James Sidoti

James Sidoti from Sidoti & Co. asked for the assumed tax rate and share count for LeMaitre Vascular's 2026 guidance. He also inquired about the approval status of RestoreFlow in Ireland, the significance of the headwind from consolidating Chicago manufacturing into Burlington, and the operating cash flow for the quarter.

Answer

CEO George LeMaitre provided the 2025 full-year tax rate of 23.2% as a good estimate for 2026 and directed to the upcoming 10-K for share count details, noting Q4 numbers are the most accurate after a Q3 anomaly. He clarified that RestoreFlow approval in Ireland is now expected in Q3 2026, delayed from Q2. George LeMaitre stated that the headwind from the Chicago-Burlington consolidation is fully baked into the 2026 guidance, implying no material impact on the consistent 72.1% gross margin guide. He reported Q4 operating cash flow as $23.1 million, CapEx as $1.8 million, and free cash flow as $21.3 million.

James Sidoti of Sidoti & Co. asked for the drivers behind the expected operating margin increase from 21% in Q1 to 24% for the full year, questioned the reason for the front-loaded sales rep hiring in Q1, and inquired about the status of the share buyback program.

Answer

CEO George LeMaitre and Executive Dorian LeBlanc explained the back-half margin ramp is driven by strong sales growth, an implied H2 gross margin of 69.9%, and the positive margin impact from discontinuing the lower-margin Aleutia distribution agreement. LeMaitre clarified the Q1 hiring surge was the fruition of a recruiting push started last July. LeBlanc confirmed that no shares had been bought back under the program as of the call date.

James Sidoti of Sidoti & Company inquired about the rationale for the timing of the convertible debt issuance in December. He also asked for clarification on whether the guided interest income and expense were GAAP figures and requested the operating cash flow for the quarter.

Answer

President David Roberts explained the convertible deal was timed to leverage a receptive market, strong business momentum, and a pipeline of larger potential acquisitions, noting the 2.5% coupon was highly attractive. He confirmed the interest figures are GAAP numbers, which include amortization of deal fees. He also stated that operating cash flow for the quarter was $14.6 million.

James Sidoti of Sidoti & Company inquired about the impact of the seven remaining MDR CE mark approvals and questioned the necessity of M&A given the company's strong organic growth.

Answer

CEO George LeMaitre clarified that only the allograft approval is a 'game changer' as it's for a new product in Europe; the other six are for products already sold under existing certificates. President Dave Roberts affirmed the company remains disciplined in its M&A approach, waiting for the right deal, which allows focus on operational excellence.

James Sidoti inquired about the company's cash flow generation, debt paydown plan, and any other options for cash utilization in 2026 and 2027, given the strengthening cash flow.

Answer

Barry Steele, Chief Financial Officer, stated that the capital allocation priorities remain unchanged, including opportunistic share buybacks, flexible debt paydown via the revolving facility, investment in the business for top-line growth, and potential M&A activities.

James Sidoti asked where the expense reduction from the renegotiated GE contract would appear on the income statement, if CEO transition expenses from 2025 would cease in 2026, and the company's plans for cash flow utilization in 2026 and 2027.

Answer

Barry Steele, Chief Financial Officer, clarified that the expense reduction from the GE contract restructuring would primarily show up in the gross margin, specifically within the cost of sales line. He also confirmed that CEO transition expenses incurred in 2025 would not be present in 2026. Barry Steele outlined capital allocation priorities, including opportunistic share buybacks, flexible debt repayment via the revolving facility, investing in the business for top-line growth, and potential M&A.

James Sidoti asked about several topics, including the drivers behind the unexpected 10% growth in the Oncology business after management previously guided for slower growth.

Answer

Outgoing CEO Richard DiIorio and CFO Barry Steele explained that the 10.3% Oncology growth was driven by a 50/50 split between solid volume growth (approx. 5%) and stronger-than-expected revenue cycle collections. DiIorio noted that while volume growth is sustainable, the significant bump from collection improvements may be difficult to replicate consistently.

The analyst asked about the future growth outlook for the core oncology business. He also inquired about the timeline for the ERP system upgrade costs and when the company might become a cash taxpayer given its remaining NOLs.

