Artivion, Inc. Price & Performance (AORT)

Thanks, operator. Good afternoon, and thank you for joining the call today. Joining me today from our Tibians management team are Pat Macon, CEO and Lance Berry, CFO. Before we begin, I'd like to make the following statements to comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risks, and uncertainties in our forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward looking statements include statements made as the company's or management's intentions, hopes, beliefs, expectations or predictions of the future. These forward looking statements are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from these forward looking statements. Additional information concerning Additional information concerning certain risks and uncertainties that may impacts these forward looking statements is contained from time to time in the company's SEC filings and in the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call on the Investor Relations section of the OTIBIAN website. Now, I'll turn over to [indiscernible] Year at Artivion.

As we achieved total constant currency revenue growth of 10% excluding PerClot. We also expanded EBITDA margins by three ten basis points, resulting in adjusted EBITDA growth of 32% year over year. Enabling us to deliver results while making breakthrough progress on several key clinical and regulatory initiatives, in further expanding our global footprint. We entered the New Year with even greater conviction in our ability to execute execute our best in class multi pronged PMA focused pipeline.

And deliver sustained double digit revenue growth while growing EBITDA at least twice the rate of constant currency revenue growth. Before reviewing the fourth quarter performance, and our expectations for 2025, I'd like to provide an update on the previously disclosed November 24 Cyber security incident. Immediately upon discovering that the threat actor had accessed our systems, we initiated business continuity plans took action to take certain systems offline, and engaged external advisors to contain and remediate the incident. Due to our team's immediate response, we mitigated the threat actor's ability to adversely impact our systems the short term disruption to our business. While we effectively operated for the final few weeks of the quarter, we estimate the incident had a negative impact of a approximately 4,500,000.0 on our Q4 revenue. [indiscernible] are now back to operating at normal levels. However, our manufacturing facilities and tissue process the beginning of the incident in late November through January.

Although this has challenged near term tissue and onyx supply, we do not expect this incident to meaningfully impact our business for the full year of 2025 and our 2025 guidance reflects that. Specifically, we expect our tissue revenues to be significantly lower than normal in Q1 the difference being recovered over the remainder of the year.

As we've discussed previously, significant portion of our tissue revenue comes from Synograft, pulmonary valves. In this case, our demand outstrips supply for these valves every quarter and therefore we hold no inventory. Importantly, we continue to receive normal levels of donations and processed tissue throughout the period of the cyber incident. And therefore, we do not anticipate any meaningful impact for the full year. However, the lead times associated with tissue that were in process or received during that time period were be longer than normal resulting in tissues that would have been released in Q1 being released later in the year. Similarly, but to a lesser extent, our lead times for Onyx temporarily extended And as a result, we expect to have some stocking distributor orders that would have occurred in Q1 to occur later in the year. Lance will provide additional details in his remarks, on the impact to Q4 as well as the timing of our 2025 revenues. Now on to our Q4 results. From a financial perspective, our Q4 performance was driven by continued growth across our product portfolio, as well as continued benefit from regulatory approvals and commercial footprint expansion in key international markets like Latin America.

From a product category perspective, Onex revenue increased 10% year over year on a constant currency basis as we continue to take market share globally with the only mechanical aortic heart valve that can be maintained at a low INR of 1.5 to two point zero. Based on feedback from the field, our recent market share gains the proven clinical benefits of the Onyx aortic valve, we maintain a strong conviction that the Onyx is the best in class aortic valve on the market and we'll continue to take market share worldwide. In addition, we are encouraged by significant new data that was presented at the Society of Thoracic Surgeons Meeting at the January. The data, which also published in JAK simultaneously, which is the Journal of American College of Cardiology, showed that across 109,000 patients from the STS database, mechanical aortic valves had a statistically significant improvement in mortality compared to surgically implanted patients under 60. This is a significant opportunity for the Onyx valve and gives us even greater confidence we should be able to continue to double digit growth for the foreseeable future. Also in Q4, our Stent graft revenues grew 8% on a constant currency basis in the fourth quarter compared to the same period last year and was one of the areas more heavily impacted by the cyber incident.

Which Lance will cover in more detail in his section. Our Stent graft portfolio remains a key component to our growth strategy and we're encouraged by our our products which are driven by our differentiated product portfolio that are focused on complex segments of the stinkraft market. Today, the products in our Stent graft portfolio are primarily sold in Europe, where we leverage our existing direct sales infrastructure to create significant cross selling opportunities across our unique aortic product offering. Our pipeline consists largely of bringing some of these proven products to The U. S. And Japanese markets representing significant growth opportunity. I will detail shortly our expectations for the impact of AMBS in The U. S. BioGlue grew 7% on a constant currency basis compared to the same period last year.

