Artivion, Inc.

Greetings, and welcome to the Ativion Third Quarter 2024 Financial Conference Call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lane Morgan from Gilmartin Group. Please go ahead.

Thanks, Operator. Good afternoon, and thank you for joining the call today. Joining me today from our Tribune's management team are Pat Madkin, CEO, and Lance Barry, 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 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 is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call on the investor relations section of the Artivian website. Now, I'll turn it over to Artivian CEO, Pat Mackin.

Hey, thanks, Elaine, and good afternoon, everyone. I'm pleased to report continued strong financial performance through the third quarter as we delivered robust revenue growth and further improved operating leverage. We also made breakthrough progress on several key clinical and regulatory initiatives that has collectively given us greater conviction in our ability to execute our best-in-class PMA-focused pipeline and delivered sustained double-digit revenue growth while growing EBITDA twice as fast as revenue. In the third quarter of 2024, we delivered constant currency revenue growth of 10 percent year-over-year, representing 95.8 million in revenue, and adjusted EBITDA growth of 28 percent year-over-year compared to the third quarter of 2023. Let me first cover our Q3 financial performance before addressing the significant clinical and regulatory updates for the quarter. From a financial perspective, our strong Q3 performance was enabled by continued growth across our product portfolio, as well as continued benefit from regulatory approvals and commercial footprint expansion in key international markets, especially in Latin America and Asia Pacific. From a product category perspective, ONIX revenues increased 15 percent year-over-year on a constant currency basis as we continue to take market share globally with the only mechanical aortic valve that can be maintained at a low INR of 1.5 to 2.0. Based on feedback from the field, our recent market share gains, and the proven clinical benefits of the ONIX aortic valve, we maintain our strong conviction that ONIX is the best aortic valve in the market and will continue to take market share worldwide. BioGlue grew 14 percent on a constant currency basis compared to the same period last year. This was the second straight quarter of double-digit constant currency revenue growth for BioGlue. We are pleased with the strong performance to date of BioGlue as we continue to grow this differentiated product globally. Also in Q3, our StentGraph revenues grew 13 percent on a constant currency basis in the third quarter compared to the same period last year. Our StentGraph portfolio remains a key component of our growth strategy, and we are encouraged by our strong results, which were driven by our differentiated portfolio products, focused on the more complex segments of the StentGraph market. Today, the products in our StentGraph portfolio are primarily sold in Europe, where we leverage our existing direct sales infrastructure to create significant cross-selling opportunities across our unique aortic product offering. Our pipeline consists largely of bringing these proven products to the U.S. and Japan markets, which represents a significant growth opportunity. Lastly, tissue processing grew 2% year over year on a constant currency basis compared to Q3 of last year. This slightly lower-than-expected growth is driven by lower-than-anticipated donor allograft volumes in the third quarter. While we do not report revenues on a product-by-product basis, for context, Tissue processing growth is driven primarily by our Synagraph pulmonary valves, which are used in the ROS procedure. For those unfamiliar with the ROS procedure, it's a double valve procedure in which a patient's native pulmonary valve is used to replace a patient's defective aortic valve, and then the patient's pulmonary valve is then replaced by the donor pulmonary allograft. Because of the success of this procedure, demand for our Synagraph pulmonary valves significantly exceeds our supply, and therefore, our growth is dependent on donor allograft volumes, which tend to fluctuate from quarter to quarter. Still, tissue processing revenues have grown 11% year-to-date on a year-over-year cost of currency basis. Importantly, our team has also initiated new measures to further improve donor yields beginning in Q4 and early into 2025, leaving us increasingly confident that our tissue business can be a mid-single-digit grower over the long term. However, you should expect to see some fluctuations in growth rates quarter to quarter, driven by underlying fluctuations in donation. From a geographic standpoint, we continue to see great results from our growth initiatives across Latin America and Asia Pacific, primarily through new regulatory approvals and commercial footprint expansion. Latin America and Asia Pacific delivered constant currency growth, revenue growth of 32 and 23 percent, respectively, compared to the third quarter of last year. We continue to anticipate strong revenue growth for both regions