LeMaitre Vascular, Inc.

Welcome to the LeMate Vascular Q3 2024 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. JJ Pellegrino, Chief Financial Officer of LeMate Vascular. Please go ahead, sir.

Thank you, operator. Good afternoon, and thank you for joining us on our Q3 2024 Conference Call. With me on today's call is our CEO, George LeMate, 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, October 31st, 2024, 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 on 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, which include organic sales growth as well as operating income, operating expense, and EPS excluding special charges. 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, .lemate.com. I'll now turn the call over to George LeMate. Thanks, JJ.

I believe this is our first ever Halloween earnings call, so I'll start my remarks appropriately. If a shareholder rang our doorbell tonight, we would have a few treats for their bag, 16% sales growth and 49% EPS growth. With that out of the way, I'll focus on five topics. Number one, our top line. Number two, the growth of our RSM team. Number three, our brick and mortar international sales offices. Number four, our latest Go Direct efforts. And finally, number five, our MDR CE Mark progress. 16% sales growth in Q3 was led by graphs, patches, and carotid shunts, up 24%, 13%, and 18%, respectively. APAC was our strongest region again, up 24% thanks to Thailand and Korea, our two newest direct markets. AMIA sales were up 22% in Q3, while the Americas were up 12%. Our 16% sales growth in Q3 was comprised of 10% pricing and 6% unit growth. We ended Q3 with 146 sales reps. As of today, we're at 149, and we're still targeting 155 to 160 for year end. Of course, as we increase rep headcount, we need to build out our sales management team. We now have 28 RSMs, ASMs, and country managers, up 17% year over year. As for our brick and mortar sales offices, we continue to hire staff in our new Paris office, which contributed to 21% French sales growth in Q3, and we're set to lease our first ever Swiss office near the Zurich airport. In China, we recently signed a lease, which will bring together our Shanghai sales office and our Shanghai warehouse into a new, larger facility. While we continue to wait for Zinashir Cardiac Patch approval, our efforts in China are starting to bear fruit. Sales were up 62% in Q3. We've also begun to push forward with Go Direct projects in Portugal and Czechia, where we expect hospital sales to begin in 2025. These will be LeMait's first European Go Direct project since 2016. Both countries utilize the CE mark and are members of the EU, making the transition less complex. Turning to regulatory, we've now received 15 of the 22 MDR CE marks we're currently seeking. The seven remaining MDRs should be received in 2025. One of these approvals is Artigraft, our largest US product. We've now received Artigraft approval in New Zealand, South Africa, Thailand, and Malaysia, and we expect to receive approvals in Singapore, Australia, Canada, and Korea in 2025. Bringing this device to international markets was a key consideration at the time of the 2020 Artigraft acquisition. I'd also like to begin to thank JJ for his 19 years at LeMait. As discussed in our August 8K, he'll be hanging up his CFO cleats in March 2025 after a fantastic career. JJ was elected to our board of directors in June 2024 for another three-year term. JJ is also helping to select and train the next CFO. We retained Russell Reynolds for the search, and interviews are ongoing. In conclusion, 2024 is shaping up to be another year of healthy sales and profit growth. With that, I'll turn the call over to JJ.