Answer

The oncology business is expected to continue growing in the low to mid-single-digit range (3-6%), driven by volume growth. The $2.5 million in ERP upgrade costs are mostly for 2025, with costs expected to be much lower in 2026. The company has about $20 million in NOLs remaining and expects to have a few more years before becoming a significant cash taxpayer.

James Sidoti of Sidoti & Co. asked about the future growth outlook for the core oncology business, the timeline for the $2.5 million ERP upgrade expense, and the current status of the company's Net Operating Losses (NOLs) and when it might become a cash taxpayer.

Answer

Executive Richard DiIorio projected continued low to mid-single-digit growth for the oncology business and confirmed the bulk of ERP costs would be in 2025, subsiding in 2026. Executive Barry Steele reported approximately $20 million in remaining NOLs, estimating the company has a few years before it becomes a significant cash taxpayer, contingent on future profitability.

James Sidoti sought clarification on the negative pressure business, asking to differentiate the use cases for Cork versus the new Smith+Nephew devices. He also questioned the significant Q2 increase in medical equipment purchases, asking about the specific drivers and future spending trends.

Answer

Executive Richard DiIorio clarified that their negative pressure business is device-agnostic, with Cork, Genadyne, and Smith+Nephew devices all available for home use based on physician preference. He explained that the Q2 spike in capital expenditures was abnormal, driven by a single large new rental customer and growth in the Pain, Oncology, and Negative Pressure businesses, and is not expected to continue at that high rate.

James Sidoti asked about the significant increase in inventory during the quarter, specifically if it was driven by the surge in cargo inspection system orders, and what the expected trend for inventory levels is over the next few quarters. He also inquired about the company's refinancing plans for its high-yield debt, including the next milestones and the current interest rate.

Answer

CFO Sam Maheshwari confirmed that the inventory increase was intentional, primarily driven by the ramp-up of cargo systems, first-time implementations, factory expansions in Las Vegas and the UK, and detector qualification in India, along with some impact from capitalized tariffs. He stated the goal is to normalize inventory by $10-$15 million in the next couple of quarters. Regarding refinancing, Maheshwari indicated plans to refinance the high-yield debt (due October 2027) before October 2026, noting good progress and promising to share more information when appropriate. He specified the current interest rate on this debt is 11.875%, with hopes to reduce it through refinancing.

James Sidoti inquired about the significant increase in inventory during the quarter, its underlying reasons, and the expected trend for inventory levels in upcoming quarters, as well as the company's plans and timeline for refinancing its debt.

Answer

CFO Sam Maheshwari attributed the inventory increase primarily to the ramp-up of cargo systems (including first-time implementations and finished goods undergoing qualification at customer sites), factory expansions in Las Vegas and the UK, and detector qualification cycles in India. He aims to reduce inventory by $10 million to $15 million in the next couple of quarters. Regarding refinancing, Maheshwari stated plans to refinance the high-yield debt, due October 2027, before it goes current (i.e., before October 2026), noting the current interest rate is 11.875%.

James Sidoti of Sidoti & Company, LLC asked for an update on the new plant in India, the company's plans for its convertible debt, confirmation on the end of customer destocking, and whether the cargo business could benefit from increased border security focus.

Answer

CFO Shubham Maheshwari confirmed the India plant is on track to be online by year-end, initially focusing on detectors for global customers. Regarding the debt, he stated the intention is to pay it down fully. CEO Sunny Sanyal affirmed that the widespread order uptick indicates the destocking phenomenon is over. He also agreed that both global security pressures and the need for tariff verification are driving demand for cargo inspection systems.

James Sidoti of Sidoti & Company, LLC requested specific revenue figures for China, clarification on whether growing end-user demand is driving inventory normalization, and details on the rising PP&E balance.

Answer

CFO Shubham Maheshwari reported that China revenue was $31 million in Q4, stable year-over-year, and that confidence in destocking subsiding is based more on qualitative customer discussions than on observed end-user demand. He confirmed the increase in Plant, Property, and Equipment (PP&E) is primarily for the two new factories in India, which will produce components for global consumption, with the first facility expected to begin production in the second half of fiscal 2025.

James Sidoti of Sidoti & Company asked about the distribution strategy and international sales potential for the newly acquired BioLife products. He also inquired about the company's capital allocation strategy, specifically whether they would use their strong cash flow to pay down debt or save it for future acquisitions.

