Artivion Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 6, 2024

There are 9 speakers on the call.

Operator

Greetings. Welcome to Artivion First Quarter 2024 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. As a reminder, this conference is being recorded.

Operator

I will now turn the call over to Lane Martin of the Gilmartin Group. Thank you. You may begin.

Speaker 1

Thanks, operator. Good afternoon, and thank you for joining the call today. Joining me today from Artemion's management team are Pat Matkin, CEO and Lance Berry, CFO. Before we begin, I'd like to make the following statements to comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties and are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Speaker 1

The forward looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations or predictions of the future. These forward looking statements are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from these forward looking statements. Additional information concerning certain risks and uncertainties that may impact these forward looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with the details highlighted on today's call on the Investor Relations section of the Ativian website. Now, I'll turn it over to Ativian's CEO, Pat Mackin.

Speaker 2

Thanks, Lane, and good afternoon, everyone. Q1 was a strong quarter for Artivion as we maintained top line growth momentum and executed on key operational priorities. I'm pleased to report that in the Q1 of 2024, we achieved constant currency revenue growth of 16% year over year, representing $97,400,000 in revenue and adjusted EBITDA growth of 60% year over year compared to the Q1 of 2023. More recently in April, new clinical data from our On X low INR post market study and AMDS PERSEVERE trial were presented at the ATS Annual Meeting in Toronto. The 5 year results from our On X aortic heart valve low INR post approval study show that the On X aortic valve has an even more durable safety and efficacy profile for patients receiving low dose warfarin than predicted by the results of the original PMA trial.

Speaker 2

Meanwhile, the late breaking 30 day data from PERSEVERE demonstrates positive aortic remodeling in over 80% of patients after treatment with AMBS. These two milestones demonstrate the continued success in our clinical and regulatory programs as well as the continued expansion of our market leading aortic portfolio. Our investment in these two products and related clinical trials reinforce that we are committed to remaining the leader in aortic health. From a financial perspective, as anticipated, our strong Q1 performance was led by tissue Each win compared each when compared to the Q1 of 2023 and all on a constant currency basis. In the Q1, we also continued to benefit from our footprint expansion through regulatory approvals in key international markets.

Speaker 2

As a whole, our first quarter results and recent regulatory and clinical achievements further validate our growth strategy. From a product category perspective, as I just mentioned, tissue processing grew 26% year over year on a constant currency basis in Q1. We expect our tissue business will continue to grow double digits throughout the balance of 2024 as we further leverage our increased supply of our proprietary Synegraft pulmonary valve and continue to benefit from higher Ross procedure volumes. Benefits from last year's tissue pricing initiative positively impacted Q1, but will begin to annualize in the Q2 of this year. As I also indicated earlier, our stent graft revenues grew 19% on constant currency basis in the Q1 compared to the Q1 of last year.

Speaker 2

Our stent graft supply is now healthy and stable, which is producing strong growth across the stent graft portfolio. Lastly, I also previously mentioned, On X revenues increased 11% year over year on a constant currency basis as we continue to take market share globally with the only aortic valve that can be maintained at an INR of 1.5 to 2.0. Based on feedback from the field, these market share gains and proven clinical outcomes that were reinforced by the results of the post market study recently presented at AATS. We will maintain our strong conviction that the On X is the best aortic mechanical valve in the market and will continue to take market share worldwide. Revenues in the Q1 were also driven by continued progress and growth initiatives in APAC and Latin America, primarily through new regulatory approvals and commercial footprint expansion.

Speaker 2

Latin America delivered constant currency revenue growth of 22%, while APAC saw a 3% decline compared to the Q1 of last year. The decline in APAC this quarter was primarily driven by timing of distributor orders, which impacted BioGlue revenue growth. Fluctuations in growth rates in APAC and Latin America are to be expected as those regions have the highest percentage of stocking distributor sales. We still anticipate strong revenue growth for both regions for the full year and over the coming years as we expect to leverage our industry leading product portfolio in those regions. Let me turn now to the clinical data presented at ATS in April that I mentioned previously.

