Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Artivion Second Quarter 2023 Financial Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I will now turn the call over to Laine Morgan from Gilmartin Group. you. Thank

begin. may You

Laine Morgan

Good thank operator. the for call today. afternoon, you, you and joining Thank

from team Artivion CEO; today me Joining management Lee, and are CFO. Ashley Mackin, Pat

Private comply make Before risks Private the and Litigation time of forward-looking call Reform Securities Comments are following like that begin, XXXX. Litigation Safe statements to uncertainties XXXX. of meaning on we statements requirements and I’d Securities of to Act within involve made with Act of look the Harbor in the the Reform the this forward

actual The forward-looking subject made these from the as or company’s that of the results future. statements. hopes, to forward-looking cause estimates a of to intentions, beliefs, to statements include uncertainties, differ predictions are statements or assumptions risks, management’s materially statements number These forward-looking and expectations may

earlier concerning the information contained is filings time-to-time Additional may that risks release uncertainties press forward-looking that and certain impact company’s statements these issued in today. SEC in the from and was

turn it Now Pat over CEO, I’ll to Artivion’s Mackin.

Pat Mackin

Laine, good afternoon, Thanks, everybody. and

outstanding million report year-over-year, of commercially pleased I’m The second currency operationally. and revenue. quarterly record was to both Artivion, quarter delivered a $XX.X in growth XXXX of for resulting revenue constant XX% in we quarter an

These a stent XXXX led all revenue of by X%. Our basis. by strong performance compared was which quarter growth graft in to currency second on increased at tissue were improved BioGlue processing up and was our XX%, business, the On-X followed XX%, constant at X%,

PerClot to Baxter. We during quarter PerClot FDA shipping also the received approval and for commenced

with clinical well as through of through drive our and with on to markets increased our new as pipeline. to our by approvals, expansion execute markets expanding continue We geographies regulatory adjustable revenue our commercial footprint strategy new existing

performance a increase in line to of top is to the in adjusted non-GAAP second strong last compared the year. XX% quarter. quarter This million second EBITDA $XX.X Our led

We were largely years in business for continue of that XXXX year confident to XXXX. our strong into and expected. the of coming half was our unfolding the the expect and as the remainder momentum into through We first well-positioned the year success

Day our adjusted to remain XXXX in currency in committed to both we driving operating believe XXXX. of leverage, revenue $XX goals. achieve compounded Investor growth XXXX, double-digit We At million on track annual March constant growth further through EBITDA and of of through delivering to these we

commercial Our executing also team well. is extremely

result in were sustained continued stent products our I across revenues in Germany production up versus stent increased a currency recent for We all in strong by XX% revenue XXXX strong beyond stent constant last part graft currency growth performance. second we As quarter the in of earlier, stent saw grafts hires a and Nexus. geographies, in mentioned and performance constant and should year, anticipate of double-digit graft graft as to production year-over-year fueled AMDS demand and remain see

Additionally, On-X XX%. revenue increased

year. the We X.X. the leading at heart mechanical valve aortic in our valve share continue is that believe to to X.X We each valve maintained market share take market be INR only of globally an best market as gains the can aortic we’re

Latin We well our executing APAC are in sales regulatory new initiative product our and footprint and America also on expansion. commercial grow to approvals through

compared second constant currency to growth and XX% delivered quarter America, XX% and prior In revenue Latin of APAC we period. respectively year the

of forward. going continue drivers expect be portfolio years over these to in regions the growth important we regions industry-leading to leverage to our continue We coming these as

PerClot to in the and Baxter. began I On earlier for regulatory received mentioned as we approval shipping FDA front, PerClot May,

and in are into beyond. with we Mitral, the factored not FDA. PROACT for continued for discussions forecast our any approval potential We’ve XXXX As regulatory

trial aortic trial. good continue Type experienced patients we We’ve PERSEVERE PMA approximately in A ID This AMDS each on approval enrolled patients have and clinical of XX up progress centers three XXX clinical addition acute make trial. initiatives, to XX on dissection. In in U.S. these progress to who for is the our our to the

attack, efficacy the failure cause of dialysis. quarter. end is primary onset and heart all months combined of anticipate likely true new a the aorta. for safety PERSEVERE enrollment the The endpoint and requiring of endpoints in reduction The in the efficacy trial renal the before We third the stroke, completing mortality, full coming are expansion the lumen in of