As a reminder, we received regulatory approval for BioGlen China last quarter and we're continuing to work through some additional administrative steps to get access to the hospital level. These steps are expected to take about six to nine months, Therefore, we expect to begin commercializing BioGlobe in China in the second half of twenty twenty five. BioGlue has been a great product for patients, for many years and we are excited to be able to bring this technology to another large market. To meet that approximately twelve thousand patients with acute type dissection could benefit from BioGlue each year. Lastly, tissue processing was the area most heavily impacted by the cyber incident, declined 8% year over year on a constant currency basis in Q4. From a geographic standpoint, continue to see results from our growth initiatives across Latin America and Asia Pacific, primarily through new regulatory approvals and commercial footboard expansion. Latin America and Asia Pacific delivered constant currency revenue growth of [indiscernible] in the fourth quarter is in 2611% for the full year. We continue to anticipate strong revenue growth for both regions over the coming years as continue to leverage our industry leading product portfolio in those regions.

I will now turn to our product pipeline and our recent significant regulatory development with the AMDS HDE. Stated simply, the Humanitarian Device Exemption or HDE represents a significant milestone achievement for Artivion. For context, an HD is a marketing application for a product that has been designated as humanitarian use device. AMBS received humanitarian use device and breakthrough designations. Due to its intended benefit for patients the treatment and diagnosis of a rare disease or condition, which other comparable options currently exist.

The HD allows for commercial distribution of AMBS in The United States prior to the receipt of any PMA. The HD for AMDS was granted based on the full primary cohort thirty day data from the Percever U. S. IDE trial. Results from the ID trial and the original DARCH trial demonstrate superior clinical benefits of the groundbreaking nature of this technology. And we believe this HDE validates even further data from the Percevere trial completed enrollment of November of twenty twenty three demonstrated statistically significant reduction in all cause mortality in primary major adverse events. Specifically, the persevered area out to thirty days, the primary endpoint demonstrated a statistically significant seventy two percent mortality and a fifty four percent reduction in major adverse events compared to the current standard of care. Finally, the results of both these trials demonstrate no dane tears in any patient treated with AMBS. Including the now five year data follow-up from the DART study.

For context, gain tears occur in up to seventy percent of patients following a hemiarch repair without AMDS. The elimination of DANE is an important clinical outcome as patients who experience a DAME will have worse clinical outcomes including increased mortality, [indiscernible] Since receiving the HDE, the one year data from AMDS persevere clinical trial was presented at late breaking sessions at the STS in Los Angeles in late January. Late breaking data from our AMBS persevere trial demonstrated sustained benefit of AMDA's AMDS out to one year with mortality in the AMDS group fifty percent lower than the reference cohort. There were also zero occurrence of dane compared to the reference cohort which could have a range of up to seventy percent. In addition, there were minimal new occurrences of stroke, renal failure requiring dialysis, or myocardial infarction.

These data build on the positive findings from the thirty day readouts further supporting the life saving nature of the AMBS technology. So we're very excited by the FDA decision to grant PHTE It is now will now only enable us to begin selling the product ahead of the PMA But it also HD stands to meaningfully benefit patient outcomes and save lives. Lance will cover the expected financial impact of the HD in twenty But I did want to cover some specifics related to the HD and the product. There are three steps that each center will have to complete before planning an AMDS as part of the AMDS launch process. First, each hospital will need to receive a site wide IRB before implanting the AMDS. Except in the case of an emergency use.

Second, we will need to have AMDS approved by the Hospital Value Analysis Third, surgeons and their clinical staff will need to be trained on the device. Lastly, from a market perspective, for those of you familiar with HTEs, there is a limit of 8,000 devices that can be implanted annually. In the case of AMBS, this limit is larger than the total number of acute DEBEGI Type one dissections that occur annually in The U. S. So from a practical standpoint, this limit is not an issue.

I'd like to update you on our pipeline. On AMDS, we are focused on securing our PMA. In Q4, we submitted our second PMA module for MBS to the FDA and are currently working to complete some additional non clinical bench top testing. This testing is pursuant to recently adopted international standards by the FDA and is not related specifically to AMDS. To account for this additional testing submission as well as the FDA review time of this data, we are now anticipating PMA approval for AMBS in mid-twenty twenty six. Importantly, given the HTE, we do not view this delay as having meaningful impact on our ability to generate AMBS revenue the meantime, Additionally, EndoSpan is expected to present its thirty day data from [indiscernible] at the AATS Annual Meeting in early May. Assuming the data shows the initial trial endpoints have been met, NexSys remains on track for approval in the second half of twenty twenty six. [indiscernible] Our strong financial, clinical and regulatory performance in '20 positioned us well for 2025 and beyond. And reinforce our confidence that we can deliver sustainable double digit revenue growth drive EBITDA margin expansion and grow adjusted EBITDA at twice the rate of constant currency revenue growth.

