Artivion(AORT) - 2024 Q3 - Quarterly Results

Executive Summary & Highlights Artivion reported strong financial performance in Q3 2024, with revenue growth and increased adjusted EBITDA. Key operational milestones included a PMA submission for AMDS, completion of the NEXUS TRIOMPHE trial, and regulatory approval for BioGlue in China Third Quarter 2024 Highlights Artivion reported strong financial performance in Q3 2024, with revenue growth and increased adjusted EBITDA. Key operational milestones included a PMA submission for AMDS, completion of the NEXUS TRIOMPHE trial, and regulatory approval for BioGlue in China Q3 2024 Key Financial Metrics | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change (GAAP) | Change (Non-GAAP Constant Currency) | | :--------------------- | :----------------- | :----------------- | :------------ | :---------------------------------- | | Revenue | $95.8 | $87.9 | 9% | 10% | | Net Loss | ($2.3) | ($9.8) | -76.5% | N/A | | Net Loss per Share | ($0.05) | ($0.24) | -79.2% | N/A | | Non-GAAP Net Income | $5.0 | $0.749 | 567.6% | N/A | | Non-GAAP EPS | $0.12 | $0.02 | 500% | N/A | | Adjusted EBITDA | $17.7 | $13.9 | 28% | N/A | - Submitted the first module of the pre-market approval application (PMA) for AMDS Hybrid Prosthesis with the U.S. Food and Drug Administration[1] - Enrollment completed in NEXUS TRIOMPHE clinical trial[1] - Received regulatory approval from the National Medical Products Administration (NMPA) to commercialize BioGlue Surgical Adhesive in China, with commercialization expected in H2 2025[1] CEO Commentary CEO Pat Mackin highlighted strong Q3 financial performance driven by growth in On-X, BioGlue, and stent grafts, along with significant revenue strength in Asia Pacific and Latin America. He also noted key R&D milestones, including BioGlue approval in China, AMDS PMA submission, and completion of the NEXUS TRIOMPHE trial - Revenue growth in Q3 was driven by year-over-year increases in On-X (15%), BioGlue (14%), and stent grafts (12%) on a GAAP basis. On a constant currency basis, On-X grew 15%, BioGlue 14%, and stent grafts 13%[3] - Continued revenue strength was observed across Asia Pacific (23% GAAP, 23% constant currency) and Latin America (21% GAAP, 32% constant currency)[3] - Key R&D milestones achieved include BioGlue approval in China, submission of the first module of the PMA application for AMDS with the FDA (anticipated approval Q4 2025), and completion of enrollment in the NEXUS TRIOMPHE clinical trial (PMA approval H2 2026)[4] Third Quarter 2024 Financial Results This section details Artivion's financial performance for Q3 2024, covering revenue and profitability metrics Revenue Performance Artivion's total revenues for Q3 2024 reached $95.8 million, demonstrating a 9% increase on a GAAP basis and a 10% increase on a non-GAAP constant currency basis compared to Q3 2023 Q3 2024 Revenue Performance | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | GAAP Change | Non-GAAP Constant Currency Change | | :------- | :----------------- | :----------------- | :---------- | :-------------------------------- | | Revenue | $95.8 | $87.9 | 9% | 10% | Profitability The company significantly reduced its GAAP net loss in Q3 2024 and achieved substantial growth in non-GAAP net income, primarily due to improved operational performance and a pretax gain from foreign currency revaluation Q3 2024 Profitability Metrics | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change | | :--------------------- | :----------------- | :----------------- | :----- | | Net Loss (GAAP) | ($2.3) | ($9.8) | -76.5% | | Net Loss per Share | ($0.05) | ($0.24) | -79.2% | | Non-GAAP Net Income | $5.0 | $0.749 | 567.6% | | Non-GAAP EPS | $0.12 | $0.02 | 500% | - Non-GAAP net income for Q3 2024 includes pretax gains related to foreign currency revaluation of $2.4 million[6] 2024 Financial Outlook This section provides Artivion's financial guidance for the full year 2024, including revenue and adjusted EBITDA expectations Revenue Guidance Artivion has narrowed its full-year 2024 revenue guidance, expecting constant currency growth between 10% to 12% and a total revenue range of $389 million to $396 million, with negligible year-over-year currency impact 2024 Full-Year Revenue Guidance | Metric | 2024 Guidance Range (Millions) | Constant Currency Growth (YoY) | | :------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $389 - $396 | 10% - 12% | - The company expects