Artivion, Inc. (AORT) August 12, 2026 Conference Transcript

All right. Good morning. My name is Bill Pledonick. I'm a senior med tech analyst here at Cana Griginuity. Welcome to our 46th annual global growth conference. With us up next, we have our Tivian. And for our Tivian, we have Lance Berry, CFO and COO. The format is going to be a short overview presentation by Lance, and then we'll sit down and we'll have our fireside chat. And with that, hand it over to Lance.

Thanks, Bill. Good morning, everyone. Quick overview on Artivion. So we're an aorta-focused medical device company. We did a little over $400 million in 2025, have guidance closer to $500 million for 2026, and roughly $90 million of EBITDA. We basically do two things. We have aortic valve replacements. We have allografts and we have mechanical valves. And then we have a series of products to treat dissections and aneurysms of the aorta. And then we also have a product that is an adjunct to the procedure surgical sealant called BioGlue. So that's basically what we do on aortic valves. We're focused on younger patients, which we define as patients under the age of 65. As far as financial objectives, what our goal is in any given year is we're trying to produce double-digit revenue growth and to grow EBITDA twice as fast as revenue. Kind of the formula for that is, you can see the left-hand side of the pie chart, is the more legacy parts of the business, preservation services and surgical sealants. Those are low to mid-single-digit growth businesses. They're very highly differentiated products, but just in very mature markets. So they don't grow very fast, but the growth is very durable and they're very profitable. On the right-hand side, we have our higher growth, higher margin segments, mechanical heart valves, which the brand is Onyx, and then our portfolio of stent graphs, which is really where all of our future growth is going to be driven and where all of our pipeline is focused. We have a really good opportunity to expand EBITDA margins, and we have three ways to do that. First, we have this excellent pipeline of products that we're bringing into the U.S. market, and each of those products have significantly higher gross margins than our current corporate average, so you have an opportunity to expand gross margin through mix. We have a global sales force that's fully built out, and our reps don't need to cover each case, which is a little bit unusual for a med tech company. Frequently, reps are in the surgery. We do not have that, and so that gives us an opportunity to leverage the sales force. And then, like most companies our size, you know, we have a global GNA infrastructure that's built out that we can leverage. And so those things together allow us to take, you know, what is double-digit growth and grow EBITDA significantly faster. So, you know, highlights of, you know, why would you invest in this company? We have really category-defining, highly differentiated products that are very defendable. They're all PMA, FDA approval products, which is a very high barrier to entry from additional competitors. We have significant leverage opportunity. We are very focused on a concentrated call point with a focused sales organization. We have this core business that, although slower growth, is very profitable. And then we have this high margin, high growth opportunity with this excellent pipeline. And so you add that all together and you can get this sustainable revenue growth with a meaningful leverage opportunity. And then lastly, just a couple of highlights on things that happened this quarter. We reported earnings last Thursday. You know, we did 9% growth, which is a little below our target. We're expecting that to improve going forward. We did have some really good progress in the stint graphs business, which is grew a little bit faster than we did in Q1, despite a much more difficult comparable. And then we had high teens growth in our Onyx line, which is fantastic. And then on the non-financial side, we had some pretty big milestones that occurred in the quarter. First, one of our high-growth devices, AMDS, we've been marketing under a humanitarian device exemption, and we got full PMA approval of that right at the end of Q2. Also, we completed an acquisition of the company Indospan. Their product is Nexus, which got PMA approval in early Q2. We also had some amazing data presented related to our Synergraph pulmonary valve, which is in our preservation services business. And we continue to enroll in our next generation product, our CIVO. The trial is called Artisan, and we're at 30 patients enrolled there. So we then reiterated guidance for the year. So overall, a really good Q2, a lot of good progress, both financially and non-financially, and have more confidence in our full-year guidance. So that is a high-level overview.

So we'll shift to the fireside chat portion. All right. All right. So, you know, for Artivian, the transformational vision that the company laid out several years ago, which was build Artivian into market leader in the Aertic Arch Repair. I mean, this is coming into focus. This is an interesting name. Every time I bring up the name Artivian, usually people are like, who? And then you say, oh, it's Cryolife. And they're like, oh, yeah, I remember Cryolife, which I think now it's like 25% of your revenues or something like that from the original business. The business has been transformed in the past decade significantly. I mean, you have the recent PMAs. You talked about AMD and Nexus. Before I get deeper into this, you know, the questions I'm usually hit with first are going to be on guidance revenues margins. So I'm going to start there and work my way down. But you had a nice Q2 beat. We saw strong stent growth. Onyx was good despite tough comps. Now you have the MDS PMA approval in hand. Guidance was unchanged. So, I mean, I think, you know, the biggest pushback this year is you started out. you had to pull guidance back after Q1, and now here we go where it was like, okay, it feels like we're back on track. Just kind of what happened through the year, what changed between Q1 and Q2? I know it didn't change guidance, but all of a sudden it feels like, oh, wait a minute, this isn't as bad as it felt.

