CRY - Earnings call transcript Q4 2018

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Operator

Greetings and welcome to the CryoLife Fourth Quarter and Year-End 2018 Financial Conference Call. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host; Lynn Lewis of the Gilmartin Group. Thank you.

You may proceed.

Lynn Lewis

morning. Good from Lynn Group. Gilmartin is This the Thanks today. for joining call

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

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

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

Pat MacKin

thank you Lynn. good everyone, joining morning, Thanks, us. And for and

we more our a expect our needing -- pipeline coming execute we strategy. single outline position years make as from for and hear solutions Simply even a experienced sales position people believe without and made for advance of getting CryoLife, suffering products, meaningful and our story This As aortic today, as in a be XXXX put, breadth acquisition. you're of in the adept highly quality from morning, going We we stronger customer keep better support. will leading will strength, the the progress why our will to I was successful team operate now an to provider of year due toward we to even CryoLife disease. becoming

growth and to $X.X steady market our approvals increase aim expect by our due geographic addressable to from to we continue We regulatory and billion expansion anticipated over to deliver.

our basis. currency versus of constant reflect and set JOTEC. leveraged As generated team XXXX in of XXXX, the basis, for our for the and America leadership on full-year organization. We We on non-GAAP global We progress XX% a on a topline and toward We completed we meaningfully. goals Asia-Pacific. both commercial XXXX advanced integration And our commercial our made growth team programs product clinical our we we XX% pipeline Latin the year. significant our enhanced

fourth growth our basis. constant to expenses to acceleration than our solid like quarter, Despite our million, to non-GAAP on currency were X% operating basis in related performance the on by growth. exceeding increase Turning in the CryoLife of from our quarter double-digit led and due in with performance, was product anticipated On-X more organic lines. up Revenue a and our operating the expectations, XXXX it pipeline revenue and fourth quarter JOTEC closed $XX.X product the revenue international began spending fourth

performance financial in later call. more the in quarter and fourth our XXXX review will Ashley outlook detail

strong that performance. employees revenue JOTEC few strong a grew well-trained dedicated clinical XXXX XXXX, its a significant for products and non-GAAP revenue instances, and including integrating progress long-term data. continue JOTEC posted product growth team our through In the and clinical talk both take by strategic priorities XXXX, into our to product then near and Now I'll experienced improved versus by minutes take driven and revenue lines. On-X we experience professionals and while organic initiatives the share highly for We CryoLife. In XXXX differentiated sales to we've by and an made of growth portfolio, milestones toward both XX% we about full-year market goals backed and and drive anticipate earnings summarize XXXX will we

valves, revenue of XX% our Our our the competitors. On-X, XXXX technology in posted demonstrate mechanical advantages growth compared best-in-class we versus of to clinical of family continue XXXX, to as

a to direct of markets portion decision. sales already we that our benefits enjoy and Finally, we the from to transitioned European of large are distributors starting

the by believe estimate the XX% key revenue also is for team XXXX. portfolio best non-GAAP of international grafts constant the of We experienced combined a portfolio recorded JOTEC non-GAAP is competes the growth our broadest on single-digits. achieved share and second revenue our is market sales growing and effect integration market. the initiative currency of low in driven the which of JOTEC completing delivering JOTEC growth and our double-digit fourth the the In portfolio This quarter, We in branched this We on XX% direct meaningful gains. stent basis. implying selling that

the carries and for XX% Turning will three remain and world surgery allowing solid a after North over in in competitive the valve reported months only that aortic as to fourth patients their On-X, gives was us we On-X on a our quarter, to tremendous an advantage. INR And American at expect label, difference European, to East our quarter grew it's of grew over FDA Africa be mechanical X.X while that level revenues the the X.X. managed starting currency XX% XX%, as Middle XX% On-X up revenue On-X constant business basis.

we've ambitious XXXX. proud opportunity Poland. the we sales initiative direct that investment I initiative products have And our advancing Italy well. an was market also expand clinical programs all important our transition our through completing agile achieved for progress addressable our pipeline. CryoLife for to XXXX key channels Another toward finally, equally we made we as And here legacy to R&D XXXX and in accomplished an meaningful in am in product Spain, and

in this product lines. achieve our be introductions in revenues JOTEC performance market For from XXXX, anticipate high and direct gains On-X existing sales products new and by growth further will to we product our via expect growth total and We year double-digit driven single-digit share force.