Thanks, George. In Q3, pricing and operational execution continue to drive our story. Our differentiated product portfolio enabled a 10% price increase, which helped improve both sales and the gross margin while we continued to restrain operating expenses. In Q3, we posted a gross margin of 67.8%, up 280 basis points -over-year. The increase was a result of higher ASPs, direct labor efficiencies, and improved restore flow allograft yields. Higher ASPs were driven by our differentiated Artigraft, Valvolatome, Restore Flow, and Shunt devices. We are guiding a Q4 gross margin of 68% as direct labor efficiencies continue. For the full year, we expect a gross margin of 68.3%, up 260 basis points -over-year. Operating expenses in Q3 2024 were $24 million, an increase of 11% versus Q3 2023. -to-date, our worldwide headcount is up only 4% to 637, reflecting our shift from significant post-COVID rehiring to a more conservative hiring posture. As a result, Q3 2024 operating income increased 43% -over-year, to $13.1 million, an operating margin of 24%. For the full year, we also expect an operating margin of 24%, up significantly from 19% in 2023. We ended Q3 2024 with $124 million in cash and securities, an increase of $10.8 million in the quarter. On the August 1 earnings call, we fielded pricing floor questions. Over time, our executive team has become more responsible for pricing decisions, as reps have sometimes cut prices on their own. In 2020, we began installing pricing floors in key European sales managers' bonus plans. In 2021, we began printing USA price floors on our company-wide gold cards. And in 2024, we began printing price floors for Europe, Canada, and Japan on these gold cards. As a result, from 2021 to 2024, our average annual price increase has been 9%. For comparison, from 2015 to 2020, our average annual price increase was 3%. We will continue to use this tool as an effective way to realize annual price increases. In general, this pricing strategy is consistent with our small niche market business plan. With regard to guidance, we are raising our Q4 sales and bottom line estimates, which are also reflected in our updated full year outlook. For more details, please see today's press release. But a few Q4 highlights include sales growth of 14% on a reported basis and 14% organically, Gross margin of 68%, Operating income of $13.3 million, up 30%, And EPS of 49 cents per share, up 30%. Separately, we would like to welcome Ross Osborne from Canter Fitzgerald, who initiated coverage on us earlier in October. With that, I'll turn it back over to the operator for questions.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions. Our first question comes from Siraj Khalil with Oppenheimer. You may proceed.

Hi, George. Can you hear me all right? Yes, Siraj. How are you doing? I'm doing wonderful. Hope all is well. So, George, splitting out the different geographies by growth rate, right? US was approximately 10%, AMEO was about 22%, APAC was 24%, and the composite growth rate was 16%. And 10% is ASP, 6% is units. Can you give us a little more granularity on OUS price increases versus unit increases? How does that split work out?

I don't know if we're going to be able to do that for you live here, Siraj, and I apologize. We've looked at it globally, not by major geography buckets. So I think unless I get a yes from JJ over here, who usually has more technical answers than me, I'm going to have to say we can pass on that question. It sounds like a reasonable question to ask. Maybe at the next meeting we should be prepared for that.

Fair enough. I appreciate that. George, in terms of AMEO and APAC, as you ramp up your direct distribution, how should we think about inventory? Obviously there are going to be fewer and fewer distributors, right? Is the logical way just to think about it that inventory currently is not a factor to be considered as we look forward to 2025?

Yeah, certainly. I would say we have so much inventory because we focus on this no backorder promise to our hospital and distributor customers. But yes, in short, we've got plenty of inventory and we're really only running effectively one shift worldwide right now. So if you really wanted to, you could triple the output at the factory. So inventory is not a problem for us.

Okay, fair enough. And George, my final question, I'll hop back in queue and let others have a chance. Your op margin growth has been pretty steady and attractive. Help us understand the puts and takes as we enter 2025, especially in terms of op margins. What are the levers you, obviously the pricing floors are one, right? They will flow through in one form or the other. But just help us understand a little more additional color on op margins. You'll see expanding in 25. And what are the different levers? Gentlemen, thank you for taking my questions.

This is JJ. Thanks for the question. So we don't give guidance, obviously, on the upcoming year. And we haven't done that yet. I would say at a high level, you can think of last year and the year before as the rehiring years. And so you saw op expense grow pretty quickly. I think it was 20% last year and 16 or 17% the year before. And that slowed down this year nicely. And so we're looking at 11% in the recent Q3 and then maybe around 10% ish for the full year. And so we've done a nice job bringing op expense growth in line. So you can sort of think about that as you move forward. The gross margin line, you've seen that be in the 65% range in the rear view mirror and more recently over the last three or four quarters coming up into the 68% range. And we're not telling you anything about going forward. Hopefully we can keep up the direct labor efficiencies that are driving that largely. And if you do that and you grow the top line nicely, then maybe you get a nice answer on the bottom line. We'll see where that goes.

Thank you. Thank

you. Thank you. Thank you. And as a reminder to ask a question, please press star 1-1 on your telephone. Our next question comes from Rick Wise with Stiefel. He may proceed.

Good afternoon, George. And congrats, JJ, on an amazing run here. Just I guess I'll start off thinking about some of the key drivers as you highlighted them in no particular order. As we contemplate 25, and I know you're not ready to give guidance, but what kind of band should we be I mean, it's hard to think about in terms of that unit and price growth driver and mix. JJ highlighted what happened and what you did in 20 and 21 and 22, et cetera. What's the next lever that's going to keep the price story going, for example?