Yeah, so for those of you that weren't following, we did have a pretty challenging Q1. We had some negative surprises, and we did lower our guidance on our Q1 call. And then we had, honestly, a really solid Q2. We made some real progress. You know, I mentioned some non-financial progress, but financially, it was really good. Stint graphs, we had a slightly better growth rate despite a much more difficult comp. And then, you know, Onyx was high teens, which was ahead of expectations, again, despite a difficult comp. So we made some really good progress. You know, we felt good about the guidance. You know, we didn't feel good about lowering it, but we felt good about the guidance that we gave on the Q1 call. You know, qualitatively, obviously, we feel better about that guidance now than we did then. I think just given the challenges we saw in Q1, we felt like some caution was appropriate. You know, let's get further in the year before we think about changing this guidance.

And then, you know, the EBITDA, as you mentioned, it's revenue double digits, EBITDA twice as fast as revenue, basically. but the EBITDA was down slightly year over year despite the strong sales because you're making these investments in Nexus. You've got R&D, you've been spending a little money there. How do we think about what's the right framework to balance growth investments versus long-term goal of EBITDA leverage? Does that, now that we're kind of getting back on track, does that still hold?

Yeah, I think 26 has some noise in it from the acquisition, right? So there are some things we need to spend some money on. some of which won't repeat. Honestly, we had our own R&D programs going, but the Induspan team had R&D programs going as well that we're really excited about and we wanted to keep going. So, you know, our R&D investment for the remainder of 26 is hotter than normal, but we felt that was appropriate. As we move into 27, you know, we'll be able to manage that back into our normal. Any given year, we want to invest 7% to 8% of sales in R&D. We don't think there will be a need to go beyond that in 27, you know, even though we are in 26. And then, you know, obviously we have, you know, two great new products with AMDS and Nexus. We want to maximize those opportunities, which will require some investment. But, you know, AMDS is kind of in the system at this point. And Nexus, it will require some investment, but it's not like a start from scratch thing, right? So we'll have a small increase in Salesforce. We will have some training, but it's a very high ASP product, and it doesn't take a lot of volume to cover those investments.

I'm going to ask you to go to the R&D. It's interesting. So you said 7% to 8% R&D, but you're really only doing R&D on one of the business segments because the rest of them don't require a lot of R&D. So it's really more of like a 20-ish percent or something on that one piece.

I think it's a great thing about our business model is that we have a large portion of our revenue that's very differentiated, very protected, but doesn't require ongoing R&D to keep it going and allows us to concentrate all of our investment into essentially one product line. As you point out, for that product line, we're investing 20 plus percent. And that's what is allowing us to shoot for a cadence of a new PMA in that product line every two years.

And you had mentioned that the Nexus acquisition isn't a product, it's a platform. Help us understand that.

Yeah, it really is. It's a fantastic product. We've been selling the product in Europe for a number of years through a distribution agreement prior to the acquisition. We think it's fantastic. The product that is first approved in the U.S. is a single branch device. In Europe, we are selling the next generation, which is a two and three branch device. That'll be the first thing we're focused on is getting that to the stage where we can get an IDE trial going in the US and try and get PMA approval for that. But then they have derivatives coming off of that that'll actually get us into adjacent segments of the arch that are pretty substantial, you know, multi-hundred million dollar type opportunities. That is a little further down the line so the near-term focus is just going to be you know getting this two and three branch on the U.S. but really closing that end-to-span acquisition pretty much just solidified our pipeline I would say for five plus years.

And then you talked about the full launch for Nexus is going to be January next year and it's manufacturing scale up. You've been selling it in Europe. Why don't you have enough product on the shelf today to sell it in the U.S. on approval if they're already making it for Europe?

Yeah well I mean believe me I wish we were swimming in inventory to go launch the product. I think you have to remember this was essentially a startup company. I mean, they sold us the product, I mean, almost at cost. They didn't make much money, you know, through us through a distribution agreement. So, and they had a pre-negotiated deal to basically be acquired upon PMA approval. So, they weren't going to invest in inventory for something that was going to happen after they sold the company. So, I think it was very reasonable. We tried to work with them to make sure that they did some, you know, minor things to increase capacity and to be ready to go which allowed us to hit the ground running the day after we closed but you know there are a number of skews in the system and um we have to build that inventory up also we want to make sure that we're really healthy the last thing you want to do is launch a product and then not being able to meet demand and then on um free cash flow it's kind of all over the map given the endospan deal and everything going on so 26 ends up being a little messy because of that.

How do we think about free cash flow in 27 and beyond?

