LeMaitre Vascular Q4 2024 Earnings Call Transcript

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Provided by Quartr
February 27, 2025
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Operator

Welcome to the LeMaitre Vascular Q4 twenty twenty four Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. J. J.

Operator

Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Good afternoon, and thank you for joining us on our Q4 twenty twenty four conference call. With me on today's call is our CEO, George LeMaitre and our President, Dave Roberts. Before we begin, I'll read our Safe Harbor statement. Today, we will make some forward looking statements with the meaning of The U. S.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward looking statements are based on our estimates and assumptions as of today, 02/27/2025, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward looking information and the risk factors in our most recent 10 K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non GAAP financial measures such as organic sales growth.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

A reconciliation of GAAP to non GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemate.com. I'll now turn the call over to George Lemaitre.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Thanks, JJ. Q4 featured growth in sales of 14%, op income of 26% and EPS of 30%. Sales growth was led by graphs, shunts and catheters up 23%, fourteen % and twelve % respectively. By geography, APAC was up 21% in Q4, EMEA '18 percent and The Americas 12 Percent. I'll focus my remarks on three topics: the growth of our sales team, our new international sales offices and our MDR CE mark and regulatory progress.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

We ended Q4 with 152 reps, up 12% year over year and we're targeting 165 at twelvethirty onetwenty five. As rep headcount has increased, we've been building out our sales management team. We now have 31 managers, up 29%. We believe the sales force is our number one asset and we will continue to invest in sales managers and offices. Just last week, we began shipping products from our new Shanghai office to Chinese customers.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

The timing of the Shanghai move is appropriate as sales were up 48% in Q4 and we received our Chinese XenoSure cardiac approval in December. We look forward to launching one of our most important products in the number two medical device market. We should begin selling XenoSure in H2. As for Europe, in December, we leased a Swiss office and we plan to begin shipping products to Swiss hospitals in June. Shipping from this office should reduce customs complexity and help increase sales.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Switzerland is LeMay's sixth largest European subsidiary and this will be our sixth European office. We also continue to push forward with Go Direct projects in Portugal and Czechia, where we believe direct to hospital sales will begin in H2. Both countries utilize the CE mark and are members of the EU. Poland might be a next logical step. Turning to regulatory, we've now received 16 of our 23 MDR CE marks.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

The seven remaining MDRs should be received in 2025. One of these approvals is Autograph, our largest U. S. Product, which we believe will receive its inaugural CE mark in H1. We've already received autographs approvals in New Zealand, South Africa, Thailand and Malaysia and we expect to receive approvals in Australia, Canada, Singapore and Korea by H1 twenty twenty six.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Also the Irish and German RestoreFlow allograft approvals are in process and we anticipate at least one approval in 2025. These approvals will expedite approvals in other European countries. I'd like to thank J. J. Pellegrino for his exceptional service to Linate Vascular.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

This is a bittersweet moment for all of us Linate ers. We're happy to watch J. J. Begin to enjoy retirement, but we'll miss him. For the last nineteen years, we've been able to enjoy his smarts, honesty, humor and warmth.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

J. J. Has been one of the key architects of LeMaitre's success and will continue on as a Board Director for the foreseeable future. As the saying goes, when one door closes, another door opens. Dorian LeBlanc will step in as our new CFO starting March 10.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Dorian has experienced has previously served as CFO at LumeraDx and VP of Finance at Elear and we're excited to welcome him. With that, I'll turn the call over to JJ for the seventy third and final time.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Thanks, George. In Q4, our differentiated product portfolio, direct to hospital model and larger sales team produced 8% price and 6% unit growth. By product, Artegraft, Valviotome and RestoreFlow led the price improvements. We're often asked about pricing, so here are some additional detail. U.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

S. List prices increased 6% going into 2022, '20 '20 '3 and '20 '20 '4. These list prices resulted in actual worldwide price increases of 8%, twelve % and nine %. For reference, the recent January 2025 U. S.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

