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spk00: Good day, ladies and gentlemen, and welcome to the Artivian 3Q 2022 Financial Conference Call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Sam Benzinger from the Gilmartin Group. Sir, the floor is yours.
spk03: Good afternoon, and thank you for joining the call today. Joining me today from our Jivian's 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 are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements May it add 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 is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. Now I'll turn the call over to Artivian CEO, Pat Mackin.
spk05: Hey, thanks, Sam. I'm pleased to report that our solid business momentum continues as we've now delivered our fourth consecutive quarter of strong constant currency top-line revenue growth. Constant currency total revenue growth was 11% compared to Q3 in the first nine months of 2021. Further, we remain on track to deliver on each of our commitments we made at our investor meeting in March. For the third quarter, we saw top-line growth across all of our product categories. More specifically, on a constant currency basis compared to Q3 of 22 versus Q3 of 2021, onyx grew 19%, tissue processing grew 13%, bio-glue grew 9%, and stentgrass grew 7%. For the first nine months of the year on a constant currency basis, stentgrass are up 22%, Onyx is up 14 percent, tissue processing is up 10 percent, and BioWu is down 4 percent, all compared to the first nine months of last year. Regarding BioWu, we have secured derogation and derogation extensions that will allow us to continue selling in virtually all European countries through year end, by which time we believe we should have the CE mark. In the third quarter, while our derogation extension requests were pending, it was unclear if we'd be able to continue to sell BioGlue into the UK and France in Q4. As a result, we estimated an additional 1.5 million in orders in Q3 that we believe typically would have been placed in Q4. Fortunately, in October, we received these derogation extensions, by which time the Q3 orders for BioGlue to those countries has already been fulfilled. Therefore, we expect BioGlue's contribution in Q4 to reflect this increase in the Q3 orders. If customers had not made these increased buyable purchases in Q3, our total revenue growth in the third quarter and the first nine months of the year would have been 10%, both on a constant currency basis compared to the prior year. Our success on all these fronts has reinforced our confidence that we can deliver on our three growth initiatives we outlined in our investor day in March, which we continue to believe will drive double-digit constant currency revenue growth through 2024 and beyond. As a reminder, our three initiatives are as follows. First, we will drive continued growth in onyx in our aortic stent grafts. Second, we continue to benefit from our investments in our commercial channels and new regulatory approvals in Asia Pacific and Latin America. And third, we will drive growth in 23 and beyond through PMA approvals in the U.S. for per clot and the onyx project mitral low INR indication. As mentioned previously, ONIX revenues grew 19% on a constant currency basis in the third quarter of 2022 compared to the third quarter of last year, driven by strength in the U.S., where revenues grew 21% compared to last year, and in Europe, where revenues increased 25% compared to last year, both on a constant currency basis. For Stentgrass, revenue in the third quarter increased 7% on a constant currency basis compared to the third quarter of last year. Even though our year-over-year growth in stent graph revenue was down sequentially compared to the second quarter, year-to-date growth at the end of the third quarter stands at 22% on a constant currency basis. Our next initiative is to expand our presence in Asia Pacific and Latin America through new regulatory approvals and commercial footprint expansion, which also remain on track. I'm pleased to report they are continuing to execute very well on this strategy as demonstrated by the third quarter constant currency revenue growth of 25 percent and 22 percent in Asia Pacific and Latin America, respectively. We continue to expect these regions to be important growth contributors over the coming years. Regarding our third initiative, we remain on track to receive regulatory approvals for the low INR label of the onyx mitral valve and for per clot by the end of the year. If the low INR label is approved, we believe we will take significant market share in the U.S. with the onyx mitral valve, just as we've done and continue to do with the onyx aortic valve. If per clot is approved by December 31st, 2022, we will receive a $25 million payment from Baxter for that milestone under our divestiture agreement, and we'll begin to generate revenue for supplying per clot to Baxter for approximately two years thereafter. In addition to our progress on each of these initiatives, we continue to make progress on the AMDS clinical trial. For AMDS, we have 11 patients enrolled in our PERSEVERE trial, which is a non-randomized clinical trial in up to 25 U.S. centers, 100 patients who have been experiencing acute type