LeMaitre Vascular, Inc. (Nasdaq:LMAT), a provider of vascular devices, implants and services, announced today Q3 2018 preliminary unaudited results, provided Q4 2018 and updated full year 2018 guidance, and announced a $0.07/share dividend.
Q3 2018 Preliminary Results
- Sales of $24.2mm vs. $24.8mm in Q3 2017 (-3% reported, +1% organic)
- Gross margin of 71.4% vs. 70.8%
- Operating income of $4.6mm vs. $5.1mm, (-9%)
- Operating margin of 19% versus 20%
- Net income of $4.3mm vs. $5.0mm, (-14%)
- Earnings of $0.21 per diluted share vs. $0.25, (-15%)
- EBITDA of $5.5mm vs. $6.0mm, (-8%)
- XenoSure sales of $5.7mm vs. $5.4mm (+6% reported, +7% organic)
On an organic basis, sales in the Americas were up 2% in Q3 2018 vs. Q3 2017, flat in Europe and down 5% in Asia-Pac Rim. Product growth in the quarter was driven by XenoSure and carotid shunts. The decline in reported sales was due in part to the April 2018 divestiture of the Reddick general surgery product lines, as well as the other factors described below.
Operating expenses increased 1% in Q3 2018 to $12.6mm. At quarter’s end the Company employed 106 sales reps, a 19% increase vs. 89 at September 30, 2017. The Company recently hired a Vice President of Asia-Pac Rim, opened an Asia-Pac Rim sales office in Singapore and received Australian XenoSure approval.
Cash on hand at September 30, 2018 was $45.6mm, up $3.7mm from June 30, 2018 excluding the $11.0mm acquisition payment for Applied Medical’s clot management business.
George W. LeMaitre, Chairman and CEO, said, “Q3 was a frustrating and humbling quarter, and my often-stated 10/20 aspiration for our business is now incongruous with our 2018 results. As a 16% shareholder, I know we need to do much better. We owe our shareholders higher organic sales growth and growing profits.”
Acquisition of Clot Management Business from Applied Medical
On September 20, 2018, the Company acquired the clot management business of Applied Medical for $14.2mm; $11.0mm was paid at closing and $3.2mm will be paid in two post-closing installments. The acquired business includes Syntel embolectomy and thrombectomy catheters, Python over-the-wire embolectomy catheters, Latis graft cleaning catheters, and irrigation catheters. Sales of the acquired business during the latest 12-month period were $3.4mm.
The Company expects the acquired business to add $0.5mm to $0.6mm in Q4 2018 sales and to have no impact on Q4 2018 operating income due to short-term channel transition costs. Following the acquisition, the Company believes it is now the second largest provider of embolectomy catheters worldwide. The acquired catheters feature latex-free balloons, complementing LeMaitre’s latex balloon catheters.
Quarterly Dividend
On October 4, 2018, the Company’s Board of Directors approved a quarterly dividend of $0.07/share of common stock. The dividend will be paid December 6, 2018 to shareholders of record on November 20, 2018.
Q3 2018 Results Versus Prior Guidance
The following items contributed to the $1.8mm difference between the Company’s Q3 2018 preliminary sales results and the midpoint of the Company’s July 26, 2018 guidance:
Item
| Actual Sales Versus Expected |
Comment
|
| Allografts | ($0.7mm) | WW allograft sales were down 5% in Q3 following record sales in Q2. The Company lost some inherited customers in its transition to a direct-to-hospital model from agents/distributors; tissue supply also constrained sales. |
| Valvulotomes | ($0.5mm) | WW valvulotome sales were down 3% in Q3 following record sales in Q2. Q3 sales were weak in direct European markets. |
| Export | ($0.4mm) | WW export sales to distributors were down 36% in Q3. Weakening currencies, economies and/or ordering patterns resulting in reduced orders from Turkey, Korea, Saudi Arabia, Russia, Greece, etc. |
| China Product Return | ($0.1mm) | Rationalizing China distribution channel |
| Hurricane Florence | ($0.1mm) | – |
| Stronger USD Since Guidance | ($0.1mm) | – |
Q4 2018 and 2018 Business Outlook
| Previous Guidance (7/26/2018) | Current Guidance | ||
| Q4 2018 Sales | NA | $25.6mm – $26.4mm (Midpoint: -1% reported, +1% organic) | |
| Q4 2018 Gross Margin | NA | 70.3% | |
| Q4 2018 Operating Income | NA | $4.8mm – $5.4mm (Midpoint: -20%) | |
| Q4 2018 Earnings Per Share | NA | $0.18 – $0.20 (Midpoint: -12%) | |
| 2018 Sales | $105.3mm – $107.9mm (Midpoint: +6% reported, +7% organic) | $102.8mm – $103.6mm (Midpoint: +2% reported, +3% organic) | |
| 2018 Gross Margin | 71.3% | 70.7% | |
| 2018 Operating Income | $27.6mm – $29.4mm (Midpoint: +35%) | $25.8mm – $26.4mm (Midpoint: +24%) | |
| 2018 Earnings Per Share | $1.04 – $1.11 (Midpoint: +25%) | $1.01 – $1.03 (Midpoint: +19%) | |
Conference Call
Management will conduct a conference call tomorrow, October 5, 2018 at 8:00am ET to review the Company’s financial results and discuss its business outlook for the remainder of the year. The conference call will be broadcast live over the Internet. Individuals who are interested in listening to the webcast should log on to the Company’s website at www.lemaitre.com/investor. The conference call may also be accessed by dialing 844-239-5284 (+1 512-961-6497) for international callers), using passcode 8692409. For individuals unable to join the live conference call, a replay will be available on the Company’s website.
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