List price increase was 8%. The actual 2025 worldwide price increase remains to be seen as many factors influence the translation of list prices into actual prices. In Q4, our gross margin increased 120 basis points year over year to 69.3%. The increase was a result of higher ASPs, direct labor efficiencies, improved restore flow allograph yields and restrained quality expenses. We are guiding a Q1 gross margin of 69.7% as we benefit from our January 2025 price increases as well as continued manufacturing efficiencies.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Operating expenses in Q4 twenty twenty four were $25,700,000 a 12% year over year increase. The increase was largely driven by investments in our sales team. However, hiring outside of the sales force was muted and our worldwide headcount was up only 6% in the quarter versus the prior year. As a result, Q4 twenty twenty four operating income increased 26% year over year to $12,900,000 and operating margin of 23%. We ended Q4 twenty twenty four with $300,000,000 in cash and securities, an increase of $176,000,000 in the quarter.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

The increase was driven by net proceeds of the convertible offering of approximately $168,000,000 as well as $10,000,000 in cash from operations. The impact to our P and L in Q4 was minimal. Interest income from the invested proceeds was $430,000 while interest expense was $205,000 which improved EPS by $0.01 per share. In Q1 twenty twenty five, we expect total interest income of $3,100,000 and total interest expense of $1,300,000 which improved EPS by $0.02 per share. As you recall, we installed the Microsoft D365 ERP system in The U.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

S. In Q1 of last year. Two weeks ago, we installed D365 at our UK subsidiary. In Q1 twenty twenty six, we plan to do installations in Germany and Sweden. In another important IT initiative, we will begin to convert our Burlington manufacturing operations to paperless manufacturing and expect several product lines to be paperless by year end.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Separately, on February 18, the Board of Directors approved a cash dividend of $0.2 per share per quarter, an increase of 25%. Our increasing dividend underscores our focus on the bottom line. Turning to guidance, please see today's press release. Although the full year 2025 highlights include organic sales growth of 10%, gross margin of 69.7%, operating income of $59,800,000 up 15% reflecting a 25% operating margin and EPS of $2.24 per share, up 16%. Separately, we would like to welcome Nathan Traybeck and Larry Biegelsen from Wells Fargo Securities, who initiated coverage on us a few weeks ago.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

With that, I'll turn the call back over to the operator for questions.

Operator

Thank And our first question comes from Nathan Trabeck of Wells Fargo. Your line is open.

Nathan Treybeck
Nathan Treybeck
Equity Research Vice President at Wells Fargo

Hey guys, thanks for taking my question and congrats on a great quarter. I guess if we could just start with guidance, can you talk about what's implied from a pricing and a volume perspective? You talked about 8% list price increase in January. I guess based on history, how much of the list price increase actually flows through to pricing increase in the year? Thanks.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Yes, Nathan. So we gave you some historical info there. So you could sort of guess for yourselves what actually happens. But as we said in The U. S, we're looking for sort of 8% as of Jan one this year.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Worldwide, it's lower outside The U. S. So blended, you can think of it as a lower number. And then the question is, what are you going to get? If you ask for 6% or 7% blended globally, 8% in The U.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

S, what are you going to get in reality? And historically over the last two or three years, it's been a bit higher than what we've asked for. But I think that assumption is probably a little aggressive. You might wind up thinking, you're just going to get what you asked for. And so maybe you're at sort of, I don't know, 6% ish pricing and 4% units, who knows, we'll see what that story winds up being, but it's going to play out over time.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

And historically, you've now got the answer that you can use to try and impute for our Q1.

Nathan Treybeck
Nathan Treybeck
Equity Research Vice President at Wells Fargo

Okay, great. And is there any data you could share with us that could say like how many of your U. S. And European accounts have already been repriced to date?

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Hey, Nathan, this is George. I apologize, it's tough to hear your something about the phone here. Could you try that one more time, maybe closer to the phone or something?

Nathan Treybeck
Nathan Treybeck
Equity Research Vice President at Wells Fargo

Yes, sorry about that. In terms of is there can you give us detail in terms of how many of your European and U. S. Accounts have already been repriced and how many are left to be repriced?

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Sure. Yes, this is George again. Yes, all the repricing starts on except for Japan, which is April 1, everything starts January 1. They've all been repriced.

Nathan Treybeck
Nathan Treybeck
Equity Research Vice President at Wells Fargo

Okay. Thank you.