growth. fuel line to top catalysts We in have also several our continued XXXX

expect E-vita second-generation our into First, -- JOTEC off-the-shelf next-generation products thoracic our called the Elephant in called stent markets thoracoabdominal three graft XXXX. Neo, our to include we These E-nside. Open and select international E-nya, Trunk branched first-ever and next-generation Frozen introduce device called

are we advance to approvals. our regulatory continuing Second,

As BioGlue we the you of quarter trial XXXX, we for for China recall, in first in clinical enrollment year. remain our of submission and the completed on track regulatory this

related JACC Dr. up in Meeting York the upcoming process at FDA Third, Class up procedures is support work to Sinai, from will XXXX. underwent setting series Master the are with a by subset guidance presenting Ross enrollment New to of work previous to launch we to XX coworkers recently Paul delayed early recent PMA reports the a when upcoming different This States, Stelzer compared literature approval. Mount the due from verification in submission and including [ph] to the XX-year for XXX-plus The study combined Fourth, provides the at anticipated Ross completed the we United about follow-up. procedure. validation Stelzer Ross establish that X,XXX also of us the PerClot look publication our our with of retrospective post large-scale studies manufacturing to be excited AATS and establish the Mazene -- than shelf-life a May. patients the more

America. young best positive and our investing been Asia-Pacific and replace it Fifth, data Ross the uptick addition seasoned an The be for aortic used in valve these a life revenues. year, the with our leadership the to the unfamiliar which strengthened double native channels the has procedure into procedure procedure our seen symposium it appears of distribution commercial with sales should commercial are position. drive to cardiac for pulmonary the restores over to the Ross are couple our geographies. has business. to a moved middle-aged option pulmonary Latin team development over in compelling tissue it the highlight allografts in expectancy we with two a valve we is long-term lead patient's very tissue and Last valve. to patients of where in We've shows the clear data aortic procedure, for the normal the efforts diseased of who years the those that professionals efficacy to For last and patients cardiac will be helped procedure The are Ross

begin with in a Asia-Pacific CryoLife second quarter sixth, sales in direct legacy China, And to channel a on the place sales Brazil products. with migrating we our across model new our focus mid-year. We expect distributors in we have will where will enhance to by

years. We high-single-digit million. initiatives these And with each the growth deliver $XXX expectations XXXX are and $XXX five between next we revenue that, providing in expect million of revenue to

in markets. filled these our long-term In with important catalysts like addition rich to described, addressable I a to will opportunities we increase have highlight several just opportunities pipeline that we would pipeline. believe near-term our

hoping we patients First, investigators half for at significant late of and and the the Thoracic in meeting submitted the an for there's to January the to anticipation Eliquis XXA enrolling enthusiasm held study. we our look and have will than We trial this valve the Society seek begin the of become the available. we'll PROACT trial, first rather working Meeting in Through to IND as commencement Surgeons year. FDA; trial this approval blood We with aortic FDA they the great more the thinner. On-X for of Coumadin obtain forward with using provide details as are

in this first in for Second, approval year We for we in China in PerClot U.S. products market in potentially the quarter will BioGlue those early XXXX both in of -- of file have a regulatory XXXX. early could the the and in XXXX.

U.S. On-X to with the the for for in JOTEC valves. valve receive which both expect SX, United We doctors we INR aortic the this over same approved JOTEC the XXXX, beginning market we and conduct the to obtaining for in are E-ventus the lower INR now peripheral sale three product That offer launch Ashley. next-generation On-X approval our XXXX, goal to leverage stent, with of is regulatory lower valve to the for have that, year, in our in profile the States. FDA fourth, call valve and products the aortic our trials micro to patients each approval not to found I With States in will in Europe Europe. Europe in currently Third, similar clinical in And plan with look United would our slated and line, turn that a product. expect self-expanding

Ashley Lee

the non-GAAP the and grew XX% a an increase the the of financial was and East revenues Africa XXXX. to quarter increase revenues increase quarter in $XX prior million, $XX.X XX% were Pacific our for XX% of On-X results when the year. compared by the Total to revenues fourth QX a a tissue and basis, the on review million, QX a on X% now as our year. $XX.X driven I'll an The an QX increase prior America million outlook. increase increased million were of American XX% the in basis Revenues were Middle and non-GAAP processing. quarter, as on Latin year-over-year. and an compared to of region, total $X.X of year. increase well X% XX% EMEA constant and from company X% from Pat. revenues X% prior fourth of basis Asia to Thanks compared to currency non-GAAP compared fourth increase Europe for quarter North fourth

of at for compared million, constant-currency revenues quarter a On-X revenues On-X quarter BioGlue year-over-year $XX.X to Africa quarter Latin fourth to quarter XX% XX% fourth the compared and in revenues were $XX.X for the Tissue quarter $X.X basis. increased X% on America. QX Europe, fourth fourth the the quarter and Middle increase $XX.X X% XX% were revenues $XX.X the of Looking product revenues and BioGlue the of of for Pacific processing individual increase and $X.X XX% to XXXX of million. of increased fourth XXXX lines. X% OUS XXXX. million. BioGlue for X% the in decreased region XXXX. a an revenues period-over-period X% year-over-year revenues fourth million, quarter on BioGlue East of constant-currency compared increased in increased to quarter were JOTEC Non-GAAP over fourth North increased the an million. to basis quarter year-over-year fourth JOTEC American revenues million. XXXX. were the the revenues fourth Asia