With that, I'll now turn the call over to Lance. Thanks, Pat, and good afternoon, everyone. Before I begin, I'd like to remind you to please refer to our press release published earlier today for information regarding our non GAAP results including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year over year basis and revenue growth rates will be in constant currency unless otherwise noted.

Total revenues were $97,300,000 the fourth quarter of twenty twenty four, up 3% compared to Q4 of twenty twenty three.

Meanwhile, adjusted EBITDA increased approximately 15% from $15,300,000 to $17,600,000 in the fourth quarter of twenty twenty four. Adjusted EBITDA margin was 18% in the fourth quarter, 170 basis point improvement over the prior year, driven by a two ten basis point reduction in non GAAP adjusted general and administrative and marketing expense as a percentage of revenue. For the full year, total revenues were $388,500,000 up 9.4% constant currency currency excluding per clot, despite the approximate one percentage point headwind from the cyber incident. Adjusted EBITDA grew 32% for the full year three times the rate of revenue growth.

This resulted in adjusted EBITDA margin of 18% of three ten basis point improvement from 2023. As Pat mentioned, we delivered these results against the challenging backdrop the November 2024 cyber incident Due to great work by our team, the incident was managed with minimal impact to our customers. Today, we are operating at normal levels with some minor inefficiencies we we expect to be resolved in the near term. To quantify, we estimate that the disruption associated with the vent had a negative revenue impact of approximately $500,000 and negative adjusted EBITDA impact of approximately $2,000,000 in Q4. As a result, the cyber incident reduced Q4 revenue growth by an estimated 5% and full year growth by approximately 1%. We're pleased with our adjusted EBITDA results which landed above the midpoint of our guidance despite the Q4 challenges. And reflects strong operational leverage. We continue to service customers throughout the temporary disruption do not expect any meaningful impact on our business from the incident for the full year 2025. However, it will have some impact on the individual quarters for the year which I will cover in the guidance section of our prepared remarks.

To help contextualize our Q4 results, I'll provide you some additional details on the estimated impacts of the twenty twenty four cyber event. We were unable to ship approximately $1,000,000 worth of orders on the last day of the quarter that were ready to be shipped. This $1,000,000 is split evenly between tissue and stem grafts. The remaining $3,500,000 in Cyber Event cyber incident headwinds related to parts of the business where we do not typically carry an inventory buffer. As we have previously discussed, demand in a large part of our tissue business outstrips supply every quarter and therefore we hold no inventory. While we continue to receive and process tissue throughout the incident, Due to the cyber event, we were less efficient unable to process as much tissue as we normally would have at the end of the quarter. We estimate this had a roughly $2,000,000 negative impact. The last $1,500,000 impact was related to a portion of our Stent graft business that is made to order. We continue to produce this product, but less efficiently than normal resulting in less product availability than would otherwise have been anticipated. On BioGlue and Autics, we were able to meet demand with inventory on hand as reflected in these products' respective Q4 growth rates which were generally in line with our expectations.

From a product line perspective, on a constant currency basis, Onex revenues increased 10% and grew 8%.

BioGlue revenues grew 7% and tissue processing revenues declined 8% in the fourth quarter. Excluding the estimated impact from the cyber incident, tissue processing would have grown a approximately 3% and stent brass would have grown approximately 16%. Other revenue declined by approximately $600,000 in the fourth quarter twenty twenty four driven by per class. As a reminder, we sold the Perk Lot business in 2021 and are currently in the process of transferring manufacturing. As a result, we expect to continue generating a limited amount of zero margin revenue from PerClot until the transfer is complete. For context, excluding PerClot, our underlying business would have grown 10% for the full year 2024 compared to 2023 and eleven percent excluding both PerClot and the cyber incident.

Our as reported expenses included approximately $4,600,000 associated with the cyber incident, which are excluded from our adjusted EBITDA The $4,600,000 impact consists of external advisor fees and an idle plant We will also occur incur additional cyber related expenses in 2025.

We anticipate seeking insurance reimbursement for some of these costs but that process will take some time and we will exclude any insurance proceeds that we receive from adjusted EBITDA at that time as well.