Operator

Thank you. And our next question comes from Rick Wise of Stifel. Your line is open.

Analyst

Hi. This is Annie on for Rick. Thanks for taking our questions. So first, I was hoping you could just talk a bit more about your sales force expansion plans. I think you said you're expecting about 165 reps by year end 2025, which is about 13 adds for the year.

Analyst

Could you kind of like break that out between international and The U. S? And is this more territory splitting? Are you opening up in new areas? And then one more follow-up.

Analyst

Thanks.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Okay. Hi, Annie. Thanks a lot for that great question. Yes, so you're right. We're thinking about 165,000,000 for the end of the year, also more sales management folks as well here.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

You're thinking geographically where should it play out most? And I would say sort of two thirds of that feels like it's a USA thing. The territories are still too large. And then that leads to the next answer to your question, which is, yes, in The U. S, it's largely about just splitting things in half and having two reps in, let's say, Nebraska instead of one rep in Nebraska.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

There is though some international growth with new markets like we've talked a lot about Portugal and Czechia. There's three more reps that are going in during the year because of these expansion things. And also Switzerland, we put the office in there. Of course, when you put the office in there, you'd grow the sales force as well. So you got one or two more going in there and so on and so forth.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

So, but I'd say two thirds about USA, North America, I should say, North America.

Analyst

Okay, great. Thank you. And then just on the Artigraft opportunity, I heard you highlight Artigraft as key among your remaining MDRC marks and that you're kind of expecting this approval still in the first half. So once approved, kind of what are you expecting in terms of physician reaction and the speed of adoption? And how will this $8,000,000 European market opportunity for Artograph contribute to 2025 growth?

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Right. So real high level, we try not I mean guidance is so hard for the whole year, you know that. So we don't even have the approval yet and maybe we'll have it in H1. So with guidance, we really don't break out the guidance by product line. You're right to be quoting that $8,000,000 number.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

That's what we've come up with on these phone calls as what the market opportunity is. And I would say we'll see. We have great faith and hope in this product line. We bought it as a $15,000,000 device back in 2020 and it's already something like last year, something like a $35,000,000 or $36,000,000 device tapes, something like that, yes, $36,000,000 So we've doubled it over five years here, four years of full results, I think, four point five years of full results. So we have high hopes, but I wouldn't even hazard a guess.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

We'll see what happens. It's going to it should be nice, but we'll see what happens.

Analyst

All right. Thank you.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Yes.

Operator

Thank you. And our next question comes from Danny Stauter of CitizensJMP. Your line is open.

Daniel Stauder
Director - Equity Research at Citizen JMP

Yes, great. Thanks for the question. Just first time guidance, we appreciate all the color, but could you give us a sense of what is contemplated here for both the high and low end of the range, maybe in terms of expected ASP bands or product launches in new regions? What do you feel could be the most likely candidate for upside or downside of these numbers? Thanks.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

I'm scratching around for how to answer this question here.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Maybe start with an ASP part of it. We, like I said, we gave you some data, but ASPs vary a lot by geography and they vary by product and they vary by manager in those geographies, so they have different stories that they're chasing and they vary by customers who may be large GPOs that can push back or not. So the ASP thing, I think when you see our band standing of high and low sales of guidance, that's kind of your answer. Within that, there is this concept, which is ASPs could come out wherever they come out. In terms of other stories, Georgia, maybe Yes.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

I was going to go add, Danny, with additional data here that might help you sort of I think we've taken the approach on this call because the pricing has become a topic that you guys all want to know about giving you guys the data and then you figure out what to do. We're making a guess, we're making a guidance of 10% organic guidance for the year, but maybe we look back over the last three years, Danny, and watch what we guide and then what actually happened. So in 2022, we guided 8%, we delivered 9% in 2023, we guided 9%. Again, these are full year guidance at the beginning of the year. We guided 9%, we got 17%, the next year in '24, we guided nine and we got 13.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

And here we are with our highest guidance in a very long time. I don't think we ever guided double digits. So it might give you an indication where we're going, but again guiding for a whole year at a medical device company, we're learning is a difficult thing. So I guess you could say we haven't underperformed our guidance in the last three years, four years that we've been giving you full year guidance organically. So that's a nice fact you could take with you.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