Speaker 2

We are very pleased to see positive results from the On X aortic heart valve low INR real world post market study presented at AATS in Toronto. The abstract reported long term clinical outcomes of 229 study participants with a target INR of 1.8 out to 5 years. The results show a significantly lower composite primary endpoint for thromboembolism, valve thrombosis and major bleeding combined at 1.83% compared to the predefined historic control of 5.39%. This was driven by an 87% reduction in major bleeding and no increase in thromboembolism. Notably, the data compares favorably to the results of the On X aortic heart valve low INR trial, the 1 year post market study results presented last year, as well as the On X aortic low INR ID study that was first published in 2014.

Speaker 2

The fact the device performed as well or better in the real world setting than it did in the original clinical trial provides strong additional validation that the On X aortic valve is the best aortic mechanical heart valve market in the market for patients. Thus increasing our confidence in our ability to obtain even greater On X aortic valve market share globally. We believe the longevity of the On X aortic valve combined with a significantly lower risk of bleeding over the other mechanical heart valves make the On X aortic valve a compelling option for patients under the age of 65. Also at AATS late breaking 30 day data from our AMDS PERSEVERE trial demonstrated positive aortic remodeling in over 80% of patients as well as no occurrence of deign tears. These positive results follow the 30 day IDE data from the same trial that was presented at STS in January of 2024, which demonstrated a statistically significant 72% reduction of all cause mortality and a 52% reduction in primary major adverse events when compared to the current standard of care Hemi Arch procedure.

Speaker 2

We're excited to see the continued positive results of the PERSEVERE study further reinforcing an unrivaled clinical benefit in the life saving nature of AMDS. We continue to anticipate PMA approval for AMDS in 2025, which would open the U. S. Adjustable market opportunity of about $150,000,000 with no competitive alternatives. In addition, our partner EndoSpan is continuing to make progress on its U.

Speaker 2

S. IDE trial called TRIUMF for its Nexus aortic R. Expense system. As of today, there have been 44 of the 60 primary endpoint patients enrolled. Assuming the trial endpoints are met, Nexus remains on track for approval in the back half of twenty twenty six.

Speaker 2

In summary, we're excited about our great progress early in 2024 and look forward to sustaining our momentum throughout 2024 and beyond by driving continued growth of our On X portfolio, stent graft, sinograft pulmonary valve and further expanding our footprint in APAC in Latin America. With that, I'll now turn the call over to Lance.

Speaker 3

Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year over year basis and revenue growth rates will be in constant currency unless otherwise noted. Total revenues were $97,400,000 for the Q1 of 2024, up 16% compared to Q1 of 2023. Non GAAP adjusted EBITDA increased approximately 60% from $10,800,000 to $17,300,000 in the Q1 of 2024.

Speaker 3

The combination of strong top line constant currency growth and significant marketing and G and A expense leverage resulted in adjusted EBITDA margin of 17.8%, a 480 basis point improvement over the prior year. From a product line perspective, tissue processing revenues increased 26%, stent graft revenues grew 19%, On X revenues grew 11% and BioGlue revenues grew 1% in the Q1 of 2024. As anticipated growth in our tissue business was very strong this quarter as we benefited from both the substantial price increase we implemented in Q2 of last year and improved supply from our yield improvement initiative. We expect the growth rate to come down in future quarters as we annualize the price increase, but we still anticipate double digit growth for the full year. On a regional basis, revenues in Latin America increased 22%, North America increased 18%, EMEA increased 17% and Asia decreased 3%, all compared to the Q1 of 2023.

Speaker 3

The decrease in Asia Pacific region was expected and driven primarily by timing of distributor orders, which also impacted BioGlue sales. As Pat discussed, you should expect to see some fluctuation in quarterly growth rates in the more distributor based regions and we still anticipate strong growth in Asia Pacific for the full year. As anticipated, gross margins were 64.6% in Q1, flat to the Q1 of 2023. General, administrative and marketing expenses in the Q1 were $30,700,000 compared to $50,400,000 in the Q1 of 2023. Non GAAP general administrative and marketing expenses were $48,100,000 in the Q1 compared to $45,200,000 in the Q1 of 2023, representing 500 basis points of leverage.