Gross margins were 63% in Q4 and were negatively impacted by approximately two percentage points by the idle plant charge Gross margins were generally in line with prior year other than the impact of the idle plant charge. General, administrative and marketing expenses in the fourth quarter were 51,400,000.0 compared to $50,300,000 in the fourth quarter of twenty twenty three, Non GAAP general, administrative and marketing expense were $47,500,000 in the fourth quarter compared to $47,400,000 in the fourth quarter of twenty R and D expenses for the fourth quarter were $7,400,000 compared to $7,600,000 in the fourth quarter of twenty twenty three. Interest expense net of interest income was $9,400,000 as compared to $5,800,000 in the prior year Other income expense this quarter included foreign currency translation loss of $4,000,000 Free cash flow was $8,700,000 in the fourth quarter of twenty twenty four. As of December 31, had approximately $53,500,000 in cash and $314,300,000 in debt net of $5,800,000 of unamortized loan origination costs.

We do not anticipate the need to raise additional capital to fund our debt obligations, our investments our channels or our pipeline in the foreseeable future. Our net leverage at the end of Q4 was 3.8 prior year.

In regard to our capital structure, as stated in our eight ks filing in December, we anticipate all outstanding notes of our convertible debt due July 2025 to convert to common stock at maturity. We believe this approach will optimize our balance sheet to focus our multiyear commitment to deleverage and reduce our interest expense.

In summary, 2024 was an excellent year.

Excluding per clock, we grew revenue 10% and adjusted EBITDA an outstanding 32 and made incredible progress on our product pipeline. While the cyber incident was frustrating due to the impact on our people and our Q4 our full year performance was still outstanding. And now for our initial outlook for the full year 2025. We expect constant currency growth of between 1014% for the full year 2025, representing a reported revenue range of $420,000,000 to $435,000,000 At current rates, we expect foreign currency to have an approximately two percentage point negative impact on as reported revenue. As we look ahead, we expect to business to grow low double digits year over year over the long term driven by our portfolio of differentiated products and our best in class R and D pipeline. With our continued top line revenue growth and general expense management, we expect adjusted EBITDA to be in the range of $84,000,000 to $91,000,000 for the full year 2025 representing 18% to 28% growth over 2024 and two hundred basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. Assuming the convertible debt is converted to shares at maturity in July, at the midpoint of our EBITDA guidance range, we expect net leverage to be below two by the end of the year.

We expect gross margins to improve by about 100 basis points driven by mix benefit from U. S. AMDS sales and continued leverage from our global sales force and G and A infrastructure. R and D expense came in slightly below expectations in 2024 at 7% of sales and is expected to increase to closer to 8% of sales in 2025, which is towards the high end of our longer term expectation. We continue to expect free cash flow to be positive for the full 2025. For revenue, we expect similar dynamics as seen in 2024 except for the anticipated positive impact of the AMD SAGE. In 2024, we also had the benefit of one full quarter of the SGPD price increase, which benefited total company 2024 growth rates by approximately one percentage point. In general, that means for 2025 annual growth rates for tissue and bio glue in the mid single digits for Onyx in the low double digits, and for Stintgrass in the mid teens before consideration of the AMDS HDE.

As Pat outlined, there are several factors that will impact the timing of AMDS revenue under the HDE and therefore, revenue In addition, some factors driving AMDS adoption under the HDE such as IRB approvals and value analysis committee approvals are largely outside of our control. We expect to have much more visibility in each of these factors as we move through the year look forward to providing more detail on our next call. At this point, we are assuming a 1% to two percentage point positive impact during 2025 to our constant currency growth rate [indiscernible] With minimal impact on adjusted EBITDA, as we invest in year one launch activities. In this first year, we will be focused on making any investments necessary to ensure the product is launched successfully and is positioned for starter contribution in 2026 and beyond. Longer term, we expect this high margin product significant benefits to our adjusted EBITDA. As it relates to quarterly cadence, while we do not anticipate the Cyber Incident will have an impact on the full year 2025, we do expect it will create some fluctuation between quarters. The extended lead times in the tissue business in Q4 twenty twenty four and the first half of Q1 twenty twenty twenty five will result in but we expect to catch up over the remainder of 2025.

Additionally, while we were able to meet Onyx demand in Q4, with existing inventory on hand, our Onyx throughput in December and January We As a result, we anticipate we will have lower than normal distributor sales of Onex in Q1 but we will catch up with catch up over the remainder of the year.

Also, we anticipate AMDS sales to be minimal in Q1 and gross sequentially five. While we do not plan to provide quarterly guidance on a regular basis, given the expected non typical quarterly cadence, we are providing one time guidance for first quarter twenty twenty five revenue for clarity. We are forecasting our first quarter reported revenue to be in the range of $94,000,000 to 90,000,000 This represents roughly $10,000,000 less of primarily tissue and some OnX revenues than we would normally expect.

