LeMaitre Vascular, Inc. Aktie

Welcome to LeMaitre Vascular Quarter 2 2026 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.

Good afternoon, and thank you for joining us for our Q2 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 will make 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, might and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, August 4, 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 will discuss non-GAAP financial measures such as organic sales growth. A reconciliation of GAAP to non-GAAP measures discussed in this 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. Artegraft grew 34% in Q2, accounting for 21% of sales. Grafts, up 23%, shunts up 18% and patches up 4%, each posted records as did EMEA, up 18%, APAC, up 18% and the Americas up 5%. Sales grew 10% organically in Q2, 7% from price and 3% from units. Catheters were down 11% in Q2 due to recall-driven overstocking in the year earlier quarter. Excluding catheters, Q2 2026 organic growth was 12%, 7% from price and 5% from units.

Notably, we underperformed our Q2 2026 sales guidance by $1.1 million for 3 reasons, each with roughly the same impact in the quarter. The strengthening of the dollar after we gave guidance on May 5, the impact of the Middle East war continues to delay export revenues and cardiac allografts sales have been hampered by supply. Our guidance reflects these 3 items continuing to hamper sales in H2.

Turning to the positive. Artegraft has become our fastest and largest product, and we're investing in the product in several ways. Number one, more international approvals; number two, longer sizes for leg bypasses, particularly for Europe; and finally, number three, building out our sales force and our commercial infrastructure.

International Artegraft sales advanced sequentially from $2.1 million in Q1 to $2.8 million in Q2, and we now expect sales of $11 million in 2026 versus $4 million in 2025. Artegraft approvals were received in Vietnam, Morocco and Turkey in Q2, and we're now approved in 56 countries. We also expect 3 large approvals in 2027, Korea, Brazil and India. In July, we met face-to-face with Japan's PMDA and the initial response was positive. We might receive approval for the AV indication by 2029/2030 without a clinical trial. Canada approved Artegraft last year and the launch is set to occur this September.

We're also working to make longer Artegraft available. Because European surgeons use Artegraft for leg bypasses, our longest Artegraft, which is 50 centimeters, is now in high demand, but the Artegraft packaging tube is just 53 centimeters long. So we plan to make approval filings for longer tubes in the U.S. and Europe in Q4 2026. For sales of these longer bovine grafts could start in H2 2027.

Here's an update on the Quick Stick project. We made a pre-submission filing to the FDA for this indication. Unfortunately, we now believe that a clinical trial is likely. If we like to follow this path, the time line would be measured in years, not quarters.

As a follow-up to the 2025 warning letter, the FDA reaudited our New Jersey facility in June 2026. At this audit, we believe that we adequately addressed 3/4 of their 2025 observations. On June 25, the FDA provided us an additional set of quality systems observations. As per standard practice, we responded on July 16. The observations from these audits have not disrupted our ability to produce, ship or invoice.

As for RFA, allograft revenues grew 17% in Q2. We now distribute these cadaver tissues in 4 countries: the U.S., Canada, the U.K. and Germany. German surgeons have recently performed 3 implants.

Our German sales force reports high levels of interest from German surgeons due to the quality and availability of our tissues. In Ireland, we have just responded to our first set of questions from the Irish Tissue Authority, and we await an inspection of our Dublin facility. Current expectations are for an Irish approval in H1 2027. Long-term, the Dublin facility is expected to be used for Irish as well as pan-European RFA distribution.

And here's the time line for when we expect to begin distributing tissues in several other countries. H1 2027, Austria, Holland and Spain. H2 2027, Australia and Switzerland. As always, we continue to hire sales reps and build out our commercial infrastructure. We ended Q2 with 163 sales reps, and we still plan to end the year with 170 to 180 reps. Nine reps have signed and are set to start in Q3 and 13 requisitions are currently open.

In July, we signed a Polish go-direct term sheet and expect to sell direct to hospital from a Warsaw warehouse this December. In addition to Dublin and Warsaw, we have 5 other warehouse projects underway. Our primary warehouse has tripled and moved to Billerica, Massachusetts. Madrid has doubled and now ships all products. Paris is doubling in Q3 and will ship all products. Toronto is moving and tripling in Q3. And finally, Hereford, U.K. is moving to the London area in Q4.

In total, about 7 new or larger warehouses opening in 2026/2027. We believe these infrastructure projects will help make a tighter connection between LeMaitre and its worldwide hospital customers.