I mean, I'll take a high-level shot at it, Rick. The strategy itself, I think, is conducive to nice price hikes, generally speaking. So the niche product element to our story, where else are you going to get a valvuletone part of the story, is a nice piece of the ASP driver. The fact that we're sort of $200 to ,000-ish devices and not $30,000 devices is a nice part of the story that doesn't sort of break the bank, if you will, of the hospital systems. And then the fact that there's no direct reimbursement really for our devices. We live under DRG codes for procedures. I think that helps that as well. And then as we said in the script, we've now sort of, oddly it took us this long. We were a little chagrined that it took us this long, but we were like, okay, we've got this tool now called the pricing floors. And so we think we can use that going forward to be more precise and more directed about the hikes that we get. It used to be you'd ask for an 8% hike and you actually got a 4% hike or whatever the number was because reps were out there discounting. And maybe we can be a little more precise with that. I don't know, George, if you got other comments around that.

No, that's pretty good. That's about what I would say, JJ.

And thank you, JJ. And George, maybe expand on your sales expansion goals. I might have thought you would have been able to add more this quarter. It's an ambitious goal to add that number maybe by year end. I don't know if it is. I'd be curious to hear your perspective. But how confident are you that you can get there? And do we expect similar kind of expansion numbers as we think about next year?

So I'll handle the back of the question first and say, yeah, you can. We're not guiding into next year, but we know we have a lot of people lined up currently to be hired. And if every last one of them got hired, we would be above that 160 number. So yeah, I would say you can expect further. I think we see ourselves more and more as a sales channel. And that's what sales channels do is they acquire stuff and put stuff through themselves. And they have to keep growing the sales channel. That's a little bit why you see us focusing all this chatter on the brick and mortar offices and check in. We had a little bit of a slow start in the year. We had a little bit of a slow start in the year. We had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And we had a little bit of a slow start in the year. And really if we're going to make it to this point it's going to be very, very important to the sales team. We're not going to get thrown in jail if we don't get to the 155, or what is it? 155 quote guidance for sales reps. We've been talking about it a lot but we feel like it's a goal. We should make it. But if we don't make it I think you guys will be happy if we make our sales numbers and our EPS numbers first, and then this will be a secondary thing. So, you know, I'm not that worried, but I think we will make it.

Gotcha. I'll stop there. It's great to see another terrific quarter. Thank you.

Thanks

a lot, Rick. Thank you. Our next question comes from Brett Fishman with KeyBank. You may proceed.

Hey, guys. Thanks for taking the questions. Just wanted to ask one on the R&D line, which came in lower relative to the past several quarters, and was curious if there was any type of, you know, transitory benefits that you may have seen there, or if you're starting to see more of a permanent reduction around some of the higher spending around the ERP implementations and regulatory costs that you've been absorbing for the last few years.

Yeah, that's a good catch and a great question. Yeah, I think on the R&D line, the regulatory piece have a lighter quarter. And I think you guys know, we've talked about this before. I think we've been spending four plus million a year or so for the last two, two-ish years, three-ish years. Maybe we're sort of 12 or 13 million dollars-ish into this spend for MDD-MDR. And it's sort of coming to some kind of conclusion-ish, if you will. And so maybe we're going to get some benefit to that going forward. We'll see. We certainly did in this quarter.

All right. Super helpful. And then just one follow up. Maybe I guess the question was kind of asked earlier, but if we take it on a global basis, the 6% volume growth for the total portfolio was pretty impressive. And I was just wondering if there was any products that you could call out from purely a unit volume growth perspective that supported that level of performance this quarter. Thanks very much.

Sure. Thanks a lot for the question, Brett. And that answer, I think, is pretty simple. The RFA, the Allograft product was up 26% in units. And the Zenasher product line was up 10% in units. And that kind of gets you to that 6%.

Thank you. Our next question comes from Jason Whites with Roth. You may proceed.

Hi, thank you. You guys mentioned some brick and mortar building over the US. Does that also include buying out of distributors or is that purely de novo in your part in terms of the whole distribution? I guess changes are up our investment.

