LeMaitre Vascular, Inc. Aktie

Welcome to the LeMaitre Vascular's Q1 2026 Financial Results Conference Call. As a reminder to everyone, today's call is being recorded.

At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining us on our Q1 2026 conference call. With me on today's call is our CEO, George LeMaitre; and our President, Dave Roberts.

Before we begin, I'll read our safe harbor statement. Today, we'll be making some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, May 5, 2026, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the Cautionary Statement regarding forward-looking information and the Risk Factors in our most recent 10-K and subsequent SEC filings, including disclosures of factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, such as organic sales growth. Reconciliations of GAAP to non-GAAP measures discussed in this call are contained in the associated press release and if applicable, in supplemental materials, both of which are available in the Investor Relations section of our website, www.lemaitre.com.

I'll now turn the call over to George LeMaitre.

Thanks, Dorian. Q1 featured 11% sales growth, a 72.7% gross margin and 42% EPS growth. Grafts were up 20%, valvulotomes 15% and carotid shunts 11% as each category posted record sales. Our 3 geographies also posted record sales. EMEA was up 20%, APAC 18%; and the Americas, 7%.

Artegraft has become our largest product, and we're investing in its growth in 3 ways: number one, filing more international approvals; number two, making longer sizes available for leg bypasses; and number three, proving Quick Stick claims for AV access. Worldwide Artegraft sales grew 36% in Q1. International Artegraft sales in Q1 were $2.1 million, and we expect 2026 sales to be $10 million versus $4 million in 2025. Health Canada has approved Artegraft and the launch is now planned for H2 2026 as we finalize Canadian-specific packaging validations. Additional Artegraft approvals are expected in 2027 for Korea, Brazil, Vietnam and India.

We're also working to make longer artegrafts available. Because European surgeons use Artegraft for leg bypasses, our longest Artegraft, which is 50 centimeters, is now in high demand, and we know we could sell longer sizes. Unfortunately, our current packaging tube is just 53 centimeters long. So the first step is to gain approval for a longer tube, and we plan to make these filings in the U.S. and Europe in H2 2026.

First sales of these longer artegrafts could start in H2 2027. Separately, we've made a pre-submission filing to the FDA as we seek Quick Stick AV access claims on Artegraft's U.S. labeling. This pre-submission will help us collaborate with the FDA to develop the pathway for a PMA filing or to design a clinical trial. While Artegraft's current U.S. labeling restricts cannulation to 10 days after implantation, peer-reviewed literature indicates that artegraft can be cannulated 1 to 3 days after implantation.

RFA grew 25% in Q1, led by strong U.S. results. We currently distribute tissues in 3 countries: the U.S., Canada and the U.K. German implants should begin in Q2, and we now expect to receive Irish approval in H2. Our Irish warehouse opened in April, and we'll begin shipping our core medical devices starting in June as we await an audit from the Irish Tissue Authority. This audit should enable tissue distribution from our Dublin warehouse to Irish hospitals in H2. Long term, this warehouse will be used for pan-European distribution. We filed for Australian approval in April, and we plan to file in Austria, Holland, Belgium, Spain and Switzerland in 2026.

As for our RFA facility transfer, tissue processing is ramping up in Burlington, and we should complete the project by year-end. We ended Q1 with 158 sales reps, up 3% year-over-year, and we plan to end 2026 with 170 to 180. We currently have 16 open requisitions for new reps, mostly in the U.S. We ended Q1 with 35 RSMs and country managers, up 13% year-over-year. We expect to go direct in Poland in Q4, and this project will include an office, warehouse, a GM, customer service team and several reps. Poland will be our 32nd direct country.

Higher ASPs, geographic expansion and disciplined spending produced 11% sales growth and 42% EPS growth in Q1. Full year 2026 also shows op leverage. Increased guidance implies 12% sales growth and 26% EPS growth. Our new 2030 goals are posted on the walls of all LeMaitre conference rooms. We call them the 2030 planks, and our playbook remains simple: produce quality devices, build our sales force, go direct in new countries, acquire niche products and focus on profitability, cash flow and dividends.

I'll now turn the call over to Dorian.

Thanks, George. Organic sales growth of 10% over Q1 2025 was driven by average selling price increases of 8% and unit growth of 2%. Unit growth was impacted by a lower-than-average quarter in our distribution business, which can be lumpy. Excluding distribution, direct sales grew 12.8% organically, comprised of 8.4% price and 4.4% units. Total organic revenue growth excludes a $2 million foreign exchange benefit in Q1 2026 and $1.5 million of Aziyo distribution sales in Q1 2025. These 2 items largely offset one another. We discontinued Aziyo distribution in May 2025.

In Q1 2026, we posted a gross margin of 72.7%. The 350 basis point year-over-year improvement was driven primarily by higher ASPs and manufacturing efficiencies. Our Q2 gross margin guidance of 72.1% reflects the impact of our new Billerica warehouse and the manufacturing transfer of our RFA processing to Burlington. Operating expenses in Q1 2026 were $30.6 million, an increase of 6% versus Q1 2025. Despite the continued expansion of the sales force, overall company headcount decreased 3% from 662 at March 1, 2025, to 641 at March 31, 2026. Q1 2026 operating income increased 41% year-over-year to $17.8 million, with an operating margin of 27% compared to 21% in Q1 2025.

Fully diluted earnings per share were $0.68, up 42%, benefiting from strong operating income and an improved effective tax rate. We believe our effective tax rate will remain lower than our historical rates. Given the strong growth in high-margin international Artegraft sales and our overall geographic sales mix, a larger share of our income qualifies for the foreign-derived intangible income or FDII deduction, which structurally lowers our tax rate. Excluding the discrete items in this quarter, we expect an 80 basis point improvement from historical effective tax rate due to the higher FDII deductions, another benefit of our U.S. manufacturing footprint.

Cash from operations generated $15 million in Q1 2026 as compared to $9 million in Q1 2025. We paid $5.7 million in dividends to our shareholders during the quarter. We ended Q1 2026 with $367 million in cash and securities, an increase of $8 million in the quarter. The LeMaitre playbook continues to drive broad-based revenue growth, supported by our differentiated products, direct-to-hospital model and strong commercial organization. We are affirming our full year revenue guidance of $280 million, representing 12% organic growth.

We are increasing our annual guidance for gross margin to 72.3% and operating to $79.8 million, representing 24% growth over adjusted 2025 operating income. We are also increasing annual guidance for diluted earnings per share to $3 or 26% growth from adjusted 2025. Historically, Q2 has been one of our strongest quarters, and we're expecting revenue of $71.5 million and an operating margin of 30%.

Our current guidance assumes a constant euro-U.S. dollar exchange rate of $1.17 and no dilutive impact from our convertible debt. For additional details, please see today's press release.

Finally, we'd like to welcome Keith Hinton from Freedom Capital Markets to the call. Keith initiated coverage on LeMaitre on March 31.

With that, I'll turn the call over to the operator for questions.

[Operator Instructions] Our first question comes from the line of Keith Hinton from Freedom Capital Markets.

I have kind of a high-level question here on the pricing side of things. So EMEA has been growing faster than the U.S. for a few years. It's my assumption that the prices there start lower and there's less ability to take price over time. So considering that kind of balance against the ongoing mix shift towards grafts, where it seems like you do have good pricing leverage in the U.S. Just how should we think about the high sustainability of high single-digit blended pricing increases in the out years?

This is George LeMaitre. Again, welcome to your firm for covering the company. And also welcome to the call in terms of asking about price increases and the sustainability. It's a question you can imagine we get frequently. We feel very comfortable with what's going on here. We have another year where I think we're validating all the way into Q1 that we're able to get these price increases. We got 8% in Q1.

Did you want me to distinguish between European pricing flexibility and U.S. pricing flexibility? Was that part of your question?

Yes, that would be perfect.

Right. I would say it's not exactly answering it, but on that topic, I would say the floors, the pricing floors that we put in are largely in and installed in the United States and about 55% of our products, we have pricing floors and then we change them from year-to-year, of course. And in Europe, I still think we have a little room to go. I think only about 40% of our products have pricing floors. So you can do more -- you can add pricing floors to more of the different products over there.

Also in Europe, I think it takes longer for prices to really get installed since particularly in Southern Europe, a lot of the stuff is sold on 3-year tenders. And so you can only change your price once every 3 years. So you change it and then it takes 3 years for it to fully get implemented. I hope that makes sense to you. So maybe a little more room over in Europe, given the fact that we're not as price floored over there and that it takes longer once you do a price -- to get to a price hike, it takes longer to get to.

Great. And then just one specific, and again, apologies if I missed this, but can you talk a little bit about the performance for patches in the quarter? I know there was a bit of a tough comp there. You were lapping some supply issues for a competitor, and I think that was the last quarter of Elutia. So just talk a little bit about that and how we should think about patches growth going forward?

Right. And I can pull out, it was not such a great quarter for patches. XenoSure was up 5%. That's the core patch. And I can get you in a second, if you stand by, I can get you the full patch category. If anyone in the room has that, we can do that. XenoSure is the main piece of all this. And I'm getting closer here, Keith. I should know this off the top of my head. Let's see. Let's see that. That's going to help me. One second, I can do it. Organic growth for the whole category was 2.3% for the quarter. Again, 5% for Zeno and 2.3% for the whole category patches. Does that help?

So we have his audio problem.

Okay. Can hear you very well at the moment?

Great. We lost you for a little while, yes.

Our next question is coming from the line of Michael Petusky from Barrington Research.

So George, I guess I'm curious with the stuff of the last, I guess, 2 months in the Middle East. Are you guys seeing any impact from that either just in terms of customers that you may have in that part of the world or just in general in terms of the cost of transporting things and so on and so forth? Just wondering any impact from sort of the international problems.

Sure. So we have a very concrete topic about that, but it's not large. We weren't able to ship $175,000 worth of export towards the Middle East, at the end of the quarter. So we ended the quarter Q1 without having shipped that. But in general, Mike, I would say, no, we're not really being bothered by this. This is a big topic for everyone in the world. But for our little world LeMaitre Vascular so far, we've been okay. Probably as time goes by, the supply chain will put extra cost on us for transportation and things like that. But I would say, for now, we're crossing fingers and toes, and I think things are okay for us vis-a-vis what's going on in Iran.

Great. And I don't know if David is there, but if he is, I'd love an update on M&A, any commentary he has there.

Mike, yes, it's Dave. Nice to hear your voice. Yes. So we're out hunting. We're active. We've put out 2 or 3 term sheets so far this year. The hunting ground remains the same of open vascular, where there are a couple of dozen targets and cardiac surgery, which, of course, is about 12% of the revenue. And the revenue sweet spot stays in that sort of $15 million to $150 million, give or take. We do look small, we do look bigger. And certainly, we have cash and dry powder to execute. So we're just trying to find a good target that's the right fit at the right price.

Obviously, you guys were pretty active for a long time in the last 5 years or so, it has been less so. Have you guys -- other than maybe looking bigger, I mean, have you guys changed the approach at all in terms of hurdle, internal hurdle rates or anything like that? Or is it just, hey, we're waiting for a pitch, and we just aren't seeing our pitch.

I would say we haven't really changed it. I mean, obviously, the last sizable acquisition we did was Artegraft, which was almost 6 years ago. We did a very small one acquisition, which some people might have missed in December. It was just a few hundred thousand of revenue over in Europe. But high level, no, I mean, I would say, since Artegraft, we did that, and it was COVID and then we're integrating. But we've been hunting. I think one factor is that there just aren't that many targets left in open vascular. So that's piece A.

Then piece B is, I think it's taken us a little while to sharpen our focus in cardiac surgery, and I feel like we're there now, which is why I think you hear me saying we're fairly active with respect to making these nonbinding offers. So we're out there. And yes, I mean, on the one hand, I'm fully cognizant of the amount of cash we have, but I've done enough bad acquisitions to know that you're really better off waiting for your pitch. And so we're waiting for our pitch.

Mike, maybe a small add to that from George would be, I think in the last 6 years since we did the last big acquisition in June of 2000, I do think -- and I think I mentioned this on one of these calls, I think we've gotten more self-confident about our ability to grow this company organically. So the last 3 or 5 years, the stock price has moved a lot based on organic growth. And I think when you prove that to yourself that you can run a business organically that well, you start feeling less pressure to do acquisitions. So I think maybe that sort of implicitly made the bar go up a little bit as well.

Our next question comes from the line of Michael Sarcone of Jefferies.

Just wanted to start, George, you opened up the call talking about some opportunities and then growth drivers for Artegraft. I wanted to hone in on the Quick Stick claims. Maybe I was hoping you could help us frame the volume opportunity. I believe Gore Acuseal is kind of the primary competitor there. Help us frame the opportunity for what you could gain in share or volume growth if you did get the Quick Stick claim.

Mike, it's Dave Roberts. I'm going to jump in on this and George can add color. Yes, you are right in identifying the Gore Acuseal. Whenever you buy a Gore Tex raincoat, you support Acuseal. So there's that. And then there are FIXIN, there are other Quick Stick grafts on the market. Of course, Quick Stick really is focused on dialysis access and not peripheral bypass.

Artegraft, it's funny. Over in Europe, as George mentioned, it's being used primarily for peripheral bypass. So a Quick Stick indication once the Europeans take up using grafts as part of their algorithm for dialysis access, the Quick Stick feature will really just help us in the U.S. And last year, our Artegraft sales in the U.S. were around $40 million. We don't really speak in TAMs too much around here.

Do we think that Quick Stick will expand our sales of Artegraft? We do. And because we see these competitors, we know there's a market. And so -- but we feel also like this regulatory path is long for us. It could be 2 years, but it could be 5 or 6 years. And so we know the market is big enough that it completely justifies us investing the dollars to pursue that indication. But in terms of exactly how much bigger we expect the market to be, I don't think we're prepared to say that. We do think it will be materially bigger than our U.S. Artegraft sales today. But beyond that, I'm not so sure we're ready to say exactly how much bigger.

I guess just another one on Artegraft, just about the 53 centimeters, the longer length. How much -- I guess I'm trying to figure out what does that do for pricing for you? Obviously, as George mentioned, one of the central focuses here is sustainability of pricing. So what kind of ASP bump do you get as you elongate the length of some of these grafts?