But we've over performed it by eight in one year and four in one year and one in the other year.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Maybe another place to go for highs and lows is the rep hiring and the cadence of that and the productivity of the reps as they come on board. And so you can think of that as a story that might get you higher or lower than you think in that range. And I think you hear us being pretty bullish about rep hiring and continuing a pace with the growth of the sales team and not just reps, Danny, but area and country managers as well. And so we're investing nicely in those all of those groups and hopefully that pushes us. And then maybe a third area to go after is the sort of the five key product lines, Artograph, XenoSure, RestoreFlow and a couple others if you want to choose.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

And those all have individual stores that have been pretty robust this year and more recently in the more recent quarters. And so those have been good stories too.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Danny, I hope you got

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

a good question obliquely here.

Daniel Stauder
Director - Equity Research at Citizen JMP

Yes. I really appreciate the in-depth answer and that's a lot of color and I appreciate it. And my next one will

Daniel Stauder
Director - Equity Research at Citizen JMP

be a little

Daniel Stauder
Director - Equity Research at Citizen JMP

bit more straightforward. I guess just on the operating margin progression for 2025, first quarter guidance 23%, full year '25 is 25%. Any more color on how we should think about the phasing throughout the year? Is it a consistent build or just any puts and takes there? Thank you for the question.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Yes, Danny, the high level is sales going up, call it, 10% and OpEx maybe a little slower than that and with a gross margin improvement. And so I think it's sort of maybe in my mind, I don't know, we'll see how this plays out and obviously we're not guiding on these pieces. But Q1 is typically a little lower number because of the sales meetings that we have and they're pretty expensive and they're $1,000,000 plus. And so you get whacked with that in a good way in Q1 and then you sort of don't in the following three quarters. So maybe you think about it sort of a little more binary like that.

Daniel Stauder
Director - Equity Research at Citizen JMP

Great. Thanks so much for the questions.

Executive

Thank you.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Thanks, Danny.

Operator

And our next question comes from Ross Osborne of Cantor Fitzgerald. Your line is open.

Matthew Park
Equity Research Associate at Cantor Fitzgerald

Hey guys, this is Matthew Park on for Ross today. Thanks for taking the questions. I guess starting with gross margin, you called out improved restore flow yields in the quarter. I guess when thinking about 2025, can you kind of walk us through the puts and takes to get to that 69.7% level? And any potential areas where you can get leverage?

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Yes. I mean, so there's lots and lots that goes through this one number, as you know. And maybe some of the good guys are sort of that direct labor efficiency piece. The ops team has been doing a really nice job keeping headcount sort of flat, but producing more units. And so their times to build have improved and their utilization has improved and all the nitty gritty stuff that we sort of manage and monitor every day has been doing really nicely.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

I think that continues. I don't know that why it wouldn't it's probably part of our answer in the guidance piece. The ASP topic we've talked about a lot now and that obviously helps the margin and that's a steady answer over the year. Quality costs are one we don't talk about all that much, but they're pretty important and they make up a decent amount of our costs, but we've been doing a nice job keeping those growth rates of quality expenses pretty muted over time. So that's a good guy.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

We've done a couple transitions of manufacturing of product lines from somewhere else to here. One was OmniFlo product line and then CardioCell more recently. And so as we work through those and those get more efficient, that will help us out. And then RestoreFlow, as you know, has been doing really well, both sales overall, but also units are up really nicely and that helps manufacturing costs for RestoreFlow. And then there's some that's just sort of meat and potatoes cost cutting, that's really important to us as well that we've been having some success with.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

So I would say those are the good guys. On the other side of the ledger, you can think of all the things you think about raises and maybe building new clean rooms, you get some more depreciation coming at you, sort of talk a little maybe a little incremental hiring around management as opposed to direct labor folks, some of those pieces. So materials costs, maybe there's an inflation topic that we went through that sort of slowing down now, so that's okay. So I would say maybe those are the most of the good guys and a few bad guys.

Matthew Park
Equity Research Associate at Cantor Fitzgerald

Got it. That was super helpful. And then I guess just one more for me on China. With XenoSure receiving approval in December, can you just walk us through what the initial commercial rollout will look like? And any incremental reps you'll need to hire to I guess support the launch?