Speaker 3

R and D expenses for the Q1 were $6,900,000 compared to $7,200,000 in the Q1 of 2023. We underspent in R and D in Q1 and we expect to catch up over the remainder of the year. We still anticipate full year R and D spend as a percentage of sales to be relatively flat to prior year. Interest expense net of interest income was $7,500,000 as compared to $6,000,000 in the prior year. Other income expenses totaled $7,500,000 in net interest expense, $3,700,000 for loss on extinguishment of debt and foreign currency translation gains of approximately $1,400,000 On the bottom line, we reported GAAP net income of approximately $7,500,000 or $0.18 per diluted share in the Q1 of 2024.

Speaker 3

Non GAAP net income was $2,600,000 or $0.06 per share for the Q1. As expected, free cash flow was negative $9,100,000 in the Q1 of 2024. As a reminder, Q1 is our most cash intensive quarter due to the payment of annual bonuses and due to normal activities such as sales meetings and industry conferences, which are heavier in the Q1. Importantly, we continue to expect free cash flow to be positive for the full year 2024. As of March 31, we had approximately $51,100,000 in cash and $313,300,000 in debt, net of $7,100,000 of unamortized loan origination costs.

Speaker 3

Importantly, this is inclusive of the impact of our recently closed comprehensive credit agreement in January. As a reminder, the initial $190,000,000 term loan $30,000,000 from the revolving credit facility were drawn at close along with the use of some cash on our balance sheet to retire the existing senior credit facilities and pay related transaction expenses in the Q1. Overall, this credit agreement coupled with strong financial performance gave us gives us flexibility with no near term debt maturity overhang as we continue to evaluate the best options to address our convertible debt. Further, we do not anticipate the need to raise additional capital to fund our debt obligations, our investments in our channels or our pipeline in the foreseeable future. Our net leverage at the end of Q1 was 4.5, down from 6.8 in prior year.

Speaker 3

At the midpoint of our EBITDA guidance, we expect net leverage to be closer to 3.5 by the end of the year and to continue to decrease in 2025. And now for our outlook for the remainder of 2024. Given our momentum in the Q1 of 2024, positive data from the recent AATS presentation supporting the long term clinical benefits of On X, improved stent graft supply and robust demand for our center graft pulmonary valves, we are raising the midpoint of our fiscal year 2024 revenue guidance and now expect constant currency revenue growth between 9% 12% compared to the previous range of 8% to 12%. We expect reported revenues to be in the range of $386,000,000 compared to our previous range of $382,000,000 to $396,000,000 At current rates, we expect FX to have a negligible impact on full year revenue growth rates. With our continued top line revenue growth and general expense management through Q1, we continue to expect adjusted EBITDA to be in the range of $68,000,000 to $72,000,000 for the full year 2024, representing a 26% to 34% growth over 2023 and 2.80 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges.

Speaker 3

The strong start to the year puts us on a good trajectory for achievement of this guidance. As a reminder, we expect gross margins to remain at levels similar to 2023 and continue to expect to drive significant leverage from our global sales force and G and A infrastructure. Additionally, R and D expense is expected to remain relatively flat as a percentage of sales. In summary, we feel great about the strong start to the year and we are excited about the prospects of the business in 2024 and beyond. With that, I will turn the call back to Pat for his closing comments.

Speaker 2

Thanks Lance. So as you've heard, we're very pleased with our Q1 performance kicking off 2024 with a very strong start. We continue to deliver strong top and bottom line growth, expand our markets and advance our clinical pipeline. We expect future growth to be driven by: 1st, the continued strong growth in our stent graft business, driven by improved supply in our innovative portfolio 2nd, continued market share gains of On X driven by the recent 5 year data from our real world post market trial reinforcing the safety and efficacy of our On X aortic low dose warfarin. 3rd, growth of our proprietary synograft pulmonary valve driven by growth of the Ross procedure and our operational improvements.

