Danny Stauder

Danny Stauder asked about the drivers behind the 90% acceleration in RestoreFlow Cardiac in Q4 and any emerging trends for 2026. He also inquired whether the manufacturing transfer of RestoreFlow from Chicago to Burlington would benefit gross margin in 2026 or 2027, and its impact on guidance.

Answer

CEO George LeMaitre attributed RestoreFlow Cardiac's growth to increased focus on cardiac allografts in North America, particularly the Ross procedure, and a training course at Mount Sinai. He noted the growth is from a small base. LeMaitre stated the manufacturing transfer is likely a slight headwind to margin in 2026 due to ramp-up/wind-down, with long-term hopes for improvement in 2027, and all costs are fully baked into 2026 guidance.

Danny Stauder from Citizens JMP asked about the acceleration of the RestoreFlow cardiac call point, which grew 90% in Q4, inquiring about the specific drivers of this performance and any ongoing trends in 2026. He also asked about the manufacturing transfer of RestoreFlow from Chicago to Burlington, specifically if it would benefit gross margin in 2026 or 2027, and how it's factored into guidance.

Answer

CEO George LeMaitre attributed the RestoreFlow cardiac growth to increased focus on the cardiac side of allografts in North America, particularly driven by the U.S. sales manager, and a significant training course at Mount Sinai. He noted that while the percentage growth is high due to a low base, it represents satisfying progress. George LeMaitre also mentioned the vascular business is performing well. Regarding the manufacturing transfer, George LeMaitre stated it would likely be a slight headwind to margin in 2026 during the ramp-up and wind-down phases, with the hope for long-term gross margin improvement in 2027, and all associated costs are fully baked into the 2026 guidance.

Danny Stauder asked for more details on the strong performance of the Specialty Nutrition Systems (SNS) segment, especially after the Q3 benefit from the UK Go Direct transition, and sought insights into Nexus Medical's early performance, any surprises, and expected product launches or drivers for 2026.

Answer

CEO Dave Pacitti highlighted strong demand and execution across the SNS portfolio, including CORTRAK penetration and robust neonatal business performance. He noted that Nexus Medical is performing better than expected, proving to be a successful tuck-in acquisition that integrates well with existing sales channels. SVP and CFO Scott Galovan confirmed Nexus contributed $5 million in revenue in 2025 and is projected to be a double-digit grower in 2026 and beyond.

Danny Stauder at Citizens JMP inquired about Avanos Medical's 2026 tariff outlook, including the potential impact of the recent Supreme Court ruling, key milestones for the China exit strategy, and the status of USMCA and Nairobi Protocol exemptions. He also requested clarification on the organic normalized growth rate for the full year, both at the consolidated company level and on a segment basis, considering the HA divestiture, Nexus acquisition, and other product rationalization efforts. Furthermore, he asked about the company's confidence in sustaining operating leverage improvements in 2026, particularly concerning R&D and SG&A expenses, and sought insights into the strong performance of the Specialty Nutrition Systems (SNS) segment, including the early performance of the Nexus acquisition and anticipated product launches or other growth drivers for 2026.

Answer

CEO Dave Pacitti and SVP and CFO Scott Galovan detailed that Avanos Medical estimates a $30 million tariff impact for 2026, with two-thirds related to China, and expressed high confidence in exiting all syringe manufacturing from China by June, transitioning production to Mexico and Cambodia. They confirmed the Nairobi Protocol exemption is still in place for long-term feeding tubes produced in Mexico and anticipate improved gross margins in the second half of 2026. Scott Galovan stated that the consolidated organic growth rate is expected to be around 5%, with SNS projected to grow mid to high single digits and Pain Management & Recovery (PM&R) low to mid single digits organically. Dave Pacitti expressed high confidence in new R&D plans and continued efficient business operations, while Scott Galovan noted that earnings expansion would exceed top-line growth, driven by sales volume and cost containment measures. For SNS, Dave Pacitti highlighted high demand and strong execution, with Nexus performing better than expected and contributing $5 million in revenue in 2025, projected for double-digit growth in 2026.

Danny Stauder asked about the impact of U.K. budget issues on AtriCure's international sales, identifying specific affected segments (pain management, MIS ablation) and quantifying the impact. He also inquired about the nuanced rollout strategy for cryoXT, specifically regarding training needs for new surgeon types.

Answer

Angie Wirick, CFO of AtriCure, identified pain management (due to reimbursement withdrawal) and standalone AFib treatment (MIS ablation, an elective procedure) as the most impacted segments in the U.K. She noted a significant reduction from a $4 million quarterly run rate to 'a little over $1 million' in Q4 2025, which was the quarter with the biggest impact. Open cardiac procedures were less affected. Mike Carrel, President and CEO, explained that the deliberate cryoXT rollout strategy, similar to EnCompass, involves reps focusing on one account at a time to ensure sticky adoption. This is crucial because it targets new surgeon types (vascular, orthopedic) not typically engaged by AtriCure. The goal is to learn from initial cases (10-15 cases, ~3 months) to refine training and protocols before broader expansion, anticipated by mid-year. Feedback has been positive.

Danny Stauder asked about the impact of UK budget issues on international sales, specifically which segments were most affected and the financial magnitude of the impact in Q4 2025, and how this might trend in 2026. He also inquired about the deliberate rollout strategy for CryoXT, asking if it requires more substantial surgeon training or has unique nuances compared to prior launches.

Answer

CFO Angie Wirick explained that the most significant impact in the UK was on pain management devices (due to NHS reimbursement changes) and standalone AFib treatment (minimally invasive ablation), which are elective procedures. She noted a reduction from a $4 million quarterly run rate to just over $1 million in Q4 2025 for the UK. President and CEO Mike Carrel described the CryoXT rollout as deliberate, similar to the Encompass clamp launch, focusing on one account at a time to ensure proper procedure understanding, training, and feedback from new surgeon types (vascular, orthopedic). He stated that the goal is to get 10-15 cases under a surgeon's belt over about three months before expanding, with positive feedback so far.