LeMaitre Vascular, Inc. (LMAT) Q1 2025 Earnings Report, Transcript and Summary

Welcome to the LeMaitre Vascular First Quarter 2025 Financial Results Conference Call. [Operator Instructions]. I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

Thank you operator. Good afternoon, and thank you for joining us on our Q1 2025 conference call. With me on today's call is our CEO, George LeMaitre and our President, Dave Roberts. Before we begin, I'll read our Safe Harbor statement. Today we will make some forward looking statements within the meeting of the US, private security litigation reform act of 1995 the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify these forward looking statements by using words such as, believe, expect, anticipate, pursue, forecast and similar expressions. Our forward looking statements are based on our estimates and assumptions as of today May 1, 2025 and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward looking information and the risk factors in our most recent 10k and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures such as organic sales growth, a reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the investor relations section of our website, www.lemaitre.com. I'll now turn the call over to George LeMaitre.

Thanks, Dorian. Q1 sales were stronger than our February 27 guidance, 13% organic and 12% reported. Growth was led by graphs up 17% and carotid chunks up 14% we posted sales records in all five of our categories, graphs, carotid chunks, catheters, velvet homes and patches. By geography, EMEA was up 18% the Americas 11% and APAC, 3% I'll focus my remarks on three topics, first, the growth of our sales force. Second, our new international sales offices, and finally, our MDRC marks. We currently have 164 reps on payroll, and we're now targeting 170 at year end. We also employ 34 sales managers versus 31 at our last earnings call. The sales force is our number one asset, so we continue to invest in reps managers and sales offices. Our new Alpine regional sales manager started on April one, and will oversee seven sales reps in Switzerland, Austria and Czechia. Shipping from our new Zurich office will reduce customs complexity for Swiss hospitals and our direct offices almost always improve sales performance. Switzerland is made sixth largest European market. We expect to sign a transition agreement with our check distributor shortly, and should log our first direct sale in August. And we are currently recruiting two check reps. As for Portugal, we hired our Lisbon rep on January, 1 signed our distributor transition agreement on March 19 and on May 1 became direct in Portugal, also in Europe. We've just received our MDR CE mark for autographs, and the European launch will begin presently. Autographed a biologic craft used primarily in AV access and purple bypass was the company's largest US product in 2024 with $37 million in us. Sales at previous earnings calls, we've estimated autographs. Current market size to be about 8 million in Europe and 8 million rest of world. We currently have autographed approvals in New Zealand, South Africa, Thailand, Israel and Malaysia. We sold $180,000 of autographs internationally in Q1. We also expect to receive approvals in Australia, Canada, Singapore and Korea by h1, 2026, so this is an exciting worldwide launch with plenty of long run upside. Our New Jersey autograph production facility is currently running a single shift and is capable of meeting this new demand separately. We continue to anticipate at least one RestoreFlow allograft approval in 2025 from Ireland or Germany. As a reminder, allografts require approval on a country by country basis. Approvals from either Ireland or Germany would then expedite our individual European country approvals, anticipating the Irish approval will be opening a Pan European RestoreFlow distribution facility in Dublin in h2 RestoreFlow is currently approved in the US, the UK and Canada. Since the 2016 acquisition, RestoreFlows sales CAGR has been 23% in summary. Q1 sales momentum, our continued office and sales force build out, and our regulatory progress allow us to increase our 2025 reported sales guidance to $245 million from 239 previously, and our organic sales guidance has advanced to 13% from 10% previously, $303 million of cash also provides strategic optionality. With that I'll turn the call over to Dorian.

