Welcome to the LeMaitre Vascular Q4 2024 Financial Results Conference Call. As a reminder, today's conference is being recorded. At this time, I would like to turn the call over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Good afternoon and thank you for joining us on our Q4 2024 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 within the meaning of the U.S. Private 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, February 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. 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.lemaitre.com. I'll now turn the call over to George LeMaitre.

Thanks, J.J. Q4 featured growth in sales of 14%, operating income of 26%, and EPS of 30%. Sales growth was led by grafts, shunts and catheters up 23%, 14% and 12% respectively. By geography, APAC was up 21% in Q4, EMEA 18% and the Americas 12%. 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. We ended Q4 with 152 reps, up 12% year-over-year, and we're targeting 165 at 12/31/25 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. 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 the Swiss office, and we plan to begin shipping products to the Swiss office in June. Shipping from this office should reduce customs complexity, and help increase sales. Switzerland is LeMaitre'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. The seven remaining MDRs should be received in 2025. One of these approvals is Artegraft, our largest U.S. product, which we believe will receive its inaugural CE Mark in H1. We've already received Artegraft's approvals in New Zealand, South Africa, Thailand and Malaysia, and we expect to receive approvals in Australia, Canada, Singapore and Korea by H1, 2026. Also, the Irish and German RestoreFlow Allograft approvals are in process, and we anticipate at least one approval in 2025. These approvals will enable approvals in other European countries. I'd like to thank J.J. Pellegrino for his exceptional service to LeMaitre Vascular. This is a bittersweet moment for all of us. At LeMaitre, we're happy to watch J.J. begin to enjoy retirement, but we'll miss him. For the last 19 years we've been able to enjoy his smarts, honesty, humor and warmth. 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 10th. Dorian has previously served as CFO at LumiraDx and VP of Finance at Alere, and we're excited to welcome him. With that, I'll turn the call over to J.J. for the 73rd and final time.

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, XenoSure, and RestoreFlow led to price improvements. We're often asked about pricing, so here's some additional detail. U.S. list prices increased 6% going into 2022, 2023 and 2024. These list prices resulted in actual worldwide price increases of 8%, 12% and 9%. For reference, the recent January 2025 U.S. 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 RestoreFlow Allograft yields, and restrained quality expenses. We are guiding our Q1 gross margin at 69.7% as we benefit from our January 2025 price increases as well as continued manufacturing efficiencies. Operating expenses in Q4 2024 were $25.7 million, 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 2024 operating income increased 26% year-over-year to $12.9 million, an operating margin of 23%. We ended Q4 2024 with $300 million in cash and securities, an increase of $176 million in the quarter. The increase was driven by net proceeds of the convertible offering of approximately $168 million, as well as $10 million in cash from operations. The impact to our P&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 2025, we expect total interest income of $3.1 million and total interest expense of $1.3 million, which improves EPS by $0.02 per share. As you recall, we installed the Microsoft D365 ERP system in the U.S. in Q1 of last year. Two weeks ago, we installed D365 at our U.K. subsidiary. In Q1 2026, 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. Separately, on February 18, the Board of Directors approved a cash dividend of $0.20 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. The full year 2025 highlights include organic sales growth of 10%, gross margin of 69.7%, operating income of $59.8 million, up 15% reflecting a 25% operating margin, and EPS of $2.24 per share, up 16%. Separately, we would like to welcome Nathan Treybeck and Larry Biegelsen from Wells Fargo Securities, who initiated coverage on us a few weeks ago. With that, I'll turn the call back over to the operator for questions.

Thank you. The operator provided instructions to participants. And our first question comes from Nathan Treybeck of Wells Fargo. Your line is open.

Hi 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 talk about an 8% list price increase in January. Based on history, how much of the list price increase actually flows through to pricing increase in the year? Thanks.

