Hello. Good day. This is RJ, your conference operator today, and we welcome you to the LeMaitre Vascular, Inc. Q3 2025 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. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir. Thank you.

Good afternoon, and thank you for joining us on our Q3 2025 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'll be making 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, November 6, 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. For example, during the quarter, we recorded a nonrecurring benefit from the receipt of the employee retention tax credit. Non-GAAP adjusted financial measures discussed in our remarks exclude the benefit of the tax credit. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and will be available on the Investor Relations section of our website, www.lemaitre.com. I'll now turn the call over to George LeMaitre.

Thanks, Dorian. Q3 featured organic sales growth of 12% and a better-than-expected gross margin. Excluding the onetime tax benefit, we also posted several bottom-line records: operating income, EBITDA, EPS, and cash generation. Q3 sales were led by Grafts, up 23%, and Shunts, up 18%. EMEA grew 18%, the Americas 10%, and APAC 4%. Price accounted for 10% of Q3 growth, with 2% from units. The April recall led to some customers front-loading catheter purchases into Q2, reducing Q3 organic and unit growth. Excluding catheters, Q3 organic growth was 14%. Our international Artegraft launch continues to exceed expectations. Q2 sales were $420,000, Q3 sales were $1.4 million, and now we expect Q4 sales of $2 million. Artegraft grew 33% worldwide in Q3. We expect 2026 Artegraft approvals in Canada and Korea. We received German approval for RestoreFlow in October and anticipate distribution beginning in Q2 2026 as we build German-specific inventory. Inventory for other EU markets will likely not need to be country-specific and can be drawn from our worldwide stock. Irish approval is expected in H1 2026. German and Irish approvals should accelerate other EU approvals. To support the launches, we recently leased a European RFA distribution facility in Dublin. As we look to understand the size of the European market, it's notable that we distributed $2.7 million of tissues in the U.K. over the last 12 months. We ended Q3 with 152 reps after implementing a performance-based reduction of 8 sales reps. We currently have 23 open rep hiring requisitions and expect to have 165 reps at year-end. On November 1, we published our 2026 U.S. hospital price list, reflecting an 8% increase. This is consistent with recent years. As usual, there will be a gap between the price list and prices realized. 55% of our North American revenue is now subject to price floors. Our 2026 international price lists are still being finalized. To support our growth, in Q1, we're opening a 34,000 square foot distribution center near our Burlington headquarters. This is our first meaningful Massachusetts real estate expansion since 2020. 2025 is shaping up to be another year of healthy sales and profit growth. We continue to make investments in our sales force, new international offices, and regulatory approvals. We're now guiding 40% operating income growth in Q4 and a 29% operating margin. I'll now turn the call over to Dorian.

Thanks, George. LeMaitre's organic growth rate was 12% in the third quarter. Year-over-year reported revenue growth of 11% was reduced by $1.3 million due to our Aziyo distribution exit, but benefited from the weaker U.S. dollar, which added $1 million to reported sales. As George detailed, excluding catheters, Q3 organic growth was 14%. In Q3 2025, we received $4.8 million from the employee retention tax credit. This nonrecurring credit impacted several P&L line items. Reported cost of sales were reduced by $2.7 million. Reported operating expenses net of fees were reduced by $0.7 million and reported interest income was increased by $0.7 million. We also recorded an additional $0.9 million in our provision for income taxes. As a result, reported gross margin was 75.3%, reported operating expenses were $25.6 million. Reported operating income was $20.3 million, reported operating margin was 33%, reported net income was $17.4 million, and reported diluted EPS was $0.75. We refer to our adjusted financial results during our call today to exclude this nonrecurring benefit. In Q3 2025, we posted an adjusted gross margin of 70.8%. This 300 basis point year-over-year increase was driven primarily by higher pricing, manufacturing efficiencies, and product mix. Adjusted operating expenses in Q3 2025 were $26.3 million, an increase of 9% versus Q3 2024. This expense growth rate is down from a 20% increase quarter-on-quarter in Q2. Higher compensation expenses and European investments in Ireland, Switzerland, Czechia, and Portugal drove H1 expenses. As we began to indicate in our Q2 earnings call, we now anticipate adjusted operating expenses decreasing by $4.5 million from H1 to H2. Q3 2025 adjusted operating income was $16.9 million, up 29%, resulting in an adjusted operating margin of 28%. Fueled by our gross margin improvements and operating expense control, 2025 is a year of operating leverage. Operating margin has increased over the first 3 quarters: 21%, 25%, 28%, and now we are guiding 29% in Q4. For reference, headcount was 633 at 9/30/2025 versus 637 at 9/30/2024. Adjusted net income increased 27% year-over-year to $14.2 million in Q3 and adjusted fully diluted earnings per share was $0.62, up 27%. We ended the quarter with $343.1 million in cash and securities, an increase of $23.6 million. We generated $28.8 million in cash from operations, and we paid $4.5 million in dividends to shareholders. On August 11, our New Jersey Artegraft facility received an FDA warning letter related to our quality management system. We have provided written responses to the agency's letter, and this has not disrupted our ability to produce, ship, or invoice products. We've raised our full year operating income and EPS guidance as our continued focus on profitable growth sets us up for a strong finish to 2025. Our full year revenue guidance is $248 million, 13% growth. We anticipate a full year adjusted gross margin of 70.3% and adjusted operating income of $63.7 million, up 22%. This results in a 26% adjusted operating margin for the year. Our guidance on adjusted fully diluted earnings per share of $2.37 is an increase of 22% over 2024. With that, I'll turn it back over to the operator for questions.