Matthew Park
Equity Research Associate at Cantor Fitzgerald

Thanks.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Okay, great. So I'll go to the rep part of the question first. Obviously, it's just China. We have four reps in China. I think we're in the middle of hiring a fifth rep.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

So this is still quite a small sales force for a 1,500,000,000 person country. You can understand that. So it's just getting started over there for us. It's always been a sore spot. I think it's finally turned the corner.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

It's a good thing now. As far as the commercial rollout, so you get the approval in December. There is a lot of football to be played between then and when you get to make your first sale. You have to get your reimbursement, which is happening this month going on right now. And then you have to get provincial listings in all the provinces.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

I think there's either 36 or 39 provinces. I forget, I should know that. And then you have to get your hospital listings. So there's a lot of bureaucracy. It's completely normal bureaucracy.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

There's nothing worse for this product than any other product. But again, this is to focus on the positive rather than that six month window where we have to wait. This is a big we've been waiting for this for a long time. We're really excited about it. We're not guiding in 2020 we're not making a call out about what it should be in 2025, probably have better ideas as to what to understand about this product for 2026 as the year goes on.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

But July is probably ish when you're going to start selling that in China.

Matthew Park
Equity Research Associate at Cantor Fitzgerald

Got it. That makes sense. Thanks for taking the questions.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Thanks a lot.

Operator

Thank you. And our next question comes from Suraj Kalia of Oppenheimer and Company. Your line is open.

Analyst

Hi, George, JJ, Dave. This is Seamus on for Suraj. Thanks for taking our questions. And I just want to say to start kind of what are any implications from tariffs? I know you guys manufacture most of the stuff within The U.

Analyst

S, but I guess any potential anything you can walk us through on that whether you guys are looking at mitigation strategies or it's just not going to be relevant or whatnot?

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Seamus, it's Dave Roberts. Thanks for the question. Yes, I mean, I think tariffs are a little bit of a moving target. I think presently there's only the 10% tariff on China that I heard from saying maybe by March 4 that tariffs in Mexico and Canada would kick in, who knows. You're right in pointing out that we most of our products, almost all the products that we purchase the raw materials come from inside The United States and we obviously manufacture here.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

So for us maybe some of our suppliers source components outside The United States, but really from that standpoint, the tariffs are going to be fairly light for us. In terms of China, if China retaliates and medical devices are included in that, China accounts for less than 1% of our worldwide sales. So, I would say at a very high level, we're fortunate that we're a very U. S. Based company in terms of how we source our products and in that respect we're quite protected.

Analyst

Got that. Thank

Analyst

you. One kind of quick one in here just on the guidance. I guess you noted, I think, six or seven more MDRC marks are expected through

Analyst

the year. If those kind

Analyst

of come through quicker, those potential like, I guess, kind of if you can, what's contemplated within the guide and is there potential upside if those kind of come through,

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

right? Of course. Yes. So with these the first round of these MDRC marks, the 23 that we're talking about, with the exception of Artigraf, all of them are just reapprovals of the old CE marks we had. So unfortunately, there's no real upside except we'll stay on the market and many of our competitors will leave the market because they didn't apply for MDR.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

But no, not really minus the autograph question, which we were asked about at the beginning of this call, where something good is going to happen. We're not putting numbers on it.

Analyst

Got it. Completely understand. And then just one last one from our side. M and A, I know you guys have been looking at some cardiac and vascular companies. I guess just to I know you guys haven't announced anything yet, but just trying to think, are you looking for something that potentially is approval in The U.

Analyst

S, worldwide approval or you'd have to take it country by country similar to Artigraft? If you can give us a little more color there. Thank you again.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Thanks, Seamus. I'd say we're a little bit agnostic with respect to where the approvals are simply because our sales channel is so broad right now. We're directing 30 or so countries around the world. And so whether it affects whether the sales are focused in The U. S.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Or OUS, it doesn't matter too much. Of course, we do like it occasionally when if the sales are focused in one country, then eventually we get approvals in other markets and that can be upside. But that's an investment as well. But I would say not a particular focus with hunting for acquisitions, which are which have revenue concentration in The U. S.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Versus Europe versus APAC.