Thanks, George. The LeMaitre portfolio of niche devices continues to deliver in Q1 as George referenced, we experienced record quarterly sales in graphs, carotid shunts, catheters, [indiscernible] and patches. Organic sales growth of 13% over Q1 '24 was driven by average selling price increases of 9% and unit increases of 4% in Q1 2025 we posted a 69.2 gross margin, the 60 basis point increase year over year was driven primarily by higher ASPs and lower inventory, scrap offset by product mix. Average selling price increases improved the gross margin by approximately 270 basis points in Q1 reduced scrap contributed an additional 85 basis points the shift in product mix, particularly towards graphs, negatively impacted the gross margin by 20 220 basis points operating expenses in Q1 2025, or 28.8 million, an increase of 16% versus Q1 2024. The increase was driven largely by higher compensation expenses, including the addition of 21 more sales professionals and higher non compensated, non-compensation sales related expenses, Q1 2025, operating income increased 6% year over year to 12.6 million, an operating margin of 21% fully diluted EPS was $0.48, up 10% we ended Q1 2025, with 302.5 million in cash in securities, an increase of 2.8 million in the quarter. Cash from operations generated 9 million in the quarter. We paid 4.5 million in dividends to shareholders and made the final deferred payment of 1.4 million related to our 2019 cardio cell acquisition. As we turn to guidance, there are two additional topics that we have incorporated into our full year forecasts. First, we have amicably wound down our porcelain patch distribution agreement with Elutia effective April 30, in order to focus on sales of our own biologics in 2024 our hospital sales of Elutia patches total approximately $5 million this product exit will likely improve our organic growth rate and gross margin. Second, we'd like to address tariffs. In summary, we believe the company is comparatively well positioned as relates to this issue. LeMaitre manufactures 100% of its products in the United States, and therefore we have limited concerns related to us import tariffs. Approximately 25% of our cost of goods sold is for raw materials and components, of which approximately $2 million is paid to foreign suppliers, largely to Australia. Simply stated, We are not big importers. As for the impact of potential retaliatory tariffs, approximately 40% of our sales are international. Since we generally compete in low rivalry markets, we anticipate low substitution risk, and we believe we can raise prices to offset most potential tariffs. China accounted for less than 1% of our total annual revenue. The Chinese import tariffs currently in place will increase our Chinese cost of goods by almost $825,000 per year. We are implementing price increases on May 15 in China, which would offset half of these costs. We remain committed to a long term view of our business prospects in China. We generally believe that cooler mines will eventually prevail and most tariffs will recede in the long run, particularly on life saving medical devices. Overall, we feel well positioned with our US, only manufacturing footprint, our US, focused supply chain and our competitive positioning in foreign markets with our niche products and direct sales model. Therefore we feel comfortable increasing our 2025 sales guidance despite trade tensions. LeMaitre continues to deliver broad based revenue growth with our differentiated products, direct to hospital model and growing commercial organization, we have raised our full year revenue guidance to 240 5 million, reflecting a continued robust sales performance and a benefit from the weaker US dollar to. Offset by the discontinuation of our Elutia distribution agreement and a weaker outlook for our small China Business. We have further updated our annual guidance for a gross margin of 69.6 operating income of 57.7 million and a midpoint guide on diluted earnings per share of $2.16 for more details, please see today's press release. With that, I'll turn it back over to the operator for questions.

[Operator Instructions]. Our first question is going to come from the line of Suraj Kalia with Oppenheimer and Company.

To start, you know, you guys had a strong 1Q. You guys beat by a little over 2 million, but you raised the guidance by seven. You know, obviously, there's some moving pieces here. You guys have autograph clearance now, the Elutia, you know, agreement, cessation, I guess what's giving you the confidence here, you know, early, especially with kind of, you know, the current things swirling around in the air in terms of tariffs, and globally, that's giving you the confidence to increase guidance so early in the year.

Thanks for the great question. Suraj, it's George, yeah, of course you're pointing out. So what gives us this confidence is a bunch of factors here, but maybe the first one that you pointed out was that we beat Q1 by a lot. So you got that going. That's already in the bag. The price hikes also are working better than anticipated. It was a big topic at the last call, but we came out and said, We think the US price list was going to increase prices by 8% and in Q1 we got an 11% in the US, so we got a little bit better than we expected with those pricing floors. Interestingly enough, getting out of these the Elutia business will help organic growth in the year, because it was reducing over time. It never really worked out well inside of our bag of goods, and so getting rid of that, oddly increases organic growth. You can see also, we're sort of, quote, guiding more sales reps than on the last call. We're guiding 165 for the end of this year, on February 27 and now come May 1, we're guiding 170 so we're putting on more reps, and we think that'll lead to additional sales growth. Obviously, you pointed out also the autographed International, you know, it's starting to work internationally. And then on Tuesday, we got the approval the big one we've been waiting for, which is a CE mark for autograph. And then, you know, just in general, Europe's going so well these days, for a variety of reasons, both price and units and all these offices we keep putting in seem to help out with growth. So I would say that's a lot. That's a big, long laundry list for your question, but that's sort of why we feel comfortable going from 10 to 13 organic.

