Q3 2024 Earnings Summary
- Aortic stent graft products are experiencing strong double-digit growth, with every product growing double digits and confidence in continued double-digit growth globally due to a differentiated portfolio and ongoing global expansion in Europe, Asia, and Latin America.
- On-X heart valve is gaining market share in the U.S. and globally, with 55% market share in the U.S. and 30% globally, driven by strong clinical data showing up to an 87% reduction in major bleeding, resulting in expectations of continued double-digit growth and increased market share.
- Promising pipeline products such as NEXUS, the only arch thoracic stent graft specifically designed for the aortic arch, and AMDS, with successful clinical trial results, are expected to contribute to future growth, with NEXUS on track for approval in 2026 and anticipated to be a game changer for patients.
- The company shows reluctance to provide detailed breakdowns of product performance and geographic segmentation, potentially indicating a lack of transparency which may concern investors.
- There is uncertainty over handling of the convertible debt maturing in July 2025, with the CFO stating that it could be settled in cash or shares, potentially leading to dilution or increased interest expenses depending on market conditions.
- Expected revenue contributions from BioGlue in China may be delayed due to lengthy local regulatory and administrative processes, with meaningful revenues not expected until the second half of 2025 and a gradual ramp-up thereafter, potentially impacting near-term growth expectations.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue growth | FY 2024 | 10% to 12% | 10% to 12% | no change |
Reported revenue | FY 2024 | $388 million to $396 million | $389 million to $396 million | raised |
Adjusted EBITDA | FY 2024 | $69 million to $72 million (28% to 34% growth and 280 bps margin expansion) | $69 million to $72 million (28% to 34% growth) | no change |
Gross margins | FY 2024 | Remain at levels similar to 2023 | Remain at a level similar to 2023 | no change |
R&D expenses | FY 2024 | Remain relatively flat as a percentage of sales | Remain relatively flat as a percentage of sales | no change |
Net debt leverage | FY 2024 | Closer to 3.5x by end of 2024 | Closer to 3.5x by end of 2024 (down from 3.9x at end of Q3 2024) | no change |
Free cash flow | FY 2024 | Expected to be positive | Expected to remain positive | no change |
2025 Directional Guidance | 2025 | No prior guidance | Expects similar dynamics for existing product portfolio in 2025 with the absence of the SynerGraft pulmonary valve increase benefit and continued EBITDA margin expansion | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
On-X Heart Valve | In Q1, the discussion focused on strong performance with market share gains, significant reductions in major bleeding, and pricing opportunities (e.g., 87% bleeding reduction, 30% global and over 50% U.S. market share). In Q2, the valve was again highlighted with 15% revenue growth and clinical benefits, emphasizing its competitive positioning. | Q3 continued to underscore the consistent strong performance of On-X with 15% revenue growth, expanding market share both in the U.S. and internationally, and reaffirmed clinical benefits (e.g., low INR maintenance and substantial bleeding reduction). | Consistent positive performance across periods with steady clinical and revenue growth. |
Robust Pipeline Development | In Q1, the pipeline for NEXUS and AMDS was described as having transformative long-term potential with promising clinical data (e.g., reduced mortality and adverse events). In Q2, enrollment progress and market opportunity for AMDS (addressing a $150 million searchable market) were emphasized, along with the ongoing U.S. IDE trial for NEXUS. | Q3 provided more detailed updates with the TRIOMPHE trial for NEXUS fully enrolled and clear PMA submission timelines for both NEXUS and AMDS, reinforcing their role in long‐term growth. | Consistent focus on a transformative pipeline with more granular updates emerging in Q3. |
Aortic Stent Graft Growth | Q1 earnings highlighted robust double-digit growth (approximately 19% year-over-year) driven by proprietary products and global market expansion. Q2 reiterated double-digit performance (13% constant currency revenue growth) with an emphasis on expanding into new geographies like the U.S. and Japan. | In Q3, stent graft products achieved 13% growth on a constant currency basis, driven by an aggressive global expansion strategy and cross-selling opportunities across regions. | Steady double-digit growth focus maintained with consistent messages across periods. |
Operational Improvements in Supply Chain | Q1 detailed improvements were noted in tissue business yields, stable stent graft supply, and enhanced SynerGraft pulmonary valve availability, supporting revenue growth. | Q3 did not mention any operational improvements, similar to the absence of such details in Q2. | Topic is no longer emphasized in the current period. |
Transparency in Product/Geographic Performance | In Q1, while high-level growth numbers and regional performance (e.g., Latin America, EMEA, Asia) were provided, the company refrained from disclosing granular product details. Q2 maintained this approach by providing overall growth metrics without a detailed breakdown for competitive reasons. | In Q3, management explicitly declined to provide detailed product segmentation or specific country-level performance, reiterating the same high-level reporting strategy. | Consistent non-disclosure approach is maintained across periods. |
Convertible Debt Uncertainty | Q1 mentioned flexibility around convertible debt with no near-term maturity overhang and expectations of a declining net leverage ratio. Q2 did not address this topic. | Q3 provided a detailed update on convertible debt maturity, describing a delayed draw term loan option to settle debt if the stock price exceeds a set threshold, with net leverage improving to 3.9x. | A new, more detailed focus on convertible debt emerges in Q3. |