Answer

CEO Fred Lampropoulos explained that BioLife had no international footprint, which presents a major growth opportunity for Merit's global sales force. He noted the product's versatility fits well within their existing sales structure. CFO Raul Parra stated that while free cash flow is strong, they plan to 'hoard the cash' for now to fund significant upcoming capital expenditures, which are already factored into their forecasts.

James Sidoti asked if the current tariff environment has increased M&A opportunities and inquired about the integration status of the two acquisitions made in the second half of last year.

Answer

Chairman and CEO Fred Lampropoulos confirmed that there is significant M&A activity in the market and Merit is actively evaluating opportunities. He stated that the integrations of the Cook Medical and EndoGastric Solutions assets are on plan, with the company focused on executing its long-term strategy.

James Sidoti of Sidoti & Company asked for details on the benefits of the new $90-100 million distribution center and inquired if the resulting free cash flow would continue to be allocated towards debt paydown in 2025.

Answer

Executives Raul Parra and Fred Lampropoulos explained the new distribution center will drive efficiency by replacing a 20-year-old system, eliminating offsite storage costs, improving customer service, and freeing up manufacturing capacity. Regarding capital allocation, Parra stated the priority is to build cash on the balance sheet to be ready for strategic M&A opportunities, rather than focusing solely on debt paydown.

James Sidoti of Sidoti & Company asked about the integration of the Cook Medical assets, including plans for sales staff and manufacturing transfers. He also inquired about the long-term strategy for the company's dramatically improved cash flow and the readiness for a rapid WRAPSODY launch post-approval.

Answer

Executive Joseph Wright confirmed Merit plans to hire some Cook sales professionals and will transfer manufacturing to a Merit facility over time, using a TSA in the interim. Executive Raul Parra noted the acquisition will be accretive to gross and operating margins in the first full year. Regarding cash flow, both Raul Parra and Fred Lampropoulos highlighted strong generation under the CGI program, which enables disciplined acquisitions. Joseph Wright added that WRAPSODY sales training is already underway for a ready launch, though VAC committee approvals will take time.

James Sidoti asked for more detail on the timeline for the 10-study CYTOGAM post-marketing program. He also questioned the potential business impact from U.S. NIH spending cutbacks and sought clarification on the quarter's high 40% tax rate, asking if it represented a cash expense and what the future tax rate might look like.

Answer

Executive Amir London explained the CYTOGAM program is a multi-year effort, with results from various studies expected between late 2025 and 2028. He also stated that no impact is currently anticipated from NIH spending changes. Executive Chaime Orlev clarified the high tax rate was a non-cash expense related to deferred tax liabilities and had no cash flow effect. He expects the rate to fluctuate in 2025 before normalizing, with the company likely becoming a cash taxpayer in late 2025 or early 2026.

James Sidoti asked about the drivers behind the significant gross margin improvement in proprietary products and questioned what the future impact on margins would be once the company begins using more plasma from its own collection centers.

Answer

Executive Amir London confirmed the margin increase was driven by a favorable sales mix, with higher sales of the company's two most profitable products, KEDRAB and CYTOGAM. He explained that while using in-house plasma will have a positive effect on cost of goods and margins, it is a gradual process. The overall efficiency gains are a result of multiple factors, including manufacturing synergies from producing CYTOGAM in-house and general economies of scale.

James Sidoti of Sidoti & Company asked for a breakdown of submission volume from the recently acquired e-TeleQuote agents and questioned whether the strong revenue growth trends from the last two quarters would continue. He also requested the company's cash and total debt figures for the end of the quarter.

Answer

CEO Vijay Kotte explained that e-TeleQuote agents are now integrated into the broader team and their results are not broken out separately, but they were a key part of the 25% year-over-year growth in agent headcount. He declined to give forward revenue guidance, noting the plan to shift capacity to GoHealth Protect in Q2 and Q3 to hedge against MA market uncertainty. CFO Brendan Shanahan provided the quarter-end cash balance of $22 million.

James Sidoti questioned how GoHealth would differentiate itself in a less disruptive AEP, similar to 2023, and asked what specific factors drove the 170% submission growth at the recently acquired e-TeleQuote (ETQ).