Got it. Appreciate all that, that helpful color. And then just kind of one more, and we'll hop back in queue. You know, can you give us any update on M and A, you know, what you're seeing? And then, George, I can't help but, you know, at least clarify this. You know, you noted that you guys have three, 3 million of cash, and it provides strategic optionality. So I feel like there's something there that you're, you know, maybe hinting at kind of behind the scenes, if you can give us any know what you may mean by that.

Thank you. Okay, really, really quickly, I'll say I'm not hinting at anything. I just feel like, if you have $3 million in the bank, you can do stuff with it. So there's no nothing underneath that. But I'll pass it over to Dave, who usually handles the M&A question.

Yeah, the pipeline's in really good shape. Obviously, we're still hunting in the center of the fairway for us, which is open vascular surgery. There are 22 or 23 targets, over 5 million of remedy. But we're also actively hunting in an adjacent space cardiac surgery, where there are crossover devices, and some cardiac surgeons do vascular surgery. I'd say, of course, like I said in previous calls, we're hunting for larger deals. Our last deal was almost five years ago, autographed, and we're obviously delighted with how that's gone. But we're hunting for larger deals. And hence we've done, we did the bond offering in December. You know, the sweet spot probably is revenues of 15 to 100 and 50 million, or something like that, worth of revenue. Thank you.

Our next question comes from the line of Michael Petusky with Barrington Research.

George. I'm curious. Any view on Xenosure in China, and just all the sort of the strain in this relationship. Do you have any concerns that this hangs it up, or is there any intelligence that you might have on that, you know, sort of relative to that issue?

It's a great question. Mike, thanks a lot. You know, I feel like the whole project just took a, I don't know, a five yard sack, if you will, not just Xenosure, but the whole China LeMaitre. And as you can remember, two years ago we were in here, you know, saying how bad China was. And then in the last year, it sort of really turned around for us. We had a fantastic Q1 if you remember, and so and so yeah, it's frustrating. But, you know, we've been there 10 years. We call it the long march. We can we plan to continue being there? It will. It will hurt us a little bit, but, you know, I bet you, in the long run, some of this stuff simmers down, I think it'll be okay. And Mike,

It's Dave. Obviously, we were delighted to get that Xenosure cardiac approval back in December. And so for us, despite all the tariff and trade tension and all that, our team is actively seeking provincial listing approvals, and the 31 provinces there, we expect to get most of those in Q4 of course, the material sales wouldn't appear, probably until next year sometime. But yeah, let's just see what happens between the countries. But in the meanwhile, you know, we're preparing to move ahead with that product line.

Okay, all right, great. And Dorian, curious, if you have this handy, you have cash flow for ops and CAPEX this quarter by any chance,

Sure Mike, cash flow from ops was nine, 9 million, and within that, depreciation and amortization was 2.552 million. Share based comp was 2.046 million, and capital expenditures for the quarter is 1.383 million, and cash flow from ops was like roughly 9.0 million.

Our next question is going to come from the line of Rick Wise with Stifel

Hi George. Just to start off on your pricing commentary, I mean, clearly, as you said, price was stronger, better than expected, and maybe I'm misremembering. Please correct me. Obviously, if I'm wrong, I feel like that the last call, we were thinking about more of a 6% blended price increase for the year. So given the first quarter performance and whatever the guidance was before, how are we How do you want us to think about price or price and volume as we break it down, and think about the full 25 year.

Okay and then I know I'm going to come to an unsatisfactory answer this question, but I'm going to get there in a second just to go at, I think the difference between your 6% number and my 8% number that I just mentioned was, I'm talking us only, and we were trying to use that as a proxy, as a simple proxy. You might have blended worldwide is 6% you might, you might remember that from the last call I did, regardless of where we remember it. The Roth act is in Q1 it was a 9% price increase and a 4% unit increase. You know, always havean eye towards having better unit growth, but it's a nice number anyway. So nine and four was what we got in Q1 I sort of talk it through now to just go back to the US, our price our list price increase was 8.1% blended in the US. And we think we got an 11, a 10 or we, I think we got an 11. So it, we got it, you know, we got a little bit more price discipline than we expected. I guess is what I would say, As for your back, your question about price, price and volume for the year, it's almost impossible for us to get what. The organic growth is, it's so hard, we don't really try to break it between price and units. Perhaps you could assume, you know, status quo. As the year goes by, I don't have any reason to think it's not status quo. And that's nine and four is the 13 for Q1 but I don't know about the next three quarters.