Hi, Jason. Yeah, you know, I think the way we worded it and ordered it might have been a little bit confusing. So to de-confuse everyone here, we are trying to do two distributor buyouts, one in Czechia and one in Portugal. That's new to you on this call. We sort of mentioned it the last call, but now it's real. And we have had discussions with those distributors. So you'll see us buy out Portugal and Czechia and then somewhat separately in these other markets like China and France and Switzerland. We've been direct for a very long time and we're doing some, you know, in France, we did open up an office about three months ago or four months ago in Switzerland. We're about to rent an office by the by the Zurich Airport. And in China, we're bringing our warehouse and our office together in a newly enlarged facility in Shanghai. So two of the first two distributor buyouts and then three brick and mortar changes that you're hearing about on this call.

OK, that's helpful. And then, you know, I know we're always asking about pricing because it's impressive. And I understand your positioning as a niche and sort of the only provider in a lot of these unique products. But, you know, based on what JJ said, it sounds like you also feel that sort of the change in approach, limiting the sales force's ability to discount is really what's behind this. And from that, it sounds like you also think there's a fair amount of sustainability in the kind of momentum we see, not necessarily, you know, the absolute numbers, but in terms of at least seeing some sort of impressive pricing. Is that is that is that the right way to think about it?

Yes, I think it is. I think in the last six months, we've come to a realization that those price floors that we started three and a half years ago are real and they work. And I don't think we quite understood the full scope of that until we started studying it. You know, shame on us for not really figuring out what we were doing well a year and a half ago. But yes, I think you're on to it.

OK, that's good to hear. And then I guess related to that, if I can push you, you may not want to answer this. But if I think about your price increases, are they across the border? You mentioned sort of your three lead products, which are definitely, you know, leadership products for you, for the market itself. Are that's where most of the price increasing happen, or is it really just something across the board?

Jason, it's a good question. And no, it's not across the board. Roughly speaking, it's in about 50 percent of the categories and it's places where we sort of have higher market share and where we have very distinct devices that are different from other products. As you might expect, so Valvolotone, Shunt, some of the latex free catheters, and then also these bovine and ovine graphs are sort of the picture of the products that are priceable, if you will. And then stuff like PTFE and Dacron graphs, where we're number three and number four in the market, you know, the price is not set in Burlington, Massachusetts. It's set elsewhere.

OK, great. And JJ, yes, congratulations. On a great run, I agree with some other comments there. I just joined again and I'll miss you. But all that said, I got to go trick or treating.

Enjoy. Thanks very much.

Thank you. Our next question comes from Danny Souter with Citizens JMP. You may proceed.

Yeah, great. Thanks. So I just wanted to start on the top line. So 16 percent growth in your hardest comp of the year. You talked about some of the drivers for your product categories and regions, but, you know, is there anything else you can point to or provide color on that's supporting this progress? You know, the progress that you're seeing this throughout this whole year. Are there any unexpected tailwinds in the market in terms of demand or is this just really just a blocking and tackling story broadly? Thanks.

OK, so underneath that graph category, Danny, thanks for the great question. Underneath that graph category, we were quoting you in the press release and also on this earnings call, graphs grew 24 percent. One subcategory of graphs that was particularly standing out was the alograft piece of our business. It was up 47 percent. So that we call that variously RFA and alograft and we build those products out in Chicago. So you've heard us talk about that like that. So I would say that's a big topic. And then also maybe sort of structurally over in Europe, I think we keep feeling and we've been talking about this for almost 24 months on these calls now. So this is not new, but we keep feeling the exit of companies that are standing down and deciding not to file their MDRs and just said, hey, this product category is not large enough or not exciting enough. We're not going to fall through. So we keep feeling that over in Europe in certain categories, notably the shunt. And then I think there's also a couple patch companies, some biologic patch companies that have retreated from the market and decided they didn't want to participate. So so maybe alografts, RFA big time this year and then continuation of this exit from the market in Europe from some of these companies. Now, that's great. And then this one.

Yeah, sorry. Sorry, I got you. I was going to say you could talk in Korea and Thailand geographically, doing really nicely and contributing to growth smaller. Yes, I know. But stories that have been growing pretty nicely. And even like we haven't talked about China that much over the last year and a half on these calls and now the word's starting to come back in. So there's a little, again, small base here, but some nice answers coming out of China in terms of gaining some momentum. So nice geographic answers as well. And Danny, this is Dave. I normally don't don't jump in on these topics, but you heard George talk about we increased the number of sales managers in the company. We we shuffled some of the upper management organization and and our sales managers. We now have 28. These are country managers, VPs, area sales managers, real regional sales managers that are up 17 percent. So I think the ratio of reps to managers is going down. The reps are probably being managed a little bit more tightly as well.

