Artivion, Inc.

Greetings. Welcome to the CryoLife second quarter 2019 financial results conference call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Greg Hadacek from the Gilmartin Group. Thank you. You may now begin.

Thank you, Operator. Good afternoon. This is Greg Hadachek from the Gilmartin Group. Thanks for joining the call today. Joining me today from Cryo-Lex management team are Pat Mackin, CEO, and Ashley Lee, CFO. Before we begin, I'd like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties and and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations, or predictions of the future. These forward-looking statements are subject to a number of risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from these forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements as contained from time to time in the company's SEC filings and in the press release that was issued earlier today. Now, I'd like to turn it over to Cryolife CEO, Pat Mackin. Pat?

Hey, thanks, Greg, and good afternoon, everyone, and thank you for joining us. Our second quarter delivered inline results despite unexpected headwinds that impacted the quarter. We demonstrated once again our differentiated portfolio can drive consistent results even while facing short-term challenges. In the quarter, we simultaneously produced solid organic revenue growth and made further progress towards a number of our key development objectives. Those of you who have been following the company know that in the second half of 2019, we expected to launch three next-generation Yotech products, along with continued progress on other pipeline opportunities. I am pleased to report Execution on our strategy and delivery of our 2019 objectives is still on track. Turning to our second quarter performance. Total revenue for the second quarter was $71.1 million, reflecting 4% on a GAAP basis and 7% on a non-GAAP constant currency basis as compared to the second quarter of 2018. This strong, consistent growth was delivered primarily by BioGlue, Onyx, and Yotech product lines. Yotech grew 8% on a non-GAAP constant currency basis relative to the second quarter of 2018 driven by increased penetration in our international markets. During the second quarter, our primary sterilization partner experienced a failure of one of its sterilization lines that caused us to lose product. Excluding the loss of revenue stemming from this situation, our Yotech growth rate would have been approximately 11% on a non-GAAP constant currency basis. Looking forward, we expect the growth trends for our Yotech products to continue, driven by the platform's differentiation as well as the introduction of three new next-generation products into key European markets by the end of this year. Turning to Onyx, revenue increased 5% on a non-GAAP constant currency basis as compared to the second quarter of 2018, with non-GAAP constant currency revenues in North America growing 6%. Despite a softer-than-expected growth in the second quarter, we expect ONIX revenue growth to remain solid as we continue to take market share from our competitors given ONIX's superior design and FDA labels. Both BioGlue and tissue businesses continue to deliver solid results. BioGlue increased 7% on a non-GAAP constant currency basis as our direct sales team and distributors in Europe and Asia Pacific continue to demonstrate the strength, effectiveness, and economic advantages of our surgical adhesive in these markets. During the second quarter, our tissue business was up 4% on a non-GAAP constant currency basis, led by another strong quarter in our cardiac tissue valve business. Before turning the call over to Ashley, who will review our second quarter financial performance, I would like to discuss some business highlights as well as near-term and long-term growth catalysts. Starting with Yotech. We remain on track to introduce three Yotech products into our European markets in 2019. In the first quarter of 2019, we submitted our next-generation thoracic stent graft and the first-ever off-the-shelf branched thoracal abdominal device for CE-Mark. Based on typical timeframes, we would anticipate receiving CE-Mark for these products in the third quarter of 2019. As a reminder, our next-generation branched thoracal abdominal device, which is named E-N-SIDE, will be the first time a branch stent graft will be available off the shelf, eliminating days of waiting for a patient-specific device custom graft to be built. Further, next month we will submit our next-generation frozen elephant trunk called the Vita Open Neo for regulatory approval and expect to receive CE mark by the end of the year. As the next driver of long-term growth for our best-in-class Onyx mechanical valves, We are currently working with the FDA to finalize the design of our PROACT-10A trial, and we hope to receive an approved IND from the FDA in the third quarter. We continue to be very excited about this trial, as we expect it to demonstrate that the unique design and technology of our onyx mechanical aortic valve will allow patients to use Eliquis versus using Coumadin and having to go to the doctor to monitor and eliminates going to the doctor to monitor and manage their post-procedure INR levels. As you know, such an indication would be a substantial benefit to patients, and we believe could accelerate growth in our onyx business. Moving to BioGlue. Our application for BioGlue was submitted for the regulatory approval to the Chinese FDA earlier this year. Regarding our per-clot product, enrollment in our U.S. per-clot trial is complete, and we remain on track to submit a PMA to the FDA in early 2020. Turning to our tissue business, as previously mentioned, we continue to experience strong demand for our pulmonary tissue valves, which we believe stems from recent long-term performance data. Adding to these positive data were results from Dr. Paul Stelzer's ROS study, which was presented in early May at the AATS meeting in Toronto. In this retrospective review of 213 patients who underwent the ROS procedure, over a 20-year period. The data demonstrated survival at 10 and 20 years of 89 and 71% respectively, as well as freedom from re-operation for ROS failure at 10 and 20 years that was 92 and 85% respectively. For those who are not familiar with the ROS procedure, it's a double valve procedure where the pulmonary allograft is used to replace the patient's native pulmonary valve, which has been moved to the aortic position. Finally, we continue to make good progress in the expansion of our sales operations in Asia Pacific and Latin America. The recent additions of our two commercial leaders have already impacted sales penetration in these areas, capitalizing on our portfolio's competitive strengths as well as cross-selling opportunities. Over the next several quarters, we remain on track to expand our commercial teams in Asia Pacific and Latin America as we migrate toward direct sales in selective territories. The experience we gained through our shift to direct sales from distribution partners in Europe has helped us implement a smoother direct process in Latin America and Asia Pacific. I will now turn the call over to Ashley for a detailed review of our second quarter results and our financial outlook. Ashley.