Yes, Nathan, we gave you some historical information so you could estimate for yourselves what actually happens. In the U.S. we're looking at 8% as of January 1 this year. Worldwide it's lower outside the U.S., so blended it's a lower number. If you ask for 6% or 7% blended globally and 8% in the U.S., historically over the last two or three years it's been a bit higher than what we've asked for. But that assumption is probably a little aggressive. You might wind up getting what you asked for. So maybe you're at roughly 6% pricing and 4% units; we'll see how the year plays out. Historically, you'll now have the data to impute for our Q1.

Okay. Great. And is there any data you could share with us about how many of your U.S. and European accounts have already been repriced to date?

Hi, Nathan. I apologize, it's tough to hear you. Could you try that one more time, maybe closer to the phone?

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

Sure. All the repricing starts on January 1, except for Japan, which is April 1. Everything starts January 1. They've all been repriced.

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

Hi, this is Annie on for Rick. Thanks for taking our questions. First, I was hoping you could talk more about your salesforce expansion plans. You said you're expecting about 165 reps by year end 2025, about 13 adds for the year. Could you 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. Thanks.

Hi, Annie. Great question. Yes, we're thinking about 165 reps for the end of the year, plus more sales management. Geographically, about two-thirds of that feels like it's a U.S. thing. Territories are still too large, so in the U.S. it's largely about splitting territories in half and having two reps where there was one. There is some international growth with new markets like Portugal and Czechia; three more reps will be added during the year for those expansions. Also Switzerland will add one or two more reps with the new office. So overall, about two-thirds in North America.

Okay. Great. Thank you. Then on the Artegraft opportunity, I heard you highlight Artegraft as key among the remaining MDR CE marks, and you expect approval in the first half. Once approved, what are you expecting in terms of physician reaction and speed of adoption? How will this $8 million European market opportunity for Artegraft contribute to 2025 growth?

High level: guidance is hard for the whole year, and we don't yet have the approval. Maybe we'll have it in H1. We don't break guidance out by product line. The $8 million number is the market opportunity we've discussed on prior calls. We have faith in the product. We bought it as a $15 million device in 2020 and it's already grown to roughly $36 million last year. We've doubled it over five years. We have high hopes, but I wouldn't hazard a specific guess for 2025; we'll see what happens.

Thank you. The operator provided instructions. And our next question comes from Danny Stauder of Citizens JMP. Your line is open.

Yes, great. Thanks for the question. First on guidance, we appreciate the color, but could you give us a sense of what is contemplated for both the high and low ends of the range? Maybe in terms of expected ASP bands or product launches in new regions? What could be the most likely candidates for upside or downside of these numbers? Thanks.

I'm thinking about how to answer this. We've taken the approach on this call, because pricing has become a topic, of giving you the data and letting you decide. We're guiding 10% organic growth for the year. Look back over the last three years at what we guided and what happened: in 2022 we guided 8% and delivered 9%; in 2023 we guided 9% and delivered 17%; in 2024 we guided 9% and delivered 13%. This is our highest guidance in a long time; I don't think we've ever guided double digits. Guiding for a whole year at a medical device company is difficult, but we haven't underperformed our guidance in the last three to four years; we've overperformed it in recent years.

Maybe start with ASPs. ASPs vary a lot by geography, product, manager and customer types like large GPOs. When you see our band of high and low sales guidance, that's your answer for ASP variability. Another place for upside or downside is the rep hiring cadence and new rep productivity. We are bullish about rep hiring and investing in area and country managers. A third area is our five key product lines — Artegraft, XenoSure, RestoreFlow and others — each with individual stories that have been robust recently. I hope that helps.

Yes, I appreciate the in-depth answer; that's a lot of color. My next question is on operating margin progression for 2025. Q1 guide is 23% and full year 2025 is 25%. Any more color on phasing through the year? Is it a consistent build or are there puts and takes?

High level: sales up about 10%, and OpEx may grow a little slower than that with gross margin improvement. Q1 is typically a slightly lower number because of expensive sales meetings — they're over $1 million — so Q1 tends to be a bit lower and the following three quarters are higher. Think of phasing as somewhat binary in that respect.

Thank you. The operator provided instructions. And our next question comes from Ross Osborn of Cantor Fitzgerald. Your line is open.