Speaker 2

4, continued growth in Asia Pacific and Latin America from our channel investments in new regulatory approvals. In conclusion, remain confident in the near and long term prospects of our business and we believe our Q1 results validate our expectation for a strong year ahead as we focus on continued revenue growth and free cash flow generation. I want to thank all of our employees around the globe for delivering a strong Q1 and their continued dedication to our mission of building a world class aortic company. With that, operator, please

Speaker 4

open the

Operator

line for questions. Thank Our first question is from Mike Matson with Needham and Company. Please proceed.

Speaker 5

Yes, thanks. So I wanted to start with the tissue business. So I know you talked a little bit the what drove the growth there, but maybe you could just elaborate on the supply and how you're able to increase that. And then the outlook, I know you're not giving guidance for 25% yet, but I mean is this business in a position now where you could sustain double digits longer than this year? Or is this more just kind of a unique year for tissue?

Speaker 5

Yes. So I would say there's a couple

Speaker 2

of things. Number 1, I've talked previously about the growth of the Ross procedure. There's been a tremendous amount of new data that's been released on the Ross that shows at 25 years that you can actually have an aortic valve replacement with your own native pulmonary valve and backfill your missing pulmonary valve with our valve. And your survival and morbidity matches that of the general population. So it's a great operation and it's growing extremely fast.

Speaker 2

So that's the first. There was some data published at presented at AATS in Toronto last week about this procedure growing extremely fast. Number 2, you heard Lance talk about we had a big price increase last year that's kind of annualized at the end of the Q1. But then we also had talked previously about some of our operational improvements that we've undertaken here at the company and seen a very nice increase in our yields. So I think the combination of those kind of three things obviously had a huge Q1 with the pricing kind of annualizing itself this year.

Speaker 2

It will be basically supply benefiting the rest of the year. And then I think going forward this procedure is not slowing down anytime soon. So I think there's a lot of opportunity for that. But as you know, ultimately there's a constraint on how many tissue valves you can get. So we're not going to give 25 guidance at this point, but feel very strong about double digit growth this year.

Speaker 5

Okay. I understand. And then if I take the EBITDA that you did this quarter and I just multiply by 4, it gets you into the guidance range. It seems like the last 2 years we've seen EBITDA kind of ramp throughout the year as your revenue ramps. So just wondering why you're maintaining the guidance here?

Speaker 5

Is there maybe it's the R and D spending timing or something, Lance?

Speaker 3

Yes. I think there's a couple of things. First of all, it's just early in the year. That's 1. 2, we did have a good start to the year, but part of that was definitely due to timing on the R and D spend and we absolutely intend to spend that money this year.

Speaker 3

So those are the 2 big things, just a little bit early to be to raise that number, which was pretty strong growth and we'll see how it goes throughout the rest of the year.

Speaker 5

Okay, great. Thanks.

Operator

Our next question is from Suraj Kalia with Oppenheimer and Company. Please proceed.

Speaker 4

Good afternoon, Pat. Lance, can you hear me all right?

Speaker 2

Yes. Hey, good afternoon, Suraj.

Speaker 4

So Pat, congrats again. You guys are on a roll. Pat, the obvious question. I know you've been talking about this for some time, but it seems like in the last two quarters, you guys seem to be just shifting gears in terms of CAGR. Now the leverage ability this quarter also surprised everyone.

Speaker 4

So Pat, just talk to us, I understand the supply issues and some of the other constraints that you were talking about, but is this something more fundamental we should be cognizant about, a more tenured sales force, rep commission changes, different marketing method. There seems to be a distinct shift in everything. Maybe if you could give us some additional color there?

Speaker 2

Yes, sure. No, I think it's one of the nice things about the company is we've got a portfolio of products, right? So we also have a portfolio of regions. And as you heard, we had strong double digit growth across all of our portfolio our entire portfolio except for BioGlue, which we expect to grow kind of low single digits and across all of our regions except for APAC because we had a timing thing. So it's kind of a combination of we got highly differentiated products with really strong channels around the world and you're seeing kind of them firing on all cylinders.

