CryoLife, Inc. (CRY)

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CryoLife Inc. (CRY)

Q1 2018 Earnings Conference Call

May 3, 2018 08:00 AM ET


Pat Mackin - Chairman, President and Chief Executive Officer

Ashley Lee - Chief Financial Officer


Jason Mills - Canaccord Genuity

Brooks O'Neil - Lake Street Capital Markets

Jeffrey Cohen - Ladenburg Thalmann

Suraj Kalia - Northland Securities

Joseph Munda - First Analysis Securities Corporation



Greetings, and welcome to the CryoLife Corporation First Quarter 2018 Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Pat Mackin, Chairman, President and CEO; and Ashley Lee, CFO for CryoLife. Thank you. You may begin.

Ashley Lee

Good morning, everyone, and thanks for joining the call. I'm Ashley Lee, the CFO of CryoLife. Before we begin, I would 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 and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The forward-looking statements include statements made as to 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 certain risks and uncertainties that may impact these forward-looking statements is contained from time-to-time, in the Company's SEC filings and in the press release that was issued last night.

Now, I'll turn it over to our CEO, Pat Mackin.

Pat Mackin

Thanks, Ashley, and good morning, everyone. I'm very pleased to report that we had a strong start to the year with a solid first quarter that generated revenue growth across all four of our major product lines, including 16% growth in On-X, and 20% growth in non-GAAP revenues for JOTEC.

In my closing comments, last quarter, I told you CryoLife has never been better positioned, more competitive on a larger addressable market opportunity than it does today. And these are factors that drove our solid first quarter. We have a sharp focus with our strategy, which is to call on cardiac and vascular surgeons, who treat patients with aortic disease.

We execute the strategy with our well-trained 125 person direct sales force, selling highly differentiated and competitive products. We worked hard to put this strategy in place and our results demonstrate that this strategy is working. We expect this strategy to drive strong performance in 2018 and beyond.

With the success of the On-X acquisition and the JOTEC integration almost complete, we are already starting to capitalize on our increasingly expanded market opportunity and to drive CryoLife's growth and profitability over the next five years.

As a result, of the On-X and JOTEC acquisitions, we've increased our addressable market to approximately $2 billion and have the potential to increase it to $3 billion through our own internal R&D efforts, including those we have previously discussed regarding bringing BioGlue to China and PerClot to the U.S.

We also remained very excited about the potential of JOTEC's R&D pipeline, and JOTEC's R&D capabilities to bring even more highly differentiated products to market.

Moving on to our quarterly review of our 2018 key initiatives. The best way to assess our progress is to examine our accomplishments for each of our five core initiatives. As you'll hear later today, we are on track with each of these initiatives, and we are well on our way towards achieving the goals we set for CryoLife for 2018.

Following my comments, Ashley will provide a detailed review of our first quarter financial results. And then, we'll open the call for any questions.

The first key initiative we set for 2018 is to achieve our full year 2018 financial guidance. In the first quarter of 2018, we delivered revenues of $61.9 million representing an increase of 30% over the first quarter of 2017. Non-GAAP revenue increases were 9% compared to the first quarter of last year, and 5% on a constant currency basis. Non-GAAP revenue increases are calculated assuming that we owned JOTEC in the first quarter of 2017.

Regarding our first quarter 2018 earnings, we delivered non-GAAP EPS of $0.02 per diluted share. Although it is still early, we believe our first quarter results had put us on solid footing to deliver on our full-year financial guidance. Ashley will provide more details in his commentary.

Our second key initiative for the year is to complete the integration of JOTEC and deliver double-digit non-GAAP revenue growth in 2018. As I just mentioned, in the first quarter of 2018, we posted non-GAAP revenue growth of 20% in the JOTEC portfolio in the first quarter of 2017 – over the first quarter of 2017. We believe these results demonstrate a significant potential of JOTEC's highly differentiated product portfolio and overall market that is growing only in the low-single digits.

We have previously communicated we expect this portfolio to take share with our highly trained direct sales force behind our highly differentiated products. We remain very excited about the prospects for the JOTEC business going forward.

Our third key initiative is to continue the momentum of On-X and deliver double-digit revenue growth in 2018. We are off to a great start, as the On-X portfolio grew 16% in the first quarter relative to the first quarter of 2017, including an increase of 23% in our direct North American markets, an increase of 33% in Europe, Middle East and Africa, despite not having the AAP product line available to us in that market.

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