I think there's a good market out there, and we've proven it with our Omniflow II product, which we've had out there for 5 or 8 years now. That's the Ovine-based device out there, Mike. And so when we get to the longer Artegraft, and we'll get there at some point, we've already proven the 50-centimeter has significantly premium pricing versus the rest of the entire Artegraft portfolio of catalog numbers, if you will, the other lengths. So I would say when you get up to 53, 55, 58, you are going to be able to get into premium pricing there. So as good as possible. And some other good news is that when we went into Europe, our manager over there put pricing above the American pricing, which is kind of rare, and it seems to be working. So it should be nice gross margin devices when we get there.

Our next question comes from the line of Brett Fishbin from KeyBanc Capital Markets.

This is Will on for Brett. Quick question on gross margin. You expanded around 350 basis points, and you called out higher pricing as well as some manufacturing efficiencies. Could you just speak a bit to the split between those 2 items? And then can you just double-click on some of the manufacturing efficiencies? And how much more room do you see to take out cost?

Yes. This is Dorian. Thanks for the question. The 350 bps year-over-year, it's largely the pricing is also driven by some positive mix. We talked about the distribution business being down a little bit. That's a lower-margin business overall. We also talked about the success of Artegraft, and that's a very high-margin business. So that price and that positive mix helped to that 350 bps. And the manufacturing efficiencies, we've talked about this on several calls now. And it's hard to identify really one single individual thing that we've done in the operations. But other than really maybe the theme of consolidating here in Massachusetts, which we do think long term gives us better operational efficiencies. But we have seen really good -- Trent Kamke who runs our operations, Ryan Connelly, our engineering team, Andrew Hodkinson, who runs quality regulatory, I think have done a nice job of just building a culture of continuous improvement here.

So we've seen that come through in a lot of just discrete, what you call lean or Kaizen projects. Maybe the best way to articulate it is at the end of 2023, we had 211 direct labor employees in the company. And at the end of 2025, we had 175. So we continue to increase the number of devices that we're manufacturing, and we can continue to do it with fewer and fewer direct labor heads. And that's really a result of these automation projects, these lean kaizen type projects. And then we've also elsewhere in the cost structure, try to drive cost out over the last year.

We did do some initiatives around freight and logistics in the back half of last year that really helped margins. We have been building out that footprint of warehouses across Europe, in particular, where we used to ship all the products from our German facility in Sulzbach to cover the European customers. We now have operations with warehouses in Switzerland, in Italy, in Spain, in France and the U.K. And just being closer to the customer has a lot of commercial benefits, but it also has a lot of cost benefits around freight. So I think we're just trying to continuously improve and drive cost out. And I think there continues to be opportunity for us there. But it really has been a great story, gross margin with the pricing and the abilities to just keep trying to continuously improve the operations.

Then maybe just sticking with the theme of margins. The guidance implies material ramp up in operating margin to hit 29% for the year. How should we think about the next few quarters and eventually getting to a 4Q exit rate?

I think material here is that we have a 30% op margin coming at us in Q2, which is historically one of our better sales quarters. So that one is a little bit more obvious. But 29%, I don't know what do we have keyed in here for the back half. We have 29% for the H2. So that implies H2 at 29%, but we don't -- we're not splitting the quarters exactly right now. I hope that's cleaning up. But I mean 30% is very close to 29%. So it's a nice exit rate in any event. And what are we at this quarter? We're at 27% right now. So a little bit better.

This is Dorian. Maybe just to jump in a little there. Again, I think we did just talk through some of the investments that we plan to make in the back half of the year, some of the investments around Artegraft, talked about the Billerica warehouse and the Burlington manufacturing transition for RFA. But also, we do expect to ramp the sales force in the back half of the year and make other commercial investments. So 2025 was a year where the front half of the year was -- had a little more expense, and we had a little less expense in the back half. 2026 will probably be a more normal year where you see the second half of the year have a little bit more OpEx than the first half.

Our next question comes from the line of Rick Wise from Stifel.

This is Annie on for Rick. So my first one is just on the first quarter OUS Artegraft performance. I think I heard you call out $2.1 million in sales this quarter, which would sort of imply this annual run rate that's a bit below your $10 million target for the full year. So I guess I'm just curious how you're thinking about the sales cadence through the rest of the year, if you're expecting sales dollars to continue stepping up each quarter or if there are any sort of seasonal dynamics that we should be conscious of and how you're expecting to sort of get to that $10 million target?

Sure, sure. And if you go on a day adjusted look at this, Annie, 2.1 in those -- in the first quarter winds up being an 8.6%, not an 8.4%. So we did do the math on that. But you have plenty coming at you. Q1 is always your lightest quarter at this company, always. Canada has approval. We should be shipping devices in Q4 or I think we're saying H2 here at some point in the back half. And you also have the Southern European region kind of ramping up right now. So we felt good about that. We put that number out there at the last quarter, so we're validating again this quarter. Makes sense to us. The ramp makes a lot of sense to us to get to $10 million.

Great. And then maybe just one on RestoreFlow Allografts. I heard you highlight that you're beginning distribution in Germany in the second quarter, I believe, and you're expecting RFA to be approved in Ireland in the second half. Maybe you could just share your latest thoughts about the European RFA market opportunity and sort of the potential speed of adoption and revenue ramp there.

Right. That's a good question. I would say it's been a little -- the Artegraft thing happened so suddenly. It sort of took front and center stage as a company last year and in this year. And I think RFA is kind of not as much focus from a regulatory perspective. But I think now the focus is on that, and these things will start coming soon. So I would say it's been a little bit slow to start with and that we should see it speed up as we get more regulatory focus on that product line.

Also in Germany, we got the approval, if you remember, in October, and we have not done one implant yet, and we're still sort of building our supply of "German approved items" and they're slightly different technical reasons. They're slightly different than the American approved items. And so it's taken a little bit longer for us to build up stock there.

Then maybe the Irish approval and audit by the Tissue Authority there is a little bit slower in coming than we expected. It took us a little bit longer to set up our Irish office, and you're not allowed to ask them to inspect your facility until the facility is truly open. So a couple of those items there. But to go back to this, we just filed in Australia, and then there's 5 European filings, which will take place in H2 of 2026, Austria, Holland, Belgium, Spain and Switzerland. So it's starting to happen here. But we would admit it's been a little bit light over there until now.

Our next question comes from the line of Danny Stauder from Citizens JMP.

Just my first one on Artegraft, specifically on the point on making the longer sizes for light bypass. Could you talk about this decision? I mean it sounds like it's higher dollar in terms of the sell point and maybe it's more common in Europe. But are there any more recent trends from vascular surgeons that you're seeing that's leading to higher demand for these longer sizes? I guess in summation, the question is why now? And why are you pursuing this at this point?

Right. I think it's always been very clear to our European colleagues that a 50-centimeter wasn't going to make them happy and that it just barely qualified for what we'll call fem-pop bypasses, which is just below the knee. They've always told us, yes, well, we can sell a 50, but George, we want 60s and 58 and 53s just like you provide us with that Omniflow graft. Again, I'm talking again about what I said. We sell Ovine Omniflow over there, and they're longer, and that's the market. They don't really do AV access in general in Europe. And so in the U.S., where we sell mostly AV access artegraft, 50 centimeters has always been sufficient for the whole entire history of this device. So we figured, oh, let's get going in Europe, but then we always knew. So this has been a project that's been on our drawing board for a while, but it's starting to get real now that we've got that CE mark.

I would add, Dan. This is Dave Roberts. The backdrop, if a patient has peripheral vascular disease, especially distally down the calf towards the foot, the smaller diameter, the artery, the more likely it is that an endovascular intervention, whether it's an angioplasty or stent or atherectomy or whatever you have, isn't going to be durable over the long haul. So that's why we always see with our valvulotome a long bypass is what surgeons want to do with our allografts here in the U.S. and in Canada and the U.K., we've always seen the most demand for the longest allograft. So clinically, there's a very good reason for it. But as George said, for us, our U.S. Artegraft business has been mostly dialysis access. It's only since we got into Europe where they're really adopting it for peripheral that it's highlighted the need for a longer artegraft.

Just following up on that line of questioning. Just in terms of the market opportunity, how much would approvals here expand your total addressable market for this business? Are there certain procedures that this unlocks? It sounds like it might be more so in Europe, but any more detail on patient population sizing or growth here would be great in terms of what this could offer you?

Right. Slightly complex answer, but the answer is we've given you a TAM, and I think we upped it the last time we met at $30 million for biologic grafts in Europe or international rather, OUS, let's call it. And that always included the bovine graft, and we sold something like $6 million last year of bovine, and we plan to sell $10 million worth of this bovine graft Artegraft. So that's 16 of the 30 TAM, but in knowing that we are already selling, it's a little complex, in knowing that we're already selling bovine for the distal bypasses for these longer bypasses, we already felt that was part of the TAM. So in the very short run, does this affect our TAM of 30 million? No. Though we should think about it for a while and come back to you guys on it. But in the short run, no, let's stay with 30 million as the TAM.

Our next question comes from the line of Nathan Treybeck from Wells Fargo.

Just thinking about capital allocation, I guess, as we think about your opportunity set, either organically or through M&A, are there any product categories you would call out in open vascular, open cardiac where you're seeing outsized momentum or maybe strategic underinvestment?

I mean for us -- Nathan, this is Dave. It's a great question. I think the first level consideration is open vascular versus open cardiac. And for us, open vascular is still the center of the fairway. But like I've said, there are limited targets set in open vascular. When you get to cardiac, we're generally steering away from capital equipment, never say never. But the more important attribute for us is the niche market. And George emphasized that when he rattled off, I think, 5 of the key tenets of the LeMaitre playbook. We're looking for these niche markets where we can acquire into a leadership position.

We really like physician preference items that are differentiated that the surgeons are going to gravitate towards over time. So the cardiac surgery market devices is, I'd say, at least 4x the size of the open vascular surgery market. So there are a lot of targets there. I'm not going to get specific for obviously competitive strategic reasons about the targets we're interested in, but there are plenty of these interesting niches that we could acquire into. And then hopefully, they would exhibit the same financial characteristics over time that our organic products are these days.

How are you thinking about the RestoreFlow German launch in Germany? How are you thinking about the ramp and the contribution to growth this year?

I mean -- this is George again. It's all baked in the guidance, but I think we're being quite cautious with what we're baking into guidance because we don't know. We've had one European launch over there, and it went fantastic. It was the U.K. But we haven't seen it yet. We have less supply. We didn't have supply issues the last time. The American and the British -- what the Americans and the British accepted for acceptable tissue was the same. So we didn't have a distinction. Now we have a distinction. Every single tissue that we send to Germany has to be sort of German qualified, if you will. So we've had a slower time. So I don't -- we don't know. We've got very cautious numbers baked in the guidance. We shall see maybe there's a little upside for everyone in this launch.

I could squeeze one more in. As we think about your guidance philosophy, I mean, we see 10% organic growth, and there was this distribution dynamic in Q1. Your guidance implies an acceleration through the rest of the year. I guess, how derisked is this guidance at this point?

I mean -- if you look at tough comps, easy comps, I think the summer quarter is an easy quarter to beat up on. So you have that going for you. And in general, maybe even Q4 is something that we can do better than what we had here. But you look at our guidance history, I think, Dave, what do we hit like 77% of the quarters for sales guidance. We haven't written on the investor preso out there. I think it's something like that, Nathan. So this is like our 78th call. So we're getting better and better at doing guidance, I think. But yes, there's always risk. We don't -- I don't think you would accuse us of sandbagging if we're "on making it 75% of the time". So we try to give you the best -- the right number and then and we chase it, too. We'll chase those numbers. They mean a lot to us.

Our next question comes from the line of Jim Sidoti from Sidoti & Company.

Can you tell me what the operating cash and the capital expenditures were in the quarter?

Sure. This is Dorian, Jim. Cash from operations was $15.1 million, and the CapEx was $2.8 million.

You talked about the consolidation of the Chicago plant. Is that something you expect to be done by the end of this year?

Yes.

I feel like I'd be missing something because I didn't ask an autograph question on the call. It seems like that's the topic of the day. You brought up Korea, Brazil, Vietnam, India. When do you expect those approvals?

2027.

Those are all 2027. So early, late, will they be contributing?

I mean, I wrote in the -- we wrote in the script H2, but I bet you get one of them in H1 and 3 of them in H2, something like that.

Okay. So they'll be moderate contributors to 2027.

We haven't even thought that through. We're thrilled to get them, and that would make us have 56 approvals instead of 52, but they're okay countries for us.

Our next question rather, comes from the line of Frank Takkinen from Lake Street Capital Markets.

I was hoping to follow up on the distributor. Is there a chance that swings back in Q2 and the back half of the year? And then is this potentially a geography where you may elect to go direct?

Okay. So you're talking about -- when we talked about export in Q1 being a little bit light, yes, there's a very good chance that it will swing back. Maybe if we look at maybe one fact that didn't come out yet, which is if you look at April, you guys -- we usually don't do this, but just to give people some comfort there. In April, sales growth was 13%. It was 7% price and 6% units. And that's a big hint that, yes, it was a temporary passing phenomenon. And one little step further here, Frank, the export business, interestingly enough, because we run around touting ourselves as a direct-to-hospital company. And lo and behold, if you really look at the facts, the export business of this company has a CAGR of 20% for the last -- since 2019, so skipping over the pandemic, starting in 2019, the 7-year CAGR, if you will, is 20%. And so that business continues to just do fantastic. And all it says to me is that the world is a very big place. We ignore it and the business keeps coming in, and then we use that to pick off places to go direct. You can see Poland, Mexico and Greece.

If you're in our building and you look at the walls at all these 2030 plank sets, it says Poland, Mexico and Greece. So you're probably going to see that happen over the next 2 or 3 years, certainly Poland this year and then Mexico and Greece coming after that. But not worried. Very excited about the export business always. And we have 4 export managers right now or 3 and 1 being filled right now. And on our plank set, we plan to get to 8 export managers by 2030. So a place where we heavily invest because of the growth of the business as well as it produces great opportunities for us to go direct.

Perfect. Thanks for the April bonus. And then on the Artegraft R&D projects you mentioned, my assumption to this answer is no, but is this at all kind of marking a transition to maybe looking more internally at the portfolio for other R&D opportunities in light of maybe the M&A -- lack of appropriate M&A currently? Or is this just kind of one-off because Artegraft has had so much momentum?