A dissection. The combined primary efficacy and safety endpoints for the trial are the reduction in all-cause mortality, new disability and stroke, myocardial infarction, and new onset renal failure requiring dialysis, as well as re-expansion of the true lumen of the aorta. We now anticipate completing a full enrollment in the first half of 2023. Following a one-year follow-up period of so many trials meets its endpoints, we anticipate that we should receive FDA approval for the AMDS in early 2025. In addition, our partner, Endospan, is making good progress on the USID Triumph trial for its Nexus aortic arch stent graft system. In that trial, there were approximately 29 patients already enrolled and treated, and a total of 40 patients enrolled and approved for treatment. Endospan estimates trial completion in June of 2023 and a PMA approval in 2025, again, assuming the trial's endpoints are met. To reiterate, if these PMA trials proceed as anticipated, we anticipate FDA approval for AMDs and Nexus in 2025. At that time, assuming we exercise our option for Endospan, These products would increase our addressable market opportunity by an estimated $900 million. Regarding PROACT-10A, while we were obviously surprised and disappointed by the termination of the trial, as recommended by the Data Safety Monitoring Board, our number one priority is always and will be patient safety. I'd like to put into perspective what the impact of stopping the PROACT-10A trial means for Artimion. If PROACT-NA had been successful, we would not have seen any revenue impact associated from the positive trial outcome for another three years if the trial had remained on schedule. Despite the termination of the trial, our current year revenue guidance and the three-year revenue outlook we presented our AMS day has not changed. Second, we believe, as many KOLs believe, that our mechanical aortic valve is the best in the market. Our aortic valves have taken market share every year since we acquired Onyx, and we do not expect that to change. No doubt a positive trial outcome would have been beneficial in accelerating the pace of our market share gains for the aortic valve, but we fully expect the onyx valve business to continue to grow with or without a positive trial result due to its superior clinical benefits and indications over competitors. Third, our growth drivers remain unaffected, and our pipeline is poised to add more than a billion dollars in the addressable market by the time Proactin-A would have been completed. We therefore still have the opportunity to substantially grow our revenues and earnings. Finally, there are positive financial implications from shutting down the trial. The majority of the $10 million we expected to spend on Proactin-A in each of the years 23 and 24 will now largely be redirected to offsetting the impact of inflationary pressures, enhancing cash flows and EBITDA. Clinical trial setbacks are unfortunately an inherent part of innovation, and our product portfolio exemplifies many successes as we continue to do so. We will continue to prioritize and support innovation as we seek to develop products and improve the lives of patients around the world. With that, I'll now turn the call over to Ashley.
spk04: Thanks, Pat, and good afternoon, everyone. Total revenues were $76.8 million for the third quarter, up 6% on a gap basis and up 11% on a constant currency basis, both compared to Q3 of 2021. As Pat mentioned, we saw strong constant currency growth across all product lines. On a year-over-year basis, in the third quarter of 2022, onyx revenues increased 17 percent, tissue processing revenues increased 13 percent, and bio-blue revenues increased 5 percent. AORI extent graph revenues decreased 6 percent due to currency headwinds. On a constant currency basis compared to the third quarter of 21, onyx revenues increased 19 percent, tissue processing revenues increased 13 percent, bio-blue revenues increased 9 percent, and aortic stent graft revenues increased 7%. On a regional basis, third quarter 2022 revenues in Asia Pacific increased 24%, Latin America increased 20%, North America increased 12%, and Europe decreased 8%, all compared to the third quarter of 21. On a constant currency basis, revenues in Asia increased 25%, Latin America increased 22%, North America increased 13 percent, and Europe increased 5 percent, all compared to the third quarter of 2021. Gross margins were 63.4 percent in Q3 compared to 66.2 percent for the third quarter of 2021. The decrease was driven primarily by inflationary impacts on materials and labor, as well as product mix within our aortic stent graft and vital glue product lines. Inflation remains persistently high and will weigh on our gross margins. However, with the continued growth in our top-line revenues, general expense management, along with funds now available due to the cessation of the proactivity study, we still anticipate delivering on our adjusted EBITDA commitments we made in March at our investor day. G&A expenses in the third quarter were $41.1 million, compared to $39.1 million in the third quarter of 21. excluding non-recurring acquisition-related and business development benefits and charges. G&A expenses were $39.9 million for the third quarter of 22 compared