Your first question comes from the line of Michael Sarcone of Jefferies.

I guess just to start, mostly good guidance changes. But on the revenue side, it looks like you're now expecting lower organic growth. Can you maybe kind of walk us through the moving pieces there and what's changed?

Sure, Mike. Thanks a lot. This is George. Obviously, it's a topic here. So maybe we break it down into the Q3 topics and the Q4 topics because obviously, we're halfway into that, right? So in Q3, we think that the catheter recall that we executed in Q2 wound up sort of front-loading sales a little bit more than we expected into Q2 and then it pulled it out in Q3, and we think it will keep pulling it out in Q4. That's a topic in Q3. Export, which we don't talk that much about, didn't have such a great European or APAC quarter in Q3. And then in general, APAC, a little bit of struggles late you're watching. It's only 7% of our sales, but we've had a tough couple of quarters here. And at the root of it, maybe there's some management turmoil. We've reloaded for a brand-new Korea RSM and a brand-new Japanese RSM, excuse me, General Manager in Japan. And so there's been a little bit of that. We don't know if it's exactly the issue, but that's certainly on our plate. And I would say that's your Q3 topic. And then in Q4, I would sort of just repeat what I said about the catheter recall and I repeat what I said about APAC in general. And then one-third of the whole thing because we're bringing guidance down by about 1.8% in the quarter, about one-third of it is FX. And at the last call on August 6, the euro was at $1.17, now the euro is at $1.15. So that strengthening of the dollar has taken away about $600,000 of sales out of our Q4 guidance. That has nothing to do with us, right? But it's still going to look like the guidance is pulled down. So that's what that is. I hope that's, we obviously expected that question. I hope that's a pretty full answer.

Very much so. And I guess just for my second, gross margins, really strong. You talked about 10% price and manufacturing efficiencies as well. I guess when we look forward to 2026, what are the moving pieces that we should think about in terms of how gross margin could change over the course of the year?

Yes. Mike, thanks. I don't think we're ready to start guiding on '26 yet. But I think you can look at the cadence of gross margin over the last 3 quarters, 69.2% in Q1, 70% in Q2, 70.8% adjusted here in Q3 and our guidance of 71.2%. And you can see that we've been making some progress. The pricing, obviously, is a nice flow-through. Getting Aziyo out, which as you remember, has a distribution-only margin, helps us from the mix perspective. You'll hear us talk a lot about Artegraft, I think, again this quarter, really providing a positive impact to product mix as well. And we continue to benefit from some of the manufacturing efficiencies, standard cost basis. It takes sometimes those a little while to flow through. So I think the ramp during the year is a good sign for us.

Your next question comes from the line of Suraj Kalia of Oppenheimer.

