| --- | --- | --- | --- | |-------|------------|----------------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | 59-2417093 | | | | | Employer | (I.R.S. | | | | No.) | Identification | | | | 30144 | | | | | (Zip Code) | | | 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 June 30, 2019 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) O ...

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 ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 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 i ...

CryoLife, Inc. (CRY) Q4 2018 Earnings Conference Call February 14, 2019 8:30 AM ET Company Participants Lynn Lewis - Investor Relations, Gilmartin Group Pat MacKin - Chief Executive Officer Ashley Lee - Chief Financial Officer Conference Call Participants Jason Mills - Canaccord Genuity Brooks O'Neil - Lake Street Capital Markets Suraj Kalia - Northland Securities Joe Munda - First Analysis Operator Greetings and welcome to the CryoLife Fourth Quarter and Year-End 2018 Financial Conference Call. [Operator I ...