X% increased fourth the respectively. revenues X% quarter, and processing year-over-year, During vascular revenues tissue cardiac and

year. fourth gross were for XX.X% full margins and XX.X% the Our the for quarter

primarily $XX.X accounting the excluding fourth of Our million, for XX.X% were during XX.X% implementation. pro were stocks the forma ongoing and million development charges purchase margins JOTEC integration quarter XXXX. JOTEC includes gross which expenses business to $X.X and full in SG&A the expenses integration, year for relates related These related expenses. the which to quarter include adjustments

fourth related the in our international anticipated product growth. than more cost of spending due where quarter to however, to expenses, operating Our and acceleration on pipeline the increased

fully $X.X $X.XX or income of we line, million $X.XX in was share net and On for diluted per XXXX GAAP the $X.X bottom QX. million the net per quarter share loss fourth reported non-GAAP of or

adversely I reported results, Our completion EPS including previously our financial those and GAAP expect preliminary press the file results Please XX-K, pending Form our affected information mentioned. results. for of additional non-GAAP audit refer release the we our our were was filing week. to of the by non-GAAP of our to a results next items Also reconciliation our to which about

at based XX, our times, we $XXX in leverage on approximately under four gross million And outstanding We had million times. equivalents term cash, approximately credit net $XX XXXX, was approximately and February our documents, leverage X.X and restricted B. our stood of had As current approximately loan our cash securities.

our expect have our three comfortably be end year. the can model. current and around of business to the support financing adjusted needs service net times debt We leverage by We our to EBITDA no

Now outlook our turning for to XXXX.

We will expect revenues XXXX full $XXX be between in $XXX and million range of million. year the in

million million. We $XX expect and between of first revenues quarter $XX

EPS share. non-GAAP device comply $X.XX expect work with in approvals. million effect in new Compared requirements current to costs get non-recurring to is scheduled approximately product which into This XXXX. costs the directive have and go new $X increased and Europe, also These medical renewals new in in includes to turn regulations what device medical to market to existing FDA. primarily associated moved Pat. $X.XX framework, and to the my new product We the regulation Europe. be necessary to The per I'll the the regulations The with between certification costs, is the by U.S. I've concludes certifications of costs to earlier, That over Latin Europe channel it approximately and a Asia-Pacific in have and $X to development reflects already our closer million acceleration line in required on referred essentially bottom investment America. comments, relate for back products of the

Pat MacKin

Thanks, Ashley.

exceptional in like performance. achieved XXXX, the all So, which many those delivered in an regulatory we I made company and financial XXXX had and would development we who to at such closing, success. milestones thank strong product a

the improves the literally people of work everyday hard Your lives around world.

with be markets we straightforward. mission Our goals expect execute leadership I've larger significantly on a in and stronger If is we a we presence the to objectives outlined the company today, serve.

drive the place all XXXX a Fortunately, leadership process. well-positioned we including and the delivering have to We to entered strong pieces performance. team solid in continue sustainable financial

all easy we given the our it's for opportunities optimistic With growth the so questions. this So days. outlined Operator, open proceed. why to now we'll understand line are morning, please that, to about I've future

Operator

Thank you.

conducting session. Canaccord be question-and-answer is We with will first line Mills Jason question now Instructions] of a Our the Genuity. from [Operator

Jason Mills

Pat and Thanks Can the question, for Ashley, taking hear me morning. good Okay? you

Pat MacKin

morning. good yes, Yes,

Jason Mills

morning. Good Great.

company. profile there, MDR much I'd because the So, necessary of to you talking mandate Ashley, you didn't of know guys have we of question, is earnings sort sort the the was like line been first and in of about got to all spending We just -- be. how it get to going which into knew the

you XX-ish, the run of broadly, that in look if of operating maybe and it. bit is midpoint give – expectations, But – be I meaningful, earnings of pro for million profile generally speaking, like it had the just fairly we into we through that excluding on the I how company looks like earnings expectations XX take, $X -- basis, should without rate calculate more the So know it the of my a I'm baseline thinking company $X million looks about, tax And your what sort don't that's forma tax assuming quite model, if Pat, it. range? XXXX, sort higher the be wondering, we as could a or