Gotcha, that's helpful. And I was hoping you'd expand on the excellent news about the Artegraft CE mark approval. How do we think about the contribution from Artegraft in Europe? What kind of incremental volumes should that offer? What's based into your guidance, just maybe some additional color there would be helpful.

Sure, that makes a lot of sense. It's why we gave you that international number, which is without Europe so far. So in the first sort of real quarter of selling internationally, we've got 180,000 we've pumped into our model, a number which it's so preliminary, but we wrote it in. It's €350,000 for the back three quarters of this year. But honestly, Rick, I think I'd love for you guys to give us a quarter or two to get our sea legs on this product, and then I think we'll be a lot better at guiding prospective on that. And then, of course, as you remember, I'm going to not want to guide on individual devices at some point, but I realize we all need more information around this. What does it mean? Another way to look at it, as we keep saying, there's an $8 million market in Europe and an $8 million market rest of world. Another way to look at it, which we keep trying to, you know, juxtapose with that number, is there's -- we sold $37 million of it in the US. If you take a really high level look at it, I don't know, maybe in 10 years, you're selling half of that, or a fourth of that. I don't know. They have different practice patterns over there. It's a long run. I hope I'm answering part of your question. You want it? You want to poke away at any of that? Rick, any other further comments on my answer? No,

No, no, that's great perspective. I will sneak in another small question about gross margin if I could. Thank you, Joanne, for the gross margin breakdown and help us think about the graph drag. Obviously, price was a positive scrap, good, you know, contributed. But is this mixed drag? Is there anything that's going to change if the year unfolds? And just maybe just give us some color about how gross margins, we should think about it as the year unfolds, you know, as the quarters unfold for the year as well. Thank you.

Yeah, and the, the Artegraft product in particular, is the component of mix that is, you can think of as being below the corporate average margin. Obviously, we've continued to see great growth in that product line. George mentioned that we've got a 23% compound annual growth rate since the acquisition there, but it is a little bit different, different product, the human tissue. And so the great growth there, and we will hopefully see that as well in 2026 with the approvals that we see coming in Europe, the investments that we're making so that that was the big contributor, from a graft perspective on the mix.

Our next question comes from the line of Michael Saccone with Jefferies.

Just to follow up on Rick's question, make sure I'm clear so just on the 1Q gross margin and operating margin coming in below guidance. Is it fair to read that as allograft kind of performed better than expected, and that's what drove the below guide margin?

Yeah, I think just graph graphs overall as a category, you know, performing as high as they did is what drove that, that mix component

And Mike, I would add, it's Dave Roberts and within that, as Dorian mentioned, allograft is allograft has been, you know, an important growth driver for us Over many quarters. And it did outperform in Q1 by about a million dollars. And so that, I'd say, was the primary driver of the gross margin, this, from a product standpoint.

Got it. That's helpful. And then just, you know, on gross and operating margin for the full year, it looks like the guy came. Down modestly for gross margin, but you're taking up your operating margin guidance at the midpoint. Can you just kind of elaborate on the moving pieces there?

Yeah. I mean, there's a lot to that, right? We have such a nice sales growth guidance, and yet the operating margin moves down from 25 to 24 for the full year. That's what you're getting at, right? Mike, What? What? What's the component of that? So as you already alluded to, we miss, we're pulling down our gross margin guidance ever so slightly for the year, because we got a 69 two in Q1 a little nervous about what does that mean? And so I think we're now at, what are we at? 69 six is the as the guide, yeah, okay, so 69 six for the yearly guide, so that that's involved in it too, I would, you know, I would go back and think about this, 24% off margins, a crazy high op margin, and it gets affected. You know, it's pretty rare to see a company with that op margin. So anything you do upsets that op margin. Maybe one thing that you can see us doing here on this call is we've increased our quote guidance, I don't know what you call it, from 165 sales reps at year end to 170. So I think our sort of bullishness that we're seeing with sales and with the success of this commercial build out, I think we're saying, hey, let's add five more to This. And I think maybe you're seeing some of that in the OP margin. And then finally, of course, a Swiss office doesn't come cheap. We continue to learn clearly the most expensive place to operate on the planet, besides Tokyo. So you got a little bit of Swiss office in there too, and some of these sales reps.

Our next question comes from the line of Frank Tarkinen with Lake Street.