This is Shaymus on for Suraj. To start, I guess, one of the things is you guys have been really good at establishing and getting price increases. I noticed during the, you noted that you're implementing an 8% price floor for 2026 in the U.S. hospitals. Just curious, how do you kind of arrive at that 8% versus, say, 7% or 9%, and kind of what are the puts and takes that go into that? Sure.

That's a great question, Shaymus. Thanks a lot. It's George. I think we're, in the U.S. and then obviously, internationally, when those come along, we don't know those yet. We're always sort of probing in our mind about which categories can take it and which categories can't. And I would say one of the reasons why we try to build a niche type business is because in some of these niches, you can achieve price hikes. So you're pushing harder on those niche categories. And then on some of the commodity categories, the Dacron, the ePTFE, maybe to a certain extent, the catheters where you're lower margins and you're more in combat with other similar devices, we're pressing it a lot less. So that 8% number we're reading to you guys right now is trying to give you a blended number across everything with sort of some of them 10s and some of them 4s and some of them nothing, things like that.

Got it. Appreciate that. And then just kind of two smaller ones on mine and then I'll package them together. Would you be able to break out, I guess, year-to-date kind of price versus volume contributions in some various categories we've kind of seen this year? And then also, how much of direct sales of OUS, as you guys have converted, contributed this year?

Okay. Great. So I think I'm going to understand your question, but the back happening is a lot easier. Is your question, what percent of sales are direct to hospital? And if that's the question, I would say 95% is a very clean number that's known by all of us a lot. Is that what you want to get at with the second question?

No. Just looking, I know you guys have converted and gone direct in Portugal, Czech. Just curious how much of that has contributed this year versus that year going direct?

I would say so far, specifically on Portugal and Czech, it's not meaningful at all. They're very small right now so far. So it wasn't a topic that came up in sales at all for the quarter. And your other question was about units and price. And of course, it's a pretty serious topic for us. In the quarter, it was, on a reported basis, if you will, it was 10% and 2%; 10% price and 2% units. But the way we look at it is without the catheter recall, we're sort of normalizing it. So excluding that recall, it was 11% price and 3% unit. If you want to draw out from that and not look exactly at Q3 and look at the 9 months of 2025, it was 4.3% units and the balance was price. Last year, it was in '24, it was 4% units. The balance was price. Then the year before that, '23, which was sort of the big year here, it was 5% units. So you can sort of feel like it's a 5% or a 4% or 4.5% these days.

Got it. I appreciate that. And sorry to push it a little on that. I guess as well, could we, can you give us a flavor of where the respective kind of categories are on that price versus volume kind of curve? Grafts has been more price versus volume, Shunts, so on and so forth.

Okay. I'll give it a shot. We don't exactly look at it like that all the time, but I would say it feels like with Valvulotomes and Shunts, you're feeling it's more of a price topic. And with Patches and Grafts, it feels more like a unit topic.

Your next question comes from the line of Rick Weiss of Stifel.

This is Annie on for Rick. So the first one for me, appreciating that you're not providing any specific 2026 guidance today. Can you highlight any key product lines or geographies that you're particularly excited about now? And sort of as we head into next year, I know you've mentioned Artegraft and allografts as having notable strength this year. So curious if these will continue to be key growth drivers moving forward.

Right. Annie, it's George again. Yes, I would call those two out. And I would then toss into the mix XenoSure, which is part of our patch category, specifically the peripheral vascular segment, but all of XenoSure has been going really well. We have a lot of momentum in it. So I would say those three devices. And maybe one of the themes you can, we can draw on is that the biologics at the company are going extremely well right now. We have a lot of momentum in them. And I don't, I definitely don't expect it to change as we go into 2026. If anything, probably some of these European approvals that you're hearing about for Artegraft as well as for RFA and our projection that we're going to get some approvals would lead you to believe that the focus of the growth is probably more about biologics than about synthetics or about transient use single-use devices.

Annie, it's Dave. Yes, it's certainly a nice cash balance. That's a gross cash balance on a net, because we have the convert. On a net basis, it's $170 million. But in terms of thinking more aggressively, I would say we do like the optionality that the higher cash balance provides us. But on the other hand, I don't necessarily feel like the team feels like, 'Oh, gosh, we better get something done quickly' and reduce our own standards for acquisitions. I would say, as I mentioned on the call in August, we've been pretty busy in terms of business development acquisition-related activity this year with term sheets, etc. So we're out there hunting, but I don't necessarily feel like having more cash; it's a nice problem to have, if you will, a high-class problem, but I don't think we're relaxing our standards for the types of acquisitions that we'll be doing.