to $37.3 million in the third quarter of 21. R&D expenses for the third quarter included a $4.7 million charge for estimated costs associated with the termination and wind down of the proactivity study as recommended by the data and safety monitoring board. The majority of these costs include future administrative and site costs that will be incurred during the fourth quarter of 2022 and the first quarter of 2023, as well as the estimated cost of clinical drugs purchased for patients participating in the study and not expected to be recovered. These costs are non-recurring, and we have excluded them for purposes of calculating adjusted EBITDA and non-GAAP earnings per share. On the bottom line, we reported GAAP net loss of approximately $13.7 million, or 34 cents per fully diluted share in the third quarter of 22. Non-GAAP net loss was $1.9 million, or $0.05 per share in the third quarter. GAAP and non-GAAP net loss includes a $3.7 million or $0.07 per share loss due to foreign currency revaluations. Excluding these amounts and the wind down costs associated with the PRO Act 10A trial, non-GAAP income was $853,000 or $0.02 per share. As of September 30, 2022, we had approximately $38 million in cash, $315 million in debt, and the full $30 million available to us under our revolving credit facility. Adjusted EBITDA for the third quarter of 2022 was $10.4 million compared to $9.3 million for the third quarter of 2021. Regarding our capital structure and the impact of a rising rate environment, As we've stated, we do not believe that we need to raise additional capital to fund our debt, our investments in our channels, or our pipeline. Even if LIBOR or SOFR increases to approximately 5%, which would place our all-in rate on our debt at approximately 8.5%, we believe we will still be able to comfortably service our debt and continue to invest in growth. With the cessation of the PRO Act 10A study, we will have an additional $10 million of funds for each of 23 and 24 previously allocated to the study, which can now be mostly redirected to earnings and cash flow. Our term loan B contains no financial covenants that would place us in default unless we were to have more than $7.5 million drawn on our revolving credit facility at the end of any calendar quarter, which we do not. As of now, we have the full $30 million available under our credit facility and do not currently foresee the need to draw on the facility. Additionally, our convertible notes do not contain any financial covenants. Please refer to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results. And now for our 2022 outlook. In our last call, we stated we had faced a $10 million currency headwind in 2022 versus 2021. Since that time, the dollar has continued to strengthen, resulting in incremental FX headwinds. And for the fourth quarter alone, we face approximately $4 million in currency headwinds compared to the fourth quarter of last year, putting our prior year constant currency revenue comparator at approximately $75 million. With that in mind, our slightly narrowed full-year constant currency growth guidance of between 9% and 10% implies full-year revenues in the range of $313 to $316 million. This contemplates our expectation for fourth quarter revenue to be in the range of between $78.5 and $81.5 million, which accounts for the impact of the previously discussed $1.5 million in BioGlue stocking orders that we benefited from in the third quarter. I'll turn the call back over to Pat for his closing comments.
spk05: Thanks, Ashley. So to summarize, our fourth consecutive quarter of strong execution continues to confirm our growth strategies working and delivering the results we'd envisioned. We continue to further expand our global commercial footprint and invest in our clinical programs. In the next three years, we expect revenue to grow double digits to approximately $400 million and to generate $75 to $80 million in adjusted EBITDA, as well as reducing our net leverage to less than three times. even despite the headwinds we face from inflation and its impact on gross margins. Our success in the third quarter positions us well to deliver on these metrics. To summarize, we saw 19% constant currency growth with ONIX, 13% growth in Tissue, 9% growth in BioBlue, and 7% constant currency growth with our AIDIC StentGraph program. We posted 25% constant currency growth in Asia Pacific and 22% in Latin America, while we continue to invest in these regions. And lastly, we have a very robust pipeline. We expect to receive PMA approval for Perclot and the Onyx Proact Mitral by the end of the year, as well as we have two U.S. clinical trials enrolling, the Endospan Nexus Triumph and the AMBS Persevere study. They are currently enrolling, and we expect to expand our total adjustable market opportunity by $900 million by early 2025, assuming we execute on the Endospan option. At this point, we have all the essential pieces in place for sustained growth and continued focus on execution. In all, the future for Artivian is bright, and we solidify our position as a leading company in aortic repair. I want to thank all Artivian employees around the world for continuing day in and day out to deliver on our mission. With that, operator, please open the lines.