Congrats on all the progress. I wanted to also start with one on Salesforce. Can you just remind us kind of ramp up time and then when we can see that convert to kind of operating leverage? I know the guidance implies that that operating income starting to grow a little quicker through the back half of the year, but typically we've seen that really outpace the top line. So when can we see some of those reps start to contribute and then drive that impressive operating leverage profile you guys have shown.

Thanks for the question, Frank. And just to put some numbers on where you're talking about h2 it looks like we are implying in the guidance that the OP income growth gets back to 14% for H2 and I think it's a piece of what you're alluding to as to how quick the reps get up and running. You know, we've been answering this question for I've been answering for 20 years. I don't have a great answer. I will say that we've done a lot of what I'll call regression analysis and Salesforce analysis. And God knows, we have a lot of data around here now, having run the Salesforce for so long, and I used to say to people, oh, it takes a year for people to ramp up. I don't feel that way anymore. I think it's quicker than that, and I think that it's extremely hard to distinguish between a rep that's been here two quarters, this is shocking, and one that's been here for five years. The performance to quota is indistinguishable for those two cadres of employees. So that's an odd answer. It's a surprising answer, but those are the numbers that keep showing up. And we've been looking at this for two and three years now. It's, it's not going away. That's what we see. I think it's maybe, unfortunately, I know there's sales reps on this phone call. I hate to do this, but maybe it's a little bit of the warm body hypothesis, where you put a rep in Cleveland, they're going to sell rather, whether they're six years into this or two months into this thing, they're going to sell stuff. I hope that helps. It's odd data, I will admit,

No, that's helpful. Thank you. And then maybe one for Dave, just on the M and a front with kind of med tech valuations and all publicly traded valuations coming in, for that matter. Does this change your thought process at all? And maybe you can get a more novel, bigger market device, rather than smaller, niche products that you've traditionally gone after at a more attractive valuation.

I mean, I would say, I would say it doesn't change our strategy so much. Frank. I mean, the types of targets that we're hunting, it all starts with the markets they're in, and they can assert those are markets we're in, and there's synergy and all that. Of course, when valuations come down, it makes targets more affordable. So you know, and we're like, have 300 plus million dollars of cash in the bank. So from that standpoint, maybe we can get more with our money. But you know, in terms of, does it, you know, change the types of things we're looking at, I would say, No, it doesn't really

Our next question is going to come from the line of Jim Sidoti with Sidoti & Company

Thanks for taking the question. So I'm going to ask the operating margin question a different way. You know, for the quarter that just ended, the margin was about 21% you're guiding for 24% for the full year. So you know what changes in the back half of the year that gets set up.

I mean, one of the, one of the big topics here, is easier comps. Excuse me, that's not, I apologize. I'm off on a different answer here. What changes? I mean, the sales ramp helps you a lot, right? And the gross margin ramp, the implied gross margin ramp. I think the H2 implied gross margin is now 69.9 for the last two quarters. So I think you get a lot in that those second two quarters, the last two quarters of the year, that yeah, Dorian can add to that.

And the dropping out of the Elutia distribution agreement, where we only were earning distribution margins, not the full manufacturing margins that we earn on our own biologics. That does have a nice pickup on the gross margin percentage for us on the back half of the year. So that's one of the lifts for us. Jim, okay,

All right, that makes sense. The other question I had is, you know, in the past, when you said you're going to add 10 sales folks in a year, you know, usually it's maybe one or two at the beginning of the year and it builds up during the year. This year you seem to add a lot right in the first quarter. Is that due to the transition from distributors to direct, you know, those folks, folks that have already been selling your product?

Jim, not really. We put in place a big quote surge last July, and it really is just that surge kind of coming to fruition. And it's always longer than you think. I would have guessed it would have happened. You remember I was quote missing my sales rep guidance in q4 and I think the bolus of reps came in Q1 not in q4 and I kind of missed it by three months. So this is just that old surge, finally coming to fruition.

All right, all right. And then the last one for me, you have that share buyback program open. Have you started buying shares back?

I don't know how we're supposed to answer that. You know, Dorian?

We have not bought any shares back as of today.

Our next question comes from the line of Brett Fishbin with KeyBanc Capital Markets.

Thanks for taking the questions. Just a couple like more clarification ones. So on, the tariffs very helpful in terms of laying out some of the key considerations. And I'm really just trying to clarify what has been incorporated into the guidance. I know you were talking about like, 825k of extra cogs related to the small China component, and then maybe something like, more modest around the raw materials and components. I'm just curious, like, if that's like, actually factored in specifically into some of the margin assumptions.

