Good afternoon, and welcome to the Artivion Third Quarter 2025 Earnings Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lynn Morgan from the Gilmartin Group. Thank you. You may begin.

Thanks, operator. Good afternoon, and thank you for joining the call today. Joining me today from Artivion's management team are Pat Mackin, CEO; and Lance Berry, COO and CFO. Before we begin, I'd like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations or predictions of the future. These forward-looking statements are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from these forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call on the Investor Relations section of the Artivion website. Now I'll turn it over to Artivion's CEO, Pat Mackin.

Thanks, Lynn, and good afternoon, everyone. I'm pleased to report another strong quarter of financial and operational results in which we delivered total constant currency revenue growth of 16% and adjusted EBITDA growth of 39% year-over-year. Further, we continue to make good progress in each of our key clinical and pipeline initiatives, which we believe will drive continued growth in the near term, medium term and long term. Our Q3 performance was enabled by continued growth across our product portfolio with stent grafts and On-X valves acting as significant growth engines. From a product category perspective, stent graft revenues grew 31% on a constant currency basis in the third quarter compared to the same period last year. Continued sequential growth was again driven in large part by AMDS as we benefited from growing early adoption and initial stocking orders. We see our stent graft portfolio as a foundational component of our growth strategy, and we are encouraged by these strong results with AMDS. Looking ahead, we intend to replicate our proven strategy by bringing additional stent graft products that are already generating revenue in Europe to the U.S. and Japan, unlocking a meaningful expansion of our total addressable market. Relative to the AMDS U.S. launch, we're very pleased with the market enthusiasm since we received the HDE in late 2024. Feedback from early adopters remains exceptional, and we're seeing more and more customers moving through the 3-step process, including IRB approval, VAC analysis and company-required surgeon training prior to implanting an AMDS under the HDE. Our early success reflects both the dedication of our existing sales force and the still growing body of positive clinical data validating the unparalleled clinical benefits of AMDS. With respect to new clinical data, we were very pleased to see 2 late-breaking science sessions highlighting…

Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Total revenues were $113.4 million for the third quarter of 2025, up approximately 16% compared to Q3 of 2024. Meanwhile, adjusted EBITDA increased approximately 39% from $17.7 million to $24.6 million in the third quarter of 2025. Adjusted EBITDA margin was 21.7% in the third quarter of 2025, and approximately 320 basis point improvement over the prior year, driven by improvements in gross margin and leverage in SG&A. From a product line perspective, stent graft revenues increased 31%, On-X grew 23%, tissue processing revenues grew 5% and BioGlue revenues grew 1% in the third quarter of 2025. On a regional basis, revenues in North America increased 19%, Asia Pacific increased 18%, EMEA increased 12% and Latin America increased 10%, all compared to the third quarter of 2024. Our as-reported expenses include approximately $700,000 in Q3 associated with the 2024 cybersecurity incident, which are excluded from adjusted EBITDA. While we have sought insurance reimbursement for some of the costs we've incurred since the incident, this process will take some time. We will exclude any insurance proceeds we receive from adjusted EBITDA as well. Gross margins were 65.6% in Q3 compared to 63.7% in the third quarter of 2024. This reflects an approximate 200 basis point increase from 2024 due primarily to favorable mix from AMDS HDE revenues in the U.S. and the exceptional On-X growth, particularly in the U.S. General and administrative and marketing expenses in the third…

Thanks, Lance. So to close things up, we're very pleased with our third quarter results, which reflect strong execution, sustained momentum across our core product lines and meaningful progress of our pipeline. We continue to deliver significant top line growth, expanding adjusted EBITDA at twice the rate while strengthening our balance sheet and investing in long-term growth. As we enter the final quarter of the year, we remain confident in our ability to drive continued performance by leveraging our differentiated portfolio, global infrastructure and targeted commercial strategy. More specifically, we expect future growth to be driven by the following growth drivers: number one, the AMDS HDE. We're commercializing AMDS in the U.S., starting to penetrate the $150 million annual U.S. market opportunity with new clinical data and reimbursement dynamics likely to act as a further tailwind to growth. Number two, On-X heart valve data. We're educating health care providers on the JAK clinical data showing mortality benefit in patients under 60 compared to bioprosthetic valves. This is a new $100 million annual market opportunity that we are pursuing with the only mechanical valve -- aortic valve that can be maintained at a low INR of 1.5 to 2.0. Number three, the NEXUS PMA. Endospan is expected to present 1-year clinical data from the late clinical trial in late January 2026, which would, assuming we exercise our option to acquire Endospan, bring us one step closer to being able to access the annual U.S. market opportunity of $150 million. And fourth, the Arcevo LSA IDE trial. The first patient was recently treated with our third-generation frozen elephant trunk device, Arcevo as part of our U.S. IDE trial. Finally, I want to thank all of our employees around the globe for their continued dedication to our mission of being a leading partner to surgeons focused on aortic disease. With that, operator, please open the line for questions.