Operator

Thank you. And our next question comes from Brett Fishman of KeyBanc Capital Markets. Your line is open.

Analyst

Hi, this is Will on for Brett. Thank you for taking the question. Last quarter you spoke about the hiccup you had with the Ireland facility being held up. Could you provide any detail on the strategy for that going forward and any updates on that? Thank you.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Sure. And maybe are you talking about the German inspection of our facility or you're talking about the you're specifically on Ireland right now?

Analyst

Yes, specifically on Ireland.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Okay.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

So there's two stories here. They're both parallel. I don't really know exactly what Irish story you're talking about, but I'll give you what our Irish approval strategy is now and what our German approval strategy is. So the the hiccup I thought you were talking about was the German auditor that didn't show up in the October because he was sick for two weeks. And so we had to wait until that German auditor came to our factory in Chicago in February.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

The audit has come and gone and went very well. We feel good. We feel like we're on track. We sort of think we don't know this. You can't ever know with an approval.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

We sort of think this is a 2025 approval. As it relates to Ireland, maybe the hiccup you're talking about is at first they were just saying, oh, you can just have a virtual office and we'll give an approval. And then the state of Ireland came back and said, gee, we want you to have an actual brick and mortar office before we grant you approval. And again, just to catch everyone else up on this, this is all about RFA, the allograph product line. We have only a UK approval in Europe right now and we're trying to get Irish and German approvals.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

And so with that on that score, Will, on that score, we definitely feel like we're getting more and more committed to have an Irish brick and mortar office with all the cryo tanks etcetera in order to pursue IRIS approval and German approval. Both of those approvals, I don't know, maybe you got a fiftyfifty chance of getting each one of them this year. So in all, we wrapped it all together in the guidance today and we said we're probably going to get one approval this year either Ireland or Germany for RFA. And then of course the upside here is approvals in either of those countries could then lead or will likely then lead to places like Holland, Spain, France accepting the Irish approval or accepting the German approval and giving us an approval in their country.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Do you think I got the

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

question well?

Analyst

Thank

Analyst

you. I appreciate the color on that.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Thank you. Thanks for the question.

Operator

Thank you. And our next question comes from Frank Hachkinen of Lake Street Capital Markets. Your line is open.

Frank Takkinen
Senior Research Analyst at Lake Street Capital

All right. Thanks for taking the questions. Congrats on all the progress. I was hoping to hop back to the sales force a little bit. Could you refresh us on the headcount by geography?

Frank Takkinen
Senior Research Analyst at Lake Street Capital

And then maybe talk a little bit more about U. S. Kind of longer term hiring plans. Do you feel this cadence of hiring is one that continues for a number of years? Or do you eventually feel like there's going to be a spot where you plateau and you really focus down on to utilization?

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Right. And maybe to get the end of that question, it all depends if we get into cardiac or not. If we stay with vascular, it's a different story. If we get into cardiac with another with a big acquisition, obviously, we're going to be doing a lot more cardiac hiring because we're sort of starting from scratch here. But as it relates to where the higher where they are right now, the bigger hiring in the quarter in Q4 took place in The U.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

S. We're up to 74 reps. We only added one European rep. We're up to 51 there and we added one in Asia Pac to get to 27 there. That all should add up to 152 right now and then we're talking about the cadence for the year.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

We added 16 reps in '24 and we're looking to add 13 reps in '25. I would say in general, I think the cadence continues for what I'll call the foreseeable future. Around the world, the territories are still on average 1,400,000 with The U. S. Being a lot larger than some of the Asia Pac and European countries.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

So to get back to the question that I was asked at the beginning by Annie, I think that the hiring is more of a U. S. Thing and I think it's more about splitting these territories and we keep chasing this number, which is maybe a regular rep should be carrying $1,200,000 or $1,000,000 of revenues. It's just too much for them to carry $2,000,000 dollars and a lot of Americans right now are carrying $2,000,000 It's too big of a burden for them and they can't go chase new business if that's the case.