Pat MacKin

he have I question, investors, Ashley, have more really I'll Yeah, think let me follow-up, into for maybe get can important one, is take I'll and macro a Ashley, this there's I the if specifics. and think will

$XXX when acquisition reps XX for the the four things and a through sales today, here, direct So, to and the million there, basically, business. and now all along we investment when forces. be we now those we have the company and JOTEC $XX I and the of required with in merged way us we've XX back, I about direct forces, look said sales get and over built got to done the reps pipeline. million set we going we our at European acquired is it Europe but And On-X, the business, infrastructure When leverage last could same go had The I years, U.S..

in is doing investing So basically been what step-by-step a to channels. we've approach our

US fixed, fixed, is Europe in have markets basically pretty and Latin is Asia-Pacific and America. solid solid our pretty we open So and wide

those We are but is a a comes we million and choosing pipeline. of once those to point, the build somewhat fixed, to out are that next have out, which couple dollars to invest is the built channels, that infrastructure basically global

have products America to that addressable can Asia-Pacific We the gets products to months, be entire add pipeline that we on in to single XX as going fixed every our and new global the market. then billion XX channels one over $X.X launched. our in are total XX of those those XX next footprint Latin leveraged And months

got of goes opportunities to the back I what I going a as last think think in goals we've the five-year building and but our and of we're nice again, I see So nearly four, kind done think company, kind and you're we've great. more a our a again here year-over-year see, are do, a company job and lot to to goes this five back this

investors high the deliver growth next five over single-digit X% in can to we revenue think we So years. X% to

of one over to next at is the company margin And we going margin toward margin, per We're this setup, moving year. XX year going goal. in going infrastructure that because as which I the next the out XX new five those the to get this quite mostly operating escalate come Our be ability the try would our XX% to is XX% say, point channels as of quickly a to are gross years. gross to operating leverage fixed five-year products margin is add months,

of But investing investing are issue, I this, five we we're a had positioned the we're goals well that. we're our of a to the one-time We're we this building thing. still to committed is and always day, channels, MDR with deal end in pipeline kind very year So company. in at think to do the which and

Jason Mills

very helpful of of color longer-term and it move not That's only products JOTEC operate of in onboard. Terrific. Wanted also relative to the to the having and remarks, the as was sort in in build where that and you the importance to around JOTEC, growing, that standpoint their strength from obviously – you expectations those it when you it. mentioned like business the you the have offerings but you'll business, came Europe

think set across couple in not markets, you're getting within competitive XXXX, which you business how new for line obviously the a part fact business. buckets and just Asia-Pacific? plans closer. about JOTEC only a volume the a products trends And perspective? you're sort a time, So maybe on from obviously trying of maybe JOTEC What five-year JOTEC? talked have an starting whether you sense but the from XXXX, seeing, to but in into your you Latin an it's important these expect JOTEC? is perspective talk US, the to or away, product you period but ASP level to that contributions basis your a several over that perspective for years start America now get coming about spend your of go-forward As and and contribute regulatory light new minute strategy us a talk and of and of on from growth Just not about I to expect you perspective get to what

Pat MacKin

the you. of having a last stutter executive We And it's the didn't you and been, A absolutely. there's growth. JOTEC in turnover trips no of We've honest so. happen. very couldn't Xth with a XX% my no, done number, it no to of I've we pipeline know XX%, team. turnover you watched year Yeah, delivered after, month acquired robust. of acquisitions or full things a in more had for or about the of it's we've and now, year plus the mean, of well in line pleased I steps year, flawless. as December be number top We've I know is kind and frankly kind so had had always things be because been field, carrier that

one, And things coming. three so, I with we've got year, think, new three this watch would there's Number starting JOTEC. I probably that products

a Stent be ever kind game Trunk, think have think, Mark year. Graft, to have of Elephant a and Two which being next-generation branched I submitted, device, changer. of submitted CE Those is first QX. we and are the are all and other We next-generation products a the Frozen planning on one thoracoabdominal going a be we've a those off-the-shelf will actually this Thoracic the in to we being launched next-generation, this month

into see that the the, products. thing fixed the on see XX% you're now, channel those to it's to European kind impact of going a, three you're So, products with get to that start new is the those as which first has channels, is footprint they going an

you'll with The Latin see in JOTEC second America. is Asia-Pacific and our thing investment

approved a We in opportunity JOTEC China. We have tremendous China. already in products have

many actually, America. markets in and in the is, where Asia-Pacific to all regulatory and those markets approvals bunch in of going We approved sell we we are is have JOTEC there's places can addition get products the products. can The a do the Latin we

going vector of into kind Asia-Pacific JOTEC build as to for So, is you're channels. expansion we America I Latin think and those the see the second out

already starting .PMA testing trials. U.S to for is, The third clinical the are we