Speaker 2

And again I just would remind you, if you look at Synograph, nobody no other company has Synograph. The ROS procedure is growing very rapidly and we are the market share leader and we're taking advantage of that. The On X valve is the market leading mechanical valve in the world and we've just shown data that shows almost an 80% reduction I mean, an 87% reduction in major bleeding. So we feel very strong that that is the only mechanical valve that should be used and we're not going to stop until we take it all. Number 3, our Snack Wrap portfolio, we have full supply.

Speaker 2

We have had no supplier problems probably for like a year and

Speaker 4

a half,

Speaker 2

very highly differentiated products. Our neo device is growing rapidly. Our thoracoabdominal devices are growing rapidly. Nobody has an AMDS. Nobody has some of the technologies we have.

Speaker 2

So I think it's just the combination of all these portfolios under this aortic umbrella with powered by channels around the world. When you combine it all together, it's driving nice results. I think it's nothing more complicated than that.

Speaker 4

So Pat, would it be fair to summarize this as more of product attributes yielding a pull through demand rather than any fundamental shift in your sales and marketing structure and messaging. Is that fair to put it that way?

Speaker 2

Yes. I mean, I guess if you think about it, we've got great channels, but this is a dynamic market, right? So just since our last call, we've released the post the 5 year post approval data for Onex and we've released more data on AMDS, right? So that AMDS PERSEVER data was in the quarter. It was at the end of January.

Speaker 2

So we've got great sales forces, great products, but they're being backed up by very strong clinical data. So everything that's been coming out on the products has done nothing but reinforce and same with the ROS. There is ROS data presented at AATS. It was one of the major focuses. And again, that's growing very rapidly.

Speaker 2

So it's really the combination Suraj of proprietary product, strong channels and really strong clinical data that just keeps coming out on all the products that we represent.

Speaker 4

Got it. Pat, one for you, one for Lance and I'll hop back in queue. In terms of additional opportunities, especially as I think about NexSys, love to get your updated thoughts. Lance, if I could quickly throw in there, I missed part of your commentary about the leverage, the SG and A in the quarter. Can you talk to about the sustainability?

Speaker 4

And also is my math right that 23.5 seems to be the conversion price? How are you all thinking about the 23 and beyond? What happens to the conversion? Gentlemen, congrats again. Thank you for taking my questions.

Speaker 2

Hey, thanks, Raj. Yes, as far as Nexus goes, I mean, there's been data, recent data was published at AATS excuse me, at STS on the TRiOMP trial, I think it was the first 20 out of the 60 in the pivotal arm, showed very strong results. They've now enrolled 44 out of the 60. That trial should enroll in the second half of this year. And it's the data looks very good.

Speaker 2

And again, you guys have been around a long time, particularly you Suraj and you know how clinical trials go. But think if you look at the data and the technology, that's a meaningful space to be able to treat a chronic dissection or an aneurysm of the arch with a catheter is a unique opportunity and that's why we invested in the company and that's why we have an option to acquire. We're obviously going to be watching this as the trial enrolls and they get their data, but it looks promising. Lance, you want to take the other 2?

Speaker 3

Yes. So on SG and A leverage, we think that's a big opportunity for us going forward. We had really good leverage last year, good start in Q1. Now 500 basis points is not something that we're committing to on a quarter by quarter basis, but you can really see when we have strong revenue growth, the leverage in the model. And I think that is a big opportunity for us going forward.

Speaker 3

On the convert, the $23.50 is when the convert is in the money, but we can't force conversion unless the stock gets to $30 I think and some change. So just to be clear on that where that is. And then as far as how we're thinking about it, I mean, we talked about this on the Q4 call that, I mean the spread between the interest, the cash interest we're paying on these converts versus the delayed draw term loan is pretty significant. And at the moment, we're just happy to pay the lower interest. And I think we'd probably all hoped that interest rates would have maybe started to come down by now, but that's not the case.

Speaker 3

So we're just watching it and we'll keep keeping our options open on what to do on that.

Operator

Our next question is from Rick Wise with Stifel. Please proceed.

Speaker 6

Hey, Pat. Hey, Lance. This is John on for Rick this quarter. Really strong growth on the top line. I just wanted to maybe start off on the On X data that recently read out at AATS.