[Operator Instructions]. Our first question comes from John McAulay with Stifel.

I wanted to start off with the comments you made about 2026. Just want to make sure I'm fully understanding. So from an Arcevo perspective, just any kind of general sense of what this trial is going to cost on an annualized basis? And two, from -- as you mentioned, AMDS, tougher comps, understandable. But on the other hand, the dollar contribution should be much stronger. It seems like sort of small contribution beginning this year ramping through the end of this year. So I just want to get a better sense of what you mean exactly by tougher comps in that sense. Does it imply slower growth? So sort of 2 parts, Arcevo and AMDS would be helpful to start.

Sure. So on our CVO, we've said repeatedly, we think we can fund our pipeline, investing in R&D at a rate of 7% to 8% of sales on an annual basis. This year, realistically, we're going to come in towards the very low end of that range, but we're only going to have a few months of a clinical trial that is ongoing this year. Next year, obviously, we'll have a full year. And it's possible that could push that toward the higher end of the range. So that would be something to keep in mind. And then on AMDS, I just -- I mean, just from a growth rate perspective, it's smaller numbers this year, but as compared to a prior year of 0. So obviously, that helps the growth rate quite a bit. And just recognizing as we move throughout the year, we are going to have actual numbers in the prior year when we think about what the actual contribution is to the growth rate and just making sure that everyone keeps that in mind.

Okay. Understood. And a follow-up on On-X, another quarter of sort of growth at 20-plus percent rate. Just want to get a sense from what you're hearing either from your reps or for direct conversations with doctors. It seems like we're in a mechanical valve sort of renaissance. We've done a few calls on it ourselves here. Just want to get a sense of what's driving the growth? Is it -- do you think it's share gain from competition? Is it some of the data you've cited? What's going on there?

Well, I think it's both. I mean we've shown over the last 8 years, we've taken market share every year because we're the only product that has an aortic valve with a low INR indication from the FDA. So that was kind of already in the works, and we are continuing to kind of -- we've been growing that business double digits for a long time. I think the new information, I think there's 2 other pieces. There's been some new clinical data we've talked about it, we've talked about it previously. A paper came out in January that presented at STS published in JAK that showed a mortality benefit in mechanical valve patients in favor over bioprosthetic valve patients in patients under 60. There was another paper that just came out last week in 140,000 patients showing a huge difference between -- and this is in patients under 65. The difference at 10 years from a totality or a reoperation the combined for 10 years for mechanical valves, like 87% of the patients didn't die or have a re-op and only 69% of the bioprosthetic valve patients didn't die or have a rep. It's like a 20-point real difference. So I think there's a real sea change in the feeling towards mechanical valves in these younger patients. And we haven't even -- I mentioned this on the last call, we've been focused on the AMDS launch in the U.S., and we haven't even really started our kind of marketing program to cardiologists. And we know that they're very excited about the clinical data that we have with On-X as well as the data that's coming out in these big series because it's better for patients. So I think we've got a very exciting growth opportunity here with On-X.

Our next question comes from Frank Takkinen with Lake Street Capital Markets.

Congrats on the quarter. I was hoping I could start with some more commentary around the new DRG that was in place. Maybe speak to what it was previously? Was there an economic challenge with it previously? Where is it now? And does it solve that challenge? And then as an extension to that, I appreciate you just launched the product, but is there a pathway to get some ASP expansion out of the product over time under the new DRG?

Yes. So let me start high level. I mean, so when CMS looks at these changes in reimbursement, basically, what they've done here is it reflects when they look at a procedure, the high cost and complexity of an advanced aortic arch procedure. So they recognize this is a very complex area. There's a lot of cost, a lot of work that's done in the replacement and repair of an aortic arch. As it relates to this wasn't a big challenge from the economics equation. However, we've been going through value analysis committees. So certainly, that will be more of a tailwind going forward if they'll be less constrained by cost. I think the final point is, I think this new DRG reflects the value of our portfolio of products across the complex aortic arch. This new DRG-209 kind of covers that whole ARC segment, and I think it validates kind of our strategy in that complex area.