Your next question comes from the line of Nathan Trebeck of Wells Fargo.

My first question, I think in your opening remarks, you disclosed a new metric that 55% of your North America customers are now subject to price floors. Can you help us understand what you're trying to convey by disclosing this? And maybe just talk about your plans to roll out price floors to the rest of your customers?

That's a great question there, Nathan. It's George again. Yes. So just to reiterate, 55% of our North American revenue is now subject to price floors. And I think we get this question so much about what are these price floors? How much of the revenue is sort of niche enough that you can put a price floor on it? And we keep having, people keep wanting us to put numbers on it. So we figured we just drag it upfront and get it out instead of it coming out as a question. How much can be priced forward? We don't know exactly. I would say it hasn't gone up that much in the Americas in the last 1 or 2 years. So you might be reaching a place there where the price floors are in on those 55. And then the balance, as I mentioned before, answering another question, maybe some of the other commodity-type stuff, you probably wouldn't, it wouldn't be wise to put a price floor on it because they run over the other guys and buy from the other guys. So I just think we're trying to, we've gotten a lot of questions about pricing around here. We always hear it. Dorian and Dave, who do most of the IR work out in the field are always getting these questions, and it would be good just to settle it with that. And that's the genesis of why we put it there.

Great. George, on the last earnings call, you made a comment that you see R&D as a percent of sales increasing back to 8% to 10% over time. Can you talk about how you intend to manage this increased spend against your EPS growth targets? And how should we think about 2026 R&D spend?

Right. And so as we were prepping for today's call, we were nervous we were going to get a bunch 'Hey, your operating margin is too high'. And so there's part of that here, which is the R&D spend is not as high as maybe you want to see right now. What is the percentage? 6% or something 5%, and one of the things we're seeing, it's a very temporal part of our life here is that we just finished all these MDRs and internally, we call it the peace dividend. I guess it's a remark about back in George Bush's day or whatever, but we're trying to convey, we just got this big bolus of expenses, and now it's coming down in R&D around these regulatory approvals for MDR. Almost certainly, somehow some way, that's going to build up with looking for different regulatory approvals elsewhere, doing factory transitions. We still have 2 factories out there, as you know, New Jersey and Chicago, and then also plain old-fashioned R&D at some point. So there's lots of ways to deploy the money. It seems unrealistic that we will be down at 5% or 6%. And I think we have room to put it back in given the 28%, 29% operating margins that we're talking about.

Okay. If I could just squeeze one more in. So you got RestoreFlow approval in Germany. I think in the past, you talked about the overall European market being $80 million to $100 million. Germany is probably the largest economy there. How are you thinking about this rollout into next year? And is this a big upside lever for where you see Street numbers are right now for '26?

Right. I haven't looked at Street numbers for '26, so I'm not trying to comment on where they're at or how this helps or doesn't help. I'm just looking at my business. And I would say the Germany approval is great, and it's the most important economy and the most important medical device market in Continental Europe. I think that's very obvious. But there's a little hiccup on it for us in that the German authorities want to see the recovery centers where we get these tissues from. All other European countries, we believe, don't really care where we get them from, just like the FDA, sorry, the American Tissue Bank Authority doesn't exactly want to go audit our recovery centers. So with the German thing, it's big, it's huge. We need it to get other approvals. But in the very short term, and why we're calling this thing out in the script here is that you have to build German-specific inventory in allografts, and it can only come for now from those 2 recovery centers, and we'll have another 2 recovery centers approved, let's say, by Q3 of next year. So it's a little bit, Germany, we'll see where it goes. It's a little bit hobbled by those recovery center items. But when we get Ireland, and then when Germany and Ireland lead to other countries, we don't think there'll be that kind of constraint, and we can draw the inventory off our worldwide bucket. The reason we put in the, and I think this is a market size question at its root also. The reason why we threw in this little stat about the U.K. is we did get our approval in the U.K. in 2022, and we've had 3 years to sort of work the kinks out over there. And last year, in the last 12 months, rather, we sold $2.7 million of tissues. We transferred or distributed is what you're allowed to say, $2.7 million of tissues in the U.K. And it gives you a sense of where we got to after 3 years. It's a great tidbit. I want, Dave, do you have another Canadian number for allograft? I don't have that at my fingertips right now.