So, yes, it has been factored in that 825, was an annualized number for China that we gave you, and we, if you, noted, we're increasing prices in China here in two weeks to recoup about 50% of that, where we have the ability to do that on the differentiated products, and that's the real significant impact for us on the back half of the year. You know, we do have the ability to reprice products if we see tariffs, retaliatory tariffs. The timing of that may not be perfect, but you know, we've incorporated our best estimates into the into the guidance for, you know, how we view the rest of the year on this issue.

All right, helpful. And then second question is just on, like, the Elutia or the pronunciation on the distribution, you know, announcement that you're stepping away. And I was just, you know, curious, like, how you're looking at that as an organic growth tailwind. Is it more like extra time, like, you know, you're not focusing on that product as much, yeah, just trying to, kind of like, figure out how exiting 5 million revenue becomes a tailwind. Thank you very much.

Sure. I think this is simple, which is the product is declining year over year in our hands, and the sooner we get it out of our hands, the less it's going to negatively impact our organic growth rate.

Yeah, Brett, when we talk about organic and we're not selling in the future because we terminated the relationship or agreed to with Elutia, you know, for the organic mat, we pulled the sales a year. Go out of the denominator. That's how that helps us. But you're also bringing up a good point, and I think this was part of the issue with the product, and laid is that it was the third patch inside of the lane bag, so the LeMaitre reps will be able to focus more on the other products, and that could make a contribute to organic growth as well. So

Our next question comes from the line of Ross Osborne with Cantor Fitzgerald

Congrats on the strong quarter, so almost halfway through the year at this point. So I'll try and squeeze in some questions on 2026 but we'll stay away from numbers at this point. So starting with Artegraft, congrats on e-mark [ph] and so following that approval, what steps do you guys need to take from an operational or generating incremental clinical data standpoint this year in order to set yourselves up for a strong 2026, round.

Thanks a lot, Ross. This is George, and you're specifically referring to the Artegraft project.

Yes.

Okay, great. Nothing, we don't owe anything to anyone. We're ready to go. This is just a marketing launch. We'll probably do some kind of, you know, just in terms of running, you know, clinical looks at it at some point. But we don't have any plan right now. We're just going at it. It's a nice launch. The device comes to us, or came to us in 2020 with lots and lots of clinical data and lots of articles. So there's no real need to go do more of that. In fact, that's probably why the thing went so quickly in the regulatory pipeline and did not require a clinical trial.

Ross, I would add, it's Dave, and great to hear from you. We actually are shipping. I mean, we're just making our initial shipment from the US to Europe next week, because obviously we couldn't ship until we had the E mark, and now we've got it. So obviously, step one is to place inventory over there. We've already begun training with our US sales reps who are expert in facile with autograph. They've started the training of our European team. But George is right, there's already an enormous amount of clinical data about this product, so there's no generation of clinical data need to launch this product line.

Okay, perfect. And then turning to RestoreFlow. Would you walk through any different market dynamics that may exist between the US versus Germany and Ireland, whether that be price or certain training, such as the return of the Ross procedure here, as we say, with Mount Sinai. And then, how many reps do you think you'll need in those markets to support adoption?

Okay, I'll go to the back of the question is a lot simpler, which is, I think we have the reps already in place. You don't need to hire additional reps. It's the beauty of this thing. It goes down our sales channel. So with that out of the way, I would say we have seen a big difference between the US and the UK and its sorry. I know you're talking about Ireland and Germany, but we're going to learn about that soon. I feel like they're very different markets. In the UK, it's very much a cardiac approach. Canada is also more cardiac for us, and the US has been more peripheral vascular. So yeah, they're going to be different. They're all going to be different markets. And you know, I think we're going to, as we get closer and closer to these launches, we'll be tailoring whether we're going to bring more peripheral over there or more kayak over there. Inside of this call, we also mentioned there's a nugget in there, which is, we're opening up a distribution site in in in Ireland, in Dublin, in the back half of the year, and that that should help us, once we get approvals in other countries, have sort of a Pan European approach to that one product, not the other products, which are generally shipped out of Frankfurt.