We anticipate this $10,000,000 will be caught up over the remainder of 2025 as we clear our tissue processing backlog and return Onyx inventory to desired levels. In summary, we are proud of our progress to date through our strong full year 2024 results and we are excited about the prospects of the business in 2025 and beyond. With that, I will turn the call back to Pat for his closing comments. Thanks Lance. So as you've just heard, our strategy is working. We're pleased with our strong performance in 2024, which positioned us well for double digit growth on the revenue side and twice as fast for EBITDA. More specifically, have the following key growth drivers will help us deliver on our continued revenue and EBITDA growth for 2025 and beyond. AMDS HD Allows Us To Begin Commercializing AMDS In The U. S. Prior to the PMA, which we're already in full process now. The recent data I mentioned about the Onyx versus bioprosthetic valves. Focusing on the mortality benefit in under six year olds in patients for mechanical valves versus tissue valves. Number three, BIAGOUX China regulatory approval. We said in the script, we will expect in the second half of this year, which continue to drive BioGlue revenue growth.

Number four, we're going to be submitting our full PMA for AMDS. We talked about that pushing back to mid-twenty twenty six.

And then finally, Nexus PMA will be showing their thirty day data, which is the primary endpoint of their FDA trial here in early May. Which gives us access to our next PMA assuming that they get approval. I want to thank our employees around the globe for their continued dedication to our mission and for being a leading partner to surgeons focused on aortic disease With that operator, please open up the line Thank you. We will now be conducting a question and answer session.

Our first question comes from the line of Rick Wise with please proceed with your question.

Thank you and Maybe let's just start off with your early AMDS commercial progress to date. It sounds like it's going well, but can you give us more detail, more color, more perspective on the number of hospitals that are interested the early physician feedback, just the The setup for for the year ahead Maybe you could talk us through that. Yes. Thanks, Rick. So let me just start with kind of the building [indiscernible] We obviously received the HTE in early December we had a couple of weeks of internal kind of paper we need to do. So device didn't really become available for shipment and selling until really late December. In January, we've trained our U. S. Commercial team which went extremely well. They're highly motivated and highly trained. Two weeks later at the January, we presented the one year Persevere data that I mentioned in my script where we show a fifty percent reduction in mortality at one year and still no danes whereas the control or the reference cohort had up to seventy percent gains. Our commercial team is in the process of The three steps, which is you've got to get an IRB, you've then got to go through Value Analysis Committee and then the surgeon's got to get trained.

Number of centers that are in the mix of that. We're not going to kind of break down and give you guys kind of our internal scorecard. We'll report the number every quarter in our Stent graft number. But I can tell you we've got roughly 55 feet on the street in The U. S. That are all actively pursuing AMDS accounts as we speak. Got you.

Don't want to be denser than usual. But help me better understand your clearly very high strong confidence 100% of the lost revenue will return throughout the throughout the year. And again, the part that confuses me is just that you think that wouldn't these patients that you might have implanted when they've gotten competitive device or some kind of competing procedure and so they're not going to come back and just talk about it on the tissue and on the OnX side, if you would. Just help us better understand.

Yes. I'll take a shot at that. First Rick and Craig can jump in. So I mean obviously there's going to be some patients that just can't wait and and we'll have to get some other some other device that the demand just so far exceeds our supply every single quarter. That I mean every quarter there patients that are getting other devices because they can't get ours. And we just have a high level of confidence of that when we can release these tissues, that they will be purchased by customers. There's just significantly higher demand than there is supply. And because we've continued to receive donations as normal, throughout this whole process, And we're processing them. It's just that it's taking longer.

So it's basically just that. I mean, because the donations coming in were still normal and that wasn't impacted. And because we don't see any change to the underlying demand, we don't see any reason why we shouldn't catch that up over the course of the year.

Yes. I mean, part of what's fueling it is the data. Right? So if you look at the two segments, the big drivers for our tissue business and for the Onyx business is the clinical data. I mean the RAS data, there was RAS data presented at American Heart November that shows it's the best aortic valve operation for younger patients under kind of 50. We literally sell every large pulmonary valve we have. So think your point is fair, like, are we missing on some right now? Yes. But we know exactly how much tissue we brought in, which was at the normal level throughout the Cyber Event we had to do some of cases that are going to take us longer to get it through the process. But we'll sell every one of them. And then same for Onyx, I mean, we were able because we had enough stuff in width [indiscernible] basically grow ONIX 10% in the fourth quarter during a cyber event, but we really depleted a lot of inventory because we weren't making bowels for a month. We will catch that up the new data I just talked about that was presented at SDS, one hundred and nine thousand patients, it basically shows that you will die more if you get a tissue valve if you're under the age of 60.