AMDS a in trial anticipate meets its we approval FDA follow-up receive assuming endpoints, period should XXXX. Following the one-year we for

for and is a In enrolled making U.S. stent its aortic addition, approximately that NEXUS out XX there progress system. were on total endpoints of XXXX. trial Endospan ID is are arch panel and of TRIOMPHE trial, a completion FDA no the met our graft XXXX PMA and treated in patients partner later patients for In required. enrolled in enrollment assuming and Again, approved XX treatment. estimates Endospan approval

for increase FDA trials reiterate, these and To exercise option anticipated, AMDS if for approval PMA as Endospan, products significantly we two we market our opportunity. these XXXX. proceed At would the that expect time, assuming in adjustable NEXUS

With that, the to turn I’ll call over now Ashley.

Ashley Lee

quarter second of constant second good XX% both million on Pat, in afternoon, $XX.X for QX of to EBITDA compared XXXX, currency of $XX.X revenues $XX.X Non-GAAP were XXXX. basis, and to Thanks, from both GAAP adjusted of everyone. the a XXXX. XX% quarter up in million quarter increased Total second million the basis XXXX the and

of quarter revenues BioGlue X% constant the a increased to year-over-year On-X grew grew revenues Tissue of second currency basis graft Tissue XX%. XX%. and XX%. revenues revenues On-X XXXX, X%. processing X%. the increased a increased basis, XXXX, increased increased revenues On second quarter BioGlue and compared X% graft in revenues processing stent increased stent On XX%. revenues

Latin revenues increased the basis, increased to all Asia-Pacific and America XXXX North America quarter X% compared XX%. regional EMEA increased quarter of XX% second increased XXXX. XX%. second in a On

North to increased Asia-Pacific quarter currency constant compared and America a all increased America XXXX. XX%, XX%, second increased On basis, X%, increased EMEA revenues XX%, the in of Latin

by quarter price of both and increases and XXXX second increase XXXX. partially mix, materials inflationary first product to Gross on impacts quarter margins the offset was and the compared quarter in and labor. increased of XX.X% improved second the by a driven to The

million million XXXX, the $XX.X in of the expenses million were benefits quarter compared XXXX other expenses quarter $XX.X quarter in excluding and to XXXX. the quarter for G&A development in second $XX G&A business non-recurring second were second of the related to charges, million expenses of and non-recurring acquisition compared second $XX.X

of of to expenses $X R&D quarter decrease to the the PROACT $X.X million of includes currency in were $XX.X final primarily of XXXX. agreement related the from them spending a to net R&D trial for second million expense, The Other charge last million interest and $X.X foreign second September. loan cessation compared gains XXA in quarter the expenses $XXX,XXX. million and with payment the million income resulted $X.X approximately translation Endospan pursuant our in to

approval impact on the AMDS offset a acquisition bottom our of PMA and for our payment deferred for XXXX. we quarter assets. $XX.X pre-tax of net to of the PerClot net the line, On $X.XX quarter to of Net loss reported charges of partially approximately Endospan, share million of second million or million of $X.X pre-tax per $X fully contingent loss by to final receipt the valuation XXXX the payment, and GAAP related allowances of the the milestone million second tax in $XX.X diluted includes consideration to related gain related

charges. Non-GAAP second excludes and the foreign non-recurring includes income quarter. currency business Non-GAAP per gains and income $X.X net was in other million development $X.XX share or

information to XXXX, additional As million press the approximately to our of $XXX full under credit $XX about to June non-GAAP including XX, reconciliation in $XX million our these refer available we results for our release debt results, cash, had a results. Please revolving in of million and us GAAP facility. our

now our And for updated for XXXX. outlook

the momentum PerClot, stent and guidance we in the improvement and are compared our to the approval for expect XX% year XXXX X% full XX% of currency half and growth of pricing XXXX, range anticipated of Given raising our to initiatives, supply first now FDA constant in of previous of between revenue XX%. grafts our revenue for