Got it. Okay. That makes sense. And then maybe just talking a little bit more about NEXUS. I heard the comment that you're on track with the second half '26 approval is the expectation still. Maybe talk through thought process around exercising that option versus not. Anything that you're still waiting to see? Or is it pretty much at this point if you feel like the approval goes through as intended, it to exercise the option and carry forward.

Yes. So I'm not going to tell you what we're going to do. I mean this is an option. Clearly, we've set everything up. I mean, I think all the pieces are set up. The next piece of information is going to be the 1-year data presented at STS at the end of January. They're currently under review with the FDA on their PMA. We've been telling people for the last probably 2 years that we think it's going to be second half of '26. And when they get FDA approval, we will make the analysis at that time whether we buy them or not. We also -- as you heard in our debt facility, we now have a $150 million delayed draw term loan, so we can acquire them. We've got the money to acquire them. I don't know, Lance, if you would add anything.

No. I mean I think we're optimistic about the process that things aren't improved to they're approved and labels aren't labeled to their labels, and we'll have to evaluate it at that point in time.

Yes. I will say from a clinical standpoint, I've had a chance personally to talk to a number of the investigators and cardiac surgeons, vascular surgeons, there is a lot of excitement about the Nexus technology. This is a platform. It's not just one product. There's multiple products behind it. So we're very excited by it, but we're not going to tell you what we're going to do as it's not appropriate.

Our next question comes from [ John Young ] with Canaccord Genuity.

Congratulations on a great quarter. I wanted to just go back to AMDS. Is there any way to think about the strong results you saw in the quarter in terms of the aortic stent graft business in terms of sell-through versus sell-in for the product?

Yes. I mean I would say just in general, you have to get the product on the shelf before you can get it used in a surgery. So right now, the majority of the revenue really continues to be heavily weighted towards that initial stocking. But as you can imagine, we're every month seeing the number of implantations increase. And obviously, that's super important part of the future is getting that adoption rate up. So right now, honestly, the revenue is still heavily weighted towards the initial stocking, but with positive exciting ramp to the implantations as well. And I would say also more importantly, the feedback from these early adopters on the surgeries has been excellent.

I appreciate that. And then is there any way to quantify just what inning you are in terms of that 600 center initial target you guys gave for MDS in terms of stocking?

It's pretty early.

Got it. And if I could squeeze just one more in. BioGlue China, should we expect any stocking in Q4 from that launch?

We've been -- well, as you can imagine, China is challenging under any normal circumstances, and the world has gotten weird in that regard over the past year. So we've kind of just told people to think about that as an incremental opportunity that's going to help us get to our mid-single-digit annual growth rate targets and to not really think about that as an incremental uptake. And so I would advise you to continue to think about it that way.

Our next question comes from Suraj Kalia with Oppenheimer & Co.

Congrats on a nice quarter. Lance, many calls going on. So if you don't mind, I'll just pose both of my questions upfront. Pat, for you, a 2-part question. And forgive me if you've already highlighted this, just how you size -- how should we size the Arcevo market? And Pat, what are you hearing about the PARTNER-III 7-year, especially the SAVR arm performance? Any color there would be great. Lance, to you, AMDS, obviously, the stent graft business is strong. I'm just curious how we should think about AMDS performance. I think you had said earlier 100-plus sites. Just size up AMDS for us in the quarter because we had roughly around $5 million to $10 million contribution for the year. So help us guide where AMDS should land up.