negligible year-over-year currency impact on full-year 2024 revenues at current rates[7] Adjusted EBITDA Guidance Artivion maintains its adjusted EBITDA growth expectation for full-year 2024, projecting an increase of 28% to 34%, resulting in a range of $69 million to $72 million 2024 Full-Year Adjusted EBITDA Guidance | Metric | 2024 Guidance Range (Millions) | Growth (YoY) | | :-------------- | :----------------------------- | :----------- | | Adjusted EBITDA | $69 - $72 | 28% - 34% | Non-GAAP Financial Measures Explanation Artivion uses non-GAAP financial measures, such as non-GAAP revenue, net income, adjusted EBITDA, and free cash flows, to provide investors with additional insights into its operational performance. These measures exclude certain items like depreciation, amortization, stock-based compensation, foreign currency revaluation, and acquisition-related expenses, which management believes do not directly correlate to underlying business operations or can vary significantly between periods - Non-GAAP financial measures include non-GAAP revenue, non-GAAP net income, non-GAAP adjusted EBITDA, non-GAAP general, administrative, and marketing expenses, and free cash flows[9] - Adjustments typically exclude depreciation and amortization, interest income and expense, stock-based compensation, foreign currency revaluation, income tax expense/benefit, corporate rebranding, business development, integration, severance, loss on extinguishment of debt, and non-cash interest expense[9] - The company uses non-GAAP measures to facilitate management's review of operational performance, for strategic planning, and to provide useful information to investors regarding unusual non-operating transactions and the operating expense structure[9] Company Information This section provides an overview of Artivion, Inc. and details regarding its Q3 2024 webcast and conference call About Artivion, Inc. Artivion, Inc. is a medical device company based in Atlanta, Georgia, specializing in solutions for cardiac and vascular surgeons treating aortic diseases. Its product portfolio includes aortic stent grafts, surgical sealants, On-X mechanical heart valves, and implantable cardiac and vascular human tissues, marketed in over 100 countries - Artivion, Inc. is a medical device company focused on developing solutions for cardiac and vascular surgeons treating patients with aortic diseases[13] - Major product groups include aortic stent grafts, surgical sealants, On-X mechanical heart valves, and implantable cardiac and vascular human tissues[13] - The company markets and sells products in more than 100 countries worldwide[13] Webcast and Conference Call Artivion held a teleconference call and live webcast on November 7, 2024, to discuss its Q3 results, with replay information provided for those unable to attend live - A teleconference call and live webcast were held on November 7, 2024, at 4:30 p.m. ET to discuss the results[11] - The teleconference replay is available by calling 877-660-6853 or 201-612-7415 (conference number 13748263)[11] - The live webcast and replay can be accessed via the Investors section of Artivion's website at www.Artivion.com[12](index=12&type=chunk) Forward-Looking Statements This section outlines that statements regarding future events, beliefs, expectations, or hopes are forward-looking and subject to various risks and uncertainties. These include the unpredictability of regulatory decisions, the realization of anticipated benefits from acquisitions and operational improvements, and the success of clinical trials and market expansion - Forward-looking statements reflect management's views at the time they are made and are subject to risks, uncertainties, estimates, and assumptions that may cause actual results to differ materially from current expectations[14] - Risks include the unpredictability of regulatory decisions, the achievement of anticipated benefits from the Ascyrus Medical LLC transaction and Endospan agreements, and the success levels of operational improvements in tissue and stent graft businesses[14] - Further risks involve the achievement of anticipated benefits from clinical trials and regulatory approvals on anticipated timelines, and the success of expansion into APAC and LATAM markets[15] Condensed Consolidated Financial Statements This section presents Artivion's condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows Statements of Operations and Comprehensive