That's a good question. It's a good way to look at it. I mean one of the nice things about being a company that doesn't do too much R&D is that the R&D projects scream at you and you can't ignore them for too long. So maybe we could put that in that category. This is very, very obvious stuff. And also, you're allowed, if you don't do too much R&D, you're allowed to do some really low-risk, low beta projects. Making a longer tube is a very low-risk projects where we have high confidence that we'll get that approved by Europe and the U.S. So I hope that gives you some color on the choice of R&D projects. Probably -- I think we've said this before, and again, it's on these plank sets. We do plan to do a little bit more R&D around here. I think in the old days, we were targeting 10%. Now we're maybe targeting 8% just because we're at 6% and saying 10% seems false. But we should do more R&D around here. There's a lot of projects. The larger you get, the more important -- the more helpful a little bit of R&D is to each one of your 160 sales reps. And I think we're becoming conscious of that.

Our next question comes from the line of Keith Hinton from the Freedom Capital Markets.

I just have a high-level question on business development. If you do decide to execute on a sizable deal in the cardiac space, just beyond the purchase price, kind of how should we think about the potential need for incremental investment to just bolster your commercial presence in cardiac? Is there kind of a level of near-term margin dilution that you're willing to live with in order to bring in another growth driver for the out years?

Keith, it's Dave. It's a good question. And the answer is it depends. And what it primarily depends on is if the cardiac surgery product is a product that's also used in vascular surgery because there are 5 or 7 crossover products like surgical sealants and figating clips and atraumatic occlusion devices like that and a relatively easy short learning curve, the answer might be no. We may not need a dilutive cardiac sales force. But if the product is a product that's used exclusively in cardiac surgery, then I would say it's much more likely. And the way we look at that is, okay, so maybe there is the need to establish some size of a cardiac sales force depends, of course, on the size of the acquisition and its geographic reach. But if that's the first step into cardiac surgery, then future cardiac acquisitions would leverage that channel to derive sales. So we're always taking a very long-term view around here. We've done vascular acquisitions for almost 30 years. And I think we would do -- we would have a long runway of cardiac acquisitions. So we pay attention to it, but it doesn't really deter us because we have a long-term viewpoint.

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

Welcome to the LeMaitre Vascular Q4 2025 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Thank you. Good afternoon, and thank you for joining us on our Q4 2025 conference call. With me on today's call is our CEO, George LeMaitre; and our President, Dave Roberts.

Before we begin, I'll read our safe harbor statement. Today, we'll be making some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 25, 2026, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied.

During this call, we may discuss non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and will be available in the Investor Relations section of our website, www.lemaitre.com.

I'll now turn the call over to George LeMaitre.

Thanks, Dorian. Q4 featured 16% sales growth, a 71.7% gross margin, and 47% op income growth. Q4 sales were led by grafts, up 27%, valvulotomes up 20%, and shunts up 18%. EMEA grew 29%; APAC, 20%; and the Americas, 10%. Artegraft grew 29% worldwide in Q4 as our OUS launch continues. We now have approvals to sell Artegraft in 52 countries. International sales were $1.9 million in Q4 and $4 million in full year 2025. We expect to sell approximately $10 million of Artegraft internationally in 2026, contributing $6 million of sales growth for the year.

In Q4, RFA vascular grew 19% and RFA cardiac grew 90%. As a reminder, we currently distribute RFA tissues in just 3 countries: the U.S., Canada, and the U.K. German distribution should begin in Q2, and we now expect to receive Irish approval in Q3. We also plan to file for approval in Austria, Holland, Belgium, Spain and Switzerland this year. On a related note, we will be consolidating our Chicago RFA facility into Burlington in 2026 as we seek to simplify operations and reduce costs.

We ended 2025 with 160 sales reps, up 5% year-over-year, and we plan to end 2026 with 170 to 180. We also expect to go direct in Poland in Q4. We've begun hiring a Polish general manager. This project will include an office, warehouse, customer service team and several sales reps. We currently sell approximately $650,000 a year to our Polish distributor, and this will be the 32nd country where LeMaitre sells direct to hospitals.

As mentioned on our November call, the 2026 U.S. price list reflects a blended 8% increase across the portfolio. On January 1, the price increase was installed and early results indicate hospital acceptance. Our U.S. customer service team tells us that this year's transition has been smoother than in years past. Our European customer service team also reports positive customer acceptance to a similar January 1 price increase.

2025 was another year of operating leverage at LeMaitre. Sales were up 14% and op income was up 30%. And our 2026 guidance indicates another nice year on the horizon, 12% sales growth and 21% adjusted op income growth.

We recently hung our 5-year goals on the conference room wall. We call them the 2030 planks. Our playbook remains simpler: produce quality devices, build our vascular sales force, go direct in new countries, acquire niche products and focus on profitability, cash flow and dividends.

I'll now turn the call over to Dorian.

Thanks, George. Q4 organic revenue growth was 15% with 9% price growth and 6% unit growth. Organic growth was broad-based both by geography and by product category. In Q4, our gross margin increased 240 basis points year-over-year to 71.7%. This increase was a result of higher ASPs and manufacturing efficiencies. Operating expenses in Q4 were $27.4 million, a 6% year-over-year increase. Our margin expansion and moderated expense growth in Q4 led to operating income increasing 47% year-over-year to $18.8 million, and operating margin of 29%.

Q4 fully diluted earnings per share were $0.68, a 39% increase year-over-year. Our Q4 EPS includes a onetime loss on a mark-to-market adjustment in our investment portfolio of $0.5 million for an investment that has subsequently been sold. Overall, 2025 was a year of 14% organic revenue growth with 9% price growth and 5% unit growth. Adjusted gross margin of 70.4%, a 180 basis point improvement over 2024, adjusted operating margin of 26%, and adjusted EPS growth of 23%. Our adjusted numbers exclude the onetime benefit from the employee retention tax credit received in Q3 2025. We ended 2025 with $359 million in cash and securities. Our free cash flow, cash from operations less capital expenditures in 2025 was $74.5 million.

In January 2026, we experienced a cyber incident that affected certain of our systems and data. We securely restored our critical systems and experienced minimal to no disruption in sales to our customers or in the manufacturing or release of product. We do not believe the incident has had a material impact to our financial position or results, and we believe we have adequate insurance coverage. The estimated impact is reflected in our 2026 guidance. However, our review of the incident remains ongoing, and we are subject to various risks described in our SEC filings, including in our upcoming Form 10-K.

On February 19, our Board of Directors approved a new $100 million share repurchase program and a Q1 2026 dividend of $0.25 per share, an increase of 25% year-over-year. This is our 15th consecutive year increasing our dividend. Our increasing dividend underscores our continued focus on profitable growth, and that commitment is reflected in our 2026 guidance. We anticipate full year 2026 revenue of $280 million, organic sales growth of 12%, a gross margin of 72.1% and operating income of $77.8 million, up 21% adjusted from a very strong 2025.

We are guiding EPS of $2.91 per share, up 22% adjusted. The manufacturing transfer of our Chicago RestoreFlow processing to Burlington and the opening of our new 34,000 square foot warehouse will drive an increase of CapEx to approximately $11 million for the year. Our guidance implies a constant euro-U.S. dollar exchange rate of $1.18 for the year and an anticipated yield on our invested cash of 4%.

The LeMaitre franchise delivered in 2025 with a focus on niche markets, our direct-to-hospital sales model, our growing commercial organization and our disciplined expense and capital management. Thanks to our focused and dedicated global teams, we believe we are poised for another successful year in 2026.

Finally, we would like to welcome Kyle Bauser to the call. Kyle has picked up the coverage of LeMaitre at ROTH. Thank you, Kyle, and we look forward to the continued coverage.

With that, I'll turn the call over for questions.

[Operator Instructions] Our first question comes from Kyle Bauser with ROTH Capital Partners.

Thank you for the welcome. It's a pleasure to be following the company. Maybe I'll just start off on guidance. Really nice finish to the year, continued operating leverage. 2026 looks to have some nice continued operating leverage in the business. Can you maybe rank the factors that will be key to achieving the operating growth kind of that's north of what the sales growth rate is, just kind of explain the leverage in the business?

Sure. This is George, Kyle. How are you doing, and welcome to the call and welcome to covering the company. Yes, maybe looking backwards, it's a little bit of a look at the leverage, but we've been pretty good at keeping headcount at a fairly stable level. We've been good at growing our sales pricing, our ASPs to the customers. You've seen that again here at the beginning of 2026 in our gross margin. We're getting a little more efficient also manufacturing our products. So old-fashioned operating leverage was what we showed last year. To get to that was at 14% sales growth and 30% profit growth, and we expect more of the same next year.

Got you. I appreciate that. And George, in your prepared remarks, you talked about the 8% blended increase for this year in prices, and it sounds like this year's transition was smoother than in the past. I guess any additional color around maybe why it was more difficult in the past, and more over kind of the outlook for future price increases? Is 8% still kind of what you're looking for going forward?

It's always on everyone's minds with us. So let's talk about prices a little bit. So this year, we decided to send the price list out on November 1 instead of December 1. And I feel like that gave everyone a little bit more time, the sales reps, the customer service reps, and the hospital purchasers, time to prepare for the transition in January. So we had a really nice transition, really smooth transition.

But it may also be worth pulling out, everyone's like, well, is this business as usual? And I think why I'm calling it out in my script is I just want to communicate to folks, it feels like business as usual -- maybe a little smoother than normal for bureaucratic reasons, but it feels like business as usual, and the U.S., what I'll call, rack rate price list increases. Kyle, you're new to this group, but we've read them out sort of in January previously -- or sorry, the first call in February previously, so I'll do it again here. But in '22, we had a 6.1% price hike for the U.S. hospitals, 5.6% the next year, 5.8% the next year, 8.1% the next year, and finally, this year, 8.3%. So it's been getting a little bit higher, but I would call this business as usual in the U.S., and we're getting word back from our European colleagues that it's business as usual as well over there.

Okay. Appreciate it. And then just quick lastly, I think reps, 160, you expect to end the year at 170 to 180. Do you anticipate -- what does the cadence look like there? Is it kind of steady, evenly distributed across the year, more back-end weighted? Just curious.

Right. Kyle, of course, you bumped into this one. So I had been giving this quarterly, and I think this is the first time we're going to try not to give this quarterly and just give it annually. It's really hard to keep track of individual sales reps and when they're going to quit and when they're going to get hired and things like that. So I think we're not going to try to give you quarterly check-ins exactly -- we may check in with it, but we won't tell you what we're trying to get to. I think you can think broadly that we're trying to tell you we're going to grow our sales force. And you already know a couple of them are going to be in Poland as well. So that includes the Polish move that we talked about in my script. But I hope that suffices, something like 170 to 180 at the end of the year.

[Operator Instructions] Our next question comes from Rick Wise with Stifel.

Great to see the excellent quarter. A couple of things. You highlighted in your starting remarks sort of who we are and what we do, the M&A, we acquired niche products, et cetera, et cetera. Hate to always hit the M&A question, but gosh, what a great job you're doing with cash generation, $359 million. Surely, all things equal, that number is going to be higher in 12 months, depending on how you manage the share buybacks. But how do we think about the setup for M&A in '26? How important is it to you now? What are you thinking about?

Maybe I'll give you a quick intro and then Dave will handle most of it. Obviously, Dave is here. I would say, in a good way, one of the things we've been trying to prove over the last 5 years is that this company was a great operating company by itself and didn't have to rely on M&A. And I think the proof is in the pudding, we've had all these years of the organic growth rate of 17%, 13%, 14% and now who knows what happens this year. So we have had a bit of a chip on our shoulder about trying to prove to you guys that we could do it organically. But of course, we went out and raised all this money. We're really in the game for M&A. Maybe Dave can expand a little bit more on how he sees the field right now.

Yes. Rick, thanks for the question. Obviously, the center of the fairway for us is still that open vascular area where we get 80% of our revenue. There are about 22 targets there, I think, as we've talked about. And frankly, we're in discussions with all of them, some more actively than others. But it's not that broad of a universe. So as you also know, we've started looking for acquisition targets in the cardiac surgery field, and that's 12% of our revenue. The sweet spot for us is revenues of anywhere from, I don't know, $15 million to $150 million. And I think some of the larger ones might be -- there are a few large ones in open vascular, but some of the larger ones are in cardiac surgery.

Do I feel more pressure to do an acquisition? I don't know. I feel it's always the same. I always feel a lot of pressure to do a good acquisition. But in terms of the timing, I would say, it's nice to have cash, because the cash creates optionality, allows us to look larger. But as I've often said, it's more important to do a right acquisition that might not be as large than to just use all the cash. That's not what we're here to do. We'd love to find a great large acquisition, but we're looking for the right acquisition.

And one more for me. Just maybe you could unpack the stellar really Artegraft performance in the quarter, and you highlighted a couple of points, but just help us understand, so 2 things, one, maybe is the TAM, is the opportunity perhaps bigger than the $8 million in Europe, for example, you talked about in the past? And I mean, you're already at $2 million quarterly run rate in the fourth quarter, I think, if I remember saying it right. But how sustainable is this? Any updated thoughts on the TAM?

Okay. So Rick, we knew we're going to have to get to this, and I would say I just take the blame for that one. We put that TAM out there. I guess we didn't exactly understand what we had in our hands, and it's a lot better than what we thought. So for fun, again, this is not too scientific, but maybe we're going to call the TAM $30 million now instead of $8 million, and that's new for this phone call. So thanks for calling us out on that. You're right on that. The TAM, you can also add up right now. We're already -- forget about TAM, but the actual market that we're selling right now.

Remember, we have that Omniflow ovine graft, that sheep graft, it's a piece of it. And then we also have this new thing, the Artegraft in Europe, which you now know is $4 million. And the other one is $6 million. I'll give you that on this phone call. We're looking backwards, it's always sort of okay, not going forward. So there's 10 million right there. And maybe we call the TAM $30 million right now. It's going great. I think it's ahead of expectations.

The doctors are more excited about it. In some ways, the Omniflow, which is the ovine sheep product, sort of it smooths out the path for the doctors to be ready for the ovine version, which is more robust and, I would say, more healthy, less prone to post-implantation issues and things like that. So all good stuff over there. The market is ready for it, and we have a fantastic sales force of about, I think, 55 reps over there maybe right now -- 55 or 60, I should know the number. 55 reps over there, Rick. So yes, we're ready to go. We keep going direct in all these new places. It feels great. It's a great launch at the right time for that company.

And you could see what happened last year. Organic growth in Europe is 17%. Is that quarter or is that year?

Year.

That's year. Okay. Yes. So 17% organic growth driven a lot by that product line. Hope I gave you what you wanted, Rick. Dave, do you want to add something about the different products maybe?

I might add, Rick, that Artegraft in the U.S. is used primarily for dialysis access procedures. And in Europe, the algorithm for dialysis treatment is fistula first and then frankly, they go right to a catheter, which is difficult for patients due to the infection risk. They skip over the middle step that we have in the U.S., which is to implant an access graft, and that's where Artegraft has really shined.