Yes. I don't have it specifically, but I would say qualitatively, we've seen pretty significant uptake of our allografts in Canada, I would say, particularly on the cardiac surgery side. I think some significant percentage of LeMaitre's revenue in Canada is now a cardiac surgery because of allografts. And some of that has to do with the fact that the other market participants aren't in Canada or they have a distributor. And of course, having an allograft at your disposal at the ready in inventory, it's very important. And we feel like that advantage will carry over to LeMaitre's allograft supply chain in Europe, but I don't have the exact figure on me.

Nathan, did we get at the essence of your question? Or do you want to reask parts of it? Or how do you feel about our answers?

No, I think, is there any way to kind of compare the size of the market in the U.K. versus the German market?

I can try it. We always assume the German market is bigger than the U.K. I'm going to say I feel like in most medical devices, it's kind of like 50% bigger than the U.K., 75% bigger than the U.K.

Your next question comes from the line of Michael Petusky of Barrington Research.

George, I didn't catch completely what you said around the sales force. Did you give the number of reps currently?

Yes, 152 at the end of the quarter with 23 open requisitions, still trying to land at 165 at the end of the year.

Okay. And I do think I caught that you let maybe 8 guys go as well. Like I'm just curious, it seems like a lot, and it seems like a lot of open slots. Is there anything to add there or just the normal course of the business?

I agree that 23 is a bit on the larger side. But of course, when you let go of 8 folks, it meant we were sort of trying to get 15 more growth territories than we had, as we, you guys have watched us grow the sales force pretty aggressively over the last couple of years. And I think as we've done that and as we've installed, you've heard this story a lot too, as we installed a lot more regional managers. We've gotten a chance to even take closer looks at the actual reps, even though there's more of them; A, there's more problems at the end of the bell curve, if you will. And then B, we have more inspectors, i.e., we now have 12 RSMs in the U.S. and 3 or 4 area sales managers above them. And I would say going back 2 years ago in the U.S., you had a VP of Sales and 8 RSMs trying to man the whole ship. And now we have a lot more management, and they're able to figure out who's not pulling their weight more quickly. So we're always doing that. We're always trying to find who's, how can we do better in a certain region and territory. So that's where the risk, the layoff there of the 8 went to. And then you got to keep growing. And I think we've been on this 165 number for at least 1 phone call, if not 2 phone calls here now.

Okay. All right. Very good. I didn't catch if you gave an update. Anything to talk about in China, I guess, particularly vascular patch or any XenoSure vascular patch or any other interesting items in China?

Right, right. So I would say the big update from China is things continue to go well. Sales growth of 40% in Q3 since you're asking about China specifically. And then the negative update is we're really, really struggling to sell the cardiac patches that we got approved last December. So that doesn't feel like a great launch. I think you guys are watching this Artegraft launch in Europe, and it's going great guns. We all know that. I would say this is the opposite of that. And then to transition to the peripheral vascular XenoSure over, this peripheral vascular bovine pericardial patch over in China. We expect to make our final filing for the approval in Q4, so within 2 months. And then we're sort of thinking another 2 years until that approval. We believe there are fewer competitors in the peripheral segment than the cardiac segment for patches in China. But we'll see. We have been really excited about that Chinese cardiac patch, and that's not working out too well for us.

Okay. And again, I may have, forgive me, this is the fifth call I've done today. I may have missed this, but did you say that MDR is completed at this point? Or is it just most substantially completed?

It's all over except the shouting. We still have one more to get, and it's a minor product line. So we're 21 of 22.

Your next question comes from the line of Brett Fishbein of KeyBanc Capital Markets.

I just had a couple of questions. I think you mentioned a target of 165 sales reps exiting 2025, and you just responded to the question about the number of open positions. But I was really just curious maybe how you're thinking about that 165 number looking ahead. It seems like a lot of hiring activity has taken place over the past couple of years. I'm really just interested like where you think that number needs to go over the medium term, 2026, maybe even 2027, or if this is kind of the right place to be?