for the full year and over the coming years as we continue to leverage our industry-leading product portfolio in those regions. I will now turn to our product pipeline and regulatory developments. We're excited to announce that we recently filed the first module of the PMA application for AMDS for the FDA. We continue to anticipate FDA approval, PMA approval for AMDS in Q4 of 2025. which, as we've discussed, would open up a U.S. addressable market opportunity of approximately $150 million with no competitive alternatives. I'm also pleased to announce our recent regulatory approval from the National Medical Products Administration, also known as NPA, to commercialize BioGlu in China. We estimate that approximately 12,000 patients in China each year have an acute type A dissection, which could benefit from BioGlu each year. There are some additional administrative steps that we have to take to gain reimbursement and to get access at the hospital level. These steps are expected to take nine to 12 months, and therefore we expect to begin commercializing BioGlue in China in the second half of 2025. BioGlue has been a great product for patients for many years, and we're excited to be able to bring this technology to another large market in China. Now to discuss the two regulatory updates I would like to now update you on our pipeline and recently released clinical data. First, in October, Endospan completed enrollment in the US IDE pivotal trial called Triumph for its Nexus aortic arch stent graft system. Assuming the trial endpoints are met, Nexus remains on track for approval in the second half of 2026. As a reminder, aortic arch disease with aneurysms or dissections who receive treatment have previously had little choice before Nexus, but to undergo an open chest surgery, which is an invasive operation associated with lengthy hospitalizations and prolonged recuperation. Nexus is a highly differentiated technology that transforms a complex surgical aortic arch repair into a minimally invasive endovascular repair. Second, at EX in October, we are very pleased to see our AMDS and Aveda Open Neo technologies take center stage at the aortic-focused late-breaking science sessions at EX. Late-breaking five-year data from our AMDS-DARTS trial reported long-term clinical follow-up on the remaining 25 of 46 study participants with acute type A dissections who were treated with approximately aortic repair and AMDS. The results demonstrate 94% of patients were free from aortic re-operation compared to existing literature on hemiarctomy outcomes which report freedom from late aortic artery operation as low as 76%. Additionally, 95% of patients were free from total aortic diameter growth above five millimeters at zones two and four. This compares favorably to existing literature on hemi-arch only outcomes, which suggests a majority of patients have early aortic diameter growth in the proximal descending aorta. For context, significant growth of the aorta can lead to increased risk of rupture, dissection, and re-operation. Long-term results from DARTS trials show a large majority of the patients experience stable or decreased total aortic diameter following the treatment with AMDS, and thus are at decreased risk for further aortic dissection or re-operation, as far out as five years post-implantation, thus showing the durable effect of the therapy. regarding AMDS 30-day from the PERSEVERE trial showed a cerebral malperfusion resolution of 90% of affected subjects in the AMDS implantation group. The results also indicate a stroke occurrence of 10.8% following AMDS implant, which compares favorably to 20.9 for hemiarch alone based on the five articles in literature. Cerebral malperfusion often leading to stroke is a major complication for acute type A aortic dissection. These positive results from PERSEVERE trials show that AMDS reduces malperfusion and the rate of stroke. We're excited to see the continued positive results from both DARTS and PERSEVERE studies, further reinforcing the significant clinical benefits and life-saving nature of AMDS. Lastly, at EX, one-year data from the NEOS trials showed that the Aveda OpenNeo is safe and effective in treating aortic arch pathologies. Avita OpenNeo is our current generation frozen elephant trunk that is sold internationally and is the predecessor to our pipeline product called Arcebo LSA. Notably, the 161 patients treated with Avita OpenNeo experienced lower one-year mortality and one-year combined major adverse event rates compared to the current market-leading device. Given that, we anticipate the Arcebo USID trial will be in the range of 120 patients These results give us greater confidence in the future success of that trial. In summary, we're encouraged by our Q3 financial performance and thrilled with the progress this quarter on the regulatory and clinical fronts. Our strong financial, clinical, and regulatory performance positions us well for a remainder of 24 and beyond and increases the confidence we have in our ability to deliver sustainable double-digit revenue growth while driving EBITDA margin expansion and growing EBITDA twice as fast as sales. With that, I'll now turn the call over to Lance.

Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Total revenues were $95.8 million for the third quarter of 2024, up 10% constant currency compared to Q3 of 2023. Adjusted EBITDA increased approximately 28% from $13.9 million to $17.7 million in the third quarter of 2024. Adjusted EBITDA margin was 18.5% in the third quarter of 2024, a 270 basis point improvement over the prior year. driven by a 220 basis point reduction in general administrative and marketing expense as a percentage of sales. We continue to believe our sales and G&A infrastructure is very scalable, and the significant leverage we've produced in the first half of the year supports our belief. From a product line perspective, ONIX revenues increased 15%, BioGlue revenues grew 14%, StentGraph revenues grew 13% and tissue processing revenues grew 2% in the third quarter of 2024. Other revenues declined approximately $561,000 and 17% in the third quarter of 2024. While relatively nominal to the business, the decline in Q3 was driven by the timing of per-clot orders from Baxter as they continued to manage down inventory levels. Though the underlying end-user sales of per-clot are beginning to ramp up, we expect these inventory dynamics dynamics to continue through the balance of 2024. Excluding this impact, our underlying business grew 11% in the third quarter compared to Q3 of 2023. On a regional basis, revenues in Latin America increased 32%, Asia Pacific increased 23%, EMEA increased 15%, and North America increased 2%, all compared to the third quarter of 2023. As anticipated, gross margins were 64% in Q3, flat compared to the third quarter of 2023. General administrative and marketing expenses in the third quarter were $50 million compared to $51.1 million in the third quarter of 2023. Non-GAAP general administrative and marketing expenses were $46.6 million in the third quarter compared to $44.7 million in the third quarter of 2023. R&D expenses for the third quarter were $6.6 million compared to $6.4 million in the third quarter of 2023. We still anticipate full-year R&D spend as a percentage of sales to be relatively flat to prior year. Interest expense net of interest income was $8 million as compared to $6.3 million in the prior year. Other income expense this quarter included foreign currency translation gains of approximately $2.4 million. Free cash flow was $7.8 million in the third quarter of 2024. Importantly, we continue to expect free cash flow to be positive for the full year of 2024. As of September 30, 2024, we had approximately $56.2 million in cash and $314 million in debt, net of $6.3 million of unamortized loan origination costs. This is inclusive of the impact of our recently closed July amendment agreements and end of span. I'd also like to add that our convertible debt moved to current on our balance sheet this quarter as expected. As we've discussed, our delayed draw term loan announced earlier this year provides us with flexibility to opportunistically settle the convert with cash or shares, assuming our stock price exceeds $23.46 at maturity in July 2025. We do not anticipate the need to raise additional capital to fund our debt obligations, our investments in our channels, or our pipeline in the foreseeable future. Our net leverage at the end of Q3 was 3.9, down from 5.3 in prior years. At the midpoint of our EBITDA guidance range, we expect net leverage to be closer to 3.5 by the end of the year and to continue to decrease in 2025. Now for our outlook for the remainder of 2024. We are continuing to expect constant currency growth of between 10 and 12 percent for the full year 2024 compared to 2023. narrowing our range of reported revenues to $389 to $396 million compared to our previously articulated range of $388 to $396 million. At current FX rates, we expect FX to have a negligible impact on full-year revenue growth rates. As we look ahead, we have conviction in the ability of the overall business to grow low double digits year over year over the long term, driven by our portfolio of differentiated products and our best-in-class R&D pipeline. With our continued top-line revenue growth and general expense management through Q3, we continue to expect adjusted EBITDA to be in the range of $69 to $72 million for the full year 2024, representing a 28% to 34% growth over 2023 and 280 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. As a reminder, we expect gross margins to remain at levels similar to 2023 and continue to expect to drive significant leverage from our global sales force and G&A infrastructure. Additionally, R&D expenses are expected to remain relatively flat as a percentage of sales. Lastly, I would like to discuss 2025. We will provide 2025 guidance in February during our Q4 earnings call, but I did want to provide you with some directional comments as you think about 2025. In general, we expect the same dynamics to be in place for the existing product portfolio in 2025 as there are in 2024, with the exception that we will not have the one-quarter of significant center graft pulmonary valve increase benefit in our tissue business in 2025 that we had in 2024. We expect to continue to drive EBITDA margin expansion by leveraging sales and G&A expenses. With that, I will turn the call back to Pat for his closing comments.