So in Europe, Omniflow, the graft that George is referring to, is used predominantly as a leg bypass graft. And we're seeing, in early days, Artegraft, the hospitals and doctors are ordering the longer ones for use in the leg. I think we'll be developing the market for AV access graft, dialysis access graft in the arm, but we believe it's there strictly because we see the success in the U.S., and the patients' benefit. So I think we're delighted by the uptake of Artegraft in Europe and outside the United States now. And I think we have a long-term growth potential there by expanding the use of it more into dialysis access.

Our next question comes from Michael Petusky with Barrington Research.

So George, I guess I'm curious about Europe and the strength there. And obviously, Artegraft gets some of the credit. But I'm just curious, do you feel like the way you guys approached MDR and sort of really got after when some other competitors didn't or just decided to sort of throw in the towel on some products. I mean, is that part of what's driving that too? And if that's the case, I'm just wondering how -- any anecdotes about picking up share and that sort of thing?

Sure. Okay. So it's a little bit of that. We've been pretty aggressive with MDR. In fact, just to sit on that point for a second, we got our final necessary MDR approval for our PTFE LifeSpan product. We couldn't be more excited about that. I think we have 22 approvals and our regulatory gang has just done a knockdown job getting those things early for us.

As to whether it's taking share because other people have fallen down on the job, other companies have not gotten their approvals. I think early on, we were getting worried that, that was the case. I don't have additional stories. You heard a lot about our shunt where we were sort of left as the only man standing for a while. I think 1 or 2 of them are coming back on the market now. But I would say, we're thrilled where we are MDR-wise. I don't have new stories about material players dropping out of the market vis-a-vis MDRs.

I will tell you, every time a company gets acquired in and around our space, I think the Edwards' embolectomy catheters were acquired by BD 1.5 years ago, somehow the larger companies that they get traded into, they don't treat these as well and they leave opportunities for us. So maybe we have some opportunities around catheters because a very large competitor now owns the Edwards catheters. But of course, Edwards is large to start with. So no new great war stories there. Just maybe we go direct, where we went direct in Portugal last year, we went direct in Czechia, you're hearing us talk about Poland. We're really covering the map over there. And at some point, we're going to be one of the largest vascular distribution channels in Europe. So maybe that always plays into our health over in Europe. I don't know.

Okay. Great. Let me ask one more question, my almost obligatory question on China. I know it's a tiny market for you, but I also know you're trying there. And I'm just wondering, any updates in China?

Sure. And I think for the last 3 or 4 calls, Mike, and I appreciate you staying on the topic, it's been good news over there. And I got another good one for you, which is I think we were up 24% in revenue in Q4. It's happening there for us as just a regular company. We're a $2 million company over there. It's small versus our guidance this year for revenues is $280 million. So you and I are now talking about a $2 million entity inside of a $280 million. So it's small, but it's growing like you'd expect it to grow in China. We're over the tariff thing. The way we got over that was we just raised prices. That's helped us a lot over there. We're profitable over there now for the first time ever. I think Q4 was a profitable quarter. And that's saying a lot. That's having come a long way from losing $1 million a year over there on regulatory filings.

The one sort of, I don't know what you say, negative over there is that we went over there to get XenoSure cardiac approved, and we got it approved after a long arduous clinical trial. And then quite honestly, it's been a big nothing burger over there. So it's not happening because of that. It's happening because of everything else. We also separately have now finalized our application for XenoSure Vascular in China. We shall see what that leads to. I don't want to make a big deal out of it here. But as an organic operating business, forget about XenoSure and all the clinical trials on that. It's going great over there. We're thrilled. We've got a new manager, he started about 1.5 years ago or so. He's doing a fantastic job.

Okay. Great. I've got to ask this because I sort of almost can't believe the number. The 20% valvulotomes, I mean, I think that product came out when I was roughly in college. I may be exaggerating, but it's pretty close, I think. How do you put up a 20 plus 20 on a product that's been around 3 decades or more?

Right. I mean, it's just a lot of focus, and we have the perfect channel. The whole channel was built around valvulotomes. For how long we've been at this, you're talking about that, I've been here 33 years, and we've been building brick by brick, a channel that's supposed to sell valvulotomes and then other stuff that Dave would buy. So it's a perfectly built channel for that. But you don't want to get too far over your skis on it. Yes, we had a great quarter, but units are roughly flat. We're not here in a market that's growing fast. So I don't want to oversell everything here. But yes, it keeps working for us. I don't know what the unit number was in Q4. We had a 20% organic -- no, 20% reported sales number in Q4.

17% organic.

17% organic. And I can't right now break that down for your units, Mike. I will say, in general, it's a flattish unit market, and we're doing it by spreading our wings around the world and finding new opportunities.

Mike, it's Dave. I would just add that the procedure in which a valvulotome is used is a peripheral vein bypass. And I agree with George, we don't want to get over our skis, overexcited. But a couple of years ago, there was this huge study done here in the United States, this BEST-CLI study from the NIH. And it showed this peripheral bypass was a more robust procedure. It held together longer with less complications, et cetera, than endovascular.

Now the big endovascular companies, they have the marketing firepower to grow their businesses, no question. But if you're wondering why the valvulotomes are resilient and the units are staying flat and not going away in the face of a lot of endovascular competition and alternatives, I would say it's because it's a procedure that works. And so yes, good for us to have a good product offering in a procedure that works for patients long term.

Okay. Great. And actually, you just brought to mind, I just want to ask before I get off, did you give the split between unit growth overall, not just for value, but overall for the company in the quarter?

Yes. This is Dorian. Mike, we did. It was 9% price, 5% units.

That's for the year of 2025; and in the quarter, 9% and 6%.

Our next question comes from Jakub Mlejnek with Oppenheimer.

Just to start with, what impact do you envision the CREST-2 trial in carotid revascularization to have on your carotid artery stenting business? And has that been -- or how has that been factored into the guidance?

Jakub, it's Dave. Thanks for the question. It's funny. We just had a record quarter for our carotid shunt business. And so how do you square that with the fact that CREST-2 came out? And I'll get to the takeaways in a second. But to give you a sense of the scale, 15% of LeMaitre's worldwide sales are used on carotid procedures. Those are shunts and patches. We get a little over 50% of our revenue OUS, but 80% of our shunt units are sold OUS. And so these CREST-2 results, that's another NIH trial, I don't know how long it will take to impact our U.S. business. Our U.S. business has been impacted by TCAR, that alternative stenting procedure, for a while.

So I think we're really well positioned because we're so diversified geographically. And then I'd also just -- CREST-2 is a Level 1 NIH study. But I would emphasize that if you peel back the onion, the exclusion criteria for stenting, they were able to exclude patients with long lesions, calcified lesions, tortuous arteries et cetera, et cetera, whereas the carotid endarterectomy cohort did not have lesion-based exclusions. And so it was a little bit of an apples and orange comparison. And it turns out if you just had 3 of the patients in the stenting -- of the 600 patients in the stenting cohort have incidents after their procedure, there would have been no statistical benefit to stenting. And so it was really pretty close to a jump ball. And then when you factor in the exclusions, I think we have to see where this goes long term. But in the meantime, I think we're pretty well positioned. Our carotid shunt business is kind of transitioning into an OUS business. And I think it's resilient for a long time to come.

Got it. Yes. I appreciate all the color on that. And then I guess back to the price versus unit growth, would you be able to break out for this last quarter, the price versus volume contributions within the various categories?

Jakub, we've tried to stay away from that just for simplicity. So no, we'd prefer not to, if you don't mind.

Our next question comes from Michael Sarcone with Jefferies.

I guess I just wanted to start on the gross margin side, do you think you can walk through the puts and takes as we make our way through 2026? It would be helpful to get some color there.

Yes. Mike, thanks. It's Dorian. And I think you saw a really nice step-up throughout 2025. We had an 80 to 90 basis point step-up each quarter. And when you adjust out the benefit of that tax credit, which on a reported basis gave us an extra 110 basis points. So we're up 180 basis points from 2024 to 2025 adjusted, and we're guiding to be up 170 basis points from 2025 to 2026. So we're seeing a nice continuation of that gross margin story.

And obviously, we get the benefit from the pricing increases coming through. We've done a nice job of getting underperforming products out of the bag. We got rid of the [ ZEO ] midway through the year. So that helped with that cadence of improvement in the gross margin in the second half of the year. But we've got some good manufacturing efficiencies that have come through. And all that offsets the normal inflationary pressures in cost of sales, but also some of that mix of the OUS business growing faster than the U.S. business. And we all know that the U.S. business has higher ASPs in general.

Back half of the year, we'll have a little bit of pressure from the manufacturing transfer for the RestoreFlow business and a little bit of pressure from opening the new 34,000 square foot warehouse we have here near the Burlington headquarters. But overall, it's just been a great gross margin story for us, up 180 and guiding for another up 170.

That's great. I guess a second one for me, and I apologize if it's been asked, but hopping between calls. Just any update on the M&A environment and what the pipeline looks like there?

Yes. Mike, I answered the question a little bit earlier for Rick, but the summary is, the pipeline is in good shape. We're pretty busy these days, still hunting in open vascular surgery, where there are 22 targets, and cardiac surgery as well. But yes, the revenue sweet spot, as I mentioned, $15 million to $150 million. Yes, we're out hunting. And as soon as we have anything to report, we'll report back.

Our next question comes from Brett Fishbin with KeyBanc Capital Markets.

Just wanted to start with a follow-up on the OUS Artegraft launch again. Just we saw a really significant upside to your original expectations in 2025, the year coming in at $4 million rather than $2 million. I wanted to just double-click on where you saw the outperformance. Just curious like on what countries are performing the best. And then just thinking about the $10 million guidance for 2026. Just curious on your approach to that, just thinking about the sequential progression in the past 2 quarters, like where it seems to be heading, if you view that as maybe a conservative approach to the year-over-year ramp?

Okay. Great. So the first part of the question is what countries. And it does feel like it's most of a Central Europe type thing right now, and I would call out what we call DACH, Germany, Austria, Switzerland. And then also, I would say, Holland has been -- or Netherlands, if you will, has been really good. So maybe that's the strength so far. And it's just getting going in our very strong markets of Italy and Spain. We were trying to figure out should we allow them to have consignment. And we weren't going to do it and then all of a sudden, we changed, we decided to do it. So we're starting to ramp up specifically in Italy and Spain. And then in the U.K., we really haven't gotten going as strong as these other places.

So I think you've gotten Central Europe really off to a fantastic start. And now you have Southern Europe, which we define as sort of France, Italy, Spain, and then Northern Europe, which is the U.K., the Nordics, to give, if you will. So I think you have a long, long way to go here, and we're not going to get involved in what inning we're in, because we always get ourselves in trouble doing that. But it feels like you've got a long way to go.

As for quarterly cadence, we thought a lot about it, and we decided to skip the hoo-ha of all that and just give you yearly number. We really don't feel comfortable guiding on one product line. They're so small versus Europe Artegraft, what is it, $10 million this year versus $280 million for the whole guidance. We don't want to get too zoned in on that topic. So we're going to give you $10 million and try not to break it down for the quarters. But still a nice answer.

You're going to pick up $6 million in growth from that product line in Europe alone -- sorry. And then also to isolate, it's mostly a European and South African thing, and it's not as much in other places so far. You have Canada to give, you have Australia to give, you just got the approvals, but it's really a European and South Africa thing right now.

All right. That was super helpful. And then I'll ask one other question. I think it was more of a topic on the last earnings call, but just wanted to ask about the overall health of the APAC market. You commented on China already, but it looks like a bit of a bounce back quarter here. And just curious if you're still seeing any signs of softness in certain countries or back to business as usual in '26?

Okay. Well, okay. Yes, it was a fantastic quarter. I think it was 20% up organically and reported. So it was a real solid 20%. It seemed like in Q4, everything sort of came back, maybe with the exception of Japan came back a little bit, but not as much as we would have wanted it to. So I would say, I still feel a little softness in Japan, but we're going into the year with all kinds of optimism, because China is now -- in terms of the size of APAC, China is getting there. Korea also had a very specific incident around direct embolectomy catheters and so it's a long story. I'm not going to get into it. And that thing has gone -- that's over now, and we're direct everywhere in Korea now. So you should get some nice action out of Korea as well as China, and that should bring you along here this year, but felt much better in Q4. We'll see what the next 12 months brings in Asia.

Our next question comes from Danny Stauder with Citizens JMP.

First one, I wanted to ask on the RestoreFlow cardiac call point. It sounded like it accelerated, I believe I heard 90%, and that's after a strong 2Q and 3Q. So I was curious what you saw in 4Q that is driving this performance? And then just more broadly, are there any recent trends in the area that are playing out thus far in 2026 that we should keep in mind here?

Okay. Maybe this thing called the Ross procedure is sort of starting to dominate conversation inside of our company. And the sales manager in the U.S. is a fellow who lives in Toronto, and he's been the guy who's generally been building the Canadian business around allografts. He's now in charge of North America. He's been in charge for 1.5 years. And I would say, he's been pushing the cardiac side of allografts a lot harder in the U.S. proper, not just Canada anymore, but in all of what we call North America. We really don't have much of a presence in Mexico. So it's mostly Canada and the U.S. So I would say it's a bit of that.

We did a big training course down at Mount Sinai in New York in October around the cardiac device, and that sort of brought a lot of interest to that device. So we're in a spot where we don't have a lot of cardiac sales. So when we sell some stuff, it looks like a lot. But still, it's was nothing 5 years ago, right? We had 0 in sales 5 years ago, and now it is something. So it's been a satisfying run, and I would say it's about the focus on cardiac.

The vascular business itself is pretty good, too. It's a lot bigger, but it grew, what, 19% in Q4. So the vascular business is also doing well, but maybe the excitement is around cardiac.

Great. That's great color. Just one follow-up for me. Staying with RestoreFlow, just with the manufacturing transfer of RestoreFlow from Chicago to Burlington, I may have missed this, but should we see this benefit to gross margin in 2026? Is it already in that guidance? Or is this more of a 2027 event? How should we be thinking about that?

Yes. It's probably a slight headwind to margin in 2026 as we ramp up in one location and wind down in another. We do think that we're bringing it here, as we have with other manufacturing transfers, to have it centralized, to have better control over it, whether or not it improves gross margins long term. I mean, I think that's our hope, but we'll get it transferred first and think about 2027 when it comes. But all the costs are fully baked into our 2026 guidance.

