CryoLife, Inc. (CRY) Q1 2020 Earnings Conference Call April 30, 2020 4:30 PM ET Company Participants Lynn Lewis - Gilmartin Group Pat Mackin - CEO Ashley Lee - CFO Conference Call Participants Jason Mills - Canaccord Genuity David Saxon - Needham and Company Suraj Kalia - Oppenheimer and Company Jeffrey Cohen - Ladenburg Thalmann Operator Greetings, and welcome to the CryoLife 2020 first quarter financial conference call. [Operator instructions] As a reminder, this conference is being recorded. It is now m ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission file number: 1-13165 CRYOLIFE INC. (Exact name of registrant as specified in its charter) Florida 59-2417093 (State or ot ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-13165 CRYOLIFE, INC. (Exact name of registrant as specified in its charter) Florida (State or other jurisdiction of incorporation or or ...

CryoLife, Inc. (CRY) Q4 2019 Earnings Conference Call February 13, 2020 4:30 PM ET Company Participants Lynn Lewis - Gilmartin Group Pat MacKin - Chief Executive Officer Ashley Lee - Chief Financial Officer Conference Call Participants Suraj Kalia - Oppenheimer David Saxon - Needham & Company Jeffrey Cohen - Landenburg Thalmann Brooks O'Neil - Lake Street Capital Markets Joe Munda - First Analysis Operator Greetings. Welcome to CryoLife's Fourth Quarter and Year End 2019 Financial Conference Call. [Operator ...

CryoLife, Inc. (CRY) Q3 2019 Results Conference Call October 30, 2019 5:30 PM ET Company Participants Greg Chodaczek - Investor Relations Pat MacKin - Chief Executive Officer Ashley Lee - Chief Financial Officer Conference Call Participants Cecilia Furlong - Canaccord Genuity Mike Matson - Needham & Company Jeffrey Cohen - Landenburg Thalmann Brooks O'Neil - Lake Street Capital Joe Munda - First Analyst Suraj Kalia - Oppenheimer Operator Greetings. Welcome to CryoLife's Third Quarter 2019 Financial Conferen ...

Part I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) CryoLife's unaudited Q3 2019 financial statements show a net loss of **$0.13 million**, with total assets of **$592.6 million** and new Endospan agreements Consolidated Statement of Operations Highlights (in thousands) | Metric | Q3 2019 (Unaudited) | Q3 2018 | Nine Months 2019 (Unaudited) | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $67,881 | $64,598 | $206,525 | $195,042 | | **Gross Margin** | $45,222 | $42,714 | $136,461 | $127,793 | | **Operating Income** | $4,704 | $4,618 | $13,411 | $6,533 | | **Net (Loss) Income** | $(134) | $1,565 | $2,401 | $(2,064) | | **Diluted (Loss) Income per Share** | $0.00 | $0.04 | $0.06 | $(0.06) | Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $36,685 | $41,489 | | Total current assets | $181,354 | $179,168 | | Goodwill | $183,368 | $188,781 | | **Total Assets** | **$592,602** | **$571,091** | | Long-term debt | $214,793 | $215,721 | | **Total Liabilities** | **$315,101** | **$296,024** | | **Total Shareholders' Equity** | **$277,501** | **$275,067** | Consolidated Statement of Cash Flows Highlights (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2019 (Unaudited) | 2018 | | :--- | :--- | :--- | | Net cash from operating activities | $14,767 | $(640) | | Net cash used in investing activities | $(20,753) | $(4,997) | | Net cash used in financing activities | $(836) | $(1,278) | - In September 2019, the company entered into significant agreements with Endospan Ltd., including an exclusive distribution agreement, a securities purchase option, and a secured loan agreement, with initial payments totaling **$15.0 million**[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk) - The company adopted the new lease accounting standard, ASC 842, on January 1, 2019, resulting in the recognition of operating lease liabilities and corresponding right-of-use assets of **$22.7 million**[14](index=14&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2019 revenue growth to **$67.9 million**, driven by product sales, and confirms sufficient liquidity for the next twelve months [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q3 2019 total revenues increased **5%** to **$67.9 million**, driven by product and service growth, with a **67%** gross margin and net loss from foreign currency impacts Revenues by Product and Service (in thousands) | Product/Service | Q3 2019 | Q3 2018 | % Change | 9 Months 2019 | 9 Months 2018 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Products** | **$47,484** | **$45,152** | **5%** | **$147,053** | **$138,063** | **7%** | | BioGlue | $15,679 | $15,646 | 0% | $50,834 | $48,685 | 4% | | JOTEC | $15,774 | $15,004 | 5% | $48,936 | $46,669 | 5% | | On-X | $12,610 | $11,298 | 12% | $36,751 | $33,495 | 10% | | **Total Preservation Services** | **$20,397** | **$19,446** | **5%** | **$59,472** | **$56,979** | **4%** | | **Total Revenues** | **$67,881** | **$64,598** | **5%** | **$206,525** | **$195,042** | **6%** | - Excluding foreign exchange effects, revenues increased by **6%** for Q3 2019 and **8%** for the nine-month period compared to 2018[68](index=68&type=chunk) - A supply issue with CardioGenesis cardiac laser therapy handpieces is expected to impact Q4 2019 sales, with supply anticipated to resume in Q1 2020[76](index=76&type=chunk) - General, administrative, and marketing expenses for the nine months of 2019 included **$2.6 million** in business development and integration expenses, a significant decrease from **$6.9 million** in the same period of 2018, primarily related to the JOTEC acquisition[88](index=88&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Net working capital was **$139.2 million** as of September 30, 2019, with **$14.8 million** net cash from operations, and sufficient liquidity for the next twelve months - Net working capital was **$139.2 million** as of September 30, 2019, compared to **$144.7 million** at December 31, 2018[92](index=92&type=chunk) - The company's primary cash requirements in the first nine months of 2019 were for general working capital, funding of the Endospan agreements, debt service, and capital expenditures[93](index=93&type=chunk) - Future cash requirements include potential funding of two additional **$5.0 million** tranches to Endospan upon completion of certain clinical trial milestones[95](index=95&type=chunk) - As of September 30, 2019, approximately **28%** of the company's cash and cash equivalents were held in foreign jurisdictions[95](index=95&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate changes on its **$225.0 million** term loan and foreign currency fluctuations, primarily impacting Euro, GBP, and CHF transactions - The company is exposed to interest rate risk on its **$36.7 million** in cash and cash equivalents and its **$225.0 million** secured Term Loan Facility[102](index=102&type=chunk) - Foreign currency exchange rate risk exists due to revenues and expenses denominated in Euros, British Pounds, Swiss Francs, Polish Zlotys, Canadian Dollars, and Brazilian Reals[103](index=103&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2019, the CEO and CFO concluded that disclosure controls and procedures are effective at a reasonable assurance level - Management, including the CEO and CFO, concluded that as of September 30, 2019, the company's disclosure controls and procedures were effective at the reasonable assurance level[104](index=104&type=chunk) Part II - OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, but management does not anticipate any material adverse effects on its financial condition or operations - The company does not believe that any pending legal matters could have a material adverse effect on its business, financial condition, results of operations, or cash flows[106](index=106&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Key risks include failure to realize benefits from JOTEC and Endospan, significant indebtedness, heavy revenue dependence on core products, and evolving regulatory environments - The company may not realize all anticipated benefits from the JOTEC Acquisition due to factors like market growth, integration challenges, and competition[106](index=106&type=chunk) - Significant indebtedness could limit the company's ability to raise capital, require dedication of substantial cash flow to repayment, and restrict operational flexibility[108](index=108&type=chunk) - The business is significantly dependent on revenues from tissue preservation services (**30%** of total), BioGlue (**23%**), JOTEC (**23%**), and On-X (**19%**), making it vulnerable to risks specific to these areas[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) - The company faces significant risks related to its new agreements with Endospan, including Endospan's ability to obtain FDA approval for the Nexus Product and successfully commercialize it[119](index=119&type=chunk) - Products and tissues are subject to significant quality and regulatory risks, including potential recalls, liability claims, and changes in regulations such as the new European Union Medical Device Regulation (MDR)[117](index=117&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2019, CryoLife purchased **2,165** common shares at **$27.04** each, solely for employee tax obligations, not as part of a