Answer

CEO Vijay Kotte clarified that he does not expect a repeat of the 2023 AEP's low-disruption environment. He explained GoHealth's strategy is hedged by using targeted marketing to find disruptive pockets and leveraging PlanFit Save to get rewarded for member retention in stable markets. Regarding e-TeleQuote, Kotte stated the success came from applying the core GoHealth business model—its proprietary technology, training, and compensation structures—to ETQ just two weeks before AEP, highlighting the platform's strength and scalability.

James Sidoti asked about the potential impact of the recent election on the business and how the company plans to adapt. He also questioned where GoHealth intends to deploy cash over the next six months, given its shift toward investment.

Answer

CEO Vijay Kotte responded that it is too early to determine the election's specific impact but expressed confidence that GoHealth's consumer-centric model provides value to any administration. Regarding cash deployment, he stated that funds will be invested in marketing to capitalize on the current high-demand environment, which is expected to continue through the first three quarters of the next year. The focus is on extending the reach of their existing efficient agent base rather than hiring new agents.

James Sidoti of Sidoti & Company asked about the potential impact of external factors, such as tariffs and drug pricing executive orders, on the business and also confirmed that the company was maintaining its full-year revenue guidance after the recent divestiture.

Answer

Executive Brendan O’Grady stated that the company does not anticipate any short-term impact from potential tariffs due to significant U.S. inventory of Rolvedon's drug substance. He also noted that since Assertio does not sell products outside the U.S. (except for Cambia in Canada), the risk from international reference pricing proposals is low. O'Grady explicitly confirmed that the company is maintaining its full-year revenue guidance of $108 million to $123 million.

James Sidoti of Sidoti & Company asked about the future distribution strategy for Cingal, whether a partnership could involve upfront payments, and the company's cash position and sufficiency to fund its pipeline through regulatory approval.

Answer

CEO Dr. Cheryl Blanchard explained that Anika is actively exploring the best distribution path for Cingal, acknowledging its different call point, and noted that while partnerships can include upfronts, value is currently driven by achieving regulatory certainty. CFO Steve Griffin affirmed the company has sufficient cash to complete the regulatory filings for both Hyalofast and Cingal. He expects cash to remain stable, with operating cash flow improving in the second half of the year.

James Sidoti inquired about the forward-looking expense run rates for Anika following its recent divestitures, specifically asking if the Q4 SG&A of around $11-12 million is a good proxy for 2025, the size of non-recurring R&D charges, and the expected R&D expenses for Cingal in 2025.

Answer

Executive Vice President, Chief Financial Officer and Treasurer, Steve Griffin, confirmed that the Q4 SG&A figure is a good approximation for the continuing operations going forward. He identified a one-time $600,000 Hyalofast filing fee in Q4 R&D but noted that overall R&D spending will trend higher in 2025 due to pipeline activities. For Cingal, Griffin stated that costs for the required toxicity study are already included in the 2025 forecast, with an update on any further bioequivalence study costs to be provided after receiving formal FDA feedback.

James Sidoti of Sidoti & Company, LLC inquired about the investment timing for the commercial channel sales force, the specific products included in this new channel, and whether the company could maintain cash flow neutrality through its strategic transition.

Answer

President and CEO Dr. Cheryl Blanchard explained that investments in the direct sales force are ongoing and factored into future guidance, timed with new product launches like Integrity configurations and Hyalofast. She clarified the commercial channel includes all OUS products (Monovisc, Orthovisc, Cingal, Hyalofast) and the U.S. regenerative portfolio. EVP and CFO Steve Griffin added that while formal cash flow guidance wasn't updated, he expects the company to be 'relatively neutral' for the full year.

James Sidoti asked how quickly customer behavior might normalize if tariffs were reversed, where the announced $13 million in annualized cost savings would be realized, and if the Q1 gross margin of 37% is a reasonable proxy for the remainder of the year.

Answer

Executive Michael Benstock estimated it would take 6-9 months for the supply chain to normalize even if tariffs were immediately removed, due to logistical disruptions. Executive Michael Koempel specified the $13 million in cost savings are from SG&A across all segments, reflecting operational efficiencies and right-sizing for lower revenue expectations. Koempel also noted that the Q1 Branded Products margin was unusually low due to sourcing and customer mix, and under normal circumstances, it would be expected to rebound, suggesting the Q1 consolidated margin is not a perfect proxy.