Regulatory/Administrative Delays (BioGlue in China) | Q1 indirectly touched on timing issues in the Asia Pacific region (3% revenue decline attributed to distributor order timing) without specifically mentioning regulatory delays. Q2 did not mention any delays. | Q3 explicitly discussed regulatory and administrative delays for BioGlue in China, noting additional steps (reimbursement and hospital access) that are expected to delay commercialization by 9 to 12 months. | A new topical concern emerges in Q3, highlighting regulatory delays. |
Seasonal and Timing Challenges | Q1 discussed seasonal challenges impacting quarterly revenue forecasts and free cash flow (e.g., negative free cash flow due to annual bonus payments and distributor timing impact in Asia Pacific). Q2 acknowledged that Q3 is typically the lowest revenue quarter with some timing differences affecting results. | In Q3, there was only a limited reference to timing—such as the PerClot order timing—suggesting that seasonal challenges are less prominently emphasized compared to earlier periods. | Emphasis on seasonal and timing challenges has decreased in the current period. |
Shift Away from Legacy Products | Q1 and Q2 clearly stated that there was no shift away from legacy products like the SynerGraft pulmonary valve or the Ross procedure, emphasizing their continued importance as growth drivers. | Q3 reaffirmed that there is continued demand for legacy products, with no indication of moving away from them, maintaining supply and demand focus. | Consistent commitment to legacy products is maintained across periods. |
Mixed Sentiment on Financial Performance | In Q1, while strong revenue growth was highlighted, there was acknowledgment of pressures on free cash flow (negative figures) and margins, resulting in a mixed sentiment. Q2 presented uniformly strong financial performance with positive EBITDA margins and free cash flow. | Q3 reported robust top-line growth, improved EBITDA margins, and positive free cash flow, indicating a clear shift away from earlier concerns. | Sentiment has improved from a mixed picture in Q1 to uniformly positive financial performance in Q3. |
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AMDS Launch Timing and Revenue Expectations
Q: How should we think about the AMDS launch and revenue in 2025?
A: The company expects FDA approval for AMDS in Q4 2025, with a soft launch beginning then. Due to necessary steps like value analysis committees and surgeon training, revenue from AMDS in 2025 will be minimal. Investors are advised to model zero revenue for AMDS in 2025. , -
BioGlue China Market Opportunity
Q: What's the outlook for BioGlue in China and its revenue potential?
A: BioGlue represents a $20 million opportunity in China. However, meaningful revenue isn't expected until the second half of 2025 due to required national and provincial registrations and hospital listings. The rollout will be gradual over several years as the company penetrates the market and trains surgeons. , -
Gross Margin Outlook
Q: Any commentary on gross margins for Q4 and 2025?
A: Gross margins are expected to remain relatively flat year-over-year, with minor fluctuations due to revenue mix. Significant gross margin expansion is anticipated once new products are approved and enter the U.S. market. For now, it's advised to model gross margins as fairly flat. -
Convertible Notes and EPS Impact
Q: Should we factor in conversion of notes when modeling EPS?
A: The company is still evaluating whether to convert the notes or draw on the delayed draw term loan, depending on interest rates and stock price. Investors should take the most conservative approach they deem appropriate—either assume conversion to shares or additional interest expense—as the decision could go either way. -
On-X Market Share and Growth Outlook
Q: What's driving On-X market share gains and the outlook for 2025?
A: On-X holds 55% U.S. market share and 30% globally, with gains driven by post-approval trial data showing an 87% reduction in major bleeding. The company expects U.S. market share to continue increasing and sees significant international opportunities. On-X is projected to maintain its double-digit growth, as it has for the past 6–7 years. -
Aortic Stent Graft Business Performance
Q: Which products are driving the aortic stent graft business growth?
A: The company has about six products covering the entire aorta, with each growing at double-digit rates. Growth is robust across Europe, Asia, and Latin America, fueled by a differentiated portfolio and global expansion efforts. -
SynerGraft Pricing and Supply Constraints
Q: Is there room for additional price increases for SynerGraft?
A: After a significant price increase last year, there's not much room for further increases on SynerGraft. The business faces supply constraints due to donation limitations, and while they're working on improving yields, they can't simply produce more. , , -
PerClot Manufacturing Agreement Impact
Q: What is the revenue impact when the PerClot agreement ends?
A: The potential headwind when the PerClot manufacturing agreement ends is about 1 percentage point of revenue. The timing depends on when the other party takes over production, but it's anticipated they'll have the agreement through full-year 2025. The impact on EBITDA is minimal. , -
Preservation Business Growth Factors
Q: How will prior price increases affect the preservation business in 2025?
A: A significant price increase for SynerGraft in Q2 2023 led to elevated growth rates in early 2024. For 2025, there won't be the benefit of that price increase, so growth rates in the tissue business will normalize without that prior uplift. -
International Expansion Insights
Q: Can you provide details on growth in specific international markets?
A: While not providing specifics to avoid alerting competitors, the company has significantly expanded its presence in Asia (from 1 to 50 employees) and Latin America (from 0 to 25 employees), going direct in key markets like Brazil and several countries in Asia.