general repurchase plan Issuer Purchases of Equity Securities (Q3 2019) | Period | Total Number of Common Shares Purchased | Average Price Paid per Common Share | | :--- | :--- | :--- | | July 2019 | 253 | $30.25 | | August 2019 | 1,912 | $26.61 | | September 2019 | 0 | -- | | **Total** | **2,165** | **$27.04** | [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) In October 2019, the Clawback Policy was amended to require recoupment of excess performance-based compensation following a material accounting restatement - In October 2019, the company's Clawback Policy was amended to require recoupment of excess performance-based compensation following a material accounting restatement[156](index=156&type=chunk)

Part I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=1&type=section&id=Item%201.%20Financial%20Statements) This section presents CryoLife's unaudited consolidated financial statements for Q2 and H1 2019 and 2018, including statements of operations, balance sheets, cash flows, and shareholders' equity [Summary Consolidated Statements of Operations and Comprehensive Income (Loss)](index=1&type=section&id=Summary%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) CryoLife reported Q2 2019 total revenues of **$71.1 million**, operating income of **$6.5 million**, and net income of **$2.8 million**, with H1 revenues reaching **$138.6 million** Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $71,139 | $68,496 | $138,644 | $130,444 | | **Gross Margin** | $46,966 | $45,851 | $91,239 | $85,079 | | **Operating Income** | $6,502 | $5,405 | $8,707 | $1,915 | | **Net Income (Loss)** | $2,832 | $226 | $2,535 | $(3,629) | | **Diluted EPS** | $0.07 | $0.01 | $0.07 | $(0.10) | [Summary Consolidated Balance Sheets](index=2&type=section&id=Summary%20Consolidated%20Balance%20Sheets) As of June 30, 2019, total assets increased to **$597.1 million**, driven by receivables and lease assets, with total liabilities at **$315.0 million** and shareholders' equity at **$282.2 million** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $39,747 | $41,489 | | Total current assets | $188,557 | $179,168 | | Goodwill | $188,106 | $188,781 | | **Total Assets** | **$597,123** | **$571,091** | | Total current liabilities | $37,468 | $34,523 | | Long-term debt | $215,013 | $215,721 | | **Total Liabilities** | **$314,970** | **$296,024** | | **Total Shareholders' Equity** | **$282,153** | **$275,067** | - The company adopted the new lease accounting standard (ASC 842) as of January 1, 2019, resulting in the recognition of **$22.7 million** in operating lease right-of-use assets and corresponding lease liabilities[16](index=16&type=chunk)[27](index=27&type=chunk) [Summary Consolidated Statements of Cash Flows](index=3&type=section&id=Summary%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly improved to **$1.9 million** for H1 2019, compared to a **$9.0 million** use in H1 2018, with an overall cash decrease of **$1.9 million** Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | | Net cash from operating activities | $1,907 | $(8,960) | | Net cash used in investing activities | $(3,646) | $(3,631) | | Net cash used in financing activities | $(824) | $(2,960) | | **Decrease in cash** | **$(1,981)** | **$(15,034)** | [Notes to Summary Consolidated Financial Statements](index=4&type=section&id=Notes%20to%20Summary%20Consolidated%20Financial%20Statements) Detailed disclosures cover accounting policies, debt, leases, revenue recognition, and segment information, including ASC 842 adoption and PerClot clinical trial progress - As of January 1, 2019, the company adopted ASC 842 (Leases), recognizing operating lease right-of-use assets and liabilities of **$22.7 million** using a modified retrospective approach[16](index=16&type=chunk)[27](index=27&type=chunk) - The company's debt is primarily from a **$225.0 million** secured term loan facility entered into in December 2017, with an interest rate of **5.58%** per annum as of June 30, 2019, and a **$30.0 million** revolving credit facility remains undrawn[33](index=33&type=chunk)[34](index=34&type=chunk) - Enrollment for the pivotal clinical trial for PerClot in the U.S. was completed in January 2019, with a Premarket Approval (PMA) submission to the FDA anticipated in early 2020[39](index=39&type=chunk) Revenue by Segment (in thousands) | Segment | Q2 2019 | Q2 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Medical devices | $51,168 | $49,313 | $99,569 | $92,911 | | Preservation services | $19,971 | $19,183 | $39,075 | $37,533 | | **Total