Thanks, Lance. So as you've heard throughout of our comments, we're committed to shareholders that we will deliver double-digit revenue growth and two times that for EBITDA. You've also just heard about our strong execution of our R&D pipeline, which gives us stronger confidence that we can deliver on these financial commitments going forward. More specifically, we have the following key regulatory approval and three PMAs in our R&D pipeline that will help us to deliver on the continued revenue and EBITDA growth. First, BioGlue China regulatory approval. This opens up a major new market starting in the second half of 2025. Second, the AMDS PMA. We've just completed the one-year follow-up of the Persevere trial, and we've just filed the first PMA module, both of which put us on track for a Q4 2025 PMA approval. Third, the Nexus PMA. Our partner Endospan completed enrollment in the Nexus IDE trial called TRIOMPH. which puts the PMA on track for approval in the second half of 2026. Fourth, our SIBO LSA PMA. Presentation of the clinical data at EACS from the NEOS clinical trial, that is our current generation frozen elephant trunk called NEOS, was in 161 patients, which showed clinical results that are better than the commercially available device that's on the U.S. market today. Given that, our USID trial for our SIBO LSA would enroll Around 120 patients, the results of the NEOS trial gives us great confidence that their SIBO LSA trial will also be successful. Finally, I want to thank all of our employees around the globe for the continued dedication to our mission of being the leading partner to surgeons focused on aortic disease. With that, operator, please open the line for questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. Again, if you would like to ask a question, please press star and then 1 now. The first question that we have comes from Daniel Stoda of Citizens JMP. Please go ahead.

Yeah, great. Thank you. I guess I'll just start off on the aortic stent graft business. Another strong quarter despite 3Q23 being a tougher comp. I just wanted to ask if you can give any more color on what specific products are performing well or if you could just give us any puts and takes on what's driving this business and Is it any cross-selling benefits or anything you're seeing in the market?

Thank you. Yeah, I would say a couple things, and Lance, you can chime in as well. I mean, when you look at – we don't break out the specific product segment detail. We've got a half a dozen products that cover the entire span of the aorta. Pretty much every one of them is growing double digits and continues to do so. we're very kind of confident in that business continuing to grow in the double-digit range. We're seeing it in Europe. We're seeing it in Asia. We're seeing it in Latin America. So, I mean, I think it's kind of more of the same because we've got such a differentiated portfolio and we're expanding globally at the same time.

Great. Thanks. And just one follow-up on Onyx. So, you noted some share gains internationally. I just wanted to get a sense of What extent are you seeing this and how should we think about this or where this could go in 2025? And are you seeing more traction just mostly because of the new data with the reduced bleeding? Just any, you know, puts and takes or any other additional commentary as we think about that? Thank you.

Yeah, so if you start at the kind of the globe, we've got about 30% market share globally. We are much stronger in the U.S. We're in the 55% range in the U.S. The share gains we're seeing are really across the globe. We continue to take share in the U.S., driven by the post-approval trial. And just as a refresher, we ran the original PMA trial for onyx low INR, and it showed a 60% reduction in major bleeding. We've ended a post-approval trial with five-year follow-up required by the FDA and 500 valves. We presented that in May, showed an 87% reduction in major bleeding. Based on our market checks and research, we expect our market share in the U.S. to continue to go up, and we've got even more upside opportunity internationally. So, you know, I think Onyx continues, and, you know, as we've told investors, we think that's a double-digit growth product, and it has been for the last six or seven years, so we'll continue to execute on what we said we would do.