Our next question comes from Jim Sidoti with Sidoti & Co.

A couple of modeling questions. The 2026 guidance, can you tell me what you're assuming for tax rate and share count?

Yes. Tax rate, I can give you, we had a Q4 '25 tax rate of 23.2%, and that was the same for the full year, 23.2% for 2025. So that's probably a pretty good number to plug in for your 2026 models. Share count, it doesn't change a whole lot, just the option activity. We'll hit publish on the 10-K in the morning, and I think you can pick up the numbers from there, or we can get them to you offline if you need them earlier.

Okay. It looks like it was down in the fourth quarter. I mean, is that a good number for 2026?

If you're looking at it being down off of '23, remember -- off of Q3 rather, remember in Q3, we had this nuance where because of the excess income from the tax credit, we actually flipped from the convertible being excluded to being included. So we had to take the dilutive impact of that. So it was a little bit wonky on the onetime. So the Q4 number is the right number to look after.

Okay. All right. And then you talked about RestoreFlow in Ireland. Is that approved already?

No, it's not, Jim. You're right to call that out. We had expected approval by the end of Q2 at the last call, and we're now calling for approval in Q3. The filing was a little bit delayed. It will go in, in March, and it was supposed to -- we thought it was going to go in earlier.

Okay. All right. And then you've also talked about the headwind to consolidate Chicago into Burlington. Is that significant? Or is that $1 million, less than $1 million, more than $1 million? Can you give us some sense on that?

I think we'll say, it's fully baked into the guidance, and you can see we've got a pretty consistent gross margin guide here, 72.1% for the quarter, 72.1% for the year. So obviously not having a material impact.

Okay. All right. And then the last one, can you give me the operating cash flow in the quarter?

Cash from operations was $23.1 million. CapEx was $1.8 million. Free cash flow of $21.3 million.

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

Hello. Good day. This is RJ, your conference operator today, and we welcome you to the LeMaitre Vascular, Inc. Q3 2025 Financial Results Conference Call. As a reminder, today's call is being recorded.

At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir. Thank you.

Good afternoon, and thank you for joining us on our Q3 2025 conference call.

With me on today's call is our CEO, George LeMaitre; and our President, Dave Roberts. Before we begin, I'll read our safe harbor statement.

Today, we'll be making some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, November 6, 2025, and should not be relied upon as representing our estimates or views on any subsequent date.

Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied.

During this call, we will discuss non-GAAP financial measures. For example, during the quarter, we recorded a nonrecurring benefit from the receipt of the employee retention tax credit. Non-GAAP adjusted financial measures discussed in our remarks exclude the benefit of the tax credit. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and will be available on the Investor Relations section of our website, www.lemaitre.com.

I'll now turn the call over to George LeMaitre.

Thanks, Dorian. Q3 featured organic sales growth of 12% and a better-than-expected gross margin. Excluding the onetime tax benefit, we also posted several bottom line records, op income, EBITDA, EPS and cash generation.

Q3 sales were led by Grafts, up 23% and Shunts up 18% EMEA grew 18%, the Americas 10% and APAC 4%. Price accounted for 10% of Q3 growth with 2% from units. The April recall led to some customers front-loading catheter purchases into Q2, reducing Q3 organic and unit growth.

Ex catheters, Q3 organic growth was 14%. Our international Artegraft launch continues to exceed expectations. Q2 sales were $420,000, Q3 sales were $1.4 million, and now we expect Q4 sales of $2 million. Artegraft grew 33% worldwide in Q3. We expect 2026 Artegraft approvals in Canada and Korea.

We received German approval for RestoreFlow in October and anticipate distribution beginning in Q2 2026 as we build German-specific inventory. Inventory for other EU markets will likely not need to be country-specific and can be drawn from our worldwide stock. Irish approval is expected in H1 2026. German and Irish approvals should accelerate other EU approvals.

To support the launches, we recently leased a European RFA distribution facility in Dublin. As we look to understand the size of the European market, it's notable that we distributed $2.7 million of tissues in the U.K. over the last 12 months. We ended Q3 with 152 reps after implementing a performance-based reduction of 8 sales reps. We currently have 23 open rep hiring requisitions and expect to have 165 reps at year-end.

On November 1, we published our 2026 U.S. hospital price list, reflecting an 8% increase. This is consistent with recent years. As usual, there will be a gap between the price list and prices realized. 55% of our North American revenue is now subject to price floors. Our 2026 international price lists are still being finalized.

To support our growth, in Q1, we're opening a 34,000 square foot distribution center near our Burlington headquarters. This is our first meaningful Massachusetts real estate expansion since 2020.

2025 is shaping up to be another year of healthy sales and profit growth. We continue to make investments in our sales force, new international offices and regulatory approvals. We're now guiding 40% op income growth in Q4 and a 29% op margin.

I'll now turn the call over to Dorian.

Thanks, George. LeMaitre's organic growth rate was 12% in the third quarter. Year-over-year reported revenue growth of 11% was reduced by $1.3 million due to our Aziyo distribution exit, but benefited from the weaker U.S. dollar, which added $1 million to reported sales.

As George detailed, excluding catheters, Q3 organic growth was 14%. In Q3 2025, we received $4.8 million from the employee retention tax credit. This nonrecurring credit impacted several P&L line items. Reported cost of sales were reduced by $2.7 million. Reported operating expenses net of fees were reduced by $0.7 million and reported interest income was increased by $0.7 million.

We also recorded an additional $0.9 million in our provision for income taxes. As a result, reported gross margin was 75.3%, reported operating expenses were $25.6 million. Reported operating income was $20.3 million, reported operating margin was 33%, reported net income was $17.4 million and reported diluted EPS was $0.75.

We refer to our adjusted financial results during our call today to exclude this nonrecurring benefit. In Q3 2025, we posted an adjusted gross margin of 70.8%. This 300 basis point year-over-year increase was driven primarily by higher pricing, manufacturing efficiencies and product mix.

Adjusted operating expenses in Q3 2025 were $26.3 million, an increase of 9% versus Q3 2024. This expense growth rate is down from a 20% increase quarter-on-quarter in Q2. Higher compensation expenses and European investments in Ireland, Switzerland, Czechia and Portugal drove H1 expenses. As we began to indicate in our Q2 earnings call, we now anticipate adjusted operating expenses decreasing by $4.5 million from H1 to H2.

Q3 2025 adjusted operating income was $16.9 million, up 29%, resulting in an adjusted operating margin of 28%. Fueled by our gross margin improvements and operating expense control, 2025 is a year of operating leverage. Op margin has increased over the first 3 quarters, 21%, 25%, 28%, and now we are guiding 29% in Q4.

For reference, headcount was 633 at 9/30/2025 versus 637 at 9/30/2024. Adjusted net income increased 27% year-over-year to $14.2 million in Q3 and adjusted fully diluted earnings per share was $0.62, up 27%. We ended the quarter with $343.1 million in cash and securities, an increase of $23.6 million. We generated $28.8 million in cash from operations, and we paid $4.5 million in dividends to shareholders.

On August 11, our New Jersey Artegraft facility received an FDA warning letter related to our quality management system. We have provided written responses to the agency's letter, and this has not disrupted our ability to produce, ship or invoice products. We've raised our full year operating income and EPS guidance as our continued focus on profitable growth sets us up for a strong finish to 2025.

Our full year revenue guidance is $248 million, 13% growth. We anticipate a full year adjusted gross margin of 70.3% and adjusted operating income of $63.7 million, up 22%. This results in a 26% adjusted operating margin for the year. Our guidance on adjusted fully diluted earnings per share of $2.37 is an increase of 22% over 2024. With that, I'll turn it back over to the operator for questions.

[Operator Instructions] Your first question comes from the line of Michael Sarcone of Jefferies.

I guess just to start, mostly good guidance changes. But on the revenue side, it looks like you're now expecting lower organic growth. Can you maybe kind of walk us through the moving pieces there and what's changed?

Sure, Mike. Thanks a lot. This is George. Obviously, it's a topic here. So maybe we break it down into the Q3 topics and the Q4 topics because obviously, we're, the guidance decrease here, we're halfway into that, right? So in Q3, we think that the catheter recall that we executed in Q2 wound up sort of front-loading sales a little bit more than we expected into Q2 and then it pulled it out in Q3, and we think it will keep pulling it out in Q4.

That's a topic in Q3. Export, which we don't talk that much about, didn't have such a great European or APAC quarter in Q3. And then in general, APAC, a little bit of struggles later you're watching. It's only 7% of our sales, but we've had a tough couple of quarters here. And at the root of it, maybe there's some management turmoil. We've reloaded for a brand-new Korea RSM and a brand-new Japanese RSM, excuse me, General Manager in Japan. And so there's been a little bit of that.

We don't know if it's exactly the issue, but that's certainly on our plate. And I would say that's your Q3 topic. And then in Q4, I would sort of just repeat what I said about the catheter recall and I repeat what I said about APAC in general. And then 1/3 of the whole thing because we're bringing guidance down by about 1.8% in the quarter, about 1/3 of it is FX. And at the last call on August 6, the euro is at $1.17, now the euro is at $1.15. So that strengthening of the dollar, am I doing this right now?

Yes, that change has taken away about $600,000 of sales out of our Q4 guidance. That has nothing to do with us, right? But it's still going to look like the guidance is pulled down. So that's what that is. I hope that's, we obviously expected that question. I hope that's a pretty full answer.

Very much so. And I guess just for my second, gross margins, really strong. You talked about 10% price and manufacturing efficiencies as well. I guess when we look forward to 2026, what are the moving pieces that we should think about in terms of how gross margin could change over the course of the year?

Yes. Mike, thanks. I don't think we're ready to start guiding on '26 yet. But I think you can look at the cadence of gross margin over the last 3 quarters, 69.2% in Q1, 70% in Q2, 70.8% adjusted here in Q3 and our guidance of 71.2%. And you can see that we've been making some progress. The pricing, obviously, is a nice flow-through. Getting Aziyo out, which as you remember, has a distribution-only margin helps us from the mix perspective. You'll hear us talk a lot about Artegraft, I think, again this quarter, really providing a positive impact to product mix as well. And we continue to benefit from some of the manufacturing efficiencies, standard cost basis, it takes sometimes those a little while to flow through. So I think the ramp during the year is a good sign for us.

[Operator Instructions] Your next question comes from the line of Suraj Kalia of Oppenheimer.

This is Shaymus on for Suraj. To start, I guess, one of the things is you guys have been really good at establishing and getting price increases. I noticed during the, you noted that you're getting put an 8% price floor, so to speak, for 2026 in the U.S. hospitals. Just curious, how do you kind of arrive at that 8% versus, say, 7% or 9%, and kind of what are the puts and takes that go into that? Sure.

That's a great question, Shaymus. Thanks a lot. It's George. I think we're, in the U.S. and then obviously, internationally, when those come along, we don't know those yet. We're always sort of probing in our mind about which categories can take it and which categories can't. And I would say one of the reasons why we try to build a niche type business is because in some of these niches, you can achieve price hikes. So you're pushing harder on those niche categories. And then on some of the commodity categories, the Dacron, the ePTFE, maybe to a certain extent, the catheters where you're lower margins and you're more in combat with other similar devices, we're pressing it a lot less. So that 8% number we're reading to you guys right now is trying to give you a blended number across everything with sort of some of them 10s and some of them 4s and some of them nothing, things like that.

Got it. Appreciate that. And then just kind of 2 smaller ones on mine and then I'll package them together. Would you be able to break out, I guess, year-to-date kind of price versus volume contributions in some various categories we've kind of seen this year? And then also, how much of direct sales of OUS, as you guys have converted contributed this year?

Okay. Great. So I think I'm going to understand your question, but the back happening is a lot easier. Is your question, what percent of sales are direct to hospital? And if that's the question, I would say 95% is a very clean number that's known by all of us a lot. Is that what you want to get at with the second question?

No. Just looking, I know you guys have converted and gone direct in Portugal, Czech. Just curious how much of that has contributed this year versus that year going direct?

I would say so far, specifically on Portugal and Czech, it's not meaningful at all. They're very small right now so far. So it wasn't a topic that came up in sales at all for the quarter. And your other question was about units and price. And of course, it's a pretty serious topic for us. In the quarter, it was, on a reported basis, if you will, it was 10% and 2%; 10% price and 2% units. But the way we look at it is without the [catheter] recall, we're sort of normalizing it. So ex that recall, it was 11% price and 3% unit. If you want to draw out from that and not look exactly at Q3 and look at the 9 months of 2025, it was 4.3% units and the balance was price. Last year, it was in '24, it was 4% units. The balance was price. Then the year before that, '23, which was sort of the big year here, it was 5% units. So you can sort of feel like it's a 5% or a 4% or 4.5% these days.

Got it. I appreciate that. And sorry to push it a little on that. I guess as well, could we, can you give us a flavor of where the respective kind of categories are on that price versus volume kind of curve? Grafts has been more price versus volume, Shunts, so on and so forth.

Okay. I'll give it a shot. We don't exactly look at it like that all the time, but I would say it feels like with Valvulotomes and Shunts, you're feeling it's more of a price topic. And with Patches and Grafts, it feels more like a unit topic.

Your next question comes from the line of Rick Weiss of Stifel.

This is Annie on for Rick. So the first one for me, appreciating that you're not providing any specific 2026 guidance today. Can you highlight any key product lines or geographies that you're particularly excited about now? And sort of as we head into next year, I know you've mentioned Artegraft and allografts as having notable strength this year. So curious if these will continue to be key growth drivers moving forward.

Right. Annie, it's George again. Yes, I would call those 2 out. And I would then toss into the mix XenoSure, which is part of our patch category, specifically the peripheral vascular segment, but all of XenoSure has been going really well. We have a lot of momentum in it. So I would say those 3 devices. And maybe one of the themes you can, we can draw on is that the biologics at the company are going extremely well right now. We have a lot of momentum in them. And I don't, I definitely don't expect it to change as we go into 2026. If anything, probably some of these European approvals that you're hearing about for Artegraft as well as for RFA and our projection that we're going to get some approvals would lead you to believe that the focus of the growth is probably more about biologics than about synthetics or about transient use single-use devices.

Got it. And then just one more. You ended the quarter with was that $343 million of cash on hand, and we've seen that balance continue to grow over time. So I'm hoping you can share any updated thinking about your capital deployment strategy. Are you thinking more aggressively about M&A? Or just any color here would be very much appreciated.