Speaker 6

As you highlighted, really strong. I just want to hear it maybe from more of a market perspective. How much share do you see as left to go for Onex to take in the mechanical space? And beyond that, what do you see as the opportunity for the valve to potentially reach the bioprosthetic market?

Speaker 2

Yes. So on the pure mechanical market, the global data we have, we've got about a 30% share globally. It's higher in the U. S. It's more like 50 plus in the U.

Speaker 2

S. Than it is outside the U. S. So we have a lot of room to go outside the U. S.

Speaker 2

I mean I've heard comments from surgeons when we've talked to them about this data about even competitive accounts like why would anybody use another valve. So our team is very fired up about going aggressively after this mechanical valve market. As far as the bioprosthetic segment typically in patients under 65, there's certainly some signals there that this data can go after bioprosthetic, but I'm not going to get out over my skis here. This data just got released and we're going to be exploring that. But for right now, we're going to aggressively after the Mechanical segment when we still have a lot of room to go.

Speaker 6

Thanks. That's helpful. And if I could sneak in sort of a 2 part here maybe, the first for Pat, the second for Lance. Just on the aortic side of the business, growth was really strong this quarter. I think it came in at kind of mid-20s.

Speaker 6

I just want to get a sense from you what the key growth contributors are and how you're looking at growth for the aortic business for

Speaker 2

rest of the year?

Speaker 6

And then second for Lance, just on the gross margin profile, tissue was particularly strong near 60%. Just how are you thinking about tissue gross margin for the rest of the year and gross margin for the business as a whole? Thanks.

Speaker 2

Yes. So just on the stent business, so the GAAP growth was 23%. We typically talk about constant currency was like 19. Obviously very strong. And I mentioned it a little bit earlier.

Speaker 2

I mean I think what's driving this, we've got strong channels kind of around the globe, but we've also got a very differentiated unique portfolio. For example, AMDS, we had the U. S. IDE trial PERSEVER presented at the beginning of the quarter, kind of the end of January with phenomenal data I mentioned it, a 72% reduction in mortality, a 52% reduction in major adverse events, no gains. So clearly the AMDS is proprietary, nobody has it and we just released great data.

Speaker 2

We've also got 2 very significant technologies in the branched stent graft area, The frozen elephant trunk in the arch and then the branched thoracabdominal in the kind of the midsection of the aorta. And those are growing very rapidly. So again, we have a it's the whole strategy, right, is we're an aorta company. We can treat from your aortic valve to your iliac with a bunch of different technologies and the majority of them are very proprietary with a strong sales force. So I think that's what's driving the stent graft side.

Speaker 2

I think you had a question on margin for Lance.

Speaker 3

Yes. So overall, we're qualitatively saying you expect gross margin to be relatively year over year. There's a lot of mix in our gross margin. And you have we have 4 different product lines at different margins in 4 different regions with different margins. And so there's a lot that goes into it.

Speaker 3

I will say specifically on the center graph pulmonary valve portion of our preservation services. Now preservation services has historically been our lowest gross margin, but our pulmonary valves are actually north of company average. And so specifically with that, as that grows faster, that's a tailwind. It's not a headwind. And now I don't want you to take those comments and say, oh, that means mix should go up because there's a lot of pieces.

Speaker 3

But that part growing faster isn't a negative for gross

Speaker 6

margin. Thanks. That's helpful.

Operator

Our next question is from Frank Taccatin with Lake Street Capital Markets. Please proceed.

Speaker 7

Great. Thanks for taking the questions. Pat and last congrats on the quarter. I was hoping to start with 1 on Onex as well. In light of all the data packs that have came out consistently higher market share, how do you think about pricing opportunity?

Speaker 7

Have you taken any recent price increases? And do you think you have the ability to continue to take price?

Speaker 2

Yes. It's a good question, Frank. I mean, it really is kind of evolving where it used to be mechanical valves and tissue valves, like 2 discrete buckets. But what's really kind of evolving from this data is that there's kind of a new category in between a mechanical valve and a tissue valve which is On X. So I mean we've really got the primary objective here is that we feel like this is the best mechanical valve out there.