I believe this relates to our operating margin, which, if you see an increasing operating margin, is a great opportunity to invest money. I do expect it to rise, though I'm unsure by how much. We haven't finalized our plans for next year yet, as we have many new sales representatives to hire. However, it will increase. Our guideline for managing the operating margin suggests that we should make these investments gradually to avoid negatively impacting our operating margin. We hold a significant number of territories in the U.S. that surpass the 2 million mark, and I've mentioned this before in calls, but we should strategically divide these and prepare for growth over the next couple of years. There’s substantial potential for growth here. Regarding China, we currently have four representatives in the country and are in the process of hiring a fifth, which is just the beginning. If we truly want to expand in China, which we do, we could potentially recruit between 30 to 100 representatives there. Most of our discussions currently don’t include China, but there is significant potential in that market of 1.3 billion people.

I appreciate that. I just had one more question. It's come up a couple of times on the call about the OUS Artegraft performance. I was hoping you can maybe just comment on what's gone differently or better than originally expected. I think a couple of quarters ago, you were talking about maybe $2 million for the full year, but obviously doing a little better there. So was it the original expectation was conservative or just getting market acceptance faster than you thought? Any color there would be awesome.

Great. Well, I love, it's sort of a softball question, so I love doing that. It feels to me like maybe we didn't realize the strength of our channel, and we've been over there for so long in so many countries direct. So maybe we didn't realize the strength of our channel and how quickly they could get to vascular surgeons with this device. I think we were a little bit nervous going in that since it's more of an AV access device in the U.S. And AV access isn't really that typical over in Europe. They use the patient's native fistula to do the work rather than implanting prostheses like the Americans do. So, and we're learning that, oh, well, maybe it doesn't get used for AV access over there, but maybe it gets used for peripheral bypasses. And so they're finding customers faster than we thought. The doctors love it. We're getting great reports. And then there's been a wildcard in this international thing in that South Africa, which does use Grafts for AV access, has exploded in terms of sales. And so you've got, basically, it's Europe and South Africa. And I think South Africa to give you some $300,000 in Q3 alone. So something huge has happened in South Africa. We've had the same dealer forever. They're an excellent dealer, and they have 50 or 60 reps down there. And it is a large country. I think it's 55 million people in South Africa. So you've got that helping out with the European launch to help it all go a lot better than expected. And I hope that's a good answer.

Your next question comes from the line of Jim Sidoti of Sidoti.

Can you give us the operating income and the CapEx in the quarter?

Yes. Cash flow from operations, Jim, was $28.8 million, and the CapEx was $2.3 million.

And the increase in the share count, is that related to the share price? And is that where you expect it to be in the fourth quarter?

The increase in the share count for the, on a reported basis, Jim, for the first time, the convert was not anti-dilutive. So if you look at our Q, which we'll file tomorrow morning, you'll see the reconciliation, and we did have to bring in some of the convert shares on a converted basis. So that was a minor point that you'll see in the Q. Overall, I think you can expect that each quarter, we're adding to share count through employee equity. And the fourth quarter is actually the largest quarter. We do a lot of grants in the fourth quarter. So then you've got a lot of vesting dates for restricted stock in the fourth quarter. So it will be up marginally in the fourth quarter due to the employee vesting.

All right. So around in that 24.5 million shares.

No, it won't be up that high. I think we're at 23.5% now. It will be maybe 24%, Jim, probably closer. Yes, 24.392.

Your next question comes from the line of Kyle Bauser of ROTH Capital Partners.

Okay. Great. So some really nice sales growth, of course, across key product categories here. Just looking at volume increases, can you speak a bit more about the makeup of this growth, I guess, in terms of new accounts versus higher utilization within existing accounts? I think you've got like 12,000 surgeons you're calling clients, and I think there's a TAM of maybe 22,000 vascular surgeons out there worldwide. Just, I know there's a lot going on in terms of flipping from distributor to direct and new launches, etc. Just trying to get a sense of the kind of growth mix profile of new business versus higher utilization in existing business?