Hi, this is Matthew Park on for Ross today. Thanks for taking the questions. First on gross margin, you called out improved RestoreFlow yields in the quarter. For 2025, can you walk us through the puts and takes to get to that 69.7% level, and any potential areas where you can get leverage?

There are many drivers. Direct labor efficiency has improved: the ops team has been keeping headcount relatively flat while producing more units, improving build times and utilization. ASP improvement obviously helps margin as a steady contributor. Quality costs are important; we've been keeping quality expense growth muted. We transitioned some manufacturing into Burlington for Omniflow and CardioCel, which should improve efficiency over time. RestoreFlow has been doing well — sales and units up — which helps manufacturing costs for that product. Additionally, general cost management efforts have helped. On the other side, there are puts like raises, new clean rooms and incremental hiring around management, plus some depreciation. Materials cost inflation is slowing. Those are the main drivers.

Got it. That was super helpful. One more on China: with XenoSure receiving approval in December, can you walk through the initial commercial rollout and whether you'll need incremental reps to support the launch? Thanks.

I'll address reps first. We currently have four reps in China and are hiring a fifth; it's a small sales force for a large country. Commercial rollout requires several steps after approval: reimbursement, which is happening now, provincial listings across roughly 36 or 39 provinces, and hospital listings. There's a typical bureaucratic timeline between approval and first sale. We're excited but not guiding for 2025 contribution; better visibility will come into 2026. July is a probable approximate start for selling in China.

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

Hi George, hi Dave, this is Seamus on for Suraj. Any implications from tariffs? I know you manufacture most products in the U.S., but any potential impact or mitigation strategies?

Thanks, Seamus. Tariffs are a moving target. Presently there is a 10% tariff on China; there have been discussions about tariffs on Mexico and Canada. Most of our raw materials come from within the U.S., and we manufacture here, so tariffs should be fairly light for us. Some suppliers may source components outside the U.S., but overall we're fortunate to be U.S.-based in sourcing, which provides protection. China accounts for less than 1% of our worldwide sales, so even if China included medical devices in retaliation, the direct impact would be small.

Got that. Thank you. On the guidance, you noted six or seven more MDR CE marks expected through the year. If those come through quicker, is there upside to the guide? What is contemplated within the guide?

Of the 23 MDR CE marks we're discussing, with the exception of Artegraft, all are reapprovals of the old CE marks. So there's no real upside beyond remaining on the market while some competitors exit because they didn't apply for MDR. Artegraft is the one with potential upside, but we're not putting numbers on that.

Understood. One last one on M&A: you've been looking at some cardiac and vascular companies. Are you looking for targets with U.S. or worldwide approvals, or is it country-by-country like Artegraft? Any color on size or focus?

We're agnostic with respect to where approvals are held because our sales channel is broad across about 30 countries. Whether revenue is focused in the U.S. or outside the U.S. doesn't matter much. Occasionally having a product concentrated in one country is fine because we can pursue approvals elsewhere, which can be upside but also requires investment. We aren't specifically focused on acquisition targets based on approval geography.

Thank you. The operator provided instructions. And our next question comes from Brett Fishbin of KeyBanc Capital Markets. Your line is open.

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

Sure. There are two parallel stories. One was a German audit scheduling hiccup; a German auditor was sick in October, so the audit occurred in February, and it went very well. We feel good and think the German approval is a 2025 possibility. For Ireland, initially the regulator suggested a virtual office might suffice, but then required an actual brick-and-mortar office with cryo tanks for RestoreFlow Allograft approval. We are committed to establishing an Irish office to pursue Irish approval and German approval. We think we have roughly a 50-50 chance at each this year. We included this in our guidance and said we're probably going to get one approval this year, either Ireland or Germany for RestoreFlow. If we get either, that can lead to approvals in other European countries like Holland, Spain or France accepting the Irish or German approval.

Thank you. The operator provided instructions. And our next question comes from Frank Takkinen of Lake Street Capital Markets. Your line is open.

Great. Thanks for taking the questions. Congrats on progress. I wanted to revisit the salesforce. Could you refresh headcount by geography and talk more about U.S. longer term hiring plans? Do you feel this cadence continues for several years or will you plateau and focus on utilization?