Higher ASPs, geographic expansion and disciplined spending produced 10% sales growth and 23% EPS growth in Q2 2026. Our 29% op margin in Q2 as well as our 17% ROE underscores the strength and profitability of our business. Full year guidance implies 11% organic sales growth and 21% EPS growth.

I'll now turn the call over to Dorian.

Thanks, George. LeMaitre's Q2 organic revenue growth of 10%, consisting of 7% price growth and 3% unit growth was impacted by the Q2 2025 stocking orders following our package-relating catheter recall. As George noted, excluding catheters, organic growth across the remaining portfolio was 12%, consisting of 7% price and 5% unit growth. The 5% unit growth was highlighted by the strong unit growth of Artegraft and Cardiac RestoreFlow.

In Q2 2026, gross margin was 72.1%. The 210 basis point increase year-over-year was driven primarily by higher ASPs, reduced shipping costs and positive product mix, supported in particular by growing high-margin Artegraft sales. We remain on track to transfer tissue processing from our Fox River Grove facility in Illinois to our Burlington, Massachusetts headquarters before the end of the year, and we have already yielded tissue in Burlington.

In addition, we began shipping our core devices in June from our new 34,000 square foot high bay warehouse in Billerica to U.S. domestic customers in our international subsidiaries and distributors.

Operating expenses in Q2 2026 were $30.4 million, an increase of 5% versus Q2 2025, resulting from continued hiring restraint as full-time employees increased marginally from 658 at June 30, 2025, to 660 at June 30, 2026. We do anticipate continued 2026 investment in expanding our global sales force, including the new sales reps joining in Q3.

Q2 operating income was a record $20.4 million, up 26% and resulting in an operating margin for the quarter of 29%. Net income increased 24% year-over-year to $17.1 million and fully diluted EPS was $0.74, up 23%. Our fully diluted EPS calculation for Q2 2026 triggered the if-converted accounting for our convertible debt, increasing the fully diluted share count to 24.5 million for the basis of this calculation.

We ended Q2 2026 with $376 million in cash and securities, an increase of $9 million in the quarter. Cash from operations generated $16 million in Q2. We incurred $2.3 million in capital expenditures and paid $5.7 million in dividends to shareholders.

We have updated our full year revenue guidance to $276.3 million and 11% reported revenue growth. Expected reported revenue has declined as we updated our FX assumptions for the strengthening U.S. dollar since our February and May guidance.

In addition, we have reduced full year organic revenue growth from 12% to 11% to reflect our Q2 results and the revenue impact related to our export business and slowing growth for RFA, largely due to anticipated supply constraints.

We anticipate full year gross margin of 72.4%, a 200 basis point improvement from adjusted 2025, full year operating income of $76.8 million, resulting in a 28% operating margin for 2026 and an op inc increase of 19% from adjusted 2025.

We have also updated our guidance of fully diluted earnings per share to $2.89, up 21% from adjusted 2025. Our guidance implies a fourth consecutive year of strong double-digit revenue growth and 20% plus EPS growth.

We'll now take questions.

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

I guess, George, just to start, you gave us the update on the Quick Stick claim, and we've got this time line measured in years now. And I guess, can you give us a little more color on how you're thinking about allocating resources to that effort? And just any updated thoughts on what you're going to do there?

Sure. We definitely see that as a nice piece of the market, Mike. And by the way, thanks for your question. I appreciate it. I think the news is fresh enough here that we just need to sit back and decide what to do next here. We're not really a clinical trial company historically, but we do have these aspirations to get a little bit more R&D focused. So I think it will take us a little time to figure that out. But we do acknowledge it's an important piece of the market, particularly in the U.S.

Got it. And then just on the RFA supply constraints, I guess, how are you thinking about next steps here? And maybe any time lines for when you could see some relief on those constraints?

Sure. As you can imagine, we're running around like crazy trying to solve this. I think when you're dealing in cadaver tissues, there are always threats of supply around you. So there's a set of 4 or 5 to-dos that we're not going to bore you with today that we're in the middle of trying to do. If you want to think of this positively, when we first took over this company in 2016 for the first 5 years, we had tremendous difficulty having enough supply of the peripheral vascular tissues, the veins and the femoral artery and such. And we've definitely solved that. We feel really good about that. And now this is sort of the next frontier.

And then I always say this to the sales force, which is 95% of your products are good to go here. We have ample supply, and they always talk about the one that doesn't. So we want to get rid of it because it's tiring to sit there and listen to it from the sales force as much as we want the sales to come out.