Yeah, we think we have the opportunity for some significant free cash flow in future years. I think maybe a marker I will throw out to think about is in 26, we were roughly free cash flow neutral, but that was including $20 million of investment in purchasing two of our existing buildings where we manufacture or our Onyx product, and then a third building for expansion. That's an unusual, non-recurring thing. We are, in general, not a very capital-intensive business. So if you had pulled that out, we had to produce $20 million of free cash flow in 26. I think that's kind of a good way to think about as a starting point as we go forward that we're going to try and be in those levels and build off of that. Do you mean in 25? I apologize. 25, yes.

Yeah, 25, 25 would have been 20 million. I don't want you to be predicting free cash flow.

No, free cash flow this year is definitely not, is going to be, is messy because of the things we discussed that.

Right, okay. Let's talk about AMDS because I think that's been kind of what some of the challenges were is you shifted from the HDE to the PMA. Why did it matter? So the questions I'm getting is, one, why did it matter? And two, if that was one of the reasons you have kind of reset guidance, you haven't really talked about the other issue was the $100,000 up front, how you've addressed that. So I was just, let's hit those two topics.

So first of all, getting PMA approval was assumed in the guidance. We had a high level of confidence that that was going to occur. So, you know, that was expected. So if you think about what is the move from HDE to PMA do, it does a couple of things. So first of all, under the HDE, each hospital has to put in place an IRB, an Investigational Review Board. It's just a requirement of the HDE. So, you know, that is that's hoops that the surgeon that's championing this product has to jump through. They have to do all the administrative things to get approval for that, get that put in place. So that's just that's just extra work for the for the surgeon. And then in some cases, the hospital, the HG doesn't require this, but the institution itself requires ongoing patient-by-patient administrative work to be done under the IRB. So with the PMA approval, those things all go away. So that's some friction in the system to both get to the point where they make the initial stocking investment that goes away, but then also it's less burden to actually use the device and implant it going forward. So, you know, directionally positive in both cases. Also, we were somewhat limited on how we could market the device under the HDE. So the PMA frees us up a little bit more around that. For example, we've had multiple papers published at major industry events post the actual IDE trial with additional information around, you know, benefits to patients with malperfusion, remodeling of the device. we have an international study that was done that has data out to five years so we have longer term data we didn't have the ability to market those things so now we're free and clear to do that that would be helpful as well now what it doesn't do is doesn't change the fact that someone in the finance arm of the hospital needs to approve an investment of a hundred thousand dollars realistically that person probably doesn't care if we have a pma or not so we still have to work that issue. I think that was one of the things that we ran into in the first quarter as being a bigger hurdle than we understood. So, in Q2, now that we're aware, we were able to go attack that. And so, you can see, I mean, in the numbers, we made progress on that. So, that's still a battle we have to fight, but I think our reps are much more equipped to go have the conversation, tools in their toolkit to help the finance person understand, like, this is, You're leaving profit on the table by not using this device because it has increased reimbursement versus the alternative. And help them understand why this is a good financial investment for the hospital. So still more work to do there. That's going to, you know, we're going to have to grind that out. I think we're in a better position than we were at the end of Q1. And I think the PMA directionally is helpful, particularly at the surgeon level.

So why, if you have the PMA and it was an impediment to getting new accounts on board with having an HDE and you clear the HDE and now your PMA, you get rid of the bottleneck with the surgeons, all this, you probably had a big backlog. Why wouldn't that be like a rat through a snake? Like, why wouldn't we just see this kind of pop through in the next quarter or two where all of a sudden you get a bunch of new accounts, which at $100,000 stocking could be some big quarters out of this product?

So, good question. I would say we definitely had some accounts where the surgeon was saying, like, I'm not willing to champion this through the process with all this extra work I'm going to have to do when you're telling me the PMA is right around the corner. Okay. So, we get the PMA. That starts the process. It doesn't end the process. So that's one. That's why it's not, you know, the rat going through the snake. I think it'll make it easier to go through the process, but it's not going to create this bolus of things that are going to come through. I do also think it'll help with implants. I mean, I think anecdotally we've had some feedback from surgeons that they were really a little more narrow in their focus on patient selection under the HDE as opposed to the PMA. And then, again, some of them had some administrative friction under the IRB that is now removed that I think will also see a positive impact on implants. But don't expect a big avalanche of new accounts to come through just because we got the PMA. So the label was broader than the original HDE label, the final label. I think it's more just without the full stamp of approval of a PMA, that they were being more cautious on basically the most needy of patients that time. I mean, it's a humanitarian exemption. It's not a full approval.

So the other question we get is we've seen the Onyx valve business, which has been kind of losing share for years. It's been growth, but all of a sudden it's new life breathed into it. we're seeing these, you know, teen growth rates out of it, and we're all trying to figure out what is the durability of that teen growth rate? Like, you know, and I know it was a data-driven thing, but how much has that even been pushed into the market yet? What can we expect out of that? Yeah, good question.