spk00: Ladies and gentlemen, for any questions or comments at this time, please press star one on your telephone keypad. Again, that's star one for any questions or comments at this time. Our first question comes from Rick Wise with Stifle. Rick, please go ahead.
spk07: Hi, Pat. Hi, Ashley. This is actually John on for Rick today. So just first one for me, kind of on what you saw in the third quarter, how things trended throughout. it seems like European performance was a little lower than we were expecting. What kind of complications, if any, did you face over there? And generally, how did you exit the quarter in that regard? And then on the second count, I'm just curious, kind of, as we head into 23, do you see these macro pressures in any ways easing, whether it be staffing, supply chain, FX, as you look ahead into next year? I know it's still early for that, but I'm just curious what your opinion is on that.
spk05: Yeah, I would say on the European side, I mean, the only real kind of softness we saw in Europe was on the Stencraft side. And that was primarily related to kind of staffing issues in our facility in Germany. We've seen, as you know, throughout the year, we're year to date, we're up 22% on Stencraft. We've guided 15 to 20, so we're still ahead of, you know, where we expected to be. it's really been kind of a growing pains exercise. We're growing very rapidly in Asia. We're growing rapidly in Latin America. We have huge demand on these products and we're challenged by getting stock on shelves and we're hiring rapidly at our manufacturing facility in Germany. So that will abate. The good news is that's a very high demand product. I mean, we're literally every time the products come available, they're kind of flying out the door. I think that was the biggest slowdown from a European perspective. On the second macro question, clearly, if you look at our gross margin, the inflationary impact on labor and materials has had a direct hit on our gross margins. That's something that, you know, again, there's, you know, good news, bad news. I think, unfortunately, those are probably here to stay. Whether or not it gets worse, you know, we'll see what happens with the Fed and how often they raise the rates. But clearly, I mean, everything we're reading, it certainly looks like we're staring down the barrel of a recession. And in a way that is, you know, our business is fairly recession-proof given that we treat, you know, severe aortic disease. Currency, I mean, again, a lot of it depends on the actions that these government states. I saw that the UK just raised their rates by 0.75, which should buoy up the pound. But as far as currency projections for next year, maybe I'll let Ashley comment on that headwind.
spk04: Yeah, I mean, we probably read the same information that you guys read. And from all indications, at least right now, we anticipate that the dollar should rise weaken somewhat as we go throughout next year. And again, I mean, who knows what we'll actually end up seeing. But as far as the interest rate environment, which Pat alluded to, everything that we're seeing right now is that rates should hopefully peak sometime in the first half of this year and then slowly start to moderate. So that's kind of the view that we have. taken into account when we, you know, communicate our outlook for 23, you know, in February.
spk07: Great. That's helpful. And then just kind of a quick follow-up on that and one quick more question. On the aortic sense and set graph side, could you quantify exactly how much of that I guess the shortfall that you saw this quarter was due to the supply issues. Do you have a number or some kind of percentage that would reflect that?