Kyle, before I get to that question, just a quick welcome to you and Ross reinitiating coverage. It's great to have you along for all these calls. As to your question, I don't have a great answer for that, to be honest with you, and I don't want to speak off the tip of my tongue here. I could come back to you separately as to you're looking for, does the unit growth come from new accounts or more utilization at the current accounts? Is that sort of the essence of the question?

Kyle, it's Dave Roberts. I would say I don't have a firm answer, but I would tell you directionally, in the U.S. and North America, maybe less new accounts, whereas in Europe, and in Europe, particularly due to Artegraft and a little bit the U.K. allografts, those are a little bit more new accounts. And then Asia PAC, which is our newest region of the world, let's say, where we have gone direct in some new countries like Thailand and Korea, etc., probably a little bit more tilted towards the new account Greenfields over there.

Okay. I appreciate that. And I appreciate the welcoming as well. We're excited to be following the name; also some really nice margin improvement here, both in gross margin and operating margin. You talked about manufacturing efficiencies and moderations of OpEx. Just trying to get a sense of the types of, maybe more specifically the manufacturing efficiencies and examples of moderating the operating expense, just to understand what still remains above and beyond kind of just economies of scale, if you will.

Yes, Kyle, I think scale does help in several of the businesses, especially the businesses that are growing fast. We've talked about RestoreFlow benefiting from scale as that has ramped up. And I think we have been working pretty diligently on efficiencies across the expense base. So we had some manufacturing efficiency projects around automation that have paid off that's allowed us to reduce overall direct labor headcount. We're working on more of the commercial operational efficiencies around logistics and shipping as well that we think will continue to pay off for us. George mentioned just better management of the sales reps and some performance-based management there. I'd say that stretches across the employee base in general. And we have been focusing on just delivering operating leverage in the back half of 2025. So I think all of those have helped contribute to the strong operating margin.

Your next question comes from the line of Daniel Stauder of Citizens.

I had 2 quick ones. So first, I wanted to ask on the open cardiac call point. I think you commented it was particularly strong last quarter. I think that has to do with RestoreFlow. So I was curious what you saw in 3Q in terms of performance? And more broadly, are there any trends in this area that are playing out into the end of the year and into 2026 that you think are interesting or we should keep top of mind?

Yes. And I'm glad you bring up the Q2 topic because Q3 was just almost a repeat performance. If you look at allograft, it grew about 56% on the cardiac side and about 14% on the vascular side. So you have the same type of dynamics going on. In general, the cardiac allograft business is growing a lot faster than the peripheral vascular allograft business. We like both of the businesses, but we're newer to cardiac. And oddly, we don't put as much emphasis on cardiac. I think our sales force feels as though it's a peripheral vascular sales force and this cardiac thing is sort of a new thing for them. So oddly, there's less attention on it by the sales reps, but the results in this one particular category are a lot better with cardiac. And it's a little bit led by the U.K. and Canada. And now another theme here is that the Canadian results are sort of starting to come down into the United States as the new manager of the sales force is Canadian. He's been here for 1.5 years, but he's just getting going here, and he's Canadian, not American. So he's bringing some of his bag of tricks up in Canada down to the states.

Great. Appreciate that. And just one follow-up on Carotid Shunts. Just on the quarter, was there anything that was driving that 18% growth? I think looking back, the year-over-year comp was actually pretty difficult at 22%. So I just wanted to see if there was anything that was specific to 3Q? And then just a little bit more broadly, I feel like carotid shunt gets called out 2 or 3 times a year, 2 or 3 quarters a year just having double-digit growth. So longer term, how do you think about this product? How should we think about this product? And anything on the market or its long-term trajectory would be great.

Sure, sure. I think at its root, we're still benefiting from the fact that BARDA left the business, particularly in Europe, but also in the U.S. about 1.5 years to 2.5 years ago. And in Europe, we've been left with an extremely high market share, where we're able to sort of do what we want with pricing; in the U.S., it's not quite as nice as that. Our market share is more down in the 20s and 25s. And so it's not quite as flexible. But it feels more like a European thing. And I think they left us with a nice position. And I think you're seeing that in terms of units and also a lot of pricing flexibility on that product line. So yes, you're right to say it keeps coming up a lot over the last 2 or 3 years. So it stands to reason because of BARDA exiting.

That ends our Q&A session, and we appreciate your participation. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.