U.S. that we're those we're we going You take about going those Europe new and to know, products coming that three the into in to talked trial are

the the total three range Europe those addressable have of we million in in that is year, the that but offerings $XXX time, SX, we're are those obviously we last to think ePTFE-covered a products is take market and then if a, that long takes million in their market to JOTEC I spaces. the margins that Now, periphery. haven't product have And and this about is competitive not probably choose say thing called And higher about the stent that's even a lot launching $XXX a it. we we would is, for period very talked from E-ventus we talked a

of channels I kind our the got Latin The on JOTEC, building then that So, in growing this being the double-digits in leverage We're which and the And to of year. summarize guess launch kind going to new there. getting already Asia-Pacific the is entire, work that. ready every wings We're started Europe. product to U.S. America last grew three pipeline line we've we're XX%. business in was products whole

So, said double-digit of period company, a we grower as when time. a we we for the JOTEC acquired long as see

Jason Mills

re-queue. I'll Pat. color. helpful Thanks, Very

Operator

you. Thank

Please with from line Markets. next coming question Street proceed with Brooks is question. of O'Neil your Our Lake Capital

Brooks O'Neil

different Good morning, accelerate it you a than of something could found, during investment make you opportunities would or describe fourth those strategic guys. of when lot. Thanks if that curious, I you the to kind the decisions just describe you that? decisions you was your to decided spending as quarter. sort made that And in was the just

Pat MacKin

back come would I'll yes, Yes. -- the I'll talk to kind say QX. then and of I about XXXX

too Asia-Pacific knew our EPS And kind obviously opportunities the had was feel about we of with where And could profitable, channel saw in Working the we in got in could R&D talked meeting with all the and company mean, in so So high XXXX where have pipeline plan. handful on we board more with this value the creation, of of return XX we with October invest it's creation we many we Board investment has long-term we the R&D management we just in these we and has in pipeline. much us. for America, higher commercial and front a the like a this We Asia-Pacific, Street shareholder company kind value long-term our low-risk constrain could with could their a shareholders, deliver return pipeline, And the markets for investments I and size we products is not our felt great EPS. of a be the and pipeline, no Latin nascent said, and I and America that, opportunities. pipeline. we have people. of way a Latin

fixed, this to we support that us. operating the see five-year Board, start Jason, with committed fully said my invest can in single-digit products of period. margin those pipeline out, talked going metrics the year we in is company and about, is will infrastructure the pipeline as come think earlier of place, through delivering for margin comes the are think the because accelerate with agreed So we comments growth, that you're per accelerate. in the company they to largely first get We high forward, as think, gross expansion X point long year. of the as once we that building needed And this I the And to term a still to we financial we and

So pipeline. sit QX, saying, plan. conscious to part of come and mean, I it's the down back overspend biggest we didn't if a I was have the

clinical a of We obviously pushing our are R&D and trial, the was are I part big hard enrollment to to trials, with for hard pushing enroll so it been quarter BioGlue China every done trial, PerClot have think overspend. get to are behind those that we we and who up and the the involved wrap

over fourth mean under quarter. in news. just I good were the me We So was our to the its actually R&D it budget year, for

we was probably that second things new A ready to commission have there, that's in we BioGlue again, because We've getting We've not plans would trial on that direct of of So starting come accrual, the enrolled. bringing pleased that to I in our only China. place. one with I'm started say the say, accrual in it of disappointed put invested and again. in missed we're on those third going kind leadership going about, had got just negative actually things, we're is, not BioGlue and the so talked to happen got we've is, to was a piece I'd the as And to we of Brazil, kind issue there commission then unfolding. but a piece JOTEC earlier the

kind a was of thing. it again, one-time So

So Latin pipeline, EPS to metrics to I'm we going, all allow are channels there with in and accelerate the to start financial and Asia-Pacific think three America, that see the direction going the you're to fronts. on this I and again, going out to company the we're that continue this here to set in build pleased invest goals

Brooks O’Neil

own I personal the think, should and My and that's is, investors one you view investment. demands a value looking will as growth to business that be great.

it up. keep So

Pat MacKin

you. Thank

Operator

Thank next Kalia line is Suraj Securities. proceed question. your the you. Please Northland of with question with The from

Suraj Kalia

Can Good morning, you me Ashley. hear Pat. Good morning, alright?

