Artivion, Inc.

Greetings. Welcome to Artivian's first quarter 2025 financial conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. Please note that today's conference is being recorded. At this time, I'll now turn the conference over to Lane Morgan with Investor Relations.

Lane, you may begin. Thanks, Operator. Good afternoon, and thank you for joining the call today. Joining me today from our trivia management team are Pat Matkins, 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 in our 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, Lane, and good afternoon, everyone. I'm very pleased to report that our first quarter performance, despite the timing impact of our previously disclosed cybersecurity incident, was largely ahead of initial expectation. Despite these headwinds, we delivered total constant currency revenue growth of 4%. and adjusted EBITDA growth of 1% year-over-year. We also maintain momentum across several key clinical and pipeline initiatives aimed at growing our addressable market. As I will discuss, we're also making significant progress with our initial AMDS launch following the FDA HDE approval. Before detailing Q1 performance, I'd like to first provide an update on our previously disclosed cybersecurity incident and the residual impact discussed on our last call. At a high level, we're very excited about our Q1 with a near total return to normal operations, including across our manufacturing facilities and tissue processing operations. As we previously communicated in February, we anticipated that our Q1 performance would be unfavorably impacted by extended lead times in the tissue business as the team works through the supply backlog. as well as in our onyx business as the manufacturing operations replenished on-hand inventory to support distributor sales. We've made great progress over the past two months, and overall, we are ahead of schedule to achieve a complete return to normalcy across both tissue and our onyx supply. For onyx, we exceeded our expectations on the supply side, returning to normal levels faster than we anticipated, enabling double-digit growth in the first quarter. We're continuing to ramp our onyx supply to capitalize on the tailwinds from positive clinical data presented at STS, which I will detail shortly. We also made great progress on clearing the tissue processing backlog, which drove most of the upside for the quarter. For context, as it relates to the impact on revenue, by the end of the first quarter, we had cleared about one-third of the backlog. Looking ahead, we anticipate we will fully be caught up by the end of the third quarter. Where there's still more work to do and to be done, we're very pleased with the progress to date, which we believe speaks to the hard work and dedication of our team in the differentiating of our Cinegraph products. Now on to the Q1 results. From a financial perspective, our Q1 performance was driven by continued growth across our product portfolio, with the exception of revenue from our preservation services business. From a product category perspective, our StentGraph revenues grew 19 percent on a constant currency basis in the first quarter compared to the same period last year. Our StentGraph portfolio remains a key component to our growth strategy, and we're encouraged by our strong results, which are driven by our differentiated portfolio of products that are focused on more complex segments of the StentGraph market. Today, the products in our StentGraph portfolio are sold primarily 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 some of these proven products to the U.S. and Japan, representing a significant growth opportunity. We're also pleased with the ongoing launch of AMDS in the U.S., following our receipt of the humanitarian device exemption in late 2024. As a reminder, there are three steps that each center has to go through to complete prior to implanting an AMDS as part of the AMDS launch process. First, each hospital will need to receive a site-wide IRB before implanting the AMDS, except in the case of an emergency. Second, we'll need to have AMDS approved by the Hospital Value Analysis Committee. And third, surgeons and clinical staff will need to be trained on this device before they implant. Initial response to the HDE from the surgeon community has been extremely positive. As of today, there are approximately 150 facilities actively seeking IRB and value analysis committee approvals. In the first quarter, we gained valuable information, in particular regarding the IRB approval process, that will enable us to more efficiently work through the process at new facilities going forward. Overall, I'm extremely pleased with the progress so far. and the response from the surgeon community and our sales force during the first months of this launch of this breakthrough product. I look forward to providing updates on future calls. As mentioned, Q1 ONIX revenue increased double digits at 11% year-over-year growth on a constant currency basis. As we outpaced initial supply expectations and continue to take market share globally, we're the only mechanical hard valve that can be maintained at a low INR of 1.5 to 2.0. Based on the proven clinical benefits of the onyx aortic valve and the growing body of evidence supporting the use of mechanical valves in younger patients, we maintain our strong conviction that onyx is the best aortic valve on the market for patients under the age of 65 and will continue to take market share worldwide. BioGlue grew 9% on a constant currency basis compared to the same period last year as we continue to see growth in all of our major markets. Lastly, tissue processing, which was the area most heavily impacted by the cybersecurity incident, declined 23% year-over-year on a constant currency basis in Q1. As discussed in February, a significant portion of our tissue revenue comes from our Synagraph pulmonary valves, for which the demand outstrips supply every quarter, and therefore we hold no inventory. Due to extended leave times for tissue that were in process or received during the period impacted by the cyber incident, there's a backlit of product that has not yet been released. However, as I mentioned earlier, progress in Q1 reinforces our expectation that we will catch up our tissue backlog this year, and we've now accelerated our timeline with an expectation to complete this by the end of Q3. We remain confident that the tissue business can grow mid-single digits for the full year in 25 and over the long term. From a geographic standpoint, we continue to see results from growth initiatives across Latin American and Asia Pacific, primarily through new regulatory approvals and commercial footprint expansion. Latin American and Asia Pacific delivered constant currency revenue growths of 26 and 8 percent, respectively, in the first quarter. We continue to anticipate strong revenue growth for both regions over the coming years as we continue to leverage our industry-leading products in those regions. I will now turn my attention to our clinical programs. As we spoke during the Q4 call, there is new data that was presented at the Society of Thoracic Surgery meeting at the end of January that was also published in JAK, the Journal of American College of Cardiology, which is very relevant for the onyx valve. Therefore, I'd like to highlight this data once more. The data showed that across 109,000 patients from the STS database, mechanical valves resulted in a statistically significant improvement in mortality compared to surgically implanted bioprosthetic valves in patients under the age of 60. We believe this data opens roughly a $100 million U.S. market expansion opportunity to convert bioprosthetic valves to mechanical valves. This is a significant opportunity for the onyx valves and gives us even greater confidence that we should be able to continue double-digit onyx growth for the foreseeable future. This past weekend at AETS in Seattle, Endospan presented late-breaking 30-day data from its US IDE trial for NEXUS aortic arch stent graft system. This trial is the first FDA IDE trial for endovascular treatment of chronic dissections in the aortic arch and is focused on patients at high risk for open surgery. The data met its protocol-defined primary endpoints, demonstrating a 63% reduction in major adverse events relative to comparators. In our conversations with physicians at AETS, surgeons generally expressed that the 30-day results were extremely positive. Surgeons were particularly pleased with the performance across stroke and renal endpoints, which was quite favorable compared to published data for alternative endovascular treatments. With these outcomes, which represent a significant development, we believe Nexus remains on track for an approval in the second half of 2026. Lastly, on our pipeline, With the HD for AMDS, we were able to commercially distribute the device in the U.S. prior to the receipt of a PMA, but we continue to focus on securing the PMA for AMDS. We are pleased to report that we've been informed by FDA that we have completed the review of the manufacturing quality management system module. We've also recently filed our clinical module of the FDA, representing the third of four modules required to be filed, keeping us on track for an FDA approval in mid-2026. In conclusion, we're extremely excited about the progress early in 2025, and remain confident in our ability to deliver sustainable double-digit revenue growth, drive EBITDA margin expansion, and grow adjusted EBITDA twice the rate of constant currency revenue growth. With that, I'll turn the call over to Lance.