Frank Takkinen
Senior Research Analyst at Lake Street Capital

Okay, that's helpful. And then maybe just for my second one, I was hoping you could talk a little bit about karate chunks. Obviously, that was really strong throughout all of 2024. If I remember correctly, I think there was a competitor that exited the market, but maybe kind of refresh us on the strength behind shunts in the year. And then is that something you think can continue in 2025?

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Right. Yes, the shunts were great this year. They were up 14%. We called them out on the press release as the second best category. It's not our largest category.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

I think we have five categories right now and it's one of the smaller categories, but it had a fantastic year, sort of wire to wire. And a lot of it as you're pointing out was not one, but a couple of competitors left the market, particularly in Europe because of the CE mark. It's sort of a smaller market. Obviously, if it's one of our smaller products, it's probably a smaller market. And we are starting to get up into sort of the high market share percentages.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

So, it was nice to see the competitors leave and we've worked hard to take advantage of that and keep on making the product and some of the pricing maneuvers that we've been doing have been helpful as well.

Frank Takkinen
Senior Research Analyst at Lake Street Capital

Perfect. Thanks for taking the questions.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Thanks a lot, Frank.

Operator

Thank you. And our next question comes from Michael Petusky of Barrington Research. Your line is open.

Michael Petusky
Managing Director at Barrington Research Associates

Hey, good evening. So David, on the balance sheet that's sort of been bolstered by the cap rates in late in twenty twenty four, I mean, has that changed at all the assets that you have sort of been looking at or maybe new assets that you're looking at as a result of the increased firepower? I'm just curious if that's changed your focus at all just in terms of sizing, I guess.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Yes. Mike, nice to hear your voice. It's funny, I feel like assets change the balance sheet insofar as last year, we had put out a term sheet, I'll just say in excess of $500,000,000 And obviously that didn't come to pass, but it really highlighted the importance for us of adding capital to the balance sheet. In addition, there have been a couple sales of businesses which took place where I think LeMaitre wasn't considered as a part of the process because before the convertible bond issuance that you're referring to in December, we just didn't have as much cash as a lot of other larger companies. So, but I will say what the extra $172,500,000 of cash does is it does enable larger acquisitions.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

I'll also say that, and I think I've said this before on these calls, I'd rather do a strategically sound good small acquisition than a large acquisition where my resolve isn't quite so high and the company's resolve. So we're very much waiting for our pitch. We love having the optionality of more cash on the balance sheet, but we are waiting for our pitch.

Michael Petusky
Managing Director at Barrington Research Associates

Okay, great. And I love the George, what you shared in terms of list price and then sort of how things played out. I am curious though, because it felt like sort of during that time period you gave us, you had started to introduce those pricing floors. I'm just wondering if sort of the bump that you got is less likely to repeat at least in terms of the amount relative to the list price because the pricing floors have you've gone down that track for a few years now and I would think there would be less opportunity there. I was just wondering if you could comment on that.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

It's a good angle on it. I think the million dollar question here around here is how long does LeMaitre's excellent pricing action work. So you could say that the pricing force will wear out at some point, except if we did just put across what do we say JJ, eight percent list price in The U. S. Sort of higher than the 6% s that you heard about in 2022%, twenty twenty three % and twenty twenty four %.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

So yes, you do have the pricing discipline looking backwards, but with the whole company coalescing on these pricing floors and then the management puts out an 8% price increase in The U. S, you would think that that would give you something going forward. It's going to be seen. We're going to see. Like I said, it's really hard to do guidance at a medical device company for a whole year on organic growth.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

But it feels like we've been pretty good about keeping our promises with the guidance around here sales wise for the last four years.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Mike, I'd say something a little more maybe I don't know if the word systemic is the right word, but high level certainly about it, which is if you're in niche markets and you're owning your niche markets and you've got differentiated devices that sell at a premium, there's always going to be stories around pricing that's probably a little bit more favorable than we see at our peers. And so for now, it might be a floor story. For a while, it was an artograph story. Remember, we bought those devices and we brought those prices up. I think that was a healthy increase in the first year and then healthy increases after that, it slowed down.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

And so that was like a two point five year story. And then before that, you were around, you remember, we did a valvulatome, sort of next gen device some years before that. And that was a two year good story. And so we give you the five previous years in the corporate presentation. They're not all the same.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

They're jumping around. Over time, it's what, like six percent to 8% or whatever it is. And it's going to bounce around depending on the stores, but it all lives under, I think, a nice strategy for pricing, which is small niche markets with differentiated devices.