revenues** | **$71,139** | **$68,496** | **$138,644** | **$130,444** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=11&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 and H1 2019 financial results, highlighting revenue growth, stable gross margin, improved operating cash flow, and sufficient liquidity [Results of Operations](index=11&type=section&id=Results%20of%20Operations) Q2 revenues grew **4%** to **$71.1 million** and H1 revenues grew **6%** to **$138.6 million**, driven by BioGlue, On-X, and preservation services, with stable operating expenses Revenue by Product/Service (Q2, in thousands) | Product/Service | Q2 2019 | Q2 2018 | % Change | | :--- | :--- | :--- | :--- | | BioGlue | $17,933 | $17,069 | 5% | | JOTEC | $17,208 | $17,205 | 0% | | On-X | $12,410 | $11,888 | 4% | | Preservation services | $19,971 | $19,183 | 4% | | **Total** | **$71,139** | **$68,496** | **4%** | Revenue by Product/Service (YTD, in thousands) | Product/Service | YTD 2019 | YTD 2018 | % Change | | :--- | :--- | :--- | :--- | | BioGlue | $35,155 | $33,039 | 6% | | JOTEC | $33,162 | $31,665 | 5% | | On-X | $24,141 | $22,197 | 9% | | Preservation services | $39,075 | $37,533 | 4% | | **Total** | **$138,644** | **$130,444** | **6%** | - Gross margin as a percentage of total revenues was **66%** in Q2 2019, down from **67%** in Q2 2018, primarily due to revenue mix and inventory write-offs, but increased for the six-month period to **66%** from **65%** in 2018 due to the absence of JOTEC inventory step-up costs[68](index=68&type=chunk) - General, administrative, and marketing expenses decreased **1%** for the six months ended June 30, 2019, primarily due to lower business development and integration expenses related to the JOTEC Acquisition (**$1.3 million** in H1 2019 vs. **$5.1 million** in H1 2018)[68](index=68&type=chunk) [Liquidity and Capital Resources](index=14&type=section&id=Liquidity%20and%20Capital%20Resources) Net working capital was **$151.1 million** as of June 30, 2019, with **$1.9 million** in operating cash flow for H1, and sufficient liquidity for the next twelve months - Net working capital was **$151.1 million** as of June 30, 2019, compared to **$144.7 million** at December 31, 2018[72](index=72&type=chunk) - Net cash provided by operating activities was **$1.9 million** for the first six months of 2019, compared to net cash used of **$9.0 million** in the same period of 2018[77](index=77&type=chunk) - The company has a **$255.0 million** senior secured credit facility, consisting of a **$225.0 million** term loan and an undrawn **$30.0 million** revolving credit facility[74](index=74&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=16&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate and foreign currency fluctuations, but management assesses a **10%** adverse change would not be material - The company is exposed to interest rate risk on its **$39.7 million** in cash and its variable-rate **$225.0 million** secured Term Loan Facility[81](index=81&type=chunk) - Foreign currency exchange rate risk exists as a portion of international revenues and expenses are denominated in Euros, British Pounds, Swiss Francs, and other currencies[81](index=81&type=chunk) - Management concluded that a **10%** adverse change in interest rates or foreign currency exchange rates would not have a material effect on the company's financial position, results of operations, or cash flows[81](index=81&type=chunk) [Item 4. Controls and Procedures](index=16&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019 - Based on an evaluation as of June 30, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[83](index=83&type=chunk) Part II - OTHER INFORMATION [Item 1. Legal Proceedings](index=16&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not anticipate any material adverse effects on its financial condition or operations - The company states that it does not believe any pending legal matters could have a material adverse effect on its business, financial condition, results of operations, or cash flows[84](index=84&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include failure to realize JOTEC acquisition benefits, substantial indebtedness, dependence on key products, regulatory compliance, and intense competition - The company may not realize all anticipated benefits from the JOTEC acquisition, and its significant indebtedness could adversely affect its ability to raise capital and react to market changes[85](index=85&type=chunk)[87](index=87&type=chunk) - The business is significantly dependent on revenues from tissue preservation services (**28%** of revenue) and key products like BioGlue (**25%**), JOTEC (**24%**), and On-X (**18%**)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) - The company faces significant regulatory risks, including potential reclassification of its CryoValve SGPV to a Class III device by the FDA and more stringent requirements under the new European Medical Device Regulation (MDR)[95](index=95&type=chunk)[97](index=97&type=chunk) - Competition is intense from large, well-established medical device companies like Baxter, Medtronic, and Johnson & Johnson, which have greater financial and marketing resources[105](index=105&type=chunk)[106](index=106&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=23&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2019, the company repurchased **8,817** common shares at an average price of **$31.17** to cover tax obligations related to stock compensation Share Repurchases in Q2 2019 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2019 | 0 | N/A | | May 2019 | 8,753 | $31.17 | | June 2019 | 64 | $31.05 | | **Total** | **8,817** | **$31.17** | - The shares purchased were tendered by employees to cover taxes on stock compensation and were not part of a formal, publicly announced buyback program[125](index=125&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q2 2019 was $71.1 million, reflecting a 4% increase on a GAAP basis and a 7% increase on a non-GAAP constant currency basis compared to Q2 2018 [7][15] - GAAP net income was approximately $2.8 million or $0.07 per fully diluted share, while non-GAAP net income was $4.1 million or $0.11 per share [19] - Gross margins were 66% for Q2, which was about 40 basis points higher than Q1 [18] Business Line Data and Key Metrics Changes - JOTEC revenue increased 8% on a non-GAAP constant currency basis, with a potential growth rate of approximately 11% if not for a sterilization issue [8][16] - On-X revenue increased 5% on a non-GAAP constant currency basis, with North America growing 6% [8][16] - BioGlue revenue increased 7% on a non-GAAP constant currency basis, driven by strong sales in Europe and Asia-Pacific [9][16] - Tissue processing revenues increased by 4%, with cardiac tissue processing revenues up 16% and vascular tissue processing revenues down 7% [17] Market Data and Key Metrics Changes - International markets saw a 20% year-over-year increase in revenues on a constant currency basis [17] - The company is expanding its sales operations in Asia Pacific and Latin America, with plans to migrate towards direct sales in selective territories [13] Company Strategy and Development Direction - The company plans to launch three next-generation JOTEC products in European markets by the end of 2019 [10][22] - The PROACT 10A trial is expected to start in Q3, which aims to demonstrate the benefits of the On-X mechanical valve [11][22] - The company is focusing on cost-down initiatives and enhancing distributor networks to improve margins [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving growth despite temporary supply issues and currency impacts, expecting a strong Q4 and a positive outlook for 2020 [20][72] - The company is addressing sterilization and supply challenges to improve JOTEC product availability [21][49] Other Important Information - The company maintains its full-year 2019 financial guidance, expecting Q3 revenues between $67.5 million and $68.5 million [20] - As of July 26, 2019, the company had approximately $44 million in cash and equivalents, with a gross leverage of approximately 4.2 times [19] Q&A Session Summary Question: Can you provide insights on JOTEC product rollouts in Europe? - Management expects CE mark approvals for two JOTEC devices in Q3 and anticipates significant growth from these launches [27][29] Question: What initiatives are in place to boost margins? - The company is focusing on cost-down initiatives, enhancing direct sales strategies, and optimizing distributor networks to improve margins [31][32] Question: What caused the slower growth in On-X? - Management noted that competitive pressure from tissue valves targeting younger patients and currency issues impacted growth, but they remain optimistic about future trials [36][66] Question: What is the status of the BioGlue application in China? - The approval timeline is uncertain, but initial feedback is expected in Q4 [42] Question: How much impact would resolving JOTEC supply issues have on Q3? - Management estimates a potential impact of $1.5 million to $2 million if supply issues were resolved [62]