Mike, this is Dorian. And maybe just to add on that. Cardiac allografts were up 39% quarter-on-quarter. So we're talking about a business that's performing very, very well, just maybe the growth rate is slowing a bit from where we anticipated. And one of the big things, of course, that we're doing on supply is to move that processing here to Burlington, Massachusetts, where we're all closer to it. So I think those are 2 important things to kind of wrap up the question.

Our next question comes from Brett Fishbin with KeyBanc.

Just had a quick one first on 2Q. The geographical performance versus our model at least looked pretty good in Europe and in Asia. And Americas was a little bit softer than expected. I was hoping you could just touch on kind of what you're seeing in the Americas region, just given some of the mixed reads on procedural growth this quarter domestically or if that was mostly driven by the catheter issue.

I would say we should start with the catheter issue, which is if you -- first of all, if you X-out the Aziyo issue, and we've all forgotten about that, but we used to distribute Aziyo way back when that was in Q2 of '25. You get it to a 6% organic number for the Americas. And then if you strip out the catheter topic, again, you can go strip out stuff, right? But if you strip that out, that's a real thing. You get it to 8% organic in the Americas. And it's probably feeling more normal to us that that's our business.

Your second part of your question, Brett, was about the procedure volume. And I think we tend not to lean on that in these phone calls about procedure volume. And one specific reason we might not lean on it is we -- the stuff we're reading a lot of the newspapers about the Affordable Care Act and all that, it's a little bit more -- it's not really our customer. Our customers are 70-year-old men and women, and they're not Medicaid patients and things like that. So we don't want to lean too hard on that. I think the internal issues, but again, if you X-out those 2 issues, you can get yourself to 8% organic growth for the quarter.

Right. Great. And then just one follow-up for me. I think you talked a lot more today in the press release and prepared remarks about some of these warehouse expansions and the magnitude and number of them. Maybe if you could just elaborate a little bit more at a high level on this like overall initiative, and if there's any long-term read into either margin expansion upside or working capital?

Right. Okay. Thanks for giving me the platform to talk about this. This is sort of one of my really serious initiatives inside the company called relocalization. And historically, we tried to address Europe just from Frankfurt because we're all excited about the EU and the Schengen zone and the euro as common currency.

And I would say myself and our team, we've sort of debunked that over 20 years. In the last 5 years, we've gotten much more serious about a Spanish hospital wants to talk to a Spanish customer service rep located in Madrid with the product sitting right next to him or her and get it shipped directly for so many reasons. That's the hypothesis of relocalization. And you can kind of see we've gone a bit hog wild with it, right? We're going to have -- when Warsaw opens up, we're going to have 7 offices in Europe, I believe, and maybe 15 years ago, it was just in Frankfurt. So we've really gone down this path. There's the outside reasoning or the larger rationale for it.

What we're also finding, which we didn't expect to find is shipping a package from Frankfurt cost $55 to the Madrid hospital and shipping a package from Madrid to the Madrid hospital costs $5. And so there's this huge shipping savings to go with Artegraft being so much bigger in Europe, just to press forward on the point here. There's an explosion of gross margin going on over in Europe. And I've never seen this in my career, but it's 6 points, 5 points, 9 points year-over-year, full points, not bps.

And it's been really satisfying to see even though we spent the money on these places, the gross margin is exploding over there for a number of reasons. And I would say the focus of the success of the company in Q2 clearly was Europe, whether it be from a sales perspective or on a growth and profitability perspective. And I think the profitability of that segment was up like 70% or something like that. It's really going nicely over there, and it's sort of intertwined with that relocalization project.

Our next call comes from Rick Wise with Stifel.

This is Annie on for Rick. My first one is on Artegraft in Europe. When we spoke with you last, we kind of heard that Artegraft was seeing early success in these European countries with shorter sales cycles, while the more tender-based countries were likely to come in further down the road. So I guess, can you update us on where those tender processes like stand today and whether the updated back half outlook is going to depend on those wins converting before the year-end?

Okay. And I think when we gave the Q1 call, we were a little bit like, "Well, is it going to be $10 million or what?" We were all talking about it. And we're happy to say Q2 seemed like a little bit better than we all expected over in Europe for Artegraft. So we're thrilled about that.