Annie, it's Dave. Yes, it's certainly a nice cash balance. That's a gross cash balance on a net, because we have the convert. On a net basis, it's $170 million. But, in terms of thinking more aggressively, I would say we do like the optionality that the higher cash balance provides us. But on the other hand, I don't necessarily, I don't think the team necessarily feels like, “Oh, gosh, we better get something done quickly” and reduce our own standards for acquisitions. I would say, as I mentioned on the call in August, we've been pretty busy in terms of business development acquisition-related activity this year with term sheets, et cetera. So we're out there hunting, but I don't necessarily feel like having more cash, it's a nice problem to have, if you will, a high-class problem, but I don't think we're relaxing our standards for the types of acquisitions that we'll be doing.

Your next question comes from the line of Nathan Trebeck of Wells Fargo.

My first question, I think in your opening remarks, you disclosed a new metric that 55% of your North America customers are now subject to price floors. Can you help us understand what you're trying to convey by disclosing this? And maybe just talk about your plans to roll out price floors to the rest of your customers? Okay.

That's a great question there, Nathan. It's George again. Yes. So just to reiterate, 55% of our North American revenue is now subject to price floors. And I think we get this question so much about what are these price floors? How much of the revenue is sort of niche enough that you can put a price floor on it? And we keep having, people keep people keep wanting us to put numbers on it. So we figured we just drag it upfront and get it out instead of it coming out as a question. How much can be priced forward? We don't know exactly. I would say it hasn't gone up that much in the Americas in the last 1 or 2 years. So you might be reaching a place there where the price floors are in on those 55.

And then the balance, as I mentioned before, answering another question, maybe some of the other commodity type stuff, you probably wouldn't, it wouldn't be wise to put a price floor on it because they run over the other guys and buy from the other guys. So I just think we're trying to, we've gotten a lot of questions about pricing around here. We always hear it. Dorian and Dave, who do most of the IR work out in the field are always getting these questions, and it would be good just to settle it with that. And that's the genesis of why we put it there.

Great. George, on the last earnings call, you made a comment that you see R&D as a percent of sales increasing back to 8% to 10% over time. Can you talk about how you intend to manage this increased spend against your EPS growth targets? And how should we think about 2026 R&D spend?

Right. And so as we were prepping for today's call, we were nervous we were going to get a bunch “Hey, you're up margin is too high”. And so there's part of that here, which is the R&D spend is not as high as maybe you want to see right now. What is the percentage? 6% or something 5%, and one of the things we're seeing, it's a very temporal part of our life here is that we just finished all these MDRs and internally, we call it the peace dividend. I guess it's a remark about back in George Bush's day or whatever, but we're trying to convey, we just got this big bolus of expenses, and now it's coming down in R&D around these regulatory approvals for MDR.

Almost certainly, somehow some way, that's going to build up with looking for different regulatory approvals elsewhere, doing factory transitions. We still have 2 factories out there, as you know, New Jersey and Chicago and then also plain old-fashioned R&D at some point. So there's lots of ways to deploy the money. It seems unrealistic that we will be down at 5% or 6%. And I think we have room to put it back in given the 28%, 29% op margins that we're talking about.

Okay. If I could just squeeze one more in. So you got RestoreFlow approval in Germany. I think in the past, you talked about the overall European market being $80 million to $100 million. Germany is probably the largest economy there. How are you thinking about this rollout into next year? And is this a big upside lever for where you see Street numbers are right now for '26?

Right. I haven't looked at Street numbers for '26, so I'm not trying to comment on where they're at or how this helps or doesn't help. I'm just looking at my business. And I would say the Germany approval is great, and it's the most important economy and the most important medical device market in Continental Europe. I think that's very obvious. But there's a little hair ball on it for us in that the German authorities want to see the recovery centers where we get these tissues from all other European countries, we believe, don't really care where we get them from, just like the FDA, sorry, the American Tissue Bank Authority doesn't exactly want to go audit our recovery centers.

So with the German thing, it's big, it's huge. We need it to get other approvals. But in the very short term and why we're calling this thing out in the script here is that you have to build German-specific inventory in allografts, and it can only come for now from those 2 recovery centers, and we'll have another 2 recovery centers approved, let's say, by Q3 of next year. So it's a little bit, Germany, we'll see where it goes. It's a little bit hobbled by those recovery center items.

But when we get Ireland and then when Germany and Ireland lead to other countries, we don't think there'll be that kind of constraint, and we can draw the inventory off our worldwide bucket. The reason we put in the, and I think this is a market size question at its root also. The reason why we threw in this little stat about the U.K. is we did get our approval in the U.K. in 2022, and we've had 3 years to sort of work the kinks out over there. And last year, in the last 12 months, rather, we sold $2.7 million of tissues. We transferred or distributed is what you're allowed to say, $2.7 million of tissues in the U.K. And it gives you a sense of where we got to after 3 years. It's a great tidbit. I want, Dave, do you have another Canadian number for allograft? I don't have that at my fingertips right now.

The Canadian revenue number?

Yes, because it might be another tidbit here to help people sort of triangulate where Germany would end up.

Yes. I don't have it specifically, but I would say qualitatively, we've seen pretty significant uptake of our allografts in Canada, I would say, particularly on the cardiac surgery side. I think some significant percentage of LeMaitre's revenue in Canada is now a cardiac surgery because of allografts. And some of that has to do with the fact that the other market participants aren't in Canada or they have a distributor. And of course, having an allograft at your disposal at the ready in inventory, it's very important. And we feel like that advantage will carry over to LeMaitre's allograft supply chain in Europe, but I don't have the exact figure on me.

Nathan, did we get at the essence of your question? Or do you want to reask parts of it? Or how do you feel about our answers?

No, I think, is there any way to kind of compare the size of the market in the U.K. versus the German market?

I can try it. We always assume the German market is bigger than the U.K. I'm going to say I feel like in most medical devices, it's kind of like 50% bigger than the U.K., 75% bigger than the U.K.

Your next question comes from the line of Michael Petusky of Barrington Research.

George, I didn't catch completely what you said around the sales force. Did you give the number of reps currently?

Yes, 152 at the end of the quarter with 23 open requisitions still trying to land at 165 at the end of the year.

Okay. And I do think I caught that you let maybe 8 guys go as well. Like I'm just curious, it seems like a lot, and it seems like a lot of open slots. Is there anything to add there or just the normal course of the business?

I agree that 23 is a bit on the larger side. But of course, when you let go of 8 folks, it meant we were sort of trying to get 15 more growth territories than we had, as we, you guys have watched us grow the sales force pretty aggressively over the last couple of years. And I think as we've done that and as we've installed, you've heard this story a lot, too, as we installed a lot more regional managers. We've gotten a chance to even take closer looks at the actual reps, even though there's more of them;

A, there's more problems at the end of the bell curve, if you will. And then b, we have more inspectors, i.e., we now have 12 RSMs in the U.S. and 3 or 4 area sales managers above them. And I would say going back 2 years ago in the U.S., you had a VP of Sales and 8 RSMs trying to man the whole ship. And now we have a lot more management and they're able to figure out who's not pulling their weight more quickly. So we're always doing that. We're always trying to find who's, how can we do better in a certain region and territory. So that's where the risk, the layoff there of the 8 went to. And then you got to keep growing. And I think we've been on this 165 number for at least 1 phone call, if not 2 phone calls here now.

Okay. All right. Very good. I didn't catch if you gave an update. Anything to talk about in China, I guess, particularly vascular patch or any XenoSure vascular patch or any other interesting items in China?

Right, right. So I would say the big update from China is things continue to go well. Sales growth of 40% in Q3 since you're asking about China specifically. And then the negative update is we're really, really struggling to sell the cardiac patches that we got approved last December. So that doesn't feel like a great launch. I think you guys are watching this Artegraft launch in Europe, and it's going great guns. We all know that. We've talked about it a lot. I would say this is the opposite of that. And then to transition to the peripheral vascular XenoSure over, this peripheral vascular bovine pericardial patch over in China. We expect to make our "final filing for the approval in Q4, so within 2 months. And then we're sort of thinking another 2 years until that approval. We believe there are fewer competitors in the peripheral segment than the cardiac segment for patches in China. But we'll see. We have been really excited about that Chinese cardiac patch, and that's not working out too well for us.

Okay. And again, I may have, forgive me, this is the fifth call I've done today. I may have missed this, but did you say that MDR is completed at this point? Or is it just most substantially completed?

It's all over except the shouting. We still have one more to get, and it's a minor product line. So we're 21 of '22.

Your next question comes from the line of Brett Fishbein of KeyBanc Capital Markets.

I just had a couple of questions. I think you mentioned a target of 165 sales reps exiting 2025, and you just responded to the question about the number of open positions. But I was really just curious maybe how you're thinking about that 165 number looking ahead, it seems like a lot of hiring activity has taken place over the past couple of years. I'm really just interested like where you think that number needs to go over the maybe like medium term, 2026, maybe even 2027 or if this is kind of the right place to be?

Okay. I think that has some to do with our op margin, which is if you see a pump op margin, this is a fantastic place to invest money. So, I do feel like it's going to want to go up. I don't know how much. I guess we really haven't finalized what happens next year. We got a lot of reps to hire right now. But it's going to go up. The rule of thumb that we sort of we're balancing the op margin, right? We want to pay as you go on these types of investments. We don't want to kill our op margin. But you have dozens of 2 million, you've heard me say this before on the call, so it's a little boring, but we have dozens of 2 million-plus territories in the U.S. alone where you should be splitting them and setting up for growth over the next 2 or 3 years.

So, it can get considerably larger. And then this is ex China. If you really, we have 4 reps in China right now. We're hiring a fifth right now, which is barely scratching the surface over there. So, if you really want to go at China, and we do, you can have -- pick a number of 30 to 100 reps over there. So, I would say most of our conversations are taking place without that China topic. But there's a long, long way to go in that 1.3-billion-person country.

I appreciate that. I just had one more question. It's come up a couple of times on the call about the OUS Artegraft performance. I was hoping you can maybe just comment on what's gone differently or better than originally expected. I think a couple of quarters ago, you were talking about maybe $2 million for the full year, but obviously doing a little better there. So was it the original expectation was conservative or just getting market acceptance faster than you thought? Any color there would be awesome.

Great. Well, I love, it's sort of a softball question, so I love doing that. It feels to me like maybe we didn't realize the strength of our channel, and we've been over there for so long in so many countries direct. So maybe we didn't realize the strength of our channel and how quickly they could get to vascular surgeons with this device. I think we were a little bit nervous going in that since it's more of an AV access device in the U.S. And AV access isn't really that typical over in Europe. They use the patient's native fistula to do the work rather than implanting prosthesis like the Americans do.

So, and we're learning that, oh, well, maybe it doesn't get used for AV access over there, but maybe it gets used for peripheral bypasses. And so they're finding customers faster than we thought. The doctors love it. We're getting great reports. And then there's been a wildcard in this international thing in that South Africa, which does use Grafts for AV access has exploded in terms of sales. And so you got, basically, it's Europe and South Africa. And I think South Africa to give you some $300,000 in Q3 alone. So something huge has happened in South Africa. We've had the same dealer forever. They're an excellent dealer, and they have 50 or 60 reps down there. And it is a large country. I think it's 55 million people in South Africa. So you've got that helping out with the European launch to help it all go a lot better than expected. And I hope that's a good answer.

Your next question comes from the line of Jim Sidoti of Sidoti.

Can you give us the operating income and the CapEx in the quarter?

Yes. Cash flow from operations, Jim, was $28.8 million, and the CapEx was $2.3 million.

And the increase in the share count, is that related to the share price? And is that where you expect it to be in the fourth quarter?

The increase in the share count for the, on a reported basis, Jim, for the first time, the convert was not anti-dilutive. So if you look at our Q, which we'll file tomorrow morning, you'll see the reconciliation, and we did have to bring in some of the convert shares on a converted basis. So that was a minor point that you'll see in the Q. Overall, I think you can expect that each quarter, we're adding to share count through employee equity. And the fourth quarter is actually the largest quarter. We do a lot of grants in the fourth quarter. So then you've got a lot of vesting dates for restricted stock in the fourth quarter. So it will be up marginally in the fourth quarter due to the employee vesting.

All right. So around in that 24.5 million shares.

No, it won't be up that high. I think we're at 23.5% now. It will be maybe 24%, Jim, probably closer.

Okay. Because on the press release you're 24.392.

Your next question comes from the line of Kyle Bauser of ROTH Capital Partners.

Hey RG, one second. Let's finish off Jim's question before we move along. Sorry about that, Kyle, but let's pause to get a decent answer here or maybe we get back to Jim with more data.

Yes. Jim, we're at 24.392, you're right, 24.392 here off the wrong page. And you probably expect that to go up to 24.5%. I think that's what you said. So you're right on, Jim. My apologies. Jim, are you all set with questions? You want to go after something else?

Your next question comes from the line of Kyle Bauser of ROTH Capital Partners.

Okay. Great. So some really nice sales growth, of course, across key product categories here. Just looking at volume increases, can you speak a bit more about the makeup of this growth, I guess, in terms of new accounts versus higher utilization within existing accounts? I think you've got like 12,000 surgeons you're calling clients, and I think there's a TAM of maybe 22,000 vascular surgeons out there worldwide. Just, I know there's a lot going on in terms of flipping from distributor to direct and new launches, et cetera. Just trying to get a sense of the kind of growth mix profile of new business versus higher utilization in existing business?

Kyle, before I get to that question, just a quick welcome to you and Ross reinitiating coverage. It's great to have you along for all these calls. As to your question, I don't have a great answer for that, to be honest with you, and I don't want to speak off the tip of my tongue here. I could come back to you separately as to you're looking for, does the unit growth come from new accounts or more utilization at the current accounts? Is that sort of the essence of the question?

Yes, exactly.

Yes. I honestly don't have a good answer for you. Dave, anything?

Kyle, it's Dave Roberts. I would say I don't have a firm answer, but I would tell you directionally, in the U.S. and North America, maybe less new accounts, whereas in Europe, and in Europe, particularly due to Artegraft and a little bit the U.K. allografts, those are a little bit more new accounts. And then Asia Pac, which is our newest region of the world, let's say, where we have gone direct in some new countries like Thailand and Korea, et cetera, probably a little bit more tilted towards the new account Greenfields over there.

Okay. I appreciate that. And I appreciate the welcoming as well. We're excited to be following the name; also some really nice margin improvement here, both in gross margin and operating margin. You talked about manufacturing efficiencies and moderations of OpEx. Just trying to get a sense of the types of, maybe more specifically the manufacturing efficiencies and examples of moderating the operating expense, just to understand what still remains above and beyond kind of just economies of scale, if you will.

