LeMaitre Vascular, Inc. (LMAT)

Q2 2010 Earnings Call Transcript

July 28, 2010 5:00 pm ET


J.J. Pellegrino – CFO

George LeMaitre – Chairman & CEO

Dave Roberts – President


Joshua Zable – Natixis Bleichroeder

Joseph Munda – Sidoti & Company

Mayank Gandhi – Cowen & Company

Sasha Kostadinov – Shaker Investments

Stephen Globus – Globus Ventures



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Good day, ladies and gentlemen, and welcome to the second quarter 2010 LeMaitre Vascular earnings conference call. My name is Sally, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to the turn call over to your host for today, Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. You may proceed, sir.

J.J. Pellegrino

Thank you, Sally. Good afternoon and thank you for joining us for our Q2, 2010 conference call. Joining me on today's call is our Chairman and CEO, George LeMaitre and our President, Dave Roberts.

Before we begin, I would like to read our Safe Harbor statement. Today, we will discuss some forward-looking statements, the accuracy of which is subject to risks and uncertainties. Wherever possible we will try to identity those forward-looking statements by using words such as belief, expect, anticipate, forecast and similar expressions. Please note these words are not the exclusive means for identifying such statements. Please refer to the cautionary statement regarding forward-looking information and the information under the caption “Risk Factors” in our 2009 10-K and subsequent SEC filings including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During this call, we may discuss non-GAAP financial measures. Please refer to our earnings release in our Web site www.lemaitre.com for a discussion and reconciliation of non-GAAP financial measures.

I will now turn the call over to George LeMaitre.

George LeMaitre

Thanks, J.J. Top to bottom, I was quite pleased with Q2. We are growing sales and we are growing profits. I'd like to summarize the quarter with three headlines. Number one, we posted sales of $14.2 million, 15% organic growth. Number 2, we posted record operating profit of $2 million, double that of a year earlier. And number 3, we received six regulatory approvals in Q2 2010.

As to our first headline, we posted record sales of $14.2 million in Q2, 2010. Sales increased 15% organically over Q2, 2009 led by 23% organic growth in the Americas. By category, open vascular increased 23% organically, while endovascular was up 2%.

Q2 2010 marked another impressive quarter for open vascular. In fact, over the last four quarters, organic vascular sales growth has been 14%, 14%, 24% and now 23%. Our success in this category is due to our broad pallet of gold standard niche devices and our widening sales footprint. The XenoSure Biologic Patch is a nice case in point. Sales have increased about $100,000 per quarter since the January 2009 US launch.

In Q2 2010, our vascular category accounted for 72% of our sales versus 67% in the year earlier period. Our April 1 North American price hike and the increased size of our sales force were the key drivers of Q2 2010 growth. Indeed at the heart of our recent success lies our lower cost sales model, which keeps a lid on sales rep compensation without sacrificing productivity.

Currently, 58% of our North American sales reps are what we call Tier A, and in Q2 2010, seven of the top 10 North American sales reps were also Tier A. The continued build out of our sales force is a time-tested expansion strategy for the company, and we are now able to do this more efficiently. My guess is that we will end 2010 with 70 sales reps worldwide.

Overseas, a good part of our recent success has come as we have leveraged, entered new large vascular geographies by terminating distributors and going direct. In Q2 2010, our French, Japanese and Italian subsidiaries reported sales growth rates of 54%, 26% and 8% respectively. Going forward, we may continue to repurchase distribution rights from international distributors as a way to enter new vascular geographies.

With respect to our second headline, operating profit in Q2 2010 of $2 million was double the $1 million we reported in Q2 2009. This 14% operating margin was achieved through increased sales, a 75% gross margin and controlled operating expenses. Over the last four quarters, we have posted operating profits of $1.3 million, $1.2 million, $1.3 million and now $2.0 million. Increased operating profits and cash flows have enabled us to ramp up our stock repurchase program to $5 million through December 2011.

Regarding our third headline; Q2 2010 was fruitful on the regulatory front and this is producing a steady flow of new product launches. Indeed we received the following six regulatory approvals in Q2 2010; AnastoClip GC in the US, Pruitt F3 Carotid Shunt in Europe, TAArget and UnBalloon in Russia, remote endarterectomy in Canada, and finally Pruitt F3 Carotid Shunt in Taiwan.

Two products of specific note seemed worth highlighting. In June 2010, we recalled the UnBalloon in Europe after receiving some complaints about re-sheeting the product. As a result of these complaints, I felt that it was prudent to have our engineers rework the product and we should be back on the market in Q4 2010. This new release will not just resolve the re-sheeting issue, but will also include several next-generation product improvements previously on the drawing board; 2010 sales for the company will not be materially impacted by this event.

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