Michael Petusky
Managing Director at Barrington Research Associates

All right. Well, I'm glad JJ weighed in there. Congratulations on your seventy third and final conference call. I think I've been around for just a little over half of them. Congratulations.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

Mike, can I give you three numbers before you get off the call?

Michael Petusky
Managing Director at Barrington Research Associates

Absolutely.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

$2,478,000 depreciation amortization million, $1,739,000 stock based comp and $2,044,000 CapEx.

Michael Petusky
Managing Director at Barrington Research Associates

Data, you're a pro. Thank you.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

There you go. Mike, thanks a lot.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Is that it? Mike, from you?

Michael Petusky
Managing Director at Barrington Research Associates

Yes, that's all I have. Thanks.

George LeMaitre
George LeMaitre
Chairman & CEO at LeMaitre Vascular

Thanks for your question.

Operator

Thank you. And our next question comes from Jim Sidoti of Sidoti and Company. Your line is open.

Jim Sidoti
Analyst at Sidoti & Company

Hey, JJ, I don't think I want to admit how many of the calls I have been on, but you will be missed.

Joseph Pellegrino
Joseph Pellegrino
CFO, Secretary & Director at LeMaitre Vascular

I know. I was trying to get George not to put the number down, but he did it anyway.

Jim Sidoti
Analyst at Sidoti & Company

Dave, I'm sure you've had bankers coming in for the past three or four years trying to sell your convert deal. What made you decide to do it in December?

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Well, hi, Jim. I would say there are when I look at our pipeline, as I looked at our pipeline going into the back half of last year, thinking about the deal the larger deal that we took a run at, but also other deals in the pipeline, it just felt like there were more larger acquisition targets in or around the pipeline. And then on top of that, LeMaitre obviously had a lot of business momentum. And the cost of capital is always lower when you don't need the money. And we didn't like we didn't have our backs against the wall, so we could be delivered about it.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

And then also, I guess the third piece was the convert market was receptive to a high quality issuer like LeMaitre. So between the pipeline and the underlying core LeMaitre business and the market, it just seemed to make sense. We did consider firm debt, but we got the convertible notes we issued have a 2.5 coupon and that's just much lower than we could get as we considered other forms of financing. So that's dilutive than equity etcetera. So it seemed to make a lot of sense to us and we're delighted we did it.

Jim Sidoti
Analyst at Sidoti & Company

And the numbers that George put out in terms of or maybe JJ put them out in terms of interest income, interest expense going forward, Was those GAAP numbers or were those cash numbers and will the GAAP numbers be different from the cash numbers because of the convert?

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Yes. So that's what's in our forecast for Q1, Jim. Total interest income

David Roberts
David Roberts
President & Director at LeMaitre Vascular

of $3,100,000

David Roberts
David Roberts
President & Director at LeMaitre Vascular

or so and total interest expense of $1,300,000 That includes amortization of the deal fees themselves.

Jim Sidoti
Analyst at Sidoti & Company

So those are GAAP numbers?

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Those are GAAP numbers. And the reason I was hesitating is because I think as you know, we have to do two EPS calcs, blah, blah, blah to satisfy the requirements of GAAP and figure out which one to use. But yes, those are GAAP numbers essentially.

Jim Sidoti
Analyst at Sidoti & Company

Okay. All right. And then last one, what was the operating cash flow for the quarter?

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Operating cash flow was $14,600,000 largely in net income of $11,200,000

Jim Sidoti
Analyst at Sidoti & Company

Got it. All right. Thank you. And once again, JJ, you will be missed.

David Roberts
David Roberts
President & Director at LeMaitre Vascular

Thanks very much, Jim. I appreciate it. It's been fun working with you.

Jim Sidoti
Analyst at Sidoti & Company

Yes.

Operator

Thank you. Ladies and gentlemen, that concludes today's conference. I would now like to thank you for your participation and you may now disconnect. Have a great day.

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Earnings Conference Call
LeMaitre Vascular Q4 2024
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