LeMaitre Vascular, Inc. 2026 Q2 Earnings Call

Please go ahead, sir. Good afternoon, thank you for joining us for our Q2 2026 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, might, and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, August 4th, 2026, 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 such as organic sales growth. A reconciliation of GAAP to non-GAAP measures 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.

Thanks, Dorian. Artegraft grew 34% in Q2, accounting for 21% of sales. Grafts up 23%, shunts up 18%, and patches up 4%. Each posted records, as did EMEA up 18%, APAC up 18%, and the Americas up 5%. Sales grew 10% organically in Q2, 7% from price, and 3% from units. Catheters were down 11% in Q2 due to recall-driven overstocking in the year-earlier quarter. Excluding catheters, Q2 2026 organic growth was 12%, 7% from price and 5% from units. Notably, we underperformed our Q2 2026 sales guidance by $1.1 million for three reasons, each with roughly the same impact in the quarter. The strengthening of the dollar after we gave guidance on May 5th, the impact of the Middle East war continued to delay export revenues, and cardiac allograft sales have been hampered by supply. Our guidance reflects these three items continuing to hamper sales in H2.

Turning to the positive, Artegraft has become our fastest and largest product, and we're investing in the product in several ways. Number one, more international approvals. Number two, longer sizes for leg bypasses, particularly for Europe. Number three, building out our sales force and our commercial infrastructure. International Artegraft sales advanced sequentially from $2.1 million in Q1 to $2.8 million in Q2. We now expect sales of $11 million in 2026 versus $4 million in 2025. Artegraft's approvals were received in Vietnam, Morocco, and Turkey in Q2. We are now approved in 56 countries. We also expect three large approvals in 2027, Korea, Brazil, and India. In July, we met face-to-face with Japan's PMDA. The initial response was positive. We might receive approval for the AV indication by 2029/2030 without a clinical trial.

Canada approved Artegraft last year. The launch is set to occur this September. We're also working to make longer Artegrafts available. Because European surgeons use Artegraft for leg bypasses, our longest Artegraft, which is 50 centimeters, is now in high demand. The Artegraft packaging tube is just 53 centimeters long. We plan to make approval filings for longer tubes in the U.S. and Europe in Q4 2026, for sales of these longer bovine grafts could start in H2 2027. Here's an update on the QuickStitch project. We made a pre-submission filing to the FDA for this indication. Unfortunately, we now believe that a clinical trial is likely. If we like to follow this path, the timeline would be measured in years, not quarters. As a follow-up to the 2025 warning letter, the FDA re-audited our New Jersey facility in June 2026.

At this audit, we believe that we adequately addressed three-fourths of their 2025 observations. On June 25th, the FDA provided us an additional set of quality systems observations. As per standard practice, we responded on July 16th. The observations from these audits have not disrupted our ability to produce, ship, or invoice. As for RFA, allograft revenues grew 17% in Q2. We now distribute these cadaver tissues in four countries: the U.S., Canada, the U.K., and Germany. German surgeons have recently performed three implants. Our German sales force reports high levels of interest from German surgeons due to the quality and availability of our tissues. In Ireland, we have just responded to our first set of questions from the Irish Tissue Authority. We await an inspection of our Dublin facility. Current expectations are for an Irish approval in H1 2027.

Long term, the Dublin facility is expected to be used for Irish as well as Pan-European RFA distribution. Here's the timeline for when we expect to begin distributing tissues in several other countries. H1 2027, Austria, Holland, and Spain. H2 2027, Australia and Switzerland. As always, we continue to hire sales reps and build out our commercial infrastructure. We ended Q2 with 163 sales reps. We still plan to end the year with 170 to 180 reps. Nine reps have signed and are set to start in Q3. 13 requisitions are currently open. In July, we signed a Polish go-direct term sheet. We expect to sell direct to hospital from a Warsaw warehouse this December. In addition to Dublin and Warsaw, we have five other warehouse projects underway. Our primary warehouse has tripled and moved to Billerica, Massachusetts. Madrid has doubled and now ships all products.

Finally, Hereford, U.K., is moving to the London area in Q4. In total, that's seven new or larger warehouses opening in 2026/2027. We believe these infrastructure projects will help make a tighter connection between LeMaitre and its worldwide hospital customers. Higher ASPs, geographic expansion, and disciplined spending produced 10% sales growth and 23% EPS growth in Q2 2026. Our 29% op margin in Q2, as well as our 17% ROE, underscores the strength and profitability of our business. Full year guidance implies 11% organic sales growth and 21% EPS growth. I'll now turn the call over to Dorian.

Thanks, George. LeMaitre's Q2 organic revenue growth of 10%, consisting of 7% price growth and 3% unit growth, was impacted by the Q2 2025 stocking orders following our package relating catheter recall. As George noted, excluding catheters, organic growth across the remaining portfolio was 12%, consisting of 7% price and 5% unit growth. The 5% unit growth was highlighted by the strong unit growth of Artegraft and Cardiac RestoreFlow. In Q2 2026, gross margin was 72.1%. The 210 basis point increase year-over-year was driven primarily by higher ASPs, reduced shipping costs, and positive product mix, supported in particular by growing high-margin Artegraft sales. We remain on track to transfer tissue processing from our Fox River Grove facility in Illinois to our Burlington, Massachusetts headquarters before the end of the year, and we have already yielded tissue in Burlington.

In addition, we began shipping our core devices in June from our new 34,000 square foot high bay warehouse in Billerica to U.S. domestic customers and our international subsidiaries and distributors. Operating expenses in Q2 2026 were $34.4 million, an increase of 5% versus Q2 2025, resulting from continued hiring restraint as full-time employees increased marginally from 658 at June 30, 2025, to 660 at June 30, 2026. We do anticipate continued 2026 investment in expanding our global sales force, including the new sales reps joining in Q3. Q2 operating income was a record $20.4 million, up 26% and resulting in an operating margin for the quarter of 29%. Net income increased 24% year-over-year to $17.1 million, and fully diluted EPS was $0.74, up 23%.

Our fully diluted EPS calculation for Q2 2026 triggered the if converted accounting for our convertible debt, increasing the fully diluted share count to 24.5 million for the basis of this calculation. We ended Q2 2026 with $376 million in cash and securities, an increase of $9 million in the quarter. Cash from operations generated $16 million in Q2. We incurred $2.3 million in capital expenditures and paid $5.7 million in dividends to shareholders. We have updated our full year revenue guidance to $276.3 million and 11% reported revenue growth. Expected reported revenue has declined as we updated our FX assumptions for the strengthening U.S. dollar since our February and May guidance.

We have reduced full year organic revenue growth from 12% to 11% to reflect our Q2 results and the revenue impact related to our export business and slowing growth for RFA, largely due to anticipated supply constraints. We anticipate full year gross margin of 72.4%, a 200 basis point improvement from adjusted 2025. Full year operating income of $76.8 million, resulting in a 28% operating margin for 2026 and an op inc increase of 19% from adjusted 2025. We have also updated our guidance on fully diluted earnings per share to $2.89, up 21% from adjusted 2025. Our guidance implies a fourth consecutive year of strong double-digit revenue growth and 20% plus EPS growth. We will now take questions.