James Sidoti inquired about the details of a $4 million acquisition, the drivers behind the lower-than-expected EPS guidance, the outlook for costs in 2025, the current pricing environment, and the company's confidence in cash flow given the new share repurchase authorization.

Answer

Executive Michael Koempel explained the acquisition was an opportunistic deal in the Branded Products segment to add blue-chip customers and talent. He attributed margin pressure to higher manufacturing costs in Haiti and a year-end inventory write-off, noting production costs will persist but the write-off was a one-time event. Executive Michael Benstock addressed pricing, stating the company is well-positioned to handle potential tariffs due to prior supply chain diversification and will pass on necessary price increases. Michael Koempel affirmed their confidence in generating strong cash flow to support the share buyback program.

James Sidoti inquired about the typical ramp-up time for new sales personnel, the company's current pricing power, and the status and intent of the ongoing share repurchase program.

Answer

Michael Benstock (executive) explained that for the new Contact Center sales team, the goal is for them to be productive within a year, noting pricing power is strong with new outsourcers but more competitive with experienced ones. Michael Koempel (executive) stated that approximately $2.6 million remained on the buyback authorization and the company would continue to purchase shares opportunistically.

James Sidoti of Sidoti & Company asked for the effective date of the next planned $2 price increase and whether the plan implied satisfaction with the first round's results. He also questioned if the Igniton launch would require additional marketing spend and asked for the plan regarding the $6 million in short-term debt on the balance sheet.

Answer

Executive James Colquhoun confirmed the next $2 price increase is planned for the end of Q1 2026 and that management was 'very impressed' with the results of the first increase. CFO Ned Preston added the new AI and community features would roll out concurrently. Executive Jirka Rysavy stated Igniton's marketing costs would be around 40%, as it will be sold independently and through partners. Regarding the debt, Ned Preston explained it is a mortgage on their campus that they plan to refinance with a similar arrangement.

James Sidoti inquired about the number of events planned for Q4, whether the price increase applies to the Gaia Plus tier, the timeline for the Marketplace to become a significant contributor, the launch date for 'Ignaton', and the company's need for future capital raises.

Answer

James Colquhoun (executive) stated there is one final sold-out event in Q4 and confirmed the current price increase is only for standard memberships, with the premium tier price to be reviewed later. Jirka Rysavy (executive) positioned the Marketplace as a precursor to a full community launch in Q1 2026, targeting profitability by mid-2025. Ned Preston (CFO) clarified the 'Ignaton' launch is aimed for June 2025. Regarding capital, both Ned Preston and James Colquhoun affirmed that with six consecutive quarters of positive free cash flow, there is no immediate need to raise cash, although they will file a routine S-3.

James Sidoti from Sidoti & Company asked how long it would take for the new Digital Health sales and marketing team to be trained and contribute to revenue, and also inquired about the reasons for the decline in capitation revenue.

Answer

Dr. Howard Berger (Executive) responded that they aim to have the Digital Health sales team fully built out and contributing by the end of the 2025 calendar year. Mark Stolper (Executive) explained that the decline in capitation revenue was an intentional and beneficial strategy. RadNet has been selectively converting underperforming capitation contracts to higher-rate fee-for-service arrangements, which has boosted overall revenue, especially as their centers are operating with high utilization and backlogs.

James Sidoti of Sidoti & Co. asked about the primary hurdles to implementing a lung cancer screening program in the U.S. similar to the one in the U.K. He also inquired about potential new risks or opportunities for the business under a new political administration.

Answer

CEO Dr. Howard Berger explained the main hurdle in the U.S. is the lack of self-referral for lung screening, unlike in the U.K.'s NHS, which leads to very low patient access despite eligibility. Executive Mark Stolper added that RadNet is seeking FDA approval for its lung AI product in the U.S. by mid-2025 to leverage the U.K.'s success. Regarding a new administration, Dr. Berger suggested a potential benefit could be a less burdensome regulatory environment for mergers and acquisitions, which would support creating scale for cost-effective healthcare delivery.