spk05: Yeah, it's hard to say. I will tell you that the demand is kind of through the roof. Again, you know, particularly given the conversations about the macro headwinds, I like where I'm sitting. with what's going on with the economy when I have a product line that's got a super high demand on it. We can solve that. That's a solvable problem. It's a lot harder to solve demand problems when they're going the other way. We're confident with the hiring that we're doing and some of the streamlining we're doing on the kind of on the operations side. I mean, it's a complex product line. I mean, that's part of, I think, part of the challenge. And I've worked in businesses like this and other companies, and, you know, we have, you know, folks that work here that have worked at other companies. It's a pretty challenging supply chain, and we're growing fast in a lot of places, and it just puts pressure on. But I don't have a number for you. You know, the number you can look at is, I mean, we're growing 22% for the year, and we told you we were going to grow 15 to 20. So, I mean, I think the quarter was a little off. But it's just more of a growing pain issue than anything else.
spk04: One thing I'll add to that, John, is that fortunately we've made the investment in the facilities. And we've talked about that over the last several quarters. But the investments in the facilities have been made. Most of the equipment purchases have been made. And as Pat alluded to earlier, we've made some changes to our compensation structure. to address the labor issues. And we've been recently having some really good success in getting people into the facility. So we think that these issues are going to abate, and we'll be able to catch up with the demand that we're seeing.
spk07: That's great color, guys. And I'm going to just sneak in one more on operating leverage here. R&D expenses, you kind of faced an incremental cost this quarter from the trial shut down, but as we look ahead into the fourth quarter and next year, I mean, what should we expect to see there? Sales growth maybe could be a bit limited by FX next year, but on the R&D and SG&A lines, I mean, should we expect to start to see more meaningful leverage and more creation of EBITDA?
spk05: Yeah, and I think we made some comments in the prepared remarks that kind of guide you in that direction, right? We were spending $10 million a year on prolactin A. That's now out. So if we were spending $40 million on R&D, that's going to be around $30 million. So you see a direct kind of drop through with that expense not being there. The other thing is we've expected to get leverage in our three-year plan. If you look back at what we presented in March in New York, we had EBITDA of 4%. 45 million this year, going to 75 to 80 million in 24. And we believe we can deliver that. We think we're going to grow EBITDA significantly faster than revenue next year, even in the face of these headwinds. So we'll give more communication on that in February. But in this market environment, one of the benefits of being a profitable company is is we can control what we have in front of us, and we realize the importance of EBITDA and cash flow, and we will see a significant increase in our EBITDA next year.
spk02: Appreciate the color, guys. Thanks.
spk00: Okay. Our next question comes from Frank Takenian from Lake Street Capital. Frank, please go ahead.
spk02: Great. Thanks for taking my questions. I wanted to maybe start on PRO Act 10A. It looked like a really solid performance there. I was hoping you could share any anecdotal feedback you've heard from any of your accounts, and specifically speaking about with PRO Act 10A being halted, any negative feedback around future demand, and then if there's any commentary you can talk to around ordering patterns, if those have been impacted since PRO Act 10A.
spk05: Yeah, I mean, so I realize that the trial was stopped late in the third quarter, but we did post 19% revenue growth with the Onyx valve in the quarter and 21% growth in the U.S. Yeah, the anecdotal comments have been actually, you know, I've talked to a lot of surgeons that were in the trial, and I've heard words like, You guys were bold to do this trial. The way you stopped it so quickly with patience at the forefront does nothing but build trust and confidence in your company. It's the best mechanical valve on the market. You know, I've had a number of, I have some big aortic surgeons say, I hadn't used your valve before the trial, but I started enrolling patients in the trial and using your valve, and I like your valve, I'm going to keep using your valve. You know, so we are, you know, and last but not least, we're the only company in the U.S. market with a low INR label that reduces bleeding by 60%. So... It doesn't change that. That paper will be published. And I think it will show, although this is a, you know, the drug eloquence failed with the onyx valve. The onyx valve didn't fail. I think what you'll see is the onyx valve performs extremely well with Coumadin. And, you know, that data will be coming out probably in the spring. But it is the best mechanical valve on the market. And, you know, we expect to continue to grow that business going forward.
spk02: Got it. That's helpful. And then maybe just one more on the comments around inflationary pressures. Curious if you could just run the gauntlet on all your products and talk to pricing power and if you intend to pass through some of those inflationary pressures into the selling price next year.
