LeMaitre Vascular, Inc. (LMAT)
Q4 2011 Earnings Call
February 27, 2012 5:00 PM ET
Joseph Pellegrino – CFO
George LeMaitre – Chairman and CEO
David Roberts – President
Jamar Ismail – Canaccord Genuity
Joe Munda – Sidoti & Company
Welcome to the LeMaitre Vascular, Fourth Quarter 2011 Financial Results Conference Call.
Previous Statements by LMAT
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As a reminder, today’s call is being recorded. At this time, I would like to turn the call over to Mr. JJ Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead sir.
Thank you, Michelle. Good afternoon. And thank you for joining us for our Q4 2011 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 are subject to risks and uncertainties. Wherever possible, we will try to identify 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 statements regarding forward-looking information and the information under the caption Risk Factors in our 2010 10-K and subsequent SEC filings including disclosure of the factors that could cause the 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 and our website www.lemaitre.com for discussion and reconciliation of non-GAAP financial measures.
I’ll now turn the call over to George LeMaitre.
Thanks, JJ. Q4 has to be seen through the wins of our Five 2011 Initiatives. Sales in Q4 2011 increased 5% organically as our European operations began to enjoy direct sales in Spain and Denmark and as the stent graft exit began to settle down. Profit in Q4 2011 was flat to Q4 2010 as the loss of stent graft sales and associated GP was offset by lower expenses.
The LeMaitre Vascular is emerging as smaller sales wise, but we’ve set the table for quicker growth. In 2012 our top-line should grow 9% as a result of more focused vascular sales bag, 16% more sales reps and two new products. Also the bottom-line benefit of two factory closures has yet to be realized.
I would now like to provide you with more details on our Five 2011 Initiatives and then review 2012 growth opportunities. One of our initiatives was to go direct in Spain and Denmark. Sales began in both countries in July 2011 and we now have a sales manager and four sales reps on the ground.
In Q4 2011 we posted $230,000 of sales in Spain and Denmark. This initiative is going according to plan. The second and third initiatives were to divest our own stent graft, which we did in June and to start distributing Endologix stent grafts, which we did in August. This strategic shift was intended to increase our focus on our core vascular devices and to extricate from the hyper competitive stent graft business. As you may recall the lion share of our stent graft business was in Europe.
In Q4 2011 our European operation posted its best organic growth quarter since Q1 2010 up 7%. The stent graft exit has also attacked on two gross margin points as the distributed stent grafts carried lower gross margins. Additionally the stent graft exit has cut op expenses in other ways. We swapped out several European clinical specialists for less expensive sales reps and we stopped our American stent graft clinical trials. This initiative is also going according to plan.
The fourth and fifth initiatives were the two 2011 factory closures. After some initial AlboGraft timing and scale up issues both manufacturing transfers are now making progress operationally. Financially though the projects are slow in reach maturity than I had anticipated. Throughout 2011 these closures cost us gross margin points. I expect the opposite as time goes by.
Our factories in Italy and California have been costing us approximately 4.2 million per year to operate. Our Italy factory was closed in Q1 2011 and our California factory was closed in Q3 2011. I am confident that the savings from these closures will be there and we need to have the patience to let the transfers settle in. this should provide us with gross margin expansion in 2012 and 2013.
Looking beyond these initiatives and into 2012, I am excited about our new products and our larger sales force. The Over-the-Wire LeMaitre Valvulotome and the UnBalloon were launched on both sides of the Atlantic in late Q4, early Q1 and we’re beginning to gain some sales experience. Combined sales of these devices in January and February ran at $1000 a year. The launches are so recent that it’s difficult to predict the ultimate size of each product, but I believe these devices will lift our growth rate in 2011 and 2013.
And these new products have an even wider sales channel, as we now have 78 sales reps in the field versus 67 at December 31, 2010. We have 44 reps in North America, 29 in Europe and five in Japan. We are now direct to hospital in eight of the 12 largest vascular markets in the world.
In summary our European rebound in Q4 2011 helped us post 5% worldwide organic sales growth. Profits were flat to Q4 2010 as the lack of stent graft sales and the associated gross profit was offset by tighter op expenses. Our Five 2011 Initiatives are beginning to contribute and in 2012 we should also benefit from a larger sales force and the two product introductions.