Income (Loss) The condensed consolidated statements of operations show a significant improvement in net loss for Q3 2024 and a shift to net income for the nine months ended September 30, 2024, driven by revenue growth and improved operating income Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric (in Thousands) | Three Months Ended Sep 2024 | Three Months Ended Sep 2023 | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :------------------------- | :------------------------- | | Total Revenues | $95,779 | $87,854 | $291,229 | $260,334 | | Gross Margin | $61,009 | $56,270 | $187,279 | $168,081 | | Operating Income (Loss) | $4,387 | ($1,244) | $36,205 | $2,570 | | Net (Loss) Income | ($2,288) | ($9,801) | $3,124 | ($26,715) | | Diluted (Loss) Income Per Share | ($0.05) | ($0.24) | $0.07 | ($0.65) | Balance Sheets Artivion's balance sheet as of September 30, 2024, shows an increase in total assets and stockholders' equity compared to December 31, 2023, while total liabilities slightly decreased. Notable changes include a significant increase in the current portion of long-term debt Condensed Consolidated Balance Sheets | Metric (in Thousands) | September 30, 2024 | December 31, 2023 | | :-------------------------------- | :----------------- | :---------------- | | Total Current Assets | $287,958 | $280,668 | | Total Assets | $803,144 | $792,397 | | Total Current Liabilities | $152,838 | $57,862 | | Current Portion of Long-Term Debt | $99,698 | $1,451 | | Total Liabilities | $498,405 | $510,617 | | Total Stockholders' Equity | $304,739 | $281,780 | Statements of Cash Flows For the nine months ended September 30, 2024, Artivion generated positive net cash flows from operating activities, while investing activities resulted in a net outflow. Financing activities provided a net inflow, primarily due to debt issuance, leading to a slight decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows | Metric (in Thousands) | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :------------------------------------ | :------------------------- | :------------------------- | | Net Cash Flows from Operating Activities | $12,097 | $7,987 | | Net Cash Flows from Investing Activities | ($16,763) | $2,167 | | Net Cash Flows from Financing Activities | $2,029 | $2,495 | | (Decrease) Increase in Cash and Cash Equivalents | ($2,767) | $14,130 | | Cash and Cash Equivalents End of Period | $56,173 | $53,481 | - Proceeds from issuance of debt amounted to $190,000 thousand for the nine months ended September 30, 2024[19] Financial Highlights by Product and Geography This section provides a detailed breakdown of Artivion's revenues by product category and geographic region for Q3 and the nine months ended September 30, 2024 Product Revenue Breakdown Artivion's product revenues for Q3 2024 showed strong growth across key categories, with aortic stent grafts, On-X, and surgical sealants being the primary drivers. Preservation services also contributed positively Product Revenue (in Thousands) | Product Category (in Thousands) | Q3 2024 Revenue | Q3 2023 Revenue | 9M 2024 Revenue | 9M 2023 Revenue | | :------------------------------ | :-------------- | :-------------- | :-------------- | :-------------- | | Aortic Stent Grafts | $28,643 | $25,523 | $92,936 | $80,032 | | On-X | $21,478 | $18,744 | $61,804 | $54,346 | | Surgical Sealants | $18,437 | $16,234 | $53,963 | $49,503 | | Other Products | $2,686 | $3,246 | $6,865 | $8,160 | | Total Products | $71,244 | $63,747 | $215,568 | $192,041 | | Preservation Services | $24,535 | $24,107 | $75,661 | $68,293 | | Total Revenues | $95,779 | $87,854 | $291,229 | $260,334 | Geographic Revenue Breakdown Geographically, Artivion experienced robust revenue growth in Q3 2024, particularly in Europe, the Middle East, and Africa (EMEA), Asia Pacific, and Latin America, while North America also saw a modest increase Geographic Revenue (in Thousands) | Region (in Thousands) | Q3 2024 Revenue | Q3 2023 Revenue | 9M 2024 Revenue | 9M 2023 Revenue | | :---------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | North America | $49,089 | $48,028 | $148,679 | $137,541 | | Europe, Middle East, and Africa | $30,423 | $26,536 | $98,156 | $84,608 | | Asia Pacific | $10,366 | $8,402 | $27,628 | $24,655 | | Latin America | $5,901 | $4,888 | $16,766 | $13,530 | | Total Revenues | $95,779 | $87,854 | $291,229 | $260,334 | Reconciliation of GAAP to Non-GAAP Financial Measures This section