spk05: Yeah, I mean, in some ways, you know, it's kind of byproduct by region. You know, where we have, and it's not rocket science, it's where we have, you know, very proprietary patented products, we obviously have a lot more pricing power. I'll give you an example. Our Cinegraph pulmonary valve, which is growing very rapidly. I mean, our tissue business is growing 13% right now. We've had significant growth with our pulmonary valve with the kind of a Roth procedure growing very rapidly. We're the market leader. The Syngraft has no competition, and it won't have any competition. So that's an example of where you can raise price. You know, in the tissue area, the vascular business, we have a couple competitors. There's not a lot of differentiation. So, you know, if you raise price, you run the risk of potentially losing market share. The other thing is a lot of our, I think one of the pieces of good news here, a lot of our newer products, our Neo Frozen Elephant Trunk, our N-Side Toeco Abdominal System, our AMDS system, those are all very high gross margin products. Those are in the 75 to 85% range. So our newest, most differentiated products are very high gross margin. And that is a mantra for us going forward is that products that you see come out from us are going to be very high gross margin. Some of our legacy products like tissue are a lower gross margin. depending on which product you're talking about in the StentGraph portfolio, if it's in more of a competitive market, it would be a lower gross margin. But our newer cutting-edge technologies are very high gross margins, which is reassuring. But we will be passing along price. And where we have differentiation, where we have open contracts, we will be looking to pass price on to offset some of these inflationary pressures.
spk02: Perfect. That's helpful. Thanks. I'll stop there.
spk05: Thanks, Ryan.
spk00: Our next question comes from Mike Mattson from Needham Capital. Mike, please go ahead.
spk06: Hi, guys. This is Joseph on from Mike. So we've heard some commentary from some companies indicating that cardiac surgeries are more or less being prioritized over other surgeries and Just wanted to know if this is consistent, I guess, with what you guys are seeing currently.
spk05: Yeah, we just had a big training program this past weekend, and I had a chance to talk to a number of heart surgeons, and their comments were, yeah, there's staffing issues at the hospitals, but the aortic cardiac cases are getting done. I mean, one, as you can imagine, the seriousness of the disease, you know, they get prioritized. And two, these are, and I've said this a number of times, the procedures that we're in are typically the most profitable in the hospital. So both from a, you know, the sickness and the disease of the patient and the importance of the procedure to that patient as well as the reimbursement and the importance of that to the hospital. We don't really see us getting affected by some of the staffing issues that are, you know, definitely out there that we hear about. There's, you know, they're finding a way to staff up these procedures.
spk06: Okay, great. Thank you. And then I guess just turning towards Asia-Pac and Latin America is great seeing the strong growth in the quarter. I'm just wondering where you guys are at in progress or, you know, what inning are you in, in terms of the Salesforce expansion, some of the investments from that and the kind of like timeline, when do you think you can start to leverage these investments?
spk05: Yeah, we, we clearly we've invested a lot and I think, you know, for my earlier comments, It was kind of laid out in our three-year plan when you look at our EBITDA. We've expected to accelerate EBITDA on that plan pretty rapidly, going from, you know, 23 to, you know, 22 to 24. We're going to start getting leverage in 23 from those markets. So we will still invest, but not at the levels we've been investing. We'll be getting kind of positive drop-through out of those markets kind of going forward.
spk06: Okay, great. That's very helpful. Thanks very much.
spk08: Yep.
spk00: Next on the line for a question, we have Siraj Khalia from Oppenheimer & Co. Siraj, please go ahead.
spk01: Pat, Ashley, can you hear me all right?
spk05: Hey, Siraj.
spk01: I hope everyone is safe and healthy. Hey, Pat. You know, now that PROACT-10A has been stopped and you're talk to you, physicians either involved in the trial or otherwise. Are you getting an inkling, knowing full well that you don't have access to the data, that there could be potentially any subgroups that you could parse through where the benefit of switching to Eliquis could be evident? Is there anything salvageable in PROACT? Are you getting any indications of that?