Yes, Kyle, I think scale does help in several of the businesses, especially the businesses that are growing fast. We've talked about RestoreFlow benefiting from scale as that has ramped up. And I think we're, we have been working pretty diligently on efficiencies across the expense base. So we had some manufacturing efficiency projects around automation that have paid off that's allowed us to reduce overall direct labor headcount.

We're working on more of the commercial operational efficiencies around logistics and shipping as well that we think will continue to pay off for us. George mentioned just better management of the sales reps and some performance-based management there. I'd say that stretches across the employee base in general. And we have been focusing on just delivering operating leverage in the back half of 2025. So I think all of those have helped contribute to the strong op.

Your next question comes from the line of Daniel Stauder of Citizens.

I had 2 quick ones. So first, I wanted to ask on the open cardiac call point. I think you commented it was particularly strong last quarter. I think that has to do with RestoreFlow. So I was curious what you saw in 3Q in terms of performance? And more broadly, are there any trends in this area that are playing out into the end of the year and into 2026 that you think are interesting or we should keep top of mind?

Yes. And I'm glad you bring up the Q2 topic because Q3 was just almost a repeat performance. If you look at allograft, it grew about 56% on the cardiac side and about 14% on the vascular side. So you have the same type of dynamics going on. In general, the cardiac allograft business is growing a lot faster than the peripheral vascular allograft business. We like both of the businesses, but we're newer to cardiac.

And oddly, we don't put as much emphasis on cardiac. I think our sales force feels as though it's a peripheral vascular sales force and this cardiac thing is sort of a new thing for them. So oddly, there's less attention on it by the sales reps, but the results in this one particular category are a lot better with cardiac. And it's a little bit led by the U.K. and Canada.

And now another theme here is that the Canadian results are sort of starting to come down into the United States as the new manager of the sales force is Canadian. He's been here for 1.5 years, but he's just getting going here, and he's Canadian, not American. So he's bringing some of his bag of tricks up in Canada down to the states.

Great. Appreciate that. And just one follow-up on Carotid Shunts. Just on the quarter, was there anything that was driving that 18% growth? I think looking back, the year-over-year comp was actually pretty difficult at 22%. So I just wanted to see if there was anything that was specific to 3Q? And then just a little bit more broadly, I feel like carotid shunt gets called out 2 or 3 times a year, 2 or 3 quarters a year just having double-digit growth. So longer term, how do you think about this product? How should we think about this product? And anything on the market or its long-term trajectory would be great.

Sure, sure. I think at its root, we're still benefiting from the fact that BARDA left the business, particularly in Europe, but also in the U.S. about 1.5 years to 2.5 years ago. And in Europe, we've been left with an extremely high market share where we're able to sort of do what we want with pricing; in the U.S., it's not quite as nice as that. Our market share is more down in the 20s and 25s. And so it's not quite as flexible. But it feels more like a European thing. And I think they left us with a nice position. And I think you're seeing that in terms of units and also a lot of pricing flexibility on that product line. So yes, you're right to say it keeps coming up a lot over the last 2 or 3 years. So it stands to reason because of BARDA exiting.

That ends our Q&A session, and we appreciate your participation. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Welcome to the LeMaitre Vascular Q2 2025 Fiscal Results Conference Call. As a reminder, today's call is being recorded.

At this time, I would like to turn the call over to Mr. Dorian LeBlance, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir. Thank you, operator. Good afternoon, and thank you for joining us on our Q2 2025 conference call. With me on today's call is our CEO, George LeMaitre; and our President, Dave Roberts. Before we begin, I'll read our safe harbor statement. Today, we'll be making some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions.

Our forward-looking statements are based on our estimates and assumptions as of today, August 5, 2025, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosures of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures such as organic sales growth. A reconciliation of GAAP to non-GAAP measures discussed in the call is contained in the associated press release and is available in the Investor Relations section of our website, www.lemaitre.com.

I'll now turn the call over to George LeMaitre.

Thanks, Dorian. Q2 was strong across the board, with sales up 15%, a 70% gross margin and EPS up 16%. As a result, we're increasing full year guidance for sales, gross margin, op income and EPS. Q2 sales were led by catheters, up 27% and grafts up 19%, while Valvulotomes and [ Chunnt ] were both up 13%. By geography, EMEA grew 23%, Americas, 12%; and APAC 12%. Our international Artegraft launch exceeded expectations in Q2 with sales of $420,000, up from $185,000 in Q1. International Artegraft sales should surpass $2 million in full year 2025. Artegraft is currently approved in the U.S., EU, U.K., Australia, New Zealand, South Africa, Israel, Thailand and Malaysia. And 2026 approvals are likely in Canada, Korea and Singapore. Artegraft is the company's largest U.S. product in 2024 with $37 million in U.S. sales.

As for RestoreFlow, we continue to anticipate at least one European approval in 2025, either Ireland or Germany. Unfortunately, there is no EU-wide approval for Allografts, but one approval in Europe should expedite others. To support the impending European launches, we are opening a RestoreFlow distribution facility in Dublin this year. RestoreFlow is currently approved in just 3 countries: the U.S., the U.K. and Canada.

In China, our XenoSure vascular patch remains on track for final submission in Q4. Approval might come in 2026. This follows the Q4 2024 Chinese XenoSure cardiac patch approval. We ended Q2 with 164 sales reps and 33 sales managers, and our international go-direct efforts continue. We recently posted our first Portuguese and Czech direct-to-hospital sales. 2025 is shaping up to be another year of healthy sales and profit growth. I'll now turn the call over to Dorian.

Thanks, George. LeMaitre's strong organic revenue growth continued in the second quarter. Our 15% organic growth consisting of 8% price growth and 7% unit growth was highlighted by the strong unit growth of Artegraft, XenoSure, RestoreFlow and catheters. Our biologics continued their strong growth. And as George discussed, our current regulatory progress provides future international growth opportunities across the biologics portfolio.

Cardiac RestoreFlow was the largest product contributor to unit sales growth as our sales team continued to expand on our success at open cardiac. In Q2, we initiated a packaging-related recall on a portion of our catheters. After a temporary supply disruption, customers placed stocking orders late in the quarter, which boosted overall catheter sales. We don't expect this to be repeated in Q3.

Year-over-year reported revenue growth of 15% benefited from the weaker U.S. dollar as foreign exchange added $1 million to reported sales. This was offset by the Aziyo discontinuation, which decreased reported revenues $1.1 million. In Q2 2025, we posted a 70% gross margin. The 110 basis point increase year-over-year was driven primarily by higher average selling prices, the continued benefit of manufacturing efficiencies and positive product mix.

Operating expenses in Q2 2025 were $28.8 million, an increase of 20% versus Q2 2024. The increase was driven largely by higher compensation expenses, including the addition of 23 sales professionals and the expansion of our European direct sales model, including the Portuguese and Czech go direct efforts. Q2 2025 operating income was $16.1 million, up 12%, resulting in an operating margin of 25%.

Net income increased 17% year-over-year to $13.8 million. We benefited from $1.7 million of net interest income in Q2 as yield on our invested cash exceeded interest expense on our convertible debt. Fully diluted EPS was $0.60, up 16%. We ended Q2 2025 with $319.5 million in cash and securities, an increase of $17 million in the quarter. Cash from operations generated a record $20.3 million in Q2, and we paid $4.5 million in dividends to shareholders.

As the landscape around international trade continues to evolve, LeMaitre remains confident in our global business model. So far, the only tariff-driven price adjustment we've made is a 25% average increase in China. During the quarter, we also increased inventory at our international warehouses, anticipating potential tariff increases. Our U.S.-only manufacturing, niche product portfolio and direct sales model give us confidence tariffs will not materially impact our financials in the second half of the year. We have raised our full year revenue guidance to $251 million and 15% organic growth due to the impact of our growing sales organization and our success across global markets.

We anticipate a full year gross margin of 69.7% and operating income of $60.9 million, up 17%. We expect operating expenses to be lower in the second half of 2025 versus the first half of 2025, resulting in a 24% operating margin for the year. We also have increased our guidance on fully diluted earnings per share to $2.30, up 19%.

With that, I'll turn it back over to the operator for questions.

[Operator Instructions] Our first question comes from Michael Sarcone of Jefferies.

Good afternoon and thanks for taking the questions . Just first one for me. You talked about some of the stocking orders at the end of 2Q. I guess could you just give us an update and maybe help quantify what the impact was in the quarter? You did have some pretty strong unit volume growth of 7%. Just wanted to get a sense for how much that was impacted by the stocking.

Right. So we -- it's -- you can't always tell, but we -- Mike, this is George. Nice to talk to you -- we're thinking it's around $800,000 in the quarter, and that's around that catheter recall, which Dorian detailed for you.

Got it. Very helpful. And then figure I'll ask another strong quarter of price taking at 8%. Maybe you can talk about how you're thinking about the sustainability of that level of price taking going forward?

Right. So maybe during this year, we don't have to think about it too much. We're starting to establish a pattern in Q1 and Q2. And so maybe it's set up for the year. As to next year, I don't know. We did -- I remember last fall, we started getting questions very early about when will you do your price hike and how much will it be? And of course, I don't want to go -- I know you're not asking me to go into 2025, but we will certainly do a price hike on January 1 around the world. And I would say the cadence that we've set is probably what happens, but we just don't know. And we can't commit to anything just yet.

Understood. Thanks George.

Our next question comes from Michael Petusky of Barrington Research.

So I guess I wanted to ask or try to drill down a little bit more on the unit volume growth. Obviously, it sounds like the catheter stocking contributed to that. But you guys also called out Artegraft, which I guess I get because of the CE Mark and the MDR there, but also XenoSure and I think possibly 1 or 2 other product categories. Could you just sort of drill down on what may have been going on there? Because honestly, 7% is -- it's a big number relative to recent history and obviously, a great number.

And Mike, this is George. Nice to talk to you again. And yes, we agree, it's a bigger number. If you extract out the catheter thing that we just talked about, it's really 5%. And quite honestly, that's sort of the last 3 years, 2023 was 5% 2024 was 4%. And so far -- sorry, and I don't know what the H1 number was. I'm only going after. This stripped out of the catheter thing is 5%. With the catheter stripped out, it's 5%. But let's go further here because you touched on a couple of other good topics here. It's not just all about the catheters. Artegraft, as you know, is in the middle of this really nice European launch and the units were up 10%. XenoSure just had another great quarter. It was up 9% in Europe and RFA cardiac was up 61%. So we keep making strides on a small base, albeit, but with the RFA cardiac, that seems to be really working, particularly in the United States.

Okay. Terrific. And I want to make sure Dave gets in on some action. Anything interesting to talk about just in terms of assets that are out there, conversations you're having? Any areas of interest that may be new?

Mike, thanks for the question. I would say nothing like too new and groundbreaking. We do continue to hunt in open vascular and cardiac surgery. We now get about 13% of our revenue in cardiac surgery. We have issued a few term sheets in the last few years. So we have been active, but nothing really new to report on this call. I think our revenue sweet spot is $15 million kind of minimum and then on up from there to, I don't know, $100 million, $150 million of revenue. I think probably preferentially, we like the drop-ins, but occasionally, there's a larger target we might look at.

Mike, this is George again. Maybe a little bit more detail. You asked about the unit growth. Maybe I can go back and give you the last 4 quarters because I was not able to pull that Q1 from memory. But here they are starting in Q3 of last year. This is unit growth, not price, just unit growth, 6%, 6%, 4%, 7% being this quarter. So 6%,6%, 4%,7%. I think if you put all those together, you're getting a 5% type company unit growth, not price.

I not remembering unit growth quite that strong but thank you appreciate it.

And operator, maybe we need to line up the next question here.

Yes. So our next question comes from Brett Fishbin of KeyBanc.

Just wanted to follow up again on Artegraft, seemed to see a nice sequential increase there in the revenue. And I just wanted to make sure that we heard the comments for the full year correctly. I wanted to verify $2 million was the full year number. And then if that's right, it seems to imply maybe around $700,000 on average per quarter in the back half, which is about double what you previously expected. So maybe just talk more about what's driving the upside versus your preliminary expectations from last quarter.

Brett, it's George again. Thanks for the question. It's a great question. Yes, you did hear right, it's $2 million for the year, and we've logged 480,000. Is that right? It was $200,000 in the first quarter and then $400,000 in the second quarter. So that makes your math approximately correct. I think we're not going to guide on exactly when the stuff happens in which quarter, but obviously, it can only happen in 2 quarters. So yes, I mean, I think we came on -- remember, we only got the approval, I think, at the -- right before the earnings call, the last time or -- yes, right before the earnings call, I think we were typing it in that day or something like that. So we didn't really have much experience in Europe with the device before that. And so you're seeing us piling up 2 months of nice results in Europe and also in South Africa, in particular as well. So it's going quite well. And so we're just pushing the guidance up on that particular product because we know you want to see that called out.

All right. Really helpful. And then just one follow-up for me. Just some of my math seems to suggest a pretty significant operating margin ramp in 4Q as compared to 3Q. Just wanted to kind of gut check that cadence. And maybe if you could just call out any moving pieces between 3Q and 4Q that would support a much higher exit rate coming out of 2025.

Yes, Brett, thanks. It's Dorian. I think there is some seasonality here. Q3 tends to be one of our lower quarters with the European summer impacting revenue. So you're going to see -- if you maybe probably do the math to imply the fourth quarter, you'll see a revenue difference stepping up from Q3 to Q4. And in addition, I think we mentioned in the script that overall operating expenses lower in the second half of the year than the first half. Again, there's the seasonality element there around variable compensation as well. But we also did set the table in the first half of the year with some of the investments we made around the increase of the sales force, the go-directs in Europe, some of the office builds. So some of that will fall off in the second half of the year, things like recruiting fees and the product launch costs for Artegraft. So we'll have the benefit of that. We do have a benefit coming through as well around the regulatory expense for the MDRs. That's largely behind us. So in the third and fourth quarter, we'll see some of that coming off.

That’s great. Thank you.

Our next question comes from Rick Wise of Stifel.

This is Annie on for Rick. So for the first one, I was just curious about your sales force expansion plans. On the last call, I believe you were targeting 170 sales reps by year-end, and it looks like you ended 2Q with 164 reps. So are you still feeling good about that 170 number? And separately, can you talk to us about where you plan to focus these new reps from a product or geographic standpoint?

