Yahoo Finance LeMaitre Vascular, Inc. (NASDAQ:LMAT) Q1 2024 Earnings Call Transcript
LeMaitre Vascular, Inc. (NASDAQ:LMAT) Q1 2024 Earnings Call Transcript May 2, 2024
LeMaitre Vascular, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day ladies and gentlemen. Welcome to the LeMaitre Vascular First Quarter 2024 Financial Results Conference Call. As a reminder, today’s call is being recorded. At this time, I would like to turn the conference over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead sir.
J.J. Pellegrino: Thank you, operator. Good afternoon and thank you for joining us on our Q1 2024 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 meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those 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 2nd, 2024, 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 10-K 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, which include organic sales growth, as well as operating income, operating expense, and EPS excluding special charges. A reconciliation of GAAP to non-GAAP measures is 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.
George LeMaitre: Thanks J.J. Q1 was an excellent quarter with 14% sales growth, a 68.6% gross margin and 62% EPS growth. We posted record sales for each of our three geographies and nine of our 12 product categories. I'll focus my remarks on the top line, our sales force, and some regulatory updates. Artegraft were up 31% in Q1, bovine patches 13%, and carotid shunts 27%. APAC was our strongest region, up 44% in Q1, driven by $600,000 of Q1 sales growth from our new sales offices in Korea and Thailand. EMEA sales were up 17%, while the Americas were up 10%. Notably, Canada was up 31% and the U.K. was up 29%. We ended Q1 with 137 reps, including 62 in North America, 52 in Europe, and 23 in APAC. We expect to have 150 reps on staff at the end of 2024 with most of the hiring in North America, where our average territory size is $2.2 million.
In Europe, the average territory size is $1.1 million and APAC is $700,000. We also continue to add international sales offices. Last Monday, we had a ribbon-cutting ceremony at our new Paris sales office. France is our sixth largest country. Opening this office should improve our connections with French surgeons and hospitals as well as our eight French sales reps. We've experienced a strong link between opening an office and sales growth. A Zurich office might be next. We seem well-positioned for the 2027 MDR CE Mark deadline. Based on recent discussions with our notified bodies, we now expect to receive an additional 11 MDR CE Marks by September 30. In total, we should possess 14 of our 22 MDR CE Marks by the end of the third quarter, and we expect to receive the remaining approvals by the end of 2025.
Our Artegraft CE Mark filing was made in December 2023. When we acquired Artegraft in 2020, it was cleared for sale only in the U.S., so receiving European approval will be a nice opportunity for our largest U.S. product line. We sold $33 million of autograft in the U.S. in 2023. We now believe that Artegraft will receive its CE Mark by Q4 2025. In the meantime, we're also submitting Artegraft for approval in Canada, Australia, Japan, Korea, Thailand, and Singapore. Separately, we continue to pursue allograft approvals in Ireland and Germany. We believe that one of these approvals will happen in 2024 and another one in 2025. These are not MDR CE Marks, but rather individual approvals by each country's human tissue authority. To conclude, Q1 was an excellent quarter with 14% sales growth, a 68.6% gross margin and 62% EPS growth.
We believe our profitability and cash balance provide us strategic optionality. With that, I'll turn the call over to J.J.
A - J.J. Pellegrino: Thanks George. We continue to apply pricing floors to more geographies and more devices. Pricing floors are possible because of our high-quality differentiated devices selling into niche markets. Average selling price has increased 8% in Q1 2024, while units increased 3%. This follows our full year 2023 ASP increase of 12% and unit growth of 5%. In Q1 2024, we posted a gross margin of 68.6%, up 300 basis points year-over-year. The increase was driven by higher ASPs and productivity improvements. More specifically, a more efficient manufacturing team continues to benefit the P&L. In Chicago, our allograft manufacturing group had a strong Q1 and then Burlington quality costs remain in check. Average selling price increases improved the gross margin by approximately 2.5% in the quarter, and our guidance calls for a 68.6% gross margin for the full year.
Operating expenses in Q1 2024 were $24.8 million, an increase of 8% versus the Q1 2023. The increase was driven largely by more employees, including 12 more sales professionals. The 8% increase compares favorably to our 20% adjusted operating expense increase in the full year 2023 and reflects our shift from post-COVID rehiring to a more restrained hiring posture in 2024. Q1 2024 operating income increased 51% year-over-year to $11.9 million and resulted in an improved operating margin of 22%, up from 17% in the prior year period. EPS was $0.44 in the quarter, up 62%. We ended Q1 2024 with $108 million in cash and securities, an increase of $3.2 million in the quarter. The increase was driven by cash from operations of $5 million. Separately, our new ERP system went live in the U.S. in Q1 2024.
The system should improve real-time reporting, streamlined financial processes, and provide more sophisticated analytics. Implementation at our overseas entities will take place in 2025 and beyond. This project should cost $7 million to $10 million, and the annual P&L impact will be about $1 million. Regarding guidance, we are forecasting improved operating leverage in 2024, driven by restrained operating expense growth and an improved gross margin. Our updated guidance includes an operating margin of 22% in 2024 versus 19% in 2023, and 17% in 2022. For more details, please see today's press release, but a few Q2 highlights include; sales growth of 10%, gross margin of 68.6%, and EPS growth of 31%. And for the full year, 2024 guidance has increased to sales growth of 11%, gross margin of 68.6%, and EPS growth of 33%.
With that, I'll turn it back over to the operator for questions.
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