provides detailed reconciliations of Artivion's GAAP financial results to various non-GAAP measures, illustrating adjustments for specific items Reconciliation of Revenues This section provides a detailed reconciliation of GAAP revenues to non-GAAP constant currency revenues for both product categories and geographic regions, highlighting the impact of exchange rate fluctuations on reported growth Reconciliation of Revenues by Product Category and Region Three Months Ended September 30, 2024 (in Thousands): | Product Category | 2024 GAAP | 2023 GAAP | Exchange Rate Effect | 2023 Constant Currency | % Change From Prior Year Constant Currency | | :--------------- | :-------- | :-------- | :------------------- | :--------------------- | :----------------------------------------- | | Aortic Stent Grafts | $28,643 | $25,523 | ($208) | $25,315 | 13% | | On-X | $21,478 | $18,744 | ($103) | $18,641 | 15% | | Surgical Sealants | $18,437 | $16,234 | ($128) | $16,106 | 14% | | Other | $2,686 | $3,246 | $1 | $3,247 | -17% | | Total Products | $71,244 | $63,747 | ($438) | $63,309 | 13% | | Preservation Services | $24,535 | $24,107 | ($22) | $24,085 | 2% | | Total Revenues | $95,779 | $87,854 | ($460) | $87,394 | 10% | Nine Months Ended September 30, 2024 (in Thousands): | Product Category | 2024 GAAP | 2023 GAAP | Exchange Rate Effect | 2023 Constant Currency | % Change From Prior Year Constant Currency | | :--------------- | :-------- | :-------- | :------------------- | :--------------------- | :----------------------------------------- | | Aortic Stent Grafts | $92,936 | $80,032 | $688 | $80,720 | 15% | | On-X | $61,804 | $54,346 | ($2) | $54,344 | 14% | | Surgical Sealants | $53,963 | $49,503 | ($10) | $49,493 | 9% | | Other | $6,865 | $8,160 | $4 | $8,164 | -16% | | Total Products | $215,568 | $192,041 | $680 | $192,721 | 12% | | Preservation Services | $75,661 | $68,293 | ($26) | $68,267 | 11% | | Total Revenues | $291,229 | $260,334 | $654 | $260,988 | 12% | Three Months Ended September 30, 2024 (in Thousands): | Region | 2024 GAAP | 2023 GAAP | Exchange Rate Effect | 2023 Constant Currency | % Change From Prior Year Constant Currency | | :---------------------------- | :-------- | :-------- | :------------------- | :--------------------- | :----------------------------------------- | | North America | $49,089 | $48,028 | ($50) | $47,978 | 2% | | Europe, Middle East, and Africa | $30,423 | $26,536 | $12 | $26,548 | 15% | | Asia Pacific | $10,366 | $8,402 | $1 | $8,403 | 23% | | Latin America | $5,901 | $4,888 | ($423) | $4,465 | 32% | | Total | $95,779 | $87,854 | ($460) | $87,394 | 10% | Nine Months Ended September 30, 2024 (in Thousands): | Region | 2024 GAAP | 2023 GAAP | Exchange Rate Effect | 2023 Constant Currency | % Change From Prior Year Constant Currency | | :---------------------------- | :-------- | :-------- | :------------------- | :--------------------- | :----------------------------------------- | | North America | $148,679 | $137,541 | ($57) | $137,484 | 8% | | Europe, Middle East, and Africa | $98,156 | $84,608 | $994 | $85,602 | 15% | | Asia Pacific | $27,628 | $24,655 | $0 | $24,655 | 12% | | Latin America | $16,766 | $13,530 | ($283) | $13,247 | 27% | | Total | $291,229 | $260,334 | $654 | $260,988 | 12% | Reconciliation of G&A, Adjusted EBITDA, and Free Cash Flows This section reconciles GAAP General, Administrative, and Marketing (G&A) expense to adjusted non-GAAP G&A, GAAP net loss to adjusted EBITDA, and GAAP cash flows from operating activities to non-GAAP free cash flows, detailing the specific adjustments made for each metric Reconciliation of G&A Expense, GAAP to Adjusted G&A, Non-GAAP Reconciliation of G&A expense, GAAP to adjusted G&A, non-GAAP (in Thousands): | Metric | Three Months Ended Sep 2024 | Three Months Ended Sep 2023 | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :------------------------- | :------------------------- | | General, administrative, and marketing expense, GAAP | $50,017 | $51,093 | $130,026 | $158,699 | | Business development, integration, and severance expense (income) | $3,431 | $6,363 | ($11,923) | $22,461 | | Corporate rebranding expense | $0 | $65 | $0 | $283 | | Adjusted G&A, non-GAAP | $46,586 | $44,665 | $141,949 | $135,955 | Reconciliation of Net Loss, GAAP to Adjusted EBITDA, Non-GAAP Reconciliation of net loss, GAAP to adjusted EBITDA, non-GAAP (in Thousands): | Metric | Three Months Ended Sep 2024 | Three Months Ended Sep 