It depends if we expand into cardiac through an acquisition or if we stay in vascular. If we stay vascular, the story is different than if we enter cardiac with a large acquisition. In Q4 the larger hiring was in the U.S.; we're up to 74 reps in the U.S., added one European rep to 51, and added one in Asia Pacific to 27, totaling 152 reps. We added 16 reps in 2024 and plan 13 in 2025. I think the cadence continues for the foreseeable future. Average territory revenue is still about $1.4 million, with the U.S. much larger than some Asia PAC and European territories. We're focused on splitting territories so regular reps carry about $1.0–$1.2 million of revenue rather than $2.0 million, which is too large and limits new business development.

Okay. That's helpful. Second, crowded shunts were strong all year. Could you refresh on the strength behind shunts and whether that can continue in 2025?

Shunts had a great year, up 14%. It's one of our smaller categories but performed very well wire-to-wire. A few competitors left the market, particularly in Europe because of CE mark issues, which helped. We're gaining share and pricing maneuvers have been helpful. We worked hard to take advantage of competitors leaving the market.

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

Hi. Good evening. On the balance sheet that was bolstered by the capital raise in late 2024, has that changed the assets you are looking at or new assets you're considering as a result of increased firepower? Has that changed your focus?

Mike, when I looked at our pipeline late last year, there were larger acquisition targets in or near the pipeline. The convertible issuance highlighted the importance of adding capital. The extra roughly $172.5 million of cash enables larger acquisitions and adds optionality. We prefer strategically sound, well-integrated smaller acquisitions over large ones that might be less certain. We like having the optionality but are waiting for the right opportunities.

Great. Regarding the list price increases you shared, I wonder if the earlier gains from introducing pricing floors are less likely to repeat. You've had pricing floors for a few years now; does that suggest less upside in the future?

Good question. The million-dollar question is how long LeMaitre's pricing momentum lasts. You could say pricing force may wear out, except we did set an 8% list price increase in the U.S. for January. With company-wide adherence to pricing floors and an 8% U.S. increase, that should provide some support going forward. We'll see how it plays out; it's difficult to guide for a whole year, but we've been consistent in delivering on our guidance the past few years.

High level: if you're in niche markets owning differentiated devices sold at a premium, pricing can be more favorable than peers. It may act as a floor for a while. Past stories like Artegraft and valvulotomes had multi-year pricing lifts. The annual increases will vary, but the strategy of small niche markets with differentiated devices supports pricing discipline.

All right. J.J., congratulations on your 73rd and final conference call. I think I've been on just over half of them. Thanks.

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

Absolutely.

2.478 depreciation and amortization million, 1.739 stock-based compensation, and 2.044 CapEx.

You're a pro. Thank you.

There you go.

Mike. Thanks a lot. Is that it from you?

Yes. That's all I have. Thanks.

Thank you. Our next question comes from Jim Sidoti of Sidoti & Company. Your line is open.

Hi J.J. I don't think I want to admit how many of the calls I've been on, but you will be missed.

Hi Jim. When I look at our pipeline going into last year, and thinking about the larger deal we considered, plus other deals, it felt like there were more and larger targets. In addition, LeMaitre had business momentum and the cost of capital is lower when you don't need the money. We weren't forced to raise cash, so we could be deliberate. The convertible market was receptive to a high quality issuer like LeMaitre, and the convertible we issued has a 2.5% coupon, which was attractive versus other financing. It seemed to make sense and we're pleased we did it.

And the numbers J.J. put out regarding interest income and interest expense going forward — were those GAAP numbers or cash numbers? Will the GAAP numbers differ because of the convert?

Those are in our forecast for Q1: total interest income of about $3.1 million and total interest expense of $1.3 million. That includes amortization of deal fees, so those are GAAP numbers.

All right. And what was operating cash flow for the quarter?

Operating cash flow was $14.6 million, largely driven by net income of $11.2 million.

Got it. All right, thank you. And once again, J.J., you will be missed.

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