Pat MacKin

good Hey, morning, Suraj.

Suraj Kalia

Pardon any. the if background noise,

of buckets three Pat, So questions.

CryoLife can in foremost, between JOTEC for and and the cross-selling can the and you CryoLife quantify cross-selling us efforts in U.S.? On-X the the quantify for First results help and us Also, Europe? you

Pat MacKin

with the back year able year. structure. to BioGlue in interesting, We'll -- difficult an if cross-selling so I is you the actually structure. you to and tell things international We actually a of about so, have year example. will trying to we an prior because had in this one Yeah, is of was the in tell things now comparative you new year the team kind January, capture just think -- of I manage that your with better prior have be it, one I'll at a a I Europe sales first the was you meeting existing that's didn't comparative

and That -- was the twice one we XXXX. opportunities cross-selling in So between CryoLife prior and growth of BioGlue Europe year this the BioGlue, -- was grew in rate or probably the JOTEC year. X% we of

So in I trained that ago. also that would a note teams clearly to it a We year -- cross-selling. full easier the product standpoint. training from adding was That's an requirement tell benefit had vascular you channel from benefited, additional a

standpoint. a we've pickup there, kind a from and opportunity the I the from reps cardiac that's way, training going which seen Elephant of more difficult legacy JOTEC CryoLife surgery think is second requirement a although was much Frozen selling a of started the other Trunk the kind also

So get we're going accelerate particularly little a see there. rapidly. probably I actually We're think we think behind that the we'll the product, on new I to when technology

of sell to benefit once Trunk. new to So we our start you're Elephant going the I think Frozen see that,

far look year-over-year. talking the grew would at of kind as CryoLife we is, metrics, U.S., I this Those On-X I you cardiac we about XX% extremely procedure, I of we -- there On-X tell tell I'm two is CryoLife come you valve the of some XXXX. -- this under patients would Ross tissue would kind the market age trial, surgery XXA think tell as in as also that would cross-selling As that the cross-selling, the two things data again, XX%. look at on out valves the Number and serious continues be to year, leader to two would well grew I And me two, I positioned undergoing PROACT going on. XX. metrics, that start aortic the

a PROACT we have to under -- think replacement. we trial for getting the aortic the for XXA the the a valve aortic there's offering is years On-X of synergy So patient Ross old literally we XX think procedure between valve what is SynerGraft, and with lot best

Suraj Kalia

we me, couple know two, between said, going valves. you the throw it. results approval any? going On-X guys three if Pat, biz. sales know That over We all impact III, guys III PARTNER the Got And force, you others, brass a words unlike at you don't around guys, have whatsoever factored is till question. up. the to to mechanical the action experience years, trial by my And, flashy down next this messaging year. of to the the in you is think you PARTNER any transcatheter come is same an enrolled and a any and time, age get if having not Do months is in although building change required forgive are come obviously, unfair In delta from last

Just curious how impact, any? thinking about are of if more the all you messaging

Pat MacKin

of a opinions current of aortic question age talked previous think average maybe trying mean, predict a on I there to I valve is different I you're On-X The are think XX. such -- patient about just going aortic is average higher. calls with a is On-X well. I average patient the to mean a have Ashley happen, that a XX, Yeah, And often this be. gap we've investors we and the valve age lot a as it's patient the data, between and that the to TAVR in, TAVR that age average get data what's is call this people of even of -- with of the age future, I mean is what going I the

that. You the better know than do I probably on data

So you It got the just a not age, XX-year gap. is right.

comes don't problem starts you say and let's long-term for The have creeping age III out the data TAVR. is PARTNER data the So down.

every so you're last. making year bet that going valve the patient go a And you to for is lower,

do are anticoagulant data offer backdrop what rest valve. where So love How in PROACT Eliquis to we going is the comment of that's I a coming that to going I do a asking TAVR then But see say trial question hard seen the me what operation? on TAVR you're we'll So their last the I'd start for out is and to operation data. what of the long again, patient to XXA the about requirement the data XX of just tell the the valves. XX-year-old on about life. actually you because can age under saying and about It's the hear the also one companies to a valve get to they a I then haven't think looks TAVR like. the next

getting were when Eliquis to you going and So are to a percutaneous a people some if for going anticoagulant, be life? for So PROACT is maybe we're TAVR is to moving target frame moving it mind The going this the older XXA. is of for the is and On-X target way on the if to moving or get one because because put you lower. you of valve you're my operation why your rest in