Ross I piggyback on George's comments, and by the way, I'd also say thank you to you and Matt and Cantor for that nice deep dive piece on restorable allografts. You guys did a really thoughtful job with that at a high level. George is right. We've seen a lot of success in the UK, and part of the reason for that is unlike the US, there aren't companies who are providing allografts and folks and providing them to hospitals. It's a fairly disorganized system in the UK, and we think that's true across Europe more generally. So regardless of the door through which we enter the European market, where it's whether it's Ireland, which opens, you know, a lot of countries doors Bush inside the EU, or Germany, which, you know, opens fewer, but still opens some, some. Markets that we see ourselves entering are equally fragmented from a supply standpoint, so we do see a lot of opportunity there. Frankly, I believe, as you and I discussed in Chicago a month and a half ago, the biggest challenge for LA me will be providing enough grafts and tissues into Europe to meet the demand.

Our next question comes from the line of Danny Stauder with Citizens JMP

Just first one on the sales and marketing spend, it was up a little bit, or quite a bit, in the first quarter, and I'm assuming that was due to the large step up in the reps. But, you know, just curious if there were any expenses that were more one time in nature there, such as signing bonuses or anything like that. And you know, how should we think about this sale and marketing expense going forward in 2025.

Thank you. Sure. Danny, thanks for the question. This is George. So first of all, there is a discrete, a big guy, discrete one, which is there's about a million dollar sales meeting almost always that happens in Q1 so it's not a year over year difference for you. But in terms of looking forward into the year, there's about a million dollars with sales meetings that you kick off, meetings that you don't need to have for the next three quarters. So there's one thing, and then you alluded to it, but I think it's maybe it's worth going through here. But at the end of q1, of 24 we had 137 reps, and today, as I sit here, we have 164 reps. It's an increase of 27 so this is a this is a big change, and I think you can feel that in the Q1 op expenses, particularly around sales and marketing. So you're right to point that out, but those are the numbers that would support what you're pointing out.

Great. Thank you for that. Then just one follow up, looking at free cash flow in terms of 2025 you talked about this a little bit. But how should we think about capex and working capital, specifically inventory, as we consider some of these regulatory approvals and geographical expansions? Thank you.

Yep, thanks for the question. I think on cap x you can, you can consider that to be this quarter, to be a fairly standard quarter for us. You know, maybe a little a little more around some of the offices that are coming online and continue the build outs for the end of the year. But not, not a big sequential change overall. On free cash flow, can continue to deliver cash to the bottom line.

And you know, Danny, I'd also point out here, you know, we've had this really. I call it lavish policy around here called no back orders at any time. And we're that guy, we always want to have the devices, and it's led us to have a pretty big inventory closet, roughly $65 million worth of inventory in our mostly in Burlington, here in Massachusetts, but also around the world, in our 13 or 15 offices. We're now finally going after that in terms of, we're going to try to be a little bit tighter at titrating back orders and the giant inventory balance, so you may see some cash free up from that this year, and it could add to some of this free cash flow.

Yeah, and in Q1 remember that it's usually a light cash flow quarter for us, because you have annual bonuses being paid in Q1 and just maybe the last point on inventory is in Q1 we were building inventory, particularly in Artegraft and in RestoreFlow, in anticipation of the this European launch, you know, for autograph and because we do believe that long term supply is one of our constraints on growing the RestoreFlow business, other than those two product categories where we are seeing the inventory with progress there and should be able to free up cash flow in the subsequent quarters.

We have a follow up question from the line of Michael Petusky with Barrington Research.

Just a couple quick ones. I may have missed this, George, did you say? How many of the I think 23 MDRC marks that you're looking to get, where you stand on those like 17 at this point, 18. I missed it. If you said it, I apologize. You're

You are good. It is 17 out of 23.

Okay, great. And then just a one for Dave as well. Dave, any of the conversations say over the last month or so with assets that you're interested in, have you. Seen anybody where they are essentially saying, Hey, we're not doing anything until some of this tariff stuff is resolved, or we're more anxious to do something because of the, you know, the screwed up nature of trading relationship. Like, have you heard any feedback either way? I'm just curious. Thanks.

Yeah, my short answer is no. I think there's a general sentiment that things are still changing a lot. So I feel like sellers aren't at, you know, one extreme or another saying we're frozen. We're not doing anything, or let's hurry up and dump this asset. I feel like everybody's fairly circumspect about it, and there, so far, discussions are generally proceeding, but we've all got an eye on it, no question.

Thank you. Ladies and gentlemen this concludes today's conference call. I would like to thank you all for your participation. You may now disconnect and have a great day.