As to your specific question on the tender, on the tender countries, I don't have a real angle on that. I will say that when it first started, let's call it, Q3 and Q4 of 2025, it felt very much like a Central Europe, I'm going to say, Holland, Belgium, Germany, Austria thing. And in the last 3 or 4 quarters, it definitely has spread out. It's become a big topic in France, Italy and Spain and a big topic in the U.K.

The tender-driven markets of sort of the Nordics. When you talk about tenders over there and in the Southern European markets, you feel like the Nordics, maybe a little slower and the tender-driven markets of the South part of Europe are doing really well right now, very well. It's helping the business post records every month and every quarter.

Great. And maybe just a follow-up on the RFA supply constraints, maybe just generally about the longer-term opportunity outside the U.S. I'm curious if you have any plans to build out tissue processing OUS and what that might entail in terms of the timing, investment and regulatory work there?

Annie, it's Dave. It's a great question. It is something we think about on a long-term basis. But I think we still have a long way to go in the U.S. to rationalize and improve our supply of cardiac tissue, especially here. So I think we're focused on that in the near-term. As Dorian mentioned, we're moving the processing from the Chicago area to Burlington. So all the management will be concentrated here, and we are taking a few steps to improve the supply here.

Certainly, as we see sales start growing OUS, that topic about supplying outside the United States becomes more relevant. But I don't think it's a near-term project for the company at this point.

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

Just my first one, I want to focus on the guidance. So if we're looking at the guide below the top line, gross margin was in line with the quarter. You raised it a bit for the full year and then full year operating income guide was lowered by a bit more than this quarter's performance versus the quarterly guide. So I guess really my question is just, could you help us with some of those dynamics, maybe it's simple as it's a function of lower sales base or some product mix, but just how should we think about these metrics moving in opposite directions in the back half and how we should think about them in our model?

Danny, it's Dorian. I think you're right on the decrease in operating income guidance is just directly dropping through from the revenue decline. And really, that's a function of the 3 factors that George walked through in the prepared remarks, which is about 1/3 of the miss for Q2 and 1/3 of the change in guidance is purely related to FX. In our prepared remarks in Q2, I think we gave the euro rate that we were forecasting at $1.17 . Of course, we exited the back half of June at $1.14, which hurt us in the quarter. It's come up a little bit to $1.15. So that's about 1/3 of the miss for Q2 and about 1/3 of the change in guidance for Q3 and Q4.

And then we do continue to just have this hangover on our export business from not being able to ship to the Middle East. We had $400,000 of orders ready to go here that just can't go out because of the conflict. We think, again that, that's probably something that's going to recur and our export business overall is going to be down for the year if this doesn't resolve.

And then the last 1/3 is really around the -- while we did post a 39% growth rate on Cardiac allografts, that curve -- that growth curve coming down a little bit from our expectation really related to the supply. So those 3 factors kind of explain the Q2, and they are really the drivers of the change in guidance and the flow-through to the bottom line is the impact on op income.

And Danny, maybe I could pick up the second half of your question, which I think you have in there, which is the bottom line and op expenses. And I think as you compare H2 2026 to H2 2025, we were sort of in belt tightening mode for those Q3 and Q4 of '25. So you're going to see, even though we haven't raised op expenses implicitly too much in this model here, it's going to look like a lot when we start coming around the Q3 and Q4, particularly the sales reps being hired. So that's something you're going to be noticing.

The lack of op leverage is going to be driven a little bit by that. It was a tight-fisted company in Q3 and Q4 of last year, a little bit less so this year. We're seeing these projects we definitely want to get involved in. And so we're not sort of slowing down a little bit. Maybe that helps you on the bottom part of the guidance.

No, that's great color. I appreciate that. Just one more focusing on the model. So Dorian, I'll ask some of these of you again. But just as I think about EPS guide, are there any other dynamics beyond gross margin and OpEx you already highlighted? I think last quarter, you talked a little bit about tax and it being below your historical rate and some of that being due to the FDIIs. We saw it step up a little bit here in the quarter. So how should we think about that in the back half? And just anything else beyond or below the operating income line that we should think about as we model out here?

Yes, sure. If you get below op inc, Danny, the put and the take is a little bit better yield on our invested cash. Yield curves come up a little bit. So we're getting a little bit better earnings on that cash balance here in July versus where we were forecasting from May.

On the effective tax rate, still getting that benefit from the FDII, but the tax rate is really impacted by the discrete items, particularly around stock-based comp and the timing of option exercises. So fewer of that in Q2.