Yes. Thanks, Raj. I'll take the Arcevo one first. So our sense of the frozen elephant trunk market in the U.S. is about $80 million. So that's just the U.S. segment, which Arcevo would be our first product in that segment when that gets -- hopefully gets approved. So that's the first question. The second is the 7-year data from PARTNER III that was presented at TCT. I think there's a bunch there. I'm not going to get into the nuances of the specific trial, but I think I have some big picture comments about the results and how to put them in context vis-a-vis what matters to the Arm-- so the first thing which you know well is the average age of that trial was 73 years old. The lines for SAVR and TAVR are already bumping up against each other. People were worried they were going to cross. So you're right there already at 7 years. Our focus on patients is under the age of 65 with our product portfolio, both with On-X and our SynerGraft pulmonary valve. If you look at the life expectancy for a 65-year-old in the U.S., it's like 20 years. So if you're struggling to kind of cross the lines at 7, why on earth would you be getting this technology if you're under 65 years old. I think that's really the important takeaway message. And even more importantly, these 2 papers that have come out recently, and I know you're very familiar with the JAK paper from January, there's another one that came out that's published in animals and 140,000 patients I just mentioned earlier. But there's now 2 huge papers that whether it's under 65 or under 60, it's showing that the mortality and reop rates from a tissue valve and mechanical valve in patients under 65 is significantly different in the benefit of mechanical valve. So it's not even -- when you start talking about TAVR at a 73-year-old, when we already know that under 65-year-olds just don't do well with tissue valves. I think that's kind of my -- how I position that trial relative to our patient population and our technology. Lance?

Yes. And then on AMDS, we've said previously, we're not going to break out U.S. AMDS performance specifically. But a couple of things. Obviously, we had a very nice acceleration in the stent graft. -- growth rates this quarter, safe to assume that AMDS was a huge factor -- AMDS in the U.S. was a huge factor in that acceleration. Also at the beginning of the year, we were pretty clear that the swing factor in whether we come in toward the higher end or the lower end of our original guidance range was likely to be the AMDS U.S. launch and how well we did with that early on. I'd say we've consistently narrowed our range to the high end each quarter. And I think it's also safe to assume that, therefore, AMDS is trending towards the high end of our original expectations of what we could do in year 1. So I think lots of positive things to point to without actually giving you a number. And I think you should assume that it's going well.

Our next question comes from Mike Matson with Needham & Co.

This is Joseph on for Mike. Just a quick one on AMDS and then maybe gross margin question. Can you just remind us, I don't know if you've actually given a time line, but the expectations for AMDS internationally? Well, I guess, in China and in Japan because I guess it is available in Europe and Canada, I believe. But just targets there for the Asian markets.

So we haven't really spoken about China. We have spoken about Japan in the past and just in general, bringing our products to the Japan market post the U.S. market. So usually, there is a little bit a year or so time frame post receiving your PMA approval to get into the Japanese market, and then you also need to work on reimbursement. So step 1 is for us to get our U.S. PMA, and we're obviously working thinking ahead on that Japan PMA, but that's kind of the first step there. Then we would move towards trying to get approval in Japan and then trying to get reimbursement in Japan.

Okay. Yes, that's clear. And then I guess, Lance, just given what you discussed on, I guess, AMDS comp being a headwind, more or less a headwind in 2026. I'm just wondering if you could frame for us what growth would look like in 2026. Is it mid-teens, the high teens, low teens? I guess, is it anywhere in that range depending on how the launch goes? And then real quick, I just wanted to get a little bit more color on gross margin. Obviously, great improvement year-over-year. But even looking sequentially, third quarter versus second quarter, pretty similar quarters even with the revenue splits, but there was substantial gross margin improvement. Is that just more AMDS and less BioGlue? Yes. Any color there would be helpful.

Yes. Maybe I'll take the gross margin first and then talk about '26. My numbers here is about a 50 basis point improvement sequentially from Q2 to Q3, so -- which was -- and it's similar from Q1 to Q2. That's really largely driven by mix AMDS, but also with On-X in the U.S. growing faster as well. Those are 2 of the highest gross margin products. Honestly, BioGlue is a fantastic gross margin product. In general, less BioGlue is not a good thing from a gross margin standpoint. But with the strength of AMDS and On-X in the U.S., that's what's really driving that continued mix benefit, which is what we've talked about. That's an expectation as we go forward and we bring these products to the U.S. market, they should have substantially higher gross margins than our current corporate average and should allow us to continue to drive mix in gross margin for a while. As it relates to 2026, we're not going to get into specifics right now. We'll give hard guidance in February, but I just wanted to give you a little bit of color. And I think mainly, I would focus on my first comment, which is we expect dynamics that are in place now to be similar dynamics that are in place in 2026. So I just want to make sure that people aren't thinking about this as an ever accelerating growth rate. We've had really good top line growth the last 2 quarters. But I think if you kind of think about the way we think about annual growth for this year, I'm signaling annual growth for the full year this year is what I'm telling you is how you should be thinking about 2026 as well at this point.

Thank you very much for taking our questions and congrats on a very Strong quarter.

