with just see not the down America. has has Latin going the basically same optimize to process that that’s country Asia a portfolio in our very think previously and there brought Pacific. product So I don’t professional see I thing and that really model. us direct And seasoned you every doing

forward. from about us going more to think I hear areas So are those you’re X going that

Joe Munda

Pat, there up the on as far down And what that, distribution that do far to have to as as think? mean, in just off, direct over to in And follow start have rep you either I America would maybe you as you Pacific? far many start or switching if reps, how any does as look once direct, initial Asia count Latin like you

Pat MacKin

Yes.

to X X Brazil or We’ll people, feet products. CryoLife X on roughly Brazil people, direct cover So the the to the street. is in X JOTEC probably team add in

year have is we you of add back and you it’s nice -- and add. the what leadership, have once go Italy, would what what’s of So have have Spain you kind direct, to infrastructure, office, of the like kind in can typically you last complement the you really to did full Poland. don’t Once the

there. You can can what’s leverage you already -- because

that, we out like. what look color Beyond ‘XX really kind might roll that of we’re on into we we’re And in not -- go those give haven’t plans. more on and early we’ll stages, commented the as that and

Operator

to over questions There turn comments. back this management for I’d at to closing further are floor time. like the no

Pat MacKin

call everybody morning. time thank to on this want for I the Yes. your

told Just are -- take I maybe thus real We and a what remarks. you. XX%. growing year-over-year. couple you portfolio take but that growing the after a quick X%, got little Tissue The is distributor On-X up out you growing great XX% of is JOTEC much far. The the is bit we a quarters When mean out up mostly, factor number portfolio is we’re year BioGlue the X hurricanes, ordering destocking is XX%. patterns. XX%. pretty flat, buybacks,

and this you very we’ve kind quarter, year. been happy performance done So and will It’s of from the be at that’s The heard of mostly with finance Ashley, IT. the integration, end not as this commercial.

integrated and both we’ve On-X I’ve it’s the about All us. So really, our JOTEC. call. And times is mentioned and behind risk on executing, about pipeline, multiple integration it’s that

Elephant E-nside products Going graft branched our E-nya, into JOTEC got thoracic Open XXXX, Trunk our launching E-vita we’ve our in X Frozen and XXXX: thoracoabdominal stent Neo. device next-generation

for China BioGlue in CFDA approval submitting FDA -- We’re QX.

first and in PerClot approval for FDA the We’re for should start half. we in trial submitting PROACT QX, XXA the

contributing got their We’ve beyond. and in those are two we going aggressive and and commercial Latin go to So then pipeline putting about take that again, to, our in start we and are be just as of finally, that regions Asia new hold, America. XXXX execution finished we to pipeline Pacific very to those is growth expect leaders talking forward and And of together, really got in we strategy. our plans starting

I to next in on what again, about excited look we’re our us Thank you. So think you front forward updating we call. have of and very

Operator

Ladies today’s and concludes gentlemen, this teleconference.

You participation. this your you good lines Have may thank for day. time, your a at disconnect and

Artivion (AORT) 3 Nov 182018 Q3 Earnings call transcript