Great. Appreciate the answer. Just one follow up for me more on the sales rep side. So do you have any plans to add more sales reps in Europe, just given some of the regulatory updates and progress there? I think when you updated your range last quarter, it was more North America focused. But how many of these are your mark for the EU? And do you feel you need to put more bodies out in the field with all the progress you've had there?

Thank you. Yeah, that's a good insight. And yeah, it gives me a chance to say, yeah, we've I think we've morphed a little bit. I think maybe in May and June, we were thinking this is all about making this a big giant surge in the Americas. And I think our opinion has evolved and I think we've added on. I think right now, if I think about my hiring board, I think there's about nine open European territories. And then, of course, you're hearing us talk about Czechia, where we'll need two reps and Poland, where excuse me, Portugal, where we're going to need one rep in Lisbon. So yes to that. And it's getting a little bit more European. It's not necessarily getting a little bit more APAC right now. We feel like we've got a lot of reps over there for the size of the business. But in the US and Europe, we could certainly use more reps. Great.

Thanks

a

lot. Great quarter.

Thank you.

Thank you. Our next question comes from Michael Kutusky with Barrington Research. You may proceed.

Hey, good evening, guys. I'm wondering, I had a note that you guys would make a final submission for Xenoshure, the cardiac indication in China in November. Is that still teed up to go here in the next 30 days?

Yeah, that's a good question. That is done. The final submission is in and now we just await our regulatory folks say, yeah, it'll be about six months, but you've heard that same story for six years on these phone calls. So if I were you, I wouldn't believe me on that.

Fair enough. So I'm curious in terms of, you know, as JJ transitions to the board here the next six months or so, what are you guys looking for in terms of, you know, potential new CFI? Is it important that he has public company experience, med tech, experience with M&A? Like, what are some of the things you guys are looking for?

OK, so are you asking me where the holes in JJ's game here? I don't think you are. I was not. I know that. I know. All kidding aside, you know, we're blessed here a little bit at LeMate in that I think a lot of companies go at it with a CFO and a CEO, and we're blessed in that we have CEO, CFO, and mega VP of business development named Dave Roberts. So there's sort of a triad here rather than two people at most companies. So we don't have to chase down all the acquisition side of that of the portfolio. We can go at it a little bit more technically. We're still trying to figure out what split to make with the IR and things like that. We'll figure that out based on, you know, who shows up for these interviews and which ones we decide to pursue. So it's a good question. I think we're lucky that most companies when they lose their CFO, they're losing one of the top two people. And here we are. We're losing one of the top three people. And it's, you know, it's a little bit helpful as we go into it. It's nerve wracking, obviously, but we think we'll get through it.

And then I guess a quick one for JJ, the subject here of the last question. JJ, in terms of the gross margin, you know, I keep writing, I think these gross margins are sustainable, but I'd much rather hear you say that than me write it. What are your thoughts?

Well, Mike, I'll tell you they're sustainable through Q4 because that's what we guided, 68.0. So you got that out of me. Going forward, we'll see. Price is obviously a big driver for the gross margin going forward. And so to the extent that, you know, we can continue to benefit from that, that'll benefit the gross margin. On the other hand, store flow is growing like crazy and that's got a lower gross margin than corporate. And so that drags you down a little bit. And then we've got the big piece around manufacturing efficiencies and can we keep those up and quality expense? Can we keep that increase muted and have to get a little leverage on that over time as sales grow around it? So, I mean, there's a lot of moving pieces and we'll see where we go, but I think those are some of the bigger drivers for you.

OK, Mike, great. And then let me ask the last one to the mega VP, Dave. Dave, what are you seeing out there? I've seen some of, you know, what I would consider your companies in the public markets, you get compared to Merit has gotten more active in M&A and some others. I mean, what are you seeing out there and valuations and just anything you can talk about in terms of the assets that, you know, you at least may think are somewhat in play?