[Part I – FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements for the quarterly period ended March 31, 2019 [Summary Consolidated Statements of Operations and Comprehensive (Loss) Income](index=3&type=section&id=Summary%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) The company reported a 9% revenue increase to $67.5 million and a significantly reduced net loss of $297 thousand Q1 2019 vs Q1 2018 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Total Revenues** | $67,505 | $61,948 | | **Gross Margin** | $44,273 | $39,228 | | **Operating Income (Loss)** | $2,205 | $(3,490) | | **Net Loss** | $(297) | $(3,855) | | **Diluted Loss Per Share** | $(0.01) | $(0.11) | [Summary Consolidated Balance Sheets](index=4&type=section&id=Summary%20Consolidated%20Balance%20Sheets) Total assets grew to $586.9 million, while liabilities increased due to the adoption of new lease accounting standards Balance Sheet Highlights (in thousands) | Metric | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $178,652 | $179,168 | | **Total Assets** | $586,928 | $571,091 | | **Total Current Liabilities** | $36,423 | $34,523 | | **Total Liabilities** | $314,306 | $296,024 | | **Total Shareholders' Equity** | $272,622 | $275,067 | - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, resulting in the recognition of **operating lease right-of-use assets of $23.0 million** and corresponding lease liabilities[11](index=11&type=chunk)[17](index=17&type=chunk) [Summary Consolidated Statements of Cash Flows](index=5&type=section&id=Summary%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated $1.2 million in cash, a significant improvement from a $9.7 million use in the prior year Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $1,161 | $(9,727) | | **Net cash flows used in investing activities** | $(1,427) | $(2,119) | | **Net cash flows used in financing activities** | $(1,215) | $(1,954) | | **Decrease in cash, cash equivalents, and restricted securities** | $(1,161) | $(13,361) | [Summary Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Summary%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity decreased by $2.5 million, primarily driven by a net loss and foreign currency translation adjustments - Total shareholders' equity decreased by **$2.5 million** during the first quarter of 2019, from $275.1 million to $272.6 million[15](index=15&type=chunk) - The comprehensive loss for the quarter was **$4.1 million**, which included a net loss of $0.3 million and a foreign currency translation loss of $3.8 million[15](index=15&type=chunk) [Notes to Summary Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Summary%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including the adoption of ASC 842, segment data, and debt facility information - The company adopted the new lease accounting standard ASC 842 on January 1, 2019, recognizing operating lease right-of-use assets and liabilities of **$22.7 million**[17](index=17&type=chunk)[34](index=34&type=chunk) - As of March 31, 2019, the company had **$186.7 million in goodwill**, all related to the Medical Devices segment[26](index=26&type=chunk) - The company has a **$255.0 million senior secured credit facility**, consisting of a $225.0 million term loan and a $30.0 million revolving credit facility[43](index=43&type=chunk)[50](index=50&type=chunk) - Enrollment for the pivotal clinical trial for PerClot in the U.S. was completed in January 2019, with a **PMA submission to the FDA anticipated in early 2020**[55](index=55&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses a 9% revenue increase, improved margins, and the company's liquidity and capital resources [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q1 2019 revenues rose 9% to $67.5 million, with gross margin improving to 66% from 63% year-over-year Revenues by Product/Service (in thousands) | Category | Q1 2019 | Q1 2018 | % Change | | :--- | :--- | :--- | :--- | | **Total Products** | $48,401 | $43,598 | 11% | | - BioGlue | $17,222 | $15,970 | 8% | | - JOTEC | $15,954 | $14,460 | 10% | | - On-X | $11,731 | $10,309 | 14% | | **Total Preservation Services** | $19,104 | $18,350 | 4% | | **Total Revenues** | **$67,505** | **$61,948** | **9%** | - **Gross margin increased to 66%** in Q1 2019 from 63% in Q1 2018, primarily due to the absence of a $1.5 million inventory step-up expense from the JOTEC acquisition[105](index=105&type=chunk)[108](index=108&type=chunk) - General, administrative, and marketing expenses decreased 2% to $36.5 million, mainly due to **lower business development and integration expenses** related to the JOTEC Acquisition[109](index=109&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity with $142.3 million in net working capital and a $30 million undrawn credit facility - Net working capital was **$142.3 million** as of March 31, 2019, with a current ratio of 5 to 1[121](index=121&type=chunk) - Management believes cash from operations and existing cash will be **sufficient to meet operational liquidity needs** for at least the next twelve months[123](index=123&type=chunk) Scheduled Contractual Obligations (in thousands) | Obligation Type | Total | Remainder of 2019 | 2020-2021 | 2022-2023 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt obligations | $225,262 | $2,085 | $5,562 | $5,562 | $212,053 | | Interest on long-term debt | $71,753 | $9,757 | $25,630 | $25,064 | $11,302 | | Operating leases | $29,095 | $4,396 | $11,653 | $5,664 | $7,382 | | **Total** | **$346,795** | **$24,822** | **$48,657** | **$38,387** | **$234,929** | [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company is exposed to market risks from interest rate and foreign currency exchange rate fluctuations - The company's interest income and expense are sensitive to U.S. interest rate changes, affecting its **$40.3 million in cash** and its **$225.0 million secured Term Loan**[142](index=142&type=chunk) - A portion of international revenues and expenses are denominated in foreign currencies, primarily the Euro, creating exposure to exchange rate fluctuations[144](index=144&type=chunk)[145](index=145&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2019 - Based on an evaluation as of March 31, 2019, the CEO and CFO concluded that the company's **disclosure controls and procedures were effective** at the reasonable assurance level[148](index=148&type=chunk) [Part II - OTHER INFORMATION](index=32&type=section&id=Part%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings.) Management believes no pending legal matters will have a material adverse effect on the company's business - The company does not believe there are any pending legal matters that could have a **material adverse effect** on its business, financial condition, or cash flows[150](index=150&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors.) The company faces significant risks related to acquisition integration, indebtedness, product dependency, and regulations - The company may not realize all anticipated benefits of the JOTEC Acquisition due to factors like **market growth, integration challenges, and competition**[152](index=152&type=chunk) - **Significant indebtedness ($225.0 million term loan)** could limit borrowing capacity and restrict operations through covenants[155](index=155&type=chunk)[156](index=156&type=chunk) - The company is highly dependent on revenues from key products: **BioGlue (26% of revenue), JOTEC (24%), and On-X (17%)**[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - The FDA is considering reclassifying the CryoValve SGPV to a Class III medical device, which would require a **costly and uncertain Premarket Approval (PMA) process**[180](index=180&type=chunk)[181](index=181&type=chunk) - The investment in PerClot is subject to significant risk, including the ability to **obtain FDA approval** and successfully commercialize it in a competitive U.S. market[176](index=176&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company purchased 81,490 shares of its common stock to cover taxes on employee stock compensation Common Share Purchases (Q1 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2019 | -- | $ -- | | Feb 2019 | 27,902 | $28.88 | | Mar 2019 | 53,588 | $29.32 | | **Total** | **81,490** | **$29.17** | - The shares purchased were tendered by employees to pay taxes on stock compensation and were **not part of a publicly announced repurchase program**[235](index=235&type=chunk) [Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reported no defaults upon senior securities during the period - None[236](index=236&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits.) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files - Exhibits filed include **CEO and CFO certifications** pursuant to Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files[239](index=239&type=chunk)

CryoLife, Inc. (CRY) Q1 2019 Earnings Conference Call April 30, 2019 4:30 PM ET Company Participants Lynn Lewis – Investor Relations-Gilmartin Group LLC Pat MacKin – Chairman, President, and Chief Executive Officer Ashley Lee – Executive Vice President, Chief Operating Officer, and Chief Financial Officer Conference Call Participants Jason Mills – Canaccord Genuity Mike Matson – Needham & Company Suraj Kalia – Northland Securities Joe Munda – First Analysis Operator Greetings, and welcome to the CryoLife Fi ...