James Sidoti of Sidoti & Co. asked for details on the projected cash burn for 2025, noting it appeared higher than the guided operating loss. He also sought confirmation that marketing initiatives in the U.S. and Europe would continue at full speed despite the challenges in China.

Answer

CFO Patrick Williams explained that the wide cash usage forecast is a direct result of the wide revenue guidance for China, as incremental sales carry a high contribution margin. He also pointed to approximately $15 million in planned CapEx and working capital management as other factors. CEO Tom Frinzi confirmed they are proceeding with key growth initiatives in the U.S. and EMEA, leveraging their strong, debt-free balance sheet to support growing markets while managing through the transitory issues in China.

James Sidoti of Sidoti & Company, LLC inquired about Trinity Biotech's Q4 outlook for TrinScreen sales, the reasons for lower hemoglobin instrument sales, the completion timeline for cost-reduction initiatives, the commercialization plan for the new preeclampsia and prostate cancer tests, and the expected Q4 share count.

Answer

President and CEO John Gillard confirmed the Q4 TrinScreen revenue forecast of approximately $3 million. He explained that lower hemoglobin instrument sales were a temporary, deliberate strategy to await a new, more valuable column and improved supply chain costs, with underlying consumable revenue remaining consistent. Gillard reiterated that major cost-saving initiatives are on track for completion by early Q1 2025, with a significant profitability impact expected thereafter. He outlined a commercialization plan for the new acquisitions, targeting revenue from the preeclampsia test in H2 2025 and the prostate cancer test in 2026, leveraging their New York State certified lab. The question on Q4 share count was deferred.

James Sidoti of Sidoti & Company, LLC inquired about Q4 revenue expectations for TrinScreen, the reasons for lower hemoglobin instrument sales, the completion timeline for cost-reduction initiatives, and the commercialization path for the newly acquired prostate cancer and preeclampsia tests.

Answer

President and CEO John Gillard confirmed the Q4 TrinScreen revenue forecast of approximately $3 million. He explained that lower hemoglobin sales were due to normalizing customer ordering patterns from 2023 and a strategic pause on pushing instrument sales until a new, more valuable column is fully rolled out. Gillard reiterated that major cost-saving initiatives are on track for completion by early Q1 2025, with a significant profitability impact expected thereafter. He projected the preeclampsia test would generate revenue in H2 2025 and the prostate cancer test in 2026, both launching as lab-developed tests from their New York-certified lab.

James Sidoti of Sidoti & Company, LLC inquired about several key areas, including the performance and outlook for TrinScreen HIV tests, the drivers behind the strong growth in the clinical chemistry business, the reason for lower Premier instrument sales, the timeline for the overall clinical laboratory business to return to growth, the development progress and trial plans for the Continuous Glucose Monitor (CGM), and the expected impact of a new distribution partner.

Answer

CEO John Gillard addressed the questions, stating that TrinScreen's Q2 revenue of $3.1 million met expectations and the company is on track for its $8 million full-year target, with potential for upside. He attributed the clinical chemistry growth to sustainable price increases and competitor supply issues. Gillard clarified that Premier instrument sales were paused to align with the rollout of a new, more efficient column system that enables more competitive pricing. He expressed confidence that the clinical laboratory segment would return to growth by Q4 2024. Regarding the CGM, he projected a design lock-in by early Q2 2025 before pivotal trials begin. Finally, he noted the new UK distribution partner is expected to be revenue and gross profit accretive by providing access to new sales contacts.

James Sidoti from Sidoti & Company, LLC inquired about the strong performance of TrinScreen HIV, the drivers of clinical chemistry growth, the timeline for the new Premier instrument system, the CGM development and trial schedule, and the impact of a new UK distribution partner.

Answer

President and CEO John Gillard confirmed that TrinScreen HIV's performance met expectations and the company is on track for its $8 million full-year target, with potential upside. He attributed clinical chemistry growth to sustainable price increases and competitor supply issues. Gillard explained the pause in Premier instrument sales was strategic, pending the rollout of a new, more efficient column system to enable aggressive pricing, and he expects the clinical lab business to return to growth by Q4. Regarding the CGM, he stated the design lock-in is an iterative process expected to finalize by early Q2 2025. He also noted the new UK distribution partner is expected to be revenue and gross profit accretive.