So, you know, this has been a solid double-digit growth business for us for years and years. And then last year, based on some data that we didn't produce, it was independent of us, two different very large 100,000-plus patient studies that was very favorable for mechanical valves versus the alternatives, and we saw our growth rate jump to 20-plus percent, right, which has been fantastic, and it slowed down some, but, you know, we were high teens this quarter, which was on a tougher conference, excellent. I think we took that data and we did our own quantitative market research and said, okay, what does this mean for a market opportunity if the physicians were to adopt basically the mindset that this clinical data would say they should adopt for treating their patients? And we sized that as roughly a $100 million U.S. market expansion opportunity. Realistically, we're in the early adopter phase of basically taking that data and turning it into patient treatment. We still have a long ways to go. Now, it takes time for data to disseminate. You still have basic change management at a surgeon level that you have to go through. You're asking them to change their mindset on a way they've been advising patients for decades, right? So there's a lot of work to do there, but the data is incredibly compelling, and we're working hard to make sure that every cardiac surgeon in the U.S. that does aortic valve replacement is aware of the data, understands the data, and it's been great, and I think we think we have years of opportunity to grow above that kind of low double digit that we we grew previously.

On the aortic arch business, you have these differentiated PMA products you're launching. The TAMs are pretty small usually for the incremental ad, 150, 250, not typically what you see in a PMA. How do I think about the competitive landscape in those different subsegments? Like who's your number one competitor kind of in the aortic arch today? And as you launch this, what type of competitive response do you expect from them?

Yeah, I think it's one of the interesting things about the business model is we have these differentiated products in these modest-sized segments that require PMAs to get a product to market. And, you know, really, that's, you don't, it probably doesn't make sense from a VC investment standpoint to invest in those, and probably from a very large company also probably doesn't, you know, the markets aren't big enough, but they're meaningful to us, and we can fund them just within our normal business model, right? We're not raising money to do these things. We're not having a major downturn in profitability to fund that. We can fund these in 7% to 8% of sales. And then once we get them approved, it's a very high barrier to additional competition. And in general, in the U.S., these products in the arts are going to have, you know, zero or one competitor, right? So, AMDS is zero competitors. It's a greenfield opportunity. It's just an adjunct to the existing procedure, You know, there may never be another competitor for that. For Nexus, it just approved one competitor on the market, Gore, that has a device that has been approved there for a short period of time, but it was a device that was designed actually for a different part of the arch. It's kind of been moved over to the part where Nexus is. We think we have some feature function benefit differentiation versus Gore. and but what you will have one competitor that we think we have some incremental leapfrogs to and then if they want to get a new device that's you know that that's a probably it's a multi-year development ide clinical trial you know about a year regulatory process so you know difficult to respond and then you know the next device in line our arcevo device is an ide clinical trial right now there's one competitor on the market terumo we think again we have a leapfrog to their device. We have basically a stent graft for the left subclavian, which is the most difficult part of the surgery. We think it can save as much as 20 minutes on the surgery. And these are patients that are on a heart-lung machine, so that really matters. And so, you know, again, it'll be difficult for them to have a competitive response to that. It'll be very expensive and time-consuming for them to do that. So it's one of the best things about this business is the high barriers to additional competition.

And then, you know, with the endospanned acquisition, you had to take on incremental debts, you know, re-levered up after de-leveraging. You know, how do we think about, you know, the de-leveraging going forward? Are you going to need more capital to get there to pay this down? How much room do you have to make it without having to do that? You know, how should we think about it?

Yeah, I mean, we don't see any need to raise additional capital. I mean, at this point, M&A is not part of our core strategy to hit those financial objectives that I laid out at the beginning. You know, Indospan was really, in some ways, the last step in this transformation that we've been doing for multiple years. All the exciting things in our space are currently in our pipeline, not in other people's pipeline. And so M&A is not really a necessary component for us to hit our objectives. and so really we can just we can grow our EBITDA and we can you know get our leverage to come down we expect a free cash flow significantly going forward and so really see no need to raise additional capital yeah I think the incremental products as you mentioned are we didn't talk about it here but I think they're like 90 plus gross yeah they're way higher than our current corporate average and and so expected to be very profitable and this in general this business is It's not very capital or inventory intensive, so it's helpful.

See if there's any questions from the audience. Anything you'd like to leave us with?

We're glad to be here. I think Artivian is a fantastic company. I've only been here about two years. I didn't do the transformation. I came in pretty much when it was over, but I think it's really compelling from both a strategic standpoint with high barriers to competition, really differentiated products, and has a really great business model with an opportunity for leverage. And if you're not familiar with it, I'd encourage you to take a look. Excellent. Thank you so much.