2023 | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :------------------------- | :------------------------- | | Net (loss) income, GAAP | ($2,288) | ($9,801) | $3,124 | ($26,715) | | Interest expense | $8,405 | $6,603 | $24,535 | $19,055 | | Depreciation and amortization expense | $6,110 | $5,759 | $17,910 | $17,260 | | Business development, integration, and severance expense (income) | $3,431 | $6,122 | ($11,923) | $26,844 | | Stock-based compensation expense | $3,769 | $3,187 | $11,499 | $10,466 | | Income tax expense | $1,022 | $382 | $5,964 | $5,720 | | Loss on extinguishment of debt | $0 | $0 | $3,669 | $0 | | Interest income | ($366) | ($339) | ($1,093) | ($679) | | (Gain) loss on foreign currency revaluation | ($2,382) | $1,882 | ($29) | $112 | | Abandonment of CardioGenesis Cardiac laser therapy business | $0 | $0 | $0 | $390 | | Corporate rebranding expense | $0 | $65 | $0 | $283 | | Gain from sale of non-financial assets | $0 | $0 | $0 | ($14,250) | | Adjusted EBITDA, non-GAAP | $17,701 | $13,860 | $53,656 | $38,486 | Reconciliation of Cash Flows from Operating Activities, GAAP to Free Cash Flows, Non-GAAP Reconciliation of cash flows from operating activities, GAAP to free cash flows, non-GAAP (in Thousands): | Metric | Three Months Ended Sep 2024 | Three Months Ended Sep 2023 | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :------------------------- | :------------------------- | | Net cash flows provided by operating activities | $11,455 | $7,232 | $12,097 | $7,987 | | Capital expenditures | ($3,639) | ($2,068) | ($9,763) | ($7,083) | | Free cash flows, non-GAAP | $7,816 | $5,164 | $2,334 | $904 | Reconciliation of Net Income and EPS This section reconciles GAAP net income (loss) and diluted EPS to their non-GAAP adjusted counterparts, detailing the specific adjustments for items like business development expenses, amortization, and non-cash interest, and their tax effects Reconciliation of (Loss) Income Before Income Taxes, GAAP to Adjusted Income, Non-GAAP Reconciliation of (loss) income before income taxes, GAAP to adjusted income, non-GAAP (in Thousands): | Metric | Three Months Ended Sep 2024 | Three Months Ended Sep 2023 | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :------------------------- | :------------------------- | | (Loss) income before income taxes, GAAP | ($1,266) | ($9,419) | $9,088 | ($20,995) | | Business development, integration, and severance expense (income) | $3,431 | $6,122 | ($11,923) | $26,844 | | Amortization expense | $3,990 | $3,766 | $11,650 | $11,453 | | Loss on extinguishment of debt | $0 | $0 | $3,669 | $0 | | Non-cash interest expense | $546 | $465 | $1,610 | $1,391 | | Abandonment of CardioGenesis Cardiac laser therapy business | $0 | $0 | $0 | $390 | | Corporate rebranding expense | $0 | $65 | $0 | $283 | | Gain from sale of non-financial assets | $0 | $0 | $0 | ($14,250) | | Adjusted income before income taxes, non-GAAP | $6,701 | $999 | $14,094 | $5,116 | | Income tax expense calculated at a tax rate of 25% | $1,675 | $250 | $3,523 | $1,279 | | Adjusted net income, non-GAAP | $5,026 | $749 | $10,571 | $3,837 | Reconciliation of Diluted Income (Loss) Per Common Share, GAAP to Adjusted Diluted Income Per Common Share, Non-GAAP Reconciliation of diluted income (loss) per common share, GAAP to adjusted diluted income per common share, non-GAAP: | Metric | Three Months Ended Sep 2024 | Three Months Ended Sep 2023 | Nine Months Ended Sep 2024 | Nine Months Ended Sep 2023 | | :-------------------------------------------- | :-------------------------- | :-------------------------- | :------------------------- | :------------------------- | | Diluted (loss) income per common share, GAAP | ($0.05) | ($0.24) | $0.07 | ($0.65) | | Business development, integration, and severance expense (income) | $0.08 | $0.15 | ($0.28) | $0.65 | | Amortization expense | $0.09 | $0.09 | $0.27 | $0.28 | | Loss on extinguishment of debt | $0 | $0 | $0.09 | $0 | | Non-cash interest expense | $0.02 | $0.01 | $0.04 | $0.03 | | Abandonment of CardioGenesis Cardiac laser therapy business | $0 | $0 | $0 | $0.01 | | Corporate rebranding expense | $0 | $0 | $0 | $0.01 | | Gain from sale of non-financial assets | $0 | $0 | $0 | ($0.34) | | Tax effect of non-GAAP adjustments | ($0.05) | ($0.06) | ($0.03) | ($0.17) | | Effect of 25% tax rate | $0.03 | $0.07 | $0.09 | $0.27 | | Adjusted diluted income per common share, non-GAAP | $0.12 | $0.02 | $0.25 | $0.09 |