LeMaitre Vascular(US:LMAT)2020-02-07 05:06Financial Data and Key Metrics Changes - In Q4 2019, the company reported record sales of $30.2 million, an increase of 6% year-over-year [7] - Adjusted operating income for Q4 2019 was $4.9 million, down 12% from Q4 2018, primarily due to lower gross margins and increased operating expenses [15] - The gross margin for Q4 2019 was 66%, a decline of 1.7% compared to the prior year [14] - For the full year 2019, organic growth improved to 6%, with adjusted operating income growth of 3% [10][11] Business Line Data and Key Metrics Changes - Biologics accounted for 30% of sales in Q4 2019, with significant contributions from biologic patches and the recently acquired CardioCel patches generating $1.4 million in sales [9][7] - The Tru-Incise acquisition contributed $500,000 in sales during Q4 2019 [7] Market Data and Key Metrics Changes - The Americas experienced a record quarter with a 6% growth, Europe grew by 4%, and Asia-Pacific saw a significant increase of 20%, driven by a 53% growth in exports [8] - Direct sales in Asia-Pacific markets of China, Japan, and Australia all grew by 10% [8] Company Strategy and Development Direction - The company plans to leverage its expertise in biologics through the CardioCel acquisition and is launching cardiac allografts in the U.S. and Canada [9] - The company aims for 10% sales growth and 17% operating income growth in 2020, indicating a focus on expanding its product offerings and market reach [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the transition from MDD to MDR in Europe, which requires more costly testing and data collection [19] - The company expects to resolve these regulatory challenges in H1 2020 and has taken steps to mitigate potential sales impacts by overstocking inventory [20] - Management expressed confidence in achieving record revenue growth in 2020, driven by acquisitions and organic growth [16] Other Important Information - The Board increased the dividend payout by 12%, marking the ninth consecutive year of dividend increases [12] - The company ended Q4 2019 with $32.7 million in cash, a decrease attributed to acquisition-related payments and capital expenditures [17] Q&A Session Summary Question: Can you walk through the quarterly growth and operating margin leverage for 2020? - Management indicated that sales growth would be fairly even throughout the year, with expectations for gross margin improvements in Q2 due to manufacturing efficiencies [23][24] Question: What are your thoughts on the medium to long-term trajectory of gross margin? - Management acknowledged that gross margin is important and that recent acquisitions have impacted margins, but they expect to improve margins over time as integration progresses [26] Question: Can you clarify the restrained 2020 OpEx spending? - Management clarified that OpEx is expected to grow by 6% in 2020, down from 10% in 2019, and emphasized that cost-cutting initiatives would not significantly hinder growth [30][31] Question: What is the expected organic growth for 2020? - Management confirmed expectations of 10% reported growth and 5% organic growth, with some headwinds from the OEM business and regulatory changes [32] Question: What was the pricing trend in Q4? - Pricing was down approximately 3% in Q4, driven by a large disposables order in China, while unit sales were up 4.5% [36] Question: Can you provide a breakdown of the rep count at the end of the year? - The company reported 54 reps in the Americas, 40 in Europe, and 18 in Asia-Pacific, totaling 112 worldwide [43] Question: What is the expected contribution from the Admedus acquisition? - Management projected around $7 million in revenue from the CardioCel and VascuCel products for 2020 [50] Question: How much is being spent on MDD to MDR transition? - Management estimated an incremental cost of about $1 million for the transition in 2020 [78]