Thanks. Thanks, Mike. We do see some activity. You mentioned Merit also, of course, Boston Scientific acquired Silk Road Medical for six times sales, not too long ago, and Exxonix for nine times sales. But I would say, you know, those are higher figures, higher revenue, small cap med device. It's only trading about two times for revenue. So that's down from the COVID days, whereas larger companies, I think there's a benefit to scale of the trading about five times. So, you know, we're out hunting as always. And I would say at the margin, we're generally looking a little bit bigger, as I've said on previous calls, than we've looked in the past, because obviously we're more profitable. We have a larger balance sheet. Things are going well for us. So, yeah. So, you know, there are targets out there. We're at various stages of discussions, etc., with some of them. And in the meantime, we feel good about our ability to reach for larger acquisitions.

OK. Could I ask a part B to my last question? I guess it's maybe to JJ, but maybe to everybody. You know, if you found that deal, that larger deal, like, I mean, like, would be one of the bigger or probably the biggest deal you've ever done. I mean, how lever do you guys willing to get given what interest rates are and all the rest of it? How deep would you go on a transaction if you all felt like it was the right one?

I think we might need to keep our counsel on that one. It sounds like any answer we could give might scare people off either way, whatever we say. So I don't know. That may be a hypothetical there that we probably shouldn't step into unless one of you guys feels you want to go at this thing generically, I guess. I don't know.

I mean, the easiest part of that is banks will lend you up to three and a half times combined EBITDA. Right. Now, beyond that, then you start to get into Georgia's area here. What are you willing to be comfortable with? So maybe we just say that's like that's certainly a comfort zone up to that. And then after that, you know, depends on the circumstance. Right. So if our EBITDA is 60, three and a half turns of that, you're looking at 200 million or whatever. And then we have excess cash on the balance sheet as well. So, Mike, I think even without getting into more complicated discussions, we're looking upwards of 300 million, just purely financeable without worrying about the EBITDA, the target, etc.

Are there deals out there like that,

Dave? Yeah, I mean, look, there are deals as small as five million dollars and deals which are hundreds of millions of dollars. And, you know, for me, always just because I have very long term viewpoint on this company, I focus on the strategic fit first. And then if there are targets which are equally meritorious strategically, then, of course, we'd rather do the larger deal. But that's just not how it works. I mean, so but to answer your question, yes, there are larger deals out there.

Very good. Thanks, guys. Another such such a great quarter. Thanks.

Thanks a lot, Mike.

Thank you. Our next question comes from Frank Takinen with Lake Street Capital Markets. You may proceed.

Right. Thanks for the question. Congrats on the quarter. When you're explaining kind of price floor rollout, I think you're going by geography. Are there any geographies that you haven't rolled out that price floor strategy or at this point, is it pretty much rolled out company worldwide?

I think we've gotten to the bigger ones. Let's let's enumerate here. We have Australia, we have Japan, we have Canada, we have UK and Europe and we have the USA. There might be a couple more to do. And then there might be a couple more to do elsewhere. But I think that's the larger chunk of our company. When we think about what do we do next year, we're always sort of testing which product line should we apply to and which geography. So if there's a place to go, we will go there. With these floors.

OK, that makes sense. And then maybe just to clarify, and I may have missed it in the prepared remarks, but Allegraft, I think in previous calls, you said Ireland and Germany 2025, 2026, respectively, does that still remain the case and expectation?

Actually, no. There's a little bit of a hiccup on both sides of that. And there's a very small hiccup in Germany, which is the more important one, which is the regulator was supposed to be in our building in Chicago October 15th or so and called a week earlier and said, hey, I'm going to be sick a week from now. And so they still haven't rescheduled their audit of the factory out there. And so that one's held up only by a man's thickness schedule. And so that I don't know what that means for the year. Maybe we leave that one alone and still at 2025 or 2026 with Ireland, something different cropped up, which is the state of Ireland or the country of Ireland has jumped in and said, hey, we're we're excited. You want to do Allegrafts? And we had previously intended just to do it as a paperwork exercise through Ireland. And now they're asking us to set up a facility there and to stock the product in Dublin and to give the state of Ireland and health care system of Ireland right of first refusal on the devices, all of which got hairy and complicated pretty fast. So I would say we're taking a step back a little bit with Ireland and we're thinking about what our next move should be. And we haven't really sorted out ourselves yet. That's all breaking news as of, I don't know, 15 or 30 days ago. So we're still trying to figure out what to do. So little delay over there. We're still, you know, really excited about pursuing our approvals in Europe, but a little bit of a disappointment on those two devices. Are those two paths? Got it.

OK, I'll stop there. Thanks.

Thanks a lot, Frank.