spk05: Yeah, so in my conversations, and I've talked to a lot of the investigators, in my conversations, I mean, the first priority, as you can imagine, is to, you know, cross over the patients on Eliquis back to Coumadin from a patient safety standpoint. That'll be done in the next kind of, the trial will be actually done in the next 30 days. they will then kind of wrap up the information, crunch the data, and we're looking to have it presented probably in the spring, maybe AATS in May. There's obviously a lot of people interested in that data, you know, because I've heard from physicians that, you know, in big centers that all their patients did fine and there was no issues. Unfortunately, when you look at the aggregate, that wasn't the case. So, clearly, we're all interested to see why that was. I think the other thing, the silver lining here, is that The onyx performed extremely well in the Coumadin group. And that data, I think, is going to be, you know, reinforcing how strong the onyx valve is. And we're going to wait until that data comes out. But I think that will be something. Even though this trial failed, I think it will reinforce that this is the best aortic mechanical valve on the market.
spk01: Got it. Pat, sorry, jumping in between multiple calls, did you all talk about Nexus in Europe, you know, the status, how things are going?
spk05: Yeah, we mentioned that. The only thing we really mentioned about Nexus was the U.S. pivotal trial. I would say that, you know, Nexus has been kind of under our expectations thus far. And one of the limitations, and you and I have talked about it, is we've been, you know, it's a single branch device at this point, which is, you know, still a big advance over, you know, doing an open surgery. But this quarter, we're actually launching our dual branch device, which I think will make a meaningful impact. It gets into some technical surgical details, but I think that the the appetite for people who are looking for a dual branch to not have to do some of the anatomical bypasses required for a single branch. So I'm very excited to see the uptake of this dual branch device, and I think it will make a meaningful difference on the Nexus portfolio in Europe.
spk01: Got it. And, Ashley, if I could just throw this in there, I'll hop back in queue. Just the debt structure, especially in the current environment, how are you thinking? Just give us a roadmap over the next two years. Gentlemen, thank you for taking my questions.
spk04: Yeah. You know, we alluded to it a little bit earlier in the commentary, but, you know, our expectations for, you know, interest rates over the next year, we saw that the funds rate were going, you know, peaking out around 5%, and that's consistent with, you know, everything that we're reading and hearing right now and gradually tapering off, you know, in the second half of 23 and beyond. And taking that into consideration, we believe that we can comfortably service all of our debt obligations without having to raise any capital or draw on our credit facility going forward. So as it stands right now, we are comfortable with where we are and see no issues with addressing our capital structure.
spk05: I knew you were jumping between calls, Suraj. Ashley goes through the script in pretty much a lot of detail around. I think there's a misunderstanding sometimes about our debt. Our convert has no covenants, and our term will be the only covenant is we can't have more than seven and a half million dollars drawn down at the end of a quarter from our credit facility, which we've not ever touched, and we have no plans to touch it. I think this whole idea that we can cover our interest payments out of operations, even with raising rates. We don't have really any financial covenants, so we're not that concerned. And we said in our three-year plan, as we accelerate our EBITDA and drive our top-line growth, even in these inflationary headwinds, we're expecting our EBITDA to get up to $75 to $80 million in 2024, which at that rate, we're going to have a less than three times net leverage. So, like I said, I mean, I get the concern, but I think if you look at the performance of the business and the fact that we've got EBITDA and we're going to accelerate EBITDA next year, I think this leverage is going to become a non-issue in the next 24 months.
spk01: Fair enough.
spk05: Thank you.
spk00: There are no further questions at this time. I would like to turn the floor back over to Pat Mackin for any closing remarks.
spk05: Well, thanks for joining. And again, we were pleased with the quarter. We saw another quarter with 11% top line growth. Our EBITDA is on track for the year. As we said, even with these inflationary headwinds, we have a lot of levers we can pull. And we'll look forward to the next call where we'll give out our guidance for 2023. But we're definitely going to be looking to keep our double-digit revenue growth and accelerating our EBITDA. We're looking forward to closing out the year and kicking off a strong 23. So thanks for joining and have a good rest of your day.
spk00: Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines at this time and enjoy the rest of your day.
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