And we discussed the data. So we're super bullish on both Onyx and the SGPV for the 10% to 14% and feel very strongly about it. Got you. And just one last one for me if I could. I just want to make sure I'm fully understanding the timeline delay the PMA timeline delay for the AMDS pushed out to mid-twenty six. Is this conservatism mean, it seems like good news that you submitted the second module in the fourth quarter.

I'm just not clear what's delayed here and why are you pushing it out? Help us better understand. Thank you so much. Yes. No, it's it's fair, Rick. So I will say when we were working on the HDE, literally there was no PMA discussions going on. We focused 100% on the HD, which obviously I think makes sense. We got that approval in early. We were submitting modules. We submitted two modules in 2024. We started having our first discussions [indiscernible] the status of the PMA in January. And one of the things the FDA notified us about this is unrelated to any of this recent stuff, there's some news testing, bench testing they that are in the international standards. They're applying it to all companies and all devices, implantable devices. We're going to have to do for AMD. So this is a kind of a new test, some new testing they want us to do. Which everyone is going to have to do. And when you look at what the testing is and how long it takes and the submissions and everything else, it's going to add two quarters. And we're just being transparent with people. I personally don't think it has a big impact.

And the only the only real difference between the HDE and the PMA is getting an IRB we feel pretty comfortable that isn't going to change kind of the revenue trajectory. So yes, I mean, we're going to keep working it and try to bring that in, but That's the we're being transparent with folks.

Got you. Thank you.

Thank you. What's your question? All right. Thanks for taking the questions. I'll also start with one maybe on AMDS. Can you remind us just how many implanting sites or potential implanting sites you see in The U. S? The penetration into those sites you have with your existing sales force with other products?

Yes. I would say big picture, there's about 1,000 centers that do de Bekke type one dissection. As a rule, I mean, we basically self stocked to all those centers.

But as a rule of thumb, 80% of the volume is probably in the top 600 centers. Which is where we're focused. Again, we call it all, but we're not obviously going to go after all 1,000 at once. It's obviously Also, the volume tends to be skewed to a larger center. So So we have I would say we have great coverage of the 80% of the volume immediately and we'll have to work through kind of prioritization, which we've already done. On which ones we go after first. But obviously, we're going to go after the larger centers and then follow we have a whole kind of cadence to that launch.

Okay. That's helpful. And then just one more on the cybersecurity incident. Can you help us at an operational level, what is occurring that is preventing the processing? Is it extra steps that now need to occur? Is it just business unit leadership distraction? What exactly is kind of the bottleneck to producing or processing the tissue?

Things that we would normally use our systems for, we were having to do manually for a period of [indiscernible] is just extending the period of time that it takes to get through everything. And it really relates to tissues that were either in process at the time of the event or that were donations are received basically through January. If we receive a donation today, it processes through our systems normally. And it'll have a normal lead time. There was a two month period plus whatever is already in process, where it's just it just it's a lot more labor intensive and it's going to take a lot longer to get through it. Okay. Thanks. And then just last one from me. Appreciate the commentary on kind of Q1 revenue. Can you help us maybe think about Q1 adjusted EBITDA in light of the revenue throughout the year.

Yes.

I mean, I think definitely Q1 is going to be the lowest adjusted EBITDA of the year. And I think you got to kind of think through that portioning with drop through on revenue. It's not like we're going to go cut a bunch of expenses out of Q1 just because we're going to have timing differences on revenue. Yes. But I also think, I mean, we give full year revenue at [indiscernible] Which is exactly what we've been telling people. We're going to grow the top line double digits and the bottom line at least twice as fast. Have given you the kind of the range of revenue and EBITDA. I think This was obviously the cyber event [indiscernible] unexpected one time it was painful to go through, our team did a great job responding to it. But trying to parcel out like Q1, we've given you kind of some revenue direction. I need full year EBITDA guidance and revenue guidance, we feel very comfortable with. So [indiscernible] That's helpful. Appreciate the commentary. Thanks guys. Thank you.

Our next question comes from the line of Suraj Saleh with Oppenheimer and Company.