We a $XXX million range $XXX in previous compared of our to expect $XXX revenues to million to range million $XXX of million. to be

half fully to the price growth for clinical the meaningfully compared approval and We recent as have with PerClot. year continue of the Germany continue accelerate the products the productive half more year pursue clear to first second as increases hires differentiation in of we will expect where become of we to in revenue

strong track for of R&D spending, our last in will $XX to meet allow a to minimum top These continued made adjusted have performance, our we EBITDA quarter commitment second revenue With adjusted line million March of on confidence we we remain $XX decrease management, and growth, EBITDA will a our Day. Investor year XXXX plus million at guidance that in expense exceed increasing us general XXXX. our of or meet factors

evaluate and to our convertible monitor July continue debt the structure, options of address we conditions capital our maturity in In to market XXXX. to regards

to an apparent continue our on year. our with we execute the EBITDA move and near-term the rate our to strategy drive to Fed’s interest capital throughout address and options end free structure As believe increases, flow we to continue will improve and as higher we cash

the And no revolving than facility that us finally, on which our Term more do any would default to we not. our covenants drawn we at unless million end place Loan $X.X contains credit B financial in quarter, calendar of were have

on the we and under it. foresee the As facility million of have do not now, our draw credit to $XX available full need

financial covenants. not As a reminder, our do convertible any notes contain

through performance XXXX, consider strong shareholder us our and Overall, expectation affords obligations greater our continue value. flexibility ways it future we will and financial to increase as the

over turn I’ll to Pat comments. call closing his back that, With the for

Pat Mackin

Hey, thanks, Ashley.

just capping first very half a began quarter So heard, the successful of you off continued a the in that year. into the as second momentum quarter first

this generally is meaningful strategy be growth to expected we and year. Our what working EBITDA

growth also in second confident up quarter following reasons. took and we’re the continue straight will guidance our for We XXXX for the strong

those approvals; Endospan’s BioGlue growth performance staffing clinical other share in and chain our regulatory performance and initiatives; NEXUS trials, Asia principally facility to On-X a as in U.S graft result driving market Pacific stent continued regions; further enrolling. of supply currently to three, TRIOMPHE strong continued continued that in are fifth, performance our have we regulatory German in our PerClot strong recent business PERSEVERE and improvements due America two investments fourth, new Latin and strong gains; due AMDS manufacturing our two, approvals and recent First, that

execute option. we Combined, adjustable to market the in on we expand Endospan significantly XXXX, expect total assuming our

double reduce grow an to less expect We margins. to and times our as EBITDA in revenue inflation gross greater basis, despite and XXXX, which face digits net million impact we $XX of continue than adjusted compared generate than on annual headwinds its X to to leverage from the on will

second and goal want I quarter. company. around be to to conclusion, we exceptional repair the In to employees of for continue leader all market for a thank advance being in our the year a delivering XXXX expect our aortic globe standout on of

we’d operator, to that for the line With like open questions.

Operator

you. Rick go session. Thank now first question-and-answer Instructions] begin comes [Operator Our ahead. the Stifel. Please question We’ll with from Wise

John McAulay

implementation wanted for product Hey, just Ashley. actually John increases how it on benefit year. been I the of you in Pat. quarter, in kind I expectations Hey, the has what Last on half contributed have Rick This off price. second start to spoke curious certain about is implementing quarter so price successful far your of and any that are was in today. second the might areas.