Speaker 2

And I do think it should be the only mechanical valve being used. So that does I think bring with it some pricing power that we will exploit. I'm not going to get into specifics on the call, but I do think there is an opportunity for that.

Speaker 7

Okay. That's helpful. And then maybe just one more for me for Lance on the free cash flow remaining quarters of the year?

Speaker 3

Cash can it can kind of jump around quarter to quarter. So we're not really committing to positive for every single quarter, but definitely expect it to be positive for the full year, probably stronger in the back half. There's just some heavy cash outlay things that occur in the first half of the year. And the second half is just a little bit lighter on that, but definitely expect to be positive for the full year.

Speaker 8

Okay. That makes sense. Thanks for taking the questions.

Speaker 2

Thanks, Frank.

Operator

Our final question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed.

Speaker 8

Hi, Pat and Lance. Just a couple from Aaron. Could you talk about EMEA a little bit as far as any macro views and any pricing that's been taken or planned to be taken? And some of that uptake in the strong quarter from new users, new surgeons that are coming on borders and more in a respect of higher utilization per surgeon or per facility?

Speaker 2

Yes. So NEO, we're not going to break out specific products underneath the kind of aortic stent umbrella, if you will. But I will say that NEO is growing very rapidly. It's a combination of expansion geographical expansion. We're selling NEO in Asia.

Speaker 2

We're selling NEO in Latin America, many markets in Europe. It's obviously not approved in the U. S. Or Japan, but it's doing extremely well. And as I mentioned earlier, it's a proprietary technology.

Speaker 2

We have a very unique stent system on that device, which we feel has better outcomes than the other devices out there and we're being very aggressive kind of going after that business. So it's a product that's done well and continues to do well.

Speaker 8

Got it. Okay. And then secondly for us, Lance, can you talk a little bit about the SG and A and maybe cadence for 2024? It seemed like it was light in the Q1 and how we should think about the leverage on the overall spend from Q2 to Q4?

Speaker 3

Yes. I mean, honestly, like on an as adjusted basis, it looks like on an as reported basis, but that's because some of the contingent consideration fluctuations. But on an as adjusted basis, it was $48,000,000 which was fairly consistent with Q4. And I think something in that kind of range is really what we think about as we move throughout the year on an as adjusted basis. So, which should drive some really good leverage year over year.

Speaker 8

Great. And then finally for us, any commentary on tissue business with regard to I know that pulmonary has been strong, but any commentary on cardiac versus vascular generally speaking on pricing or units out there for the quarter?

Speaker 2

Yes. Again, we're not going to break out components underneath that kind of the tissue. Obviously, we've talked several quarters in a row about the price increases on cardiac and the volume increases. So cardiac is definitely driving it, but the whole segment is growing. So but we're not going to break out pieces.

Speaker 8

Perfect. Okay, I got it. That does it for us. Thanks for taking the questions.

Speaker 2

Thanks, Jeff.

Operator

Mr. Mackin, there are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Speaker 2

No. Thanks for joining for our Q1 call again. We were very pleased with the Q1 and 16% top line growth, 60% bottom line growth. We're executing executing on the pipeline. We've got great products, great data, great sales forces and plan on doing more of the same as the year keeps going.

Speaker 2

So appreciate your support and look forward to our next call with you.

Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time and thank you for your participation.

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Key Takeaways

  • 16% constant currency revenue growth to $97.4 M and 60% adjusted EBITDA increase to $17.3 M in Q1 2024.
  • Presented 5-year On-X valve post-market data demonstrating an 87% reduction in major bleeding and no increase in thromboembolism.
  • AMDS PERSEVERE trial 30-day data showed positive aortic remodeling in over 80% of patients and significant reductions in mortality and adverse events, supporting a 2025 PMA submission.
  • Raised full-year guidance to 9–12% revenue growth and $68–72 M adjusted EBITDA, reflecting confidence in the pipeline and market expansion.
  • Asia-Pacific revenues declined 3% due to distributor order timing, and Q1 free cash flow was negative $9.1 M driven by seasonal cash outlays.
AI Generated. May Contain Errors.
Earnings Conference Call
Artivion Q1 2024
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