Great. Thank you very much.

Thank you.

The next question we have comes from Suraj Kalia of Oppenheimer & Co. Please go ahead.

Hi, Pat, Lance. Congrats on the quarter. Can you hear me all right? Yeah, we can hear you fine. Perfect. Hey, so Pat, Cinegraph, you know, long-term, mid-single-digit growth, I guess just a tangential question. Do you think there are some other ways in terms of alternative assets that, you know, can be complementary to growth rates? How do you all think, or, you know, basically, this is the way the ROS has done, this is the way Cinegraph does. and the donation algorithm, and that's the way we should start thinking about it.

Yeah, I think, so there's a couple things that are, I think, super impressive about, one, the Ross, and two, the Ross with Synegraph. We have 25 years of data on the Ross procedure with Synegraph, and it's phenomenal. The reason the procedure's taken off is because of that data. There's been a kind of a number of different papers that have you know, been published recently that show, you know, if you get a ROS procedure, that you can actually match the survival and lifestyle of a patient who didn't have one. So, the data is outstanding. You know, the challenge here is that we're just constrained by donation. Now, we are doing things. We're always working on continuous improvement. You know, last year, this past year, we've worked on our yields on the Synagraph pulmonary valve, which have been very impressive. We've got more kind of tricks up our sleeve. We've got other things we're working on because we're always looking at stuff. So we'll continue to work at it. It's just, you know, I don't have the luxury of, you know, telling the factory to make more. So we literally sell every one that comes out, and we're working to make sure that we can, you know, meet the demands of the market to the best of our ability.

Pat, in terms of, and I know this might be dumb, but the Nexus, you know, obviously the 30-day outcomes were good in terms of stroke and paraplegia and whatnot. Pat, even though the TRIUMPH trial calls out 30 days, remind us again, is there any late migration we should be worried about?

No, so we've had, I think the only public data on Nexus, the USID trial called TRIUMPH, was presented at STS last year, I think in 20 patients. It was Brad Leschner from Emory who presented that data and did show very good results. And, you know, the big thing they're looking at, right, is what's the stroke rate, what's the paraplegia rate, what's the reoperate, what's the mortality, renal dialysis, so all the same stuff we track in Persevere. So we have not seen the full 60-day cohort that will be presented to the FDA. We may see that in January. We may see that in May. We don't run that trial. Endospan runs that. So as soon as they get that data out, we'll be able to react to it. I think the one thing that's very important about this device, and we went through this in our diligence when we looked at it, it is the only arch thoracic stent graft designed for the arch. And if you ask surgeons about it, it's specifically designed for the arch. It's a two-piece system. To my knowledge, we've seen no migration on this technology because of that reason. It's a custom or specifically designed technology for the aortic arch. And we've seen excellent results to date. And I'm very excited to see what the 60 show because I think this is going to be a game changer for patients.

Got it. Lance, one question for you and I'll hop back in the queue. Is the game plan still that the stock is you know, let's say above $30, force a conversion, and then should we start factoring in on an as-converted basis when we think about the fully deluded EPS? Because you guys are pretty close right now to break even, and you just want to make sure from a modeling perspective, any color would be great. Gentlemen, thank you for taking my questions.

Thanks, Raj. Yeah, so we've continued to say, we're in the, we have the luxury now of having options, with our delayed draw term loan. And we've been saying for the past couple of quarters, look, we have the ability to take a wait and see approach to see what goes on with interest rates, what goes on our stock price, and then based on that decide. We're still in that mode. What I would tell investors is it could go either way. And just to take whatever you think is the most conservative approach. If you want to put the shares in and assume that they get converted to shares as the most conservative approach, do that. If you want to assume that we draw down the delayed draw term loan and have incremental interest expense, if you think that's a more conservative approach, I would tell you to do that. And at the moment, we're still watching and it could go either way.

Thank you. Thank you.

The next question we have comes from Frank Takanan of Lake Street Capital. Please go ahead.