Ashley Lee

Yes.

successful and in I talked looking patented of It’s patients. for through also year. we’re more products nobody and at raise go the A of given think, benefit these that on a place we demand with very throughout I significant really quarter. prices fourth products technology of I lot of there. highly some of and my the chose second we those see prices So be to expect that provides mentioned as been to some lot else rolling about as that the quarter fully we a the proprietary And has our those will in comments, were third to that

of as executed. been we well very kind and been thought it’s So

John McAulay

of half second a first Great. price Great. midpoint? end curious, take in, of that, the just of built on it to the to increases If second factors through could Is more the through price? just the the be the talk And little at I’m the I’d look you the with upside implies to what’s the higher and there it almost revenue there? split year. and then lens range? XX-XX you Like, in balance I getting follow-up us potential to a half, guidance it like first. the Can that just the for

Ashley Lee

our mentioned there’s think a for pull. the got in of I always lot I I we just Yes. talked we stent increases have can price got or up growing inventory, mean, great our comments they’re my We’ve about. that if – we done job the stent which levers grafts X% we’ve in grafts you quarter, We’ve supply of in XX% grew the X% range, a back now. first kind that the and building look our

stent to graft we the to continue So business expect grow faster.

some We some product going kick in. in. there stuff that new of out also to coming in are kick We’ve have that’ll launches regulatory got

lot we’ve mean, out. of think difference. we get really it, a got like, roll And So any projections that’s when think stuff’s to we going to the when for are approved I for like quarter, going launches

So I can digits. those depend XX% range XX%, mean, if how we’re grow confident the question things is, on together. grow we come The to double is in going we

John McAulay

Got Thank you. it. That’s very helpful.

Operator

go comes with Oppenheimer. question ahead. from Suraj Kalia Please next Our

Shaymus Contorno

today. Hi, Congrats great This for Pat. quarter. actually on on Hi the Ashley. is Suraj Shaymus

about it my right. jumped, amount XX%, kind Just to on say, kind decent our of if SG&A, looking at is a I’d math of start end,

reason that, please? a you it down particular if that’s break see any that going for Can continuation a little, looking for forward. might just Just we

Ashley Lee

Yes. jump. one. real I would It’s actually not take a that SG&A

Pat Mackin

Yes. spike big we was in had contributor acquisition. consideration the The biggest AMDS that the for contingent

charge that million adjusted in previous prepared our that remarks million. was that came I to in $XX And a described, of So $XX amounts I’d the the SG&A comments about that at some just year. made and excluding around roughly compared non-cash

Ashley Lee

an way look that mean, mean, at accounting grew our at grew and the I that’s X%. the If the company, of XX% pure of operating we operations I acquisition I an Yes. line we expenses the this, top look did. I gyration

Shaymus Contorno

it. Got

Pat Mackin

Yeah.

around XX% to previous from over a the to is little it the comparison XX% true around So year.

Shaymus Contorno

Thank you for that. Perfect.

thinking for of kind how room current rate, as of kind we of think growth well, Just U.S. average sites what’s should kind utilization On-X the there? of

Ashley Lee

Yes.

a growing I’m acquired market is the we been On-X an global million since the a a double going mean, we’ve company. in That’s obviously about specifics. – mitral I and we to aortic So valve. plays have $XXX that into not digits get valve

because our on You still can plenty seen exit to have exit, – the do taken places. much of other had of so some we’ve growth. that decided we’ve we math for room numbers, kind in geographies competitors but in We’ve share they’ve some

a double-digit On-X the for and upside see are aortic. to and growth valve better also publication around interested we the even had So we’ve continue that’s really world than mitral that up people we the very put in

customers aorta, strength and at feel think continue the we the So going of global that our grow with range on our I forward. channel to it’s product, focus to our with of going relationships and kind the double-digit

Shaymus Contorno

Perfect. Perfect. Thank you questions. for taking our

Operator

comes Street ahead. from [Operator Instructions] question Markets. go Lake Our Frank Takkinen Please Capital next with

Frank Takkinen

should prepared to half Great. Thanks but into and a that line still be been how to one we the came start Was the Wanted done? on through in that. stents. back work capacity on confident your back solidly for take hoping quarter. with us of really be about taking you there you with the your the quarter. year? deeper alluded clearly to you item questions. the a remarks, has challenge it Pat, little this bit status Are feeling that manufacturing pretty could Is current of thinking Congrats