James Sidoti of Sidoti & Company, LLC inquired about Trinity Biotech's TrinScreen HIV sales distribution, the quantification of ramp-up costs, progress in the hemoglobin business, future CGM development spending, and the expected quarterly interest expense.

Answer

CEO John Gillard explained that for commercial reasons, specific country details for TrinScreen HIV sales would not be disclosed, but shipments to countries beyond Kenya are expected in 2024. He clarified that ramp-up costs are related to training and efficiency improvements, with automation and supply chain optimizations expected to boost margins toward the 50%+ goal for 2025. For the hemoglobin business, the focus is on a new, more efficient column and buffer combination. Gillard confirmed CGM spending will likely increase in 2025 for pivotal trials but noted that leveraging Trinity's established partner network is reducing current development costs. He projected future quarterly interest expense to be approximately $2.5 million.

James Sidoti of Sidoti & Company, LLC inquired about the geographic distribution of the $8 million in 2024 TrinScreen sales, the quantification of onetime ramp-up costs, product development in the hemoglobin business, the future trajectory of CGM development spending, and the expected quarterly interest expense for the remainder of 2024.

Answer

CEO John Gillard explained that for commercial reasons, specific country details for TrinScreen sales would not be disclosed, but shipments are expected to extend beyond Kenya in 2024. He clarified that initial margin pressure was due to ramp-up inefficiencies, not onetime costs, and expects margins to improve through automation, supply chain optimization, and offshoring, reiterating a 50%+ margin target for 2025. For the hemoglobin business, the key innovation is a new, more efficient column and buffer combination. Gillard confirmed CGM spending would likely increase in 2025 for pivotal trials but noted that their established partner network is reducing overall development costs. He projected future quarterly interest expense to be approximately $2.5 million.

James Sidoti of Sidoti & Company asked if there were any one-time revenue items beyond the $1.4 million catch-up payment, whether SurVeil sales were exceeding internal projections, and about plans for sales force expansion and international distribution. He also inquired about the company's cash position and need for future capital raises.

Answer

Executive Timothy Arens confirmed the $1.4 million royalty catch-up was the only significant one-time item. While declining to comment on internal projections, he pointed to the raised guidance as a sign of confidence in the vascular portfolio. Executive Gary Maharaj explained that sales force expansion will be selective and tied to territory profitability, following a 'grow as we go' model. He stated that the immediate focus is on the U.S. market to maintain capital discipline, and international expansion would only be considered if it did not require cash burn. He affirmed the current cash balance is sufficient to fund growth.

James Sidoti questioned if there were any one-time revenue items, whether SurVeil sales were exceeding internal projections, and about plans for sales force expansion or international distribution.

Answer

CFO Timothy Arens confirmed the $1.4 million in royalty catch-up payments was the only one-time revenue item. He indirectly confirmed SurVeil's outperformance by highlighting that the overall guidance was raised past the Q2 beat while core business guidance remained unchanged. Executive Gary Maharaj stated that the focus remains on the U.S. market, and any sales force expansion will be selective and data-driven. International expansion would only be considered with a partner to minimize cash burn.

Asked about the outlook for SurVeil orders in the second quarter, whether they would be higher or lower than Q1, and sought clarification on the full-year interest expense guidance.

Answer

Executives expect continued SurVeil orders from Abbott but anticipate that Q2 orders will be lower than the initial Q1 stocking order, which is typical. This expected decline in SurVeil orders is the primary reason for the projected sequential revenue dip. Regarding interest expense, the full-year guidance of ~$3.5 million is expected to be distributed relatively evenly across the four quarters.

Asked for the year-end sales force count and future expansion plans. He also inquired about the milestones required for Abbott's SurVeil launch, the potential for timing shifts, whether the launch is global, and the future trajectory of R&D spending.

Answer

The sales force ended the year at 23 reps, with plans for selective, cash-constrained additions rather than a large expansion in FY24. Regarding the SurVeil launch, they reiterated the first half of calendar 2024 timeline, citing confidentiality for not being more specific, and confirmed the launch is for the U.S. only initially. R&D expense is expected to trend down slightly but will remain substantial to support pipeline products.