Please proceed with your Pat Lance, can you hear me all right? Hey, hey, Suraj. First and foremost, congrats on a strong finish to the year. Despite cyber breach and you guys have had a four year run for what it's worth. And I've never missed a beat even in COVID. So it's unfortunate. For this macro level incident. Pat, that having said, the 190,000 patient retrospective analyses that you talked about Yes. Directionally points like there is a strong argument to be made that mechanical valves should dominate 60 below maybe 60 to 65 But by the same token, Pat, that analysis also indicated that overall mechanical valve usage was declining, right? So I guess my question, Pat, to you is what kind of missionary work is needed let's say, from from Artivion, to reverse this trajectory. And get to the expectation that Onyx would deliver.

Yes. So maybe I can make a couple of comments. So this was presented as a late breaker at STS and it's one hundred and nine thousand patients. And they basically looked at if you got a tissue valve or a mechanical valve, and you're under the age of 70 was the actual study. And basically the lines cross at 60. So if you were under 60, you actually had a survival benefit by getting a mechanical valve. As far as the [indiscernible] mechanical valve market declining, it actually it was shown over years the mechanical valve market has actually been growing. By the way, that's just a U. S. Number that they're looking at. So we've actually been the market has actually been growing it's way down from where it was say ten years ago. And I think to your point, I think I think, if you talk to surgeons, Surgeons were really blown away by the data and guys were walking out of there saying, I don't know if you heard the discussant was from the Mayo Clinic and basically said you guys have been doing patients wrong and you should have been putting mechanical valves in under year olds all along.

It was a pretty much a smacked out.

And I think to your question, I think getting after referring cardiologists with our surgeon group and we've got some some plans in place that we're working on kind of midpoint of the year. So I do think there's some to your point, there's some stuff we can do to accelerate that. But this recent Onyxx post approval data, showing an eighty seven percent reduction in bleeding coupled with this recent data out of 60 means we can actually start going after valves in patients 60 which doubled our business. So people were always kind of like him and Han, well, you guys keep growing Onyx 10%. How long are you going to be able to keep doing that? Well, it looks like for a while.

Got it. Pat, on AMDS, I know everyone has asked a question of the others. So forgive me for belaboring this. From thirty days to one year, right, we now have the data What has been the conversation in the clinical community in terms of the thirty day to one year trajectory What's the noise on the ground? Any Any color you could share with us?

Yes. I was actually just at a surgical meeting with about 60 heart surgeons We had this data was presented again and this is just last weekend I think there is overwhelming It's been shown in work that other analysts have done support for this device being used in acute type beta dissections is extremely strong. I mean to have a lot of these patients by the way, a lot of these patients like die on the table. So seventy two percent reduction in mortality, this is truly a life saving device, which is why the FDA took us down the HDE pathway.

And I think this is going to be a very important device for patients who have this devastating condition. And the physician buzz on this is extremely high.

So I think the reason we're so bullish on our is AMBS is really a great ticket. We have a great sales force We have great clinical data. We have a great device. There's no competition. [indiscernible] we're going to be pushing hard to get this technology to patients.

Got it. And that's one quick one then I'll hop back in queue. OUS has obviously been strong especially LATAM and as you look for FY twenty twenty five, I believe you said there'll be 1% to 2% hit on FX. Forgive me if I got that number wrong, but just kind of Yes, 2%.

It's really the euro It's two percentage points at current rates.

And should we still think about OUS just in terms of relative contribution to The U. S. As being quite a bit higher, just any additional [indiscernible] because look, regulatory and policy wise, the environment is quite uncertain. Hence, I'm just trying to understand how as you all think through OUS contribution, what are the relative buffers in place?

Yes, thanks. I mean, I think as far as the I'm not sure if I understood part about the regulatory side of things. But I mean, we're about fifty-fifty U. S. Outside The U. S. The biggest region for us is obviously Europe, which is heavily impacted about the Europe, which is where the FX comes in. But all of our regions are growing. Yes. Comments about contribution. I don't know if that was about revenue contribution contribution or about EBITDA contribution. But as it relates to EBITDA, have a pretty significant natural hedge given our manufacturing that we do in Europe And so has some small impact on 2025 EBITDA, but it's not [indiscernible] Thank you.

Thank you. Our next question comes from the line of Mike Mattson with Needham and Company.

Please proceed with your question.

Yes, thanks. Can you just remind us on as far as EndoSpan goes, when would be the earliest that you potentially have to make a decision on whether or not to acquire the company? I'm assuming it would be probably more in the 2026 timeframe, but just want to make sure that that's right.