Overall, for the blend of the year, our ETR for our guidance hasn't really changed too much, but you're always going to see some variability. And I think we did caution in the call last quarter not to read into the 20.3 as the long-term rate on the ETR. But yes, probably a little higher than we anticipated in Q2, settling out more normalized throughout the year.

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

So George, you've dealt with shortages for allografts before. What did you do then, and are you going to do something similar now?

Well, and I would broaden that to, we pride ourselves. Thanks for the question, Jim. Great question. We pride ourselves on being a no backorder company. You've heard that from me a billion times over the years. And we got to that with peripheral vascular, largely through huffing and puffing and sweating and figuring how to do stuff better. I think the big move here is going to be bringing the factory to Burlington, where it's near, Trent, who's the Head of Ops, and Andrew, who's the Head of Regulatory, who's the guy in charge of approving all the stuff going out the door. So I think that's the major move.

We have AI in the background here with new program called Donor IQ, and we have put some constraints on because we were nervous about purchasing too much and only using a piece of this, and we've removed those constraints. So there's a number of moves we can pull. I think it will get better. And again, I think Dorian, in his initial response here is pointing out, okay, but we still did grow business 39% in the first -- in the second quarter. So there's still -- the cardiac business, there's still cause for -- well, it's going fast and they're missing that last piece of business by the lack of supply, but it's still a nice business. But yes, we got to get down to work on that and fix that. It's on us.

So it sounds like you have a sufficient number of organ procurement people that you're dealing with to get the product, you just have to get better at processing it?

I would say it's both. I do think we also consider from time to time bringing on more recovery groups. So there's a limited number of those in the whole country, and we're already dealing with about half of them, but we do consider bringing more of them on from time to time. So that might be an avenue as well.

Okay. And then just a quick one for Dave. Just an update on the pipeline out there with growing acquisitions and what are you seeing?

Yes. Jim, thanks for the question. It's a pretty active pipeline right now. Obviously, I don't usually disclose how many deals or the size of deals, but we are busy. In fact, we're adding a fourth member to the biz dev team this coming Monday. So it is pretty busy. The target zone is what we've focused on in the past, the roughly 2 dozen businesses in open vascular that are big enough for us to focus on, or expanding the cardiac surgery where we had about 13% of our Q2 revenue. And the sweet spot, I'd say, is anywhere from $15 million to $150 million of revenue. So pretty active pipeline, building the team and stay tuned.

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

So apologies if this has already been addressed. I'm jumping around a little bit. But just in terms of catheters in the quarter, was that just simply a tough year-over-year comp? Or is there any sort of durable change going on there in terms of competitive dynamics?

Sure, Keith. Thanks for the question. It's George. Yes, it's a big topic here in that in Q2 of 2025, we had a very big recall of a simple product line problem with our packaging on catheters. So we pulled in a lot of product and oddly, which doesn't always happen, the customer then went and did a bunch of hoarding. All of the customers around the world went and did a bunch of hoarding and bought a lot of devices. Therefore, we had a huge catheter sales in Q2 last year.

And now coming around the bend here in Q2 of this year, catheter sales were down 11%. So if you strip the catheters out of the company's performance, instead of us showing up here today on this call with a 10% organic growth rate, you'd have a 12% organic growth rate. So it does make a big difference. We called that out in the press release, and we've called it out in this phone call as well. It's an important topic. And we do believe that it's transient and that you won't have that brutal comp again as you go into H2.

Okay. Great. And again, apologies if I missed this, but did you guys talk at all about the plans for Artegraft Quick Stick in terms of potential trial there, trial design, time line, anything like that?

We did. And Keith, unfortunately, the news that we got from our FDA meeting, and we did address this in the prepared remarks. Unfortunately, the FDA seems to be leaning. It's not for sure, but they seem to be leaning towards you got to go back and do a clinical trial for that. And so that puts us back at, gosh, should we go forward with this, it's a big investment, it's a X-year time line. So we're still in the thinking it through phase of that project.

Our next question comes from Michael Petusky with Barrington Research.

Mike, it's George in Burlington. I think you're up if you're still hanging on to the call. Operator, he's usually pretty good about being here. So let's assume something happens here. You can either go on to next questions or wrap up the call whatever you see is the right next move.

Right. So it looks like we have no further questions. And give me one moment. Ladies and gentlemen, that does conclude today's conference. I'd like to thank you for your participation, and you may now disconnect. Have a great day.

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.