Pat Mackin

Yes.

inflationary the go even the performance all stent you we were and our period hit last time couple we top having is grafts, of we where our line facility grafts. for right, in QX, the bottom hard in reason last talked – hiring is if really in kind was one a of about we over which line quarters, people and our that our that Germany, of the this produce big So this is though year, light stent that only our highlighted like kind we on back

a The trained quarter that team the the they’ve they in great last XX Those year. initiative in they we like in hired done, XX, the get place of did to the We all basically put our last which a – told plan hired fourth in hit we first you first job. the year, were then of quarter and half quarter production fourth people. and big had for quarter

and in We’re there. second very into the and place. set we’ve the well-positioned. team that well XXXX the half We’ve got up people we’re going for got producing They’re with

largely So the executed that extremely think us is behind and teams I well.

Frank Takkinen

share just And parse as of that there’s in are heard the but that maybe bring can on I normal. on occurring. if returning Okay. you between comments could On-X, of there’s another one, hoping on a deeper That’s growth was I maybe market as to us you – there that was helpful. market any little kind more there in bit taking growth hoping the And market as share, well well, if taking out dynamics factor the

Pat Mackin

Yes.

mean, So their business the I TAVR I TAVR reported grew one if faster that, companies think of that surgical one is which business, interesting. their you saw, thing than

in So I market that there that. well market kind to do a and we in our growth we continue think overall don’t know of on great regions. is of a that all have the perform do data I

double All regions have been of digits. growing our

that I that’ll or out patient is, got excellent got market grows, XXX we’ve data. On-X think a other post-approval presented on thing We’ve be not data the whether coming more valve. shortly here trial our with

just as message and out valve pining continuation taking doing it’s just the and sales share drum we they the team as of best we the great got we expand and aortic just their we’re it’s a So world in internationally, well. job keep and getting on keep a that

that think room to a I us for of again, business. lots So to grow there’s continue

Frank Takkinen

you infusion maybe generation quarter, clearly of within was the well as factors And couple hoping regular or are Ashley non-operational you to cash $XX the cash last last cash us parse related the the that not outflow the a then about just could to Great. think us for in kind cash quarter of this then one the P&L as but through cash kind could and business, the from in $XX to million of and the end through quarter the generation million bridge hoping year. some generation was Endospan help the

Ashley Lee

Yes.

Frank, the you’re So to the right, PMA second Endospan. Baxter. payment there lot from milestone received the noise We was in of quarter. We a had payment

in of fair $X noise amount generated when a flow quarter of was of in there we out, free So year. second actually that And there. million all cash of we – back this you the

about well. talking driving higher, cash only EBITDA we’ve focus our So a adjusted focus lot generating on but a been on not as

where basis with to point second quite couple very trends pleased last free So flow commit we’ve that we’re a ready the where a and basis and close we’re quarter flow been cash yet at where getting quarters basis. positive think a be XX-month in think the the point cash being forward. generating with ended up I we’re to really will that where free we’re the to we that don’t individual and trailing about the quarter. over on able an But we generate very XX-month we’re we encouraged are going quarterly both of seeing we a basis on to trailing

Frank Takkinen

Thanks I’ll taking for the there. questions. Perfect. stop

Operator

further are at Instructions] no There time. [Operator questions this

session. our concludes that So question-and-answer

I to over floor Pat for CEO Mackin, closing the and President would to now turn like remarks.

Pat Mackin

Well, we listen, as quarter. joining a afternoon. this see, can great thanks had for call And the you

on in We have top in into well-positioned EBITDA. very of and the and second going growth adjusted we’re to half deliver confidence of our think a lot million line our $XX double-digit XXXX

Thanks back and for will quarter. joining. tuned be we stay next So

Operator

attending Thank you for The now today’s concluded. has presentation. conference

now disconnect. You may

Artivion (AORT) 3 Aug 232023 Q2 Earnings call transcript