Yes, that's correct, Mike. I think the exciting thing that's coming up here pretty quickly is they're going to be presenting their kind of pivotal data of the 60 patients trial that will be based that you'll have the full data set at AATS in May in Seattle, so not so far away. And then basically, it's just kind of the same cross we went through with prior PMAs, which is they'll hit one year follow-up in October, excuse me, they'll hit one year follow-up in October, but to get data together then submit the PMA. We're saying second half of twenty twenty six they'd get approval. Which means we have ninety days post that to make a decision. Which so depending when they get approval, let's say they get approval in Q4, we'd have to make a decision in Q1 of twenty twenty seven.

Okay, thanks.

And then just as far as the the convertible debt goes, I guess, why not roll it over into a new convert versus just letting it exchanging it for shares basically? [indiscernible] roll it into the existing private debt that we have We just felt like at this point in time, it would be best to deleverage get that down lower Hopefully, we're going to get great news and execute our option on EndoSpan.

And this will just put us in even better position to do that. So that's the drivers behind the thought around unit share. Yes. We've talked to we talk to our shareholders all the time and one of the things we've talked about and I think people would like to see us be lever As Lance said, at the midpoint of our EBITDA, guidance for 2025, If we transition that convert to shares we're going to be sitting around two. Which feels a lot better than 3.8.

Yes.

Okay. Got it. Thank you.

Thank you. Our next question comes from the line of Daniel Stodder with Citizens.

Please proceed with your question.

Yes, great. Thank you.

So first one just on guidance. Appreciate the cadence and the commentary around first quarter Adjust back of the envelope, if we plug in the midpoint for the first quarter and have improvement throughout the year, gets us to second half 25% closer to mid to high teens growth. Is that the right way we should be thinking about it or just anything else you can give us on the cadence would be great. Yes.

So I think there's a couple of things, right.

So one is and it's The cyber thing did create a timing issue, which is unfortunate. But we're being very kind of transparent with everybody. It's a timing thing. Our underlying business is totally fine. And it's taking us some time to process the tissue and to build up our inventory on Onyx. I told you all the good news on both of those product lines. Think a couple other things. One, AMBS will build throughout the year. Right? We just launched, we just trained our sales force in the January.

So got to go through that process I talked about. We've got to get IRBs, value analysis training. So we will definitely build AMBS throughout the year.

Obviously, Q4 is going to be a pretty easy comp given the cyber event that we just talked about. So I think when you put that all together and then you spread more inventory for Onex later in the year tissues getting pushed later in the year, you add it all together, it holds together. Yes, I wouldn't be putting guidance out like this if I didn't believe it.

No, totally get it. I guess just one follow-up on guidance, but more on on the bottom line or EBITDA rather.

You mentioned contributions are from more operating leverage and Pretty sure you said some will come from the AMDS benefits.

How much is that adding to the EBITDA outlook? I think we've talked about 90% gross margins for that product, but what's the EBITDA margin we should be thinking about? Just kind of the math on on the EBITDA leverage is expecting about one point percentage point of gross margin expansion [indiscernible] two percentage points of leverage out of SG and A and then we're going to increase our spend in R and D by about 1%. Point as compared to last year.

Okay.

Great. Thank you very much.

Thank you.

Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann.

Please proceed with your question.

Hi, Pat and Lance. Thanks for taking our questions. Just one Lance, you talked about gross margin improvement of 100 basis points Can you just clarify is that full year over full year not related to the fourth quarter, correct?

Correct. That's full year. Now, obviously, we expect to have more AMDS revenues and that's really what's driving the benefit.

But yes, the 100 basis point impact. Okay, got it.

And you think you'll break out AMDS at some point separately or it will be contained within our sense and gross?

That's not the plan, but we definitely think you'll expect it see the impact in our stent graft number pretty clearly.

Got it. And then just one more for me. Pat, you talked about this. So we should expect to see the 60 patient data at the thoracic conference in May? [indiscernible] Correct.

Okay. Got it. But does it for us? Thanks for taking the question.

Thanks, Jeff. Thanks.

Thank you. And we have reached the end of the question and answer session. And I would like to turn the floor back to Pat Macing for closing remarks. Yes. Well, thanks for joining the call and as you hear, we obviously dealt with a challenging cyber event in the fourth quarter and still delivered a good year. We've got some stuff we've got to clean up On the tissue side and Onyx inventory, kind of out of the first quarter. But we're super excited about our AMD this long term Onyx data showing mortality benefit where we can double that opportunity launching BIOHU in China in this RAS Day, a data that keeps coming out stronger and stronger where we sell every pulmonary valve [indiscernible] as you heard in the guidance, we're pretty bullish on the company and appreciate your attention and look forward to updating you on our progress on the next call.

Thank you. This does conclude today's [indiscernible] thank you for your participation. [indiscernible]