Great. Hey, guys. This is Nelson Cox on for Frank, and congrats on all the progress. I maybe just want to start with AMDS. Can you walk us through how we should think about the launch of that, maybe just the learning curve? You guys need to go through VACs. Is this a soft launch in 25 with a full launch in 26, and then maybe just some other... Any other comments would be helpful.

Yeah, and just to kind of refresh people where we are, right, so I mentioned in my comments we just hit the one-year follow-up. We're going to have to obviously get that data pulled together, and that will be the clinical module that gets submitted. Based on how we've laid out the modules, we've submitted our first module, would put us in the, you know, and that the approval has us on track for Q4 of 25, so a year from now. I think you're, I mean, you know, Assuming we get it in Q4 of 25, I think a soft launch is a good way to describe Q4 of 25. We do have to go through value analysis committees. We do have to train surgeons. We've got to get them to buy the devices. We've got a great sales force. We know these customers. We know these hospitals. We already have all the relationships, but we still have to go through the process. I also think that the fact that this is a life-saving I just told you that we saw strokes cut in half with acute type A dissections that was just published at EX from the PERSEVERE trial. I think the fact that the mortality is so much lower, the stroke is so much lower, gain is so much lower, that we're hopeful that we can get through these value analysis committees faster, but I'll know it when we do it. I'll have better visibility once we've launched it. But we are geared up and we'll have the sales team ready to go.

And maybe I'll jump in, just put my plug in for everyone as you think about 2025 from a modeling standpoint. I would advise everyone to not put any revenue in for AMDS. You know, with the Q4 approval and just the things you have to do to get going, you know, revenue would be very minimal if any in 2025. I think the safe thing is just at the moment to assume zero and then if, you know, we get you know, beneficial timing and it's sooner, then, you know, we can talk about adding some then.

Perfect. Thanks for that. And then maybe just about the price and opportunity in the preservation business, specifically CenterGraph. Do you see more room to take additional price or do you kind of feel like you're reaching a point where it can maybe stay consistent for a while?

Yeah, I mean, I think we're sensitive to the pricing environments out there. And I think the price increase we did last year was pretty significant. And I don't think there's a lot of room on that. I think there's other parts. It's not the only tissue we have in the portfolio. So there are other areas where we will be getting price increases. But I think the Cinegraph one is probably not one we're going to be going after anytime soon.

Got it. Perfect. Thanks, guys.

Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. The next question we have comes from Mike Masson of Needham & Co. Please go ahead.

Yeah, thanks for taking my questions. I guess with AMDS... I'm a little surprised that it's the first module because I feel like the data is usually like the final module. So can you maybe just talk about what's going on there?

Yeah, let me clarify, Mike. I think I might have made it sound confusing when I just said that, right? So we have four or five modules we're going to submit. We submitted the first module. The last module will be clinical. Okay. So you're correct.

The last module is going to be clinical. And so when will that final model be submitted, do you think? Probably in the second quarter. Second quarter of next year? 25, yeah. Okay. And you still think it can be approved in the fourth quarter? Yeah, I do. Okay. All right. Okay, and then just on BioGlue in China, I seem to remember you talking about that being like a $20 million opportunity. Is that still the right number? Yeah. No, it's actually, it's actually, go ahead. And then how, I'll let you answer that. Let me just go ahead and finish the question. So then how, how fast does that, would that ramp? I mean, is this kind of like a one year step up or would it be like a more gradual kind of like tailwind over like several years as you penetrate that market?

Yeah, so first thing is, Lance and I had to go back and look at our earnings transcripts and find out when we last talked about Biogle China, it was two years ago. And we basically said, we're working with the Chinese regulators, and you'll hear from us in the summer of 24. And we obviously are very happy to have a report on the approval. Your math is correct. But I think it's like most things, right? So I mentioned in my comments that we've, you know, China has its own special requirements, right? So we've got to get the national medical registration, then we have to get province registration, and we've got to get on hospital price list. So, you know, it takes some time. So we aren't really expecting anything meaningful until the second half of 25. But this will be a, you know, we'll be rolling this out to hospitals. We've got to train surgeons. We've got to get them familiar with the product. So this will be kind of the gradual kind of uptick over several years, not a one-year thing.