Suraj Kalia

much margin. the or the you kind contribution some percent the do gross mention you year in One maybe percent from what is from Thanks channel, Pat There of said the all watching and question. outlook? and enthusiasm what you markets, I wrong how operating contribution this question just target XX% can I you're Pat frame maybe this improvement the Can will improvement about be five-year and us passion. five-year thinking for my was XXX see chime from quantify in. It Ashley it okay. battle. got how bps numbers for fun per love margins, final taking product mix, new what

Pat MacKin

together we at we When look considerations. put our these plan, five-year all strategic

you as And shown we and so agree not the again U.S. invested. solidify we like once On-X, market acquired a would one think that kind have of the really we I of we've things

be In in XXXX bunch have investment from into But we we’re -- to XXXX JOTEC fact was that to rounding increased year-over-year fixed will want their so XXXX. that just spending zero. We're record of to don't add like year and the one U.S. into we're out. infrastructure still We channel. still countries, a

America. fixed. on in in year a the XXXX told Pacific big don't two annualize to and once increased million So as be in full will probably JOTEC so see XXXX, fixed you $X just Europe, the of are Asia at end We we're 'XX those you, investing themselves. Latin they Those I channel in investment get

are it new new world you XXXX, have out and products any I don't when reps. to coming add your So fixed. up with finish XX backed then global around I that the channels are

a doesn't the leveraging out margin with of how of So to get you take products. math operating channels your figure XX% it just XX new to lot by

we ran the We're chain to I and I Baxter. at also not wasn't hired worked downside. right. relates JOTEC at have former out CryoLife, but executive, just global of, in supply a are gross goal. margin, it they have done five zero we kind something on with the he comes from, on, it cost good down As to break a legacy last cost where operations the all looking On-X CryoLife, it Medtronic, years, focused particularly

but like over the even things. products into of got employing over. reduction, to cost, things lean, on design suppliers, kind high years. just not easy. new next cost the in on the have purchase point down basically pieces downside one kinds five be liability, the get working getting for frankly from these not X% of all to reduction place We something we We're to cost price We'll like control like cost on kinds mixed all of get very our using and It's have

Operator

Thank you.

with of Please with the Munda question your line proceed next is First from Joe Our Analysis. question.

Joe Munda

me and Pat morning, okay? Ash. hear you Good Can

Ashley Lee

Yeah.

Pat MacKin

Hey. Good Joe. morning,

Joe Munda

as just pieces wanted I on that the the that but you just excitement $X device pipeline. A some moving give could here, framework first touch R&D year? off, thoughts maybe to what of the how if I the us play on Europe, regards over clarity to So probably up, will out well wondering the to in was get expect related wanted to of lot in picking I of going forward. lot cadence a Obviously to your as million med

Pat MacKin

Yeah.

that to is for products think list, to but got in so go a we've things not the XX going that's pipeline. positive I right, real mentioned, that that products I investors the So of one those the back I'm XX laundry

I'm keep -- We are XX%. roughly again, about a and around R&D able five-year spending our talking that fund to period pipeline over

is I billion million think years, the $X.X to big but pipeline that's opportunity. a I deal. get over about five access $XXX mean investment that we a

top contribute crazy may go to up R&D spend. So, percentages again, spending bit, able it our our to may think, we're years little some of we're R&D year And not it a fund grow, our pipeline a I on under line actually this piece because continues we're also R&D operating XX% R&D come can top little bit, because to but continue XX% as of the build will time go our another business grow statement the to spending going that's line, a which this this to margin. over leverage income down down, and we

even because that size bit the business, is our affordable lower. and XX% pipeline or little again, of keeping at a So,

the MDR year, throughout breakout as I of given know I that. we've As far don't it’s the that kind mean -- to

Ashley Lee

the get the with quarterly -- China expense work year submission. we're exception with the we're final the I R&D to that doing PMA think the PerClot to the work of on we be Yeah, that doing BioGlue I somewhat mean, and throughout expect submission level

but could are R&D and higher digits to for quarters standpoint of overall, R&D as first than XXXX. from we single Pat last revenue little XX% estimating a second mentioned, in the be an The two, bit high up

Pat MacKin

think to. need Yeah, saying raise to think I saying to just We I issue think to, I -- that Joe, need to don't really thing we we're going money. We another to don't don't that's the need don't not have do is, other I'm for we We I'm another do okay. investors don't not shares. also acquisition. important acquisition, need