Our next question comes from Daniel Stauder with JMP Securities.

So first one for me on On-X. Great to see the growth here. But I wanted to ask on the cross-selling benefits. I think you noted last quarter that there was a large uptick in new accounts. Could you give us any color on these new users? I know it's early days, but are you seeing any notable utilization trends from these new surgeons? Are they converting their usage to On-X after initially using it? Just trying to get an idea of some of the stickiness with On-X and some of these new adds.

Yes. I mean I would just point to the growth rate. We had pretty similar growth rate in Q3 versus Q2, which I think is a very positive sign. We're very early on in this with the new data, but early signs are really positive. And again, I think maintaining that growth rate for 2 quarters is a good sign.

Yes, definitely. Great. Yes. Just one quick follow-up. So I know you -- also on On-X, I know you had said in the past that the first half growth really came without much marketing on your end, and I'm not sure if you touched on this, but is that still the case? And have you put more capital towards marketing the 2 data sets? And if not, when might that start? And how much more of a tailwind could that be?

Yes. I mean we're still getting spooled up on that. Now obviously, like we're in front of a lot of surgeons right now because of AMDS. And when we get in front of them, we're making sure that we are -- make sure they're aware of the data in that regard. We talk about marketing the data, we also need to get that information out to cardiologists, not just cardiac surgeons. That is a little bit longer lead time initiative, and I would say that really hasn't started at all. That's going to be probably more of a 2026 type activity.

Yes, the cardiologist piece, I guess, is what I was referring to. So appreciate it.

Our next question comes from Jeffrey Cohen with Ladenburg Thalmann.

So I wondered if you could dive into the Arcevo trial a little bit and give us a sense of what kind of pace on recruitment you expect in a little compare and contrast versus the current [Indiscernible]... and perhaps a sense of number of SKUs that you would expect as well.

Yes. So this is a -- the Neo device is currently available in Europe and a bunch of international markets. We had a product through our acquisition in that space for 20 years, and this is -- the ArceEvos the third-generation device. The really unique kind of differentiating factor, which has been patented and we have a license on is a subclavian branch, which again is technical, but it just makes the procedure easier and faster, which is really helpful in these really sick patients. So this is like a 130-patient trial in 30 centers. It's roughly the same. It's kind of an equivalent trial to what we did with PERSEVERE with AMDS, a lot of the same centers, roughly the same numbers. We're not going to get into the details and stuff like that, but we've already started enrolling. We put a press release out this morning, and we expect to have sites kind of rolling on board and be enrolling over the next, I'd say, 12 to 18 months.

Okay. Got it. And then a quick follow-up, if you could. Besides pulmonary grafts, anything to call out specifically in the tissue business from the quarter, experience weaknesses or the areas of note?

Yes. So the tissue business is back to kind of normalized growth at 5%. We did note that we now expect the full year to be closer to flat than mid-single digits. We have, at this point, pretty much caught up all of the backlog that we had on releasing our very high demand tissue from the cyber event from last year. So that's all done. Honestly, like we are not going to quite see the 100% catch-up that we thought we did. We're going to be close, but we're not going to quite get back to mid-single digits for the full year. But we -- with the normalized run rate and what we're seeing on the donation side, we expect to get back to that kind of mid-single-digit growth next year. So that's kind of where we are on the tissue business.

Mr. Mackin, there are no further questions at this time. So I would now like to turn the floor back over to management for closing comments.

Yes. Well, thanks for joining the call, and we're super excited about the results, 16% top line and 39% bottom line while reducing our leverage and with a great cash flow. I think just kind of shows the business model in action. We've got a couple of great growth drivers with On-X. We've talked a lot about it on this call with the low INR, the new data, the cross-selling with the AMDS trainings, AMDS with the new reimbursement code, DRG-209 and our new clinical data we just presented at EA. So we're going to be driving the growth in those segments I think the last point I would make is really our business model is about bringing aortic innovations to the market. And it's basically setting up that every 2 years, you've got a new aortic technology come into the U.S. and then we'll take other places. ADS, obviously, we launched in '25. And then hopefully, with NEXUS getting approval and our acquisition of them, we launched that fully in '27, '28, and we're kind of finishing up that launch -- we'll be launching our CVO. So just PMA after PMA after PMA, and then we've got a bunch more behind it. So this is a business model that's really just getting going. So we appreciate everybody's support and look forward to the next call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful afternoon.