Yeah, okay, got it. All right, and then the per-clot manufacturing agreement, how much revenue is that generating and when does that end? To what degree will that become a headwind at some point and what year would that be when that happens?

So that depends on how fast they can be ready to take it over. They obviously would like to take it over as fast as they can and we'd be more than happy to to transfer it to them. If it just went away completely, it's a full year in and then a full year out, you're talking about slightly less than a one percentage point headwind, so it's just not significant. This year it's created some noise quarter to quarter, but it's always about a point. For the full year this year, it's probably about a point headwind to last year. And, you know, if it stays at that level, which is our assumption, when it goes away completely, you know, it'll be about a point headwind that year. Right now, it looks like probably for sure we'll have it for the full year of 25, and then we'll have to assess after that. Okay, got it. It also has really little to no impact on EBITDA. We're just kind of manufacturing it for them.

Yeah, got it. Okay, thank you. Thanks, Mike.

Thank you.

The next question we have comes from Jeffrey Cohen of Ladenburg-Tolman. Please go ahead.

Good afternoon. Thanks for taking our questions. So I guess firstly, Lance, you had some commentary about the preservation business for 2025. Was that Q1 that you called out from the previous bolus of – Q1 in Cinegraph and Q1 last year or Q1 this year as it would pertain to Q1 next year?

So, we took the big increase in price for Cinegraph in Q2 of 2023. So, we had one quarter in 2024 of elevated growth rates from that price increase before we annualize that. So if you look back in Q1 of 2024, we had a very high growth rate for the tissue business. And that's the one thing I'm calling out that really that'll be the one thing that's different if you think about 2025 versus 2024. We will not have that one quarter of elevated growth rate in the tissue business.

Yeah, that was the $25.7 million increase. from 26.3. Okay, I got that. That's clear to me. Could you talk a little bit about LATAM and APAC by specific countries, Japan, as well as the balance, APAC-specific countries and or LATAM-specific countries?

Yeah, you know, we're not going to get into specific countries, Jeff. You know, I don't necessarily need to telegraph it to our competitors what we're doing. I will say that, you know, In Asia, when I started here, we had one person, and now we've got 50. In Latin America, we had none, and now we have 25. You know, we're direct in Brazil. We've talked about that before. We mostly run a distributor business in LATAM. So we've gone direct in several countries in Asia, but I'm not going to get into the specifics of where we are now and where we're going later.

Okay, got it. And then lastly... Lance, any further commentary on gross margins for Q4 and or for 25? Does it feel like mid-60s is the right territory to think about?

Yeah, I think at the moment we just need to think about gross margins being relatively flat year-to-year and quarter-to-quarter. You may have some minor fluctuations just due to revenue mixing in any given quarter. And then once down the line when we get approvals of these products in our pipeline and they come to the U.S. market, then we should be able to see some gross margin expansion through mix. But at the moment, I would tell people to just kind of model gross margin. It's fairly flat year to year.

Okay, perfect. That does it for us. Thanks for taking the questions.

Thanks, Jeff.

Ladies and gentlemen, we have reached the end of our question and answer session, and I would like to turn the call back to Pat Mackin for closing remarks. Please go ahead, Sam.

Yeah, thanks for joining. We appreciate it. We had another strong quarter of double-digit revenue growth and more than twice that on the bottom line at 28%. You heard about some really amazing performance on our pipeline, regulatory approval in China, late-breaking trials on AMDS at EACS in Europe, the biggest cardiac meeting in Europe. The NEO trial presented at EACS as well. We've also got Nexus has finished enrollment in their pivotal trial, which puts them on track for 26. And we just saw the NEO's trial in Europe in 161 patients, which is more than we're going to do in the US. And we had very positive results that are better than the market, the only product in the US market from a competitive standpoint. We're very confident that we can continue to grow this business double-digit, top line, and twice as fast on the bottom line. Thanks for joining, and we'll see you at our next call.

Thank you, Sal. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.