You and or getting way, over an and we a it's by to should the new products at contribute XX keep my low-risk got It's investment acquisition. years, million five products which a the I XX% R&D approved look the five the our pipeline, regions these years, lots pipeline but geographies. can operating decelerating move under $XXX markets, margin, just as it's are a but can probably of other that, spend in trials very doing either new to over

hitting. this pipeline, It XXXX feel have and margin, it'll channel particularly I and Latin we this very operating increase confident investment product drive XXXX, and that's as drive XXXX, our as starts really in solidifies channels to all margin. don't America, said with Asia-Pacific after we when So in will and before, the

the this This building the with puzzle next XX and So, shown in put in what company, is and the we've On-X done JOTEC Europe. piece well of U.S., we've I is we're thing again, very next months. together in think the the

Joe Munda

sense. Okay, you that that. Thank for makes

a procedures. two to the a other expecting had on tissue giving, XXXX looking the quarter But ramp a you're anything the the year? there. in of -- ramp had new -- growth my are regards second a else a strong it in in this first year, for of as the product of there expecting that year I'm -- be assuming this of guidance clarity second in and excitement here, Ross like I'm you a just tissue there talking you're bit about about clarity, model, Maybe lot launches. result The half of other half may I looks is that's from strong based questions little

Pat MacKin

Yes.

know or for you if we is XXXX, I catalysts for that quickly, the eight back, we've catalysts through but look seven XXXX. like go you So, if and got at went it

approved JOTEC three so new and those get products the as half, start and first rolled get we out the are hitting are in are clearly, them second The going -- to those those the soon market. in as

with in quarter. those So, three see accelerated JOTEC go we BioGlue to in start will of half the the direct back growth second starting XXXX, products. Brazil with new We're to with

the and in China have distributors second both new We in the for On-X portfolio our of year. portfolio JOTEC half for the our

So, in starting trial the -- we've second half. XXA have to get clearly the kind we the got half, starting momentum PROACT of in first but

mid-point are year. lot of of starting catalysts So, clearly the a kind to hit these of

those catalysts think just drive all clearly of because back are half. back to the of half, inherently coming So going to kind the I fruition,

Joe Munda

in I and something the this forward? is XXXX had it tissue been past, the cardiac continue you in it we're appears going is business, -- Okay. Is guess to really then taking but mid-single-digit to a on this trend expect forecasting going growth, hold. And

Pat MacKin

Yes.

to was would we the goals we almost it I So, grew very we I XX pretty is made There said, mid-single-digit years with basically that Ross we're leader big tissue. the tissue of Ross like, I We transparent last I think resurgence symposium a would of the patients May, XX% and say, so call market see and and are it the on had kind AATS thought business cardiac internal XXX the in X%. the There grow a pleased data. paper is in and we segment. about up follow-up. Meeting earlier at some comments X% year.

positive received our So for of how is I data if that another -- that's valve that think could business. be segment pulmonary the

That our this The over trial Clinic we've the got this a on calls should data valve. years, second Cleveland we've over is be mentioned for X,XXX-patient tissue coming going the we -- year. out at the aortic and

mid-single, actually valves. unfolds. of But bump very about on could actually be data we're up things see our encouraged kind not keep tissue out the by we'll that So of coming only are how those two could us hearing us that and what in we some the

Joe Munda

thank Okay, you.

Operator

Thank appears floor the questions to for It further pass this so you. management additional I'd concluding over time, like any to we have no back comments. at

Pat MacKin

want doing the -- excited And with Well, hear to that who what of our we all listen, as can about hopefully joined enthusiasm the company. the I are morning. everyone thank you call this we're from

to has have in years, you've we the that pipeline I we don't message we an the probably decision I issue M&A, us to to and do think need most don't with need to new transformed. takeaway company issue think four made for this best And don't the the important invest our shares, is need if debt. new been last we

and America debt Latin in outside is We're investing things. kind coming channels two investment. the so down Our international and of our of we is fixing Asia-Pacific Europe are and US, requiring some

of you at XXXX. will annualize in And we've income need As got those a a pipeline market XX% our over addressable things take statement five for lot hold, that with less is, what next the products those can by billion. be the than investment will we of spending those of in give total additional that XX market fixed -- R&D And without years. do And as of get $X.X five-year this, channels up those fixed we range. XX% start you growth gross plan our operating margin point the get single-digit going matures, pipeline we high into as that see as the margin as try second the investors to to the give you in accelerating to move half and one XXXX, will year can move of we to think think as we do we're per

I we you we're do, all about our have day. to appreciate lots a support and a this we but we've and got again, is and think, Thank the great think more investors. from company So extremely future excited our great

Operator

and gentlemen, your your lines may today's teleconference. at we thank and participation for you Ladies this does you disconnect Again, time. conclude this

Artivion (AORT) 14 Feb 192018 Q4 Earnings call transcript