Thank you. Our next question comes from Jim Sidoti with Sidoti and company. He may proceed.

Hi, good afternoon. Thanks for taking the questions. So of the seven NDR approvals that you're waiting for, are there one or two that you think will be more impactful or you think they're all about to say?

No, in fact, I would say the only one that's really a game changer and I'll explain why in a second is this this artigraft device, because it's a brand new one. We've never had an approval in Europe with the other ones. Jim, the other six, we have current EU MDD CE marks, which are durable through 2027. So we don't have to worry about whether we're being stopped or not to sell those devices. The MDR is the way you're supposed to go. And once you get an MDR, it's then changeable. And you're not sort of in a straight jacket product wise. But only one really counts. It's artigraft.

OK, and when do you expect that one?

2025. And I think we're starting to say H1 2025.

OK. All right. And, you know, Dave, you've been pretty disciplined, you know, the past couple of years. I mean, is there any reason why you need to do a deal with 16 percent drop on growth? You know, can you continue to be disciplined going forward?

Yeah, I mean, Jim, it's a good question. We haven't done a deal since June of 2020. And I would say we just we're waiting for the right deal at the right price. We have we have bid on a few different deals. And for various reasons, that hasn't come together. And rather than, you know, chase deals up in price or whatever, we, as you mentioned, we have been disciplined. So in a funny way, I do think there even though, you know, I personally would like to do a deal. You know, I'm I feel like I'm slowing this down, waiting for the right deal. In the meantime, it allows the rest of the company to keep, you know, getting the house in order really, really nicely. And I think our ability to focus on pricing and these pricing floors is a great example of that. Our ability to consolidate factories like Cardia Cell and focus on gross margin and hire manufacturing engineers. A lot of good things are happening, you know, while we hunt for the next acquisition. So I think we will be disciplined and we won't hold the trigger until we find something that we believe is really right.

All right. And just, JJ, I just want to say, whoever does replace you, they're going to have some big shoes to fill. You've been one of the things. Thanks. Appreciate it. Appreciate it. And and there's probably five or six people on the call. I'll be happy to take that job if you guys want to, you know, take us.

Thanks,

Jim. Not me, though.

I'm going to miss I'm going to miss talking to you on these calls.

All right. Thank you, guys. Thanks a lot, Jim. Thank

you. Our next question comes from Ross Osborne with Cantor Fitzgerald. You may proceed.

Hi, guys. Congrats on the strong quarter and thanks for taking our questions. So starting off, we'd be curious to hear how you are progressing and targeting cardiac surgeons. And as a follow up to that, does it make sense to add cardiac focus reps?

OK, so that's a great question. I think we're up to about 14 percent of our sales are now cardiac sales as opposed to vascular and still some interventional radiology and stuff like that. So 14 percent. We do not have any dedicated cardiac reps right now. I think the back part of your question is, are you considering cardiac reps, dedicated cardiac reps? It's certainly something we think about. We haven't gone forward with it yet. I still feel like I always say to Dave and JJ, the world's a big place. And filling out a peripheral vascular sales force for the world, it's not one hundred and forty five reps. It's a lot more than that. And so, you know, we have that imperative and we're already got nine products for the vascular surgeons. So we only have two or three products, if you will, for the cardiac surgeon. So I think it's a more efficient call point. But it's certainly something we have to think about, particularly since I would say, you know, the targets that we see, the acquisition targets we see, something like 60 percent of them seem to be cardiac and 40 percent of them seem to be peripheral vascular. And so at some point here, the company is going to need two distinct sales channels. That's almost inevitable, in my opinion, but we shall see.

OK, great. And sticking with yourselves for us with headcount growing, would you walk through some of the low hanging fruit and where you can leverage cross selling?

Sure, I would say the lowest hanging fruit is in the United States, where still, because of that 2020 acquisition, we have really large sales per sales rep. I think in the US it's something like one point seven or something, a million dollars per sales rep. And as a result, I would say the easiest thing to do is to as a for instance, this isn't true. But, you know, if Iowa, we only have one rep and they got four million dollars with the sales, let's say that were true. The low hanging fruit is split Iowa up and have two reps there and have two of them with two million dollars in sales. And I think that's where we keep going. We keep going after the really full sales reps who've got too much sales. They can't they can't handle three million dollars of the sales. Got it. Thanks for taking our questions. Thank you very much

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