Artivion(US:AORT)2022-11-05 21:02Financial Data and Key Metrics Changes - Total revenues for Q3 2022 were $76.8 million, up 6% on a GAAP basis and up 11% on a constant currency basis compared to Q3 2021 [16] - Gross margins decreased to 63.4% in Q3 2022 from 66.2% in Q3 2021, primarily due to inflationary impacts on materials and labor [17] - GAAP net loss was approximately $13.7 million or $0.34 per fully diluted share in Q3 2022, while non-GAAP net loss was $1.9 million or $0.05 per share [19] Business Line Data and Key Metrics Changes - On-X revenues increased 19% on a constant currency basis in Q3 2022 compared to Q3 2021, with U.S. revenues growing 21% and European revenues increasing 25% [8][16] - Tissue processing revenues grew 13%, BioGlue revenues increased 9%, and aortic stent graft revenues grew 7% on a constant currency basis [16] - For the first nine months of 2022, stent grafts were up 22%, On-X was up 14%, tissue processing was up 10%, and BioGlue was down 4% compared to the same period in 2021 [4] Market Data and Key Metrics Changes - Revenues in Asia Pacific increased 25%, Latin America increased 22%, North America increased 13%, and Europe increased 5% on a constant currency basis compared to Q3 2021 [17] - The company faced approximately $10 million in currency headwinds in 2022, with an additional $4 million expected in Q4 2022 [22] Company Strategy and Development Direction - The company aims to drive continued growth in On-X and aortic stent grafts, expand presence in Asia Pacific and Latin America, and achieve PMA approvals for PerClot and On-X PROACT Mitral [7][10] - The company expects to grow revenues to approximately $400 million and generate $75 million to $80 million in adjusted EBITDA by 2025 [23] Management's Comments on Operating Environment and Future Outlook - Management noted that inflationary pressures on labor and materials are expected to persist, impacting gross margins [28] - Despite macroeconomic challenges, the company believes its business is relatively recession-proof due to the nature of its products [28] Other Important Information - The PROACT Xa trial was terminated, but management remains confident in the On-X valve's market position and growth potential [13][40] - The company has made significant investments in facilities and equipment to address labor issues and meet demand [33] Q&A Session Summary Question: European performance and macro pressures - Management acknowledged softness in European stent graft sales due to staffing issues but noted overall strong demand and growth in other regions [27][28] Question: Aortic stent graft shortfall quantification - Management indicated that while demand is high, they do not have a specific percentage for the shortfall but are confident in resolving supply chain challenges [31][32] Question: R&D expenses and operating leverage - Management expects R&D expenses to decrease due to the cessation of the PROACT Xa study, allowing for more leverage in EBITDA growth [34][36] Question: Feedback on PROACT Xa and future demand - Surgeons expressed confidence in the On-X valve despite the trial's termination, reinforcing its market position [38][40] Question: Inflationary pressures and pricing power - Management indicated that pricing power varies by product and region, with proprietary products allowing for price increases to offset inflation [41][44] Question: Cardiac surgeries prioritization - Management confirmed that aortic cardiac cases are being prioritized in hospitals despite staffing issues, due to their critical nature [46] Question: Sales force expansion in Asia Pacific and Latin America - Management expects to start seeing positive financial impacts from investments in these regions in 2023 [48] Question: Debt structure and servicing - Management expressed confidence in servicing debt obligations without raising additional capital, even in a rising interest rate environment [56][59]