Okay. Annie, thanks a lot for the question. It's George. Yes, so we got to 164. I would say if we said 165 to 170, I think that was what we were after last time. You may remember 170. I feel like we're sort of more in the 165 range right now, but I don't think that's a material difference. I think we've gotten up to a place, and we feel really good about it. You can see the results in Q2. So I think 165 is where we're going to wind up at the end of the year, although these things turn on a dime, 3 people quit, you hire 5 people. It goes up and down. In terms of where and what product lines, same business as usual. We have -- at this 164, we have 77 reps in the U.S. -- excuse me, U.S. and Canada. We have 57 in Europe and 30 in Asia Pac, and they all carry the entire bag. There's no specialized sales forces here.

Got it. Thanks for the color there. And then Also, I'm wondering how we should think about international sales growth heading into the back half of the year. It seemed particularly strong this quarter, up 21%. So curious if we should expect similar growth into the back half or if there are any specific market dynamics that we need to be sensitive to?

I mean we try not to split up the guidance between what's going to happen in North America and Europe. But I think you can tell, things are going great in Europe for us. And the big opening here, the very big opening that we've got is this Artegraft in Europe right now thing. We also have coming along, as I mentioned in my script, RFA in Europe, and that will come along. It will come along later. Maybe that's material revenues in '26 -- late '26, I don't know, early '26, something like that. But right now, you do have that dynamic, which is in Europe. You don't have that type of mega launch going on in the U.S. That being said, we've had a nice turnaround in the U.S. proper over the last couple of quarters. And this quarter with Americas being a 12% number, I think reported and organic was -- can anyone help me what was the organic Americas number? 15% -- sorry, 15% organic Americas number. You're starting to see the U.S., not just Canada now, but the U.S. sort of pull the cart, if you will, in North America. So we've got a couple of nice quarters in the U.S. So not to be forgotten about is the U.S., but of course, as you can see, 23% reported growth in Europe, things are going fantastic over there for a number of reasons.

Got. It thanks so much.

Our next call comes from Suraj Kela with Oppenheimer & Company.

George, can you hear me all right?

Perfectly, Suraj.

So George, a couple of questions, and I'll pose them right up front. George, there is generally a certain level of uncertainty in the trade and tariff environment. I appreciate your commentary about China being one of the pockets where you'll have managed these issues. But as you look at the current environment, George, how do you all strategically prioritize different products for price increases versus volume impacts, I guess I'm trying to understand what is the sensitivity of different buckets of products. How do you -- how are you navigating? I got to increase the price for Artegraft, I got to reduce the price for RestoreFlow or whatever in the current environment. Obviously, nominal growth is important. I get that. But just as you long term, strategically, as you think about it, I'd love to get any color there, if possible.

Yes. And of course, Suraj, thanks for the question. Of course, this is a huge topic at the end of every year as we're going over the cusp of the new year. I mean I would say it's just -- a lot of it is driven by logic. If you have 80% market share in a smallish market, you can move prices. And if you have 12% market share in a large market, you can't move prices. So I think the foundation of this company is we try to stay in niches where we can have some kind of impact in that niche. And that means going back to the Jack Welch strategy over and over again, Chairman of GM -- excuse me, GE, if you're #1 or #2 in the market, things are going to go well for you. If you're #4 in the market, you're going to be struggling and you're going to be taking prices from someone else. So I would say maybe it's not much more complex than the Jack Welch #1 or #2 in the market strategy.

Internationally, maybe we have a little twist on this, too, Suraj, which is if you go to places, for instance, we went to Thailand, you saw that. We went to Portugal recently. If you go to some of these slightly off the beat and track markets, you find that the other big competitors in Vascular don't necessarily follow you because they feel funny going to the Board of Directors and saying, "Hey, we're going direct in Korea next week. And they're like, why are you doing that? And as a result, I think we're finding ourselves in these off the beat and track markets where we can take advantage of pricing because the other competitors don't follow us to those markets. So 2 ways to look at it. I hope that starts to answer your question, Suraj.

Fair enough. And George, how would you characterize the churn in your sales force in the current environment?

Thanks, Suraj. And you're asking a question inside there, what's the turnover rate probably, and it's 12% right now. I think it's normal and fine, and I've been here for 33 years. We've had a sales force for like 25 of them, and it feels like it bounces around between -- in a really tight hiring environment, you might get it down to 10. And in a complex environment, it might be up to 15 or 20. So it seems normal to me right now.

Our next question comes from Nathan Treybeck of Wells Fargo.

Can you, by any chance, break out how much of the $2 million of Artegraft sales that you expect this year will be in Europe specifically? And what is the implied share that you're capturing? I think you out sized the market at $8 million before. And where could your market share realistically go in Europe?

Right. And you said $2 million in sales, right? I just want to confirm that, right?

Yes, you said $2 million oUS.

Okay. And again, if we have a -- most of this is European right now. It is -- we are quoting international, but most of it is European for the time being, except for that South Africa plug. But yes, we've been quoting $8 million there and $8 million rest of world, right, not U.S. and not Europe. So we're saying it's a $16 million market for now. And again, this is to be discovered as time goes by. But obviously, 2 divided by $16 million is what we think is going to happen right now. But yes, Dave's got something to add as w ell.

It's a good question. In a way, we're kind of building a market OUS because when you think of dialysis access, which is where Artegraft is used primarily outside the United States, the only biologic company is LeMaitre with Omniflow in Europe, and that's only maybe 15% or 20% used in dialysis access. So --really, in terms of thinking about market share, we're really creating the market OUS. And I think that's what makes it so exciting. So yes, I think if we continue to see success, could we view the market as larger than 8+ 8? Possibly. But we're really pleased by the initial success. It's very early days, but the initial success with Artegraft OUS.

That's very helpful. And then in terms of assuming you launch RestoreFlow in Germany or Ireland, any way you could kind of quantify the market opportunity in these countries and how we should think about the ramp once you get that approval?

Yes. So it's Dave again here, Nathan. The Allograft market in Cardiac and Vascular is very well understood in the U.S. It's $100 million to $150 million market roughly. We think for various reasons, pricing, et cetera, the European market is a little bit smaller, but not materially smaller. And so for us, could we think of an $80 million or $100 million market in Europe at maturity? I would say, yes, that's possible. But it will take a while to get there because, as George pointed out already in his prepared remarks, once we get approval either in Ireland or Germany, that doesn't automatically grant us approval in the rest of Europe. We have to go sort of door-to-door, country by country seeking those approvals. And then -- and that will take a little time. But then secondly, and this is a pretty important point, allografts, unlike the rest of our business, are a supply-constrained product. In general, if we could get our hands on more Allografts, we could sell more. And so I will give kudos to our team in the Chicago area who does the processing. We have been able to start an inventory build in Chicago for Europe. But I personally think that will be somewhat of a rate limiter over time, and we've got to figure out a way to satisfy all the demand in Europe over time. But in the near term, we're very excited about Ireland or Germany. And then as we turn on Canada and the U.K., we met with a lot of success, and we don't really have a reason to believe that we won't in the markets where we first gain approval. So kind of one step at a time, but we're optimistic. And I mean, for us, $100 million-ish market in Europe is fairly big. to a lot of companies, that's just a niche market.

Our next question comes from Daniel Stotter of Citizens JMP.

Just first one on free cash flow. It was really strong this quarter. I think you called out a record in cash from operations. Just in terms of free cash flow for the rest of 2025, how should we think about this in the back half of the year? With that in mind, how should we think about CapEx, working capital, specifically inventory as we consider some of the regulatory approvals and geographical expansions that are coming the rest of the year?

Yes. Dorian and Dan, thanks for the question. As you mentioned, $20.3 million in cash from operations, a record for us. I think it's probably best to add the quarters together and think about them as the first half of the year, where we're at $29.4 million. And we do have some benefit from working capital, and that can be a little -- it can have some variability to it. But if you kind of look at our cash from operations and compare it to our operating income, we're pretty much in sync. We're not a fonybolony earnings company. Earnings create cash here, and that's what you're seeing. Although there's some lumpiness from period to period, I think over the long haul, you can expect those to track with each other.

On CapEx, we've had $1.3-ish million of CapEx for the last 2 quarters. don't expect that to change materially. We have some build-out going on here and just some maintenance CapEx, but nothing material that's going to change to the back half of the year.

Great. And then just one follow-up on R&D. I know it's a small number, but that stepped down a bit. So I just wanted to ask how we should think about that in the back half of the year as we consider the different contributors to overall OpEx for the rest of '25.

Right. This is George. And Dorian mentioned this before, but there is what we're terming a piece dividend around here in terms of we just got done with the MDRs. And so it's light around here. Certainly, there's going to be other stuff that's popping up that's going to be a 6% spend on R&D is quite low for us. I think we feel more comfortable. All of the charts on the wall say sort of 8s and 9s and 10s for us. So it probably needs to go up at some point. But for now, that's where we're at. And obviously, we're not just going to go out and spend it to spend it. It's helping us a little bit on the op margin side right now.

Our next question comes from Ross Osborn of Cantor Fitzgerald.

Congrats on the strong quarter. Starting off with RestoreFlow, what has feedback been with the cardiac call point? And what can you do to help facilitate adoption within this group?

Do you mind repeating that question one more time?

Yes. Just regarding the cardiac call point, how has feedback trend is ? And what can you do to help facilitate adoption within this group?

So I would say the feedback has been fantastic. I mean, obviously, Ross, it's Dave. Obviously, you heard that 61% unit growth figure in cardiac allografts, which that's a pretty large number for us. We're really happy to be seeing that growth. I will say what's different with cardiac allografts this quarter is we're starting to see some traction in the United States. So for us, the story of cardiac allografts has been adoption in the U.K. and Canada with the U.S. lagging behind. But with the increasing adoption and popularity of the Ross procedure and frankly, just a greater focus of our U.S. reps on allografts and a little bit on cardiac. -- we're seeing a nice uptake with that. And we do find that our vascular reps because they're very familiar with allografts are able to support the cardiac cases.

Okay. Great. And then when thinking about the RestoreFlow initial launch in either Ireland or Germany, outside of the supply headwinds, are there any other large hurdles you guys are going to have to overcome that may be unique to those geographies relative to the U.S.?

This is George. On the positive side, you have sales forces that are really excited to see this product in Germany and Ireland because -- they've heard so much from their British colleagues as well as the American on the plus side, they have that. There is one detail about Germany, which they -- the German regulators want to see paperwork from every single recovery center where we get these cadaveric pieces. And so there's another sort of layer of rate limiting there by the German authorities. We do -- so they want to see all the paperwork that normally the British, the Irish Canadians have decided we don't need to see that paperwork, but the Germans do. And of course, Germany is going to be a lot bigger than Ireland. So you got that. But we'll work through it. That's what we do here, and we have folks that do that for us all the time. So we'll work through it, but that's another potential small stumbling block. But almost certainly, we'll get through that.

Our next question comes from Frank Takkinen of Lake Street Capital Markets.

Hi, thanks for taking my questions. I was going to swing back to RestoreFlow cardiac. I'm just curious if that has anything to do with -- I think there was a competitive dynamic where one of your competitors had a little bit more supply-constrained operating status in recent quarters. Does that have anything to do with the unit growth you saw? And if that is the case, do you see that impacting unit growth going forward if their supply improves?

Frank, it's George again. Thanks for the good question. It's a great question, actually. To be quite honest, we really didn't know about that while it was going on. You're obviously referring to Artivion. There's only 3 players in this market and Artivion is one of them. We didn't know about that when it was really live and happening, and we found out about it in retrospect. -- if the phenomenon had been limited to, hey, in Q1, we sold a lot of stuff, I might say, yes, it probably had something to do with that. But I think you can see our numbers for the last several quarters. RFA keeps going very, very well, particularly cardiac. So I don't really think it's that, although it's illogical to say when a competitor leaves the market, something doesn't happen. So we didn't know about it while it was going on, but our results have been durable for the last several quarters. So I don't think it's that. But you bring up a good point. Remember, they're not participating to much extent in Canada, and they're not participating at all in the U.K., which is where lots of this growth comes from. So at least on those 2 markets. And then you've heard Dave here call out that the big surprise for us now is in the U.S. recently. That might tie to it a little bit, but the big surprise recently is in Q2, the American market seems to have opened up for us. But we think that's for a different reason, which is our sales manager ran the Canadian business, and he did a great job running the Canadian business, and now he's taking his game plan and putting it on the U.S. business. So we think that's the reason for the great work in the U.S.

Helpful. And then maybe just on the sales force. Obviously, you had a big bolus of hiring in Q1. My assumption is a lot of those folks are probably ramping up throughout Q2 and maybe the fruit to bear with them is still coming? Or did they have a material impact on kind of the strong Q2 results as well?

Right. I always -- I never know how to answer this question because all of our charts say they impact immediately, and it's really counterintuitive. It makes a lot more sense that it takes someone 3 or 6 or 9 months to figure out how to do their job well. But our charts all say you hire people when it starts happening. So I'm going to give you both answers and say, I've been doing this for a long time. I still can't figure it out.

Our next call comes from Jason Wittes of ROTH.

Maybe just a couple of follow-ups here. One, you mentioned the R&D was light this quarter, but I think is the implication that it remains light for the rest of the year? And then related to that, in terms of sort of new product introductions and regulatory approvals, I know we're waiting on the U.K. and Germany. Is there anything else that we should have on our radar to be aware of?

Sure. Jason, how are you doing? Maybe I answer the back of the question. You're saying we're waiting on Ireland and Germany. I think that's what you meant to say.

That's correct.

No problem. And in my script, I would say we're also waiting on Chinese XenoSure peripheral that's a biggie. -- and that we're making the final filing in Q4 here, and then we hope in '26 to get an approval for that. So I'd say those are a couple of the biggies. And then also somewhere in the script there, I think, is we're waiting on Artegraft in Singapore, Korea and Canada, Canada being the very big one there and Korea sort of big and then Singapore, not that big for us. So I think you've got a -- you do have a nice regulatory pipeline in front of you, and we can all see the nice results of Artegraft in Europe and South Africa. You can hear that, too. But way back at the beginning of your question, you were asking for, hey, is the R&D -- maybe my answer wasn't that clear. I would say gosh, as the year goes on, I'd hate to give guidance on inside of where the expenses are. I think implicitly, you're seeing an op expense guidance, and it's going down a little bit in H2, as Dorian has detailed versus H1. But where it comes, whether it's in G&A, whether it's in sales and marketing or R&D, I don't think we should probably guide on that or detail that, if that's okay.

Okay that’s fair I appreciate it. I’ll get back in queue.

Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation. You may now disconnect. Have a great day.