LeMaitre targets 40% Q4 operating income growth and 29% margin as Artegraft expansion accelerates

Earnings Call Insights: LeMaitre Vascular, Inc. (LMAT) Q3 2025

MANAGEMENT VIEW

* CEO George LeMaitre highlighted "organic sales growth of 12% and a better-than-expected gross margin" for Q3, noting "several bottom line records, op income, EBITDA, EPS and cash generation." He identified Grafts and Shunts as key product drivers, growing 23% and 18% respectively, and called out international momentum: "EMEA grew 18%, the Americas 10% and APAC 4%."
* The Artegraft international launch performed above expectations, with Q3 sales of $1.4 million and a Q4 outlook of $2 million. CEO LeMaitre said, "Artegraft grew 33% worldwide in Q3. We expect 2026 Artegraft approvals in Canada and Korea."
* Strategic expansion in Europe was underscored by recent RestoreFlow approval in Germany and upcoming launches in Ireland, with the CEO stating, "German and Irish approvals should accelerate other EU approvals. To support the launches, we recently leased a European RFA distribution facility in Dublin."
* A performance-based reduction of 8 sales reps brought the total to 152, with 23 open requisitions; "we expect to have 165 reps at year-end," said CEO LeMaitre. He also announced an 8% increase in the 2026 U.S. hospital price list and plans to open a new 34,000 square foot distribution center in Massachusetts.
* The CEO projected, "We're now guiding 40% op income growth in Q4 and a 29% op margin."
* CFO Dorian LeBlanc stated, "LeMaitre's organic growth rate was 12% in the third quarter. Year-over-year reported revenue growth of 11% was reduced by $1.3 million due to our Aziyo distribution exit, but benefited from the weaker U.S. dollar, which added $1 million to reported sales."
* CFO LeBlanc also detailed the financial impact of a $4.8 million employee retention tax credit, resulting in a reported gross margin of 75.3%, operating income of $20.3 million, net income of $17.4 million, and diluted EPS of $0.75. He specified, "Q3 2025 adjusted operating income was $16.9 million, up 29%, resulting in an adjusted operating margin of 28%."

OUTLOOK

* The company raised its full year revenue guidance to $248 million, projecting 13% growth, and targets a full year adjusted gross margin of 70.3%. Adjusted operating income guidance increased to $63.7 million, up 22%, for a 26% adjusted operating margin. Adjusted fully diluted EPS guidance is $2.37, an increase of 22% over 2024.
* Upcoming regulatory milestones include anticipated Artegraft approvals in Canada and Korea in 2026, and RestoreFlow launches in Germany and Ireland. CEO LeMaitre said, "We expect 2026 Artegraft approvals in Canada and Korea."
* Management indicated ongoing investments in sales force expansion, new international offices, and regulatory approvals for 2025 and beyond.

FINANCIAL RESULTS

* Q3 2025 reported gross margin was 75.3% (boosted by a nonrecurring tax credit), while adjusted gross margin was 70.8%, up 300 basis points year-over-year. Adjusted operating expenses grew 9% to $26.3 million but were down from a 20% increase quarter-on-quarter in Q2.
* Cash and securities at quarter-end totaled $343.1 million, an increase of $23.6 million. The company generated $28.8 million in cash from operations and paid $4.5 million in dividends.
* Headcount stood at 633 at quarter-end, slightly down from 637 a year prior.

Q&A

* Michael Sarcone, Jefferies LLC: Asked about lower organic growth guidance. CEO LeMaitre explained the Q2 catheter recall led to front-loaded sales, impacting Q3 and Q4, and noted "about 1/3 of it is FX... that change has taken away about $600,000 of sales out of our Q4 guidance."
* Shaymus Contorno, Oppenheimer: Inquired about the 8% price increase for 2026. CEO LeMaitre said the figure reflects a blend across categories, with niche products allowing larger hikes.
* Rick Wise: Asked about key growth drivers for 2026. CEO LeMaitre cited Artegraft, allografts, and XenoSure, stating "the biologics at the company are going extremely well right now."
* Nathan Treybeck, Wells Fargo: Queried the disclosure on price floors. CEO LeMaitre responded, "55% of our North American revenue is now subject to price floors," and discussed strategic rationale.
* Michael Petusky, Barrington: Asked about China. CEO LeMaitre reported "sales growth of 40% in Q3" but cited challenges with cardiac patch launches.
* Brett Fishbin, KeyBanc: Probed on sales force targets and Artegraft OUS outperformance. CEO LeMaitre attributed international Artegraft strength to faster market acceptance and effective dealer networks, especially in South Africa.

SENTIMENT ANALYSIS

* Analysts raised recurring questions about growth guidance, pricing power, and sales force execution, with a neutral to slightly positive tone, seeking clarification on strategy and key metrics.
* Management maintained a confident but measured tone, frequently referencing pricing leverage, operational discipline, and growth opportunities. CEO LeMaitre consistently outlined reasons behind changes, stating "we obviously expected that question" and providing detailed breakdowns.
* Compared to the previous quarter, management's confidence in biologics and international expansion was more pronounced, while analysts exhibited increased scrutiny over organic growth guidance and pricing sustainability.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full year revenue was revised down to $248 million from $251 million in Q2, reflecting lower expected organic growth and FX headwinds. Operating income and EPS guidance both increased from the prior quarter.
* Gross margin guidance improved from 69.7% in Q2 to 70.3% in Q3, with operating margin guidance rising from 24% to 26% for the year.
* Artegraft international sales targets were raised, with Q3 outpacing previous expectations and a higher Q4 forecast. The cadence of sales force expansion was adjusted, with a reduction in reps but a continued plan to reach 165 by year-end.
* Analysts' focus shifted more to pricing power, the sustainability of biologics growth, and management of geographic expansion, compared to last quarter's emphasis on unit growth and new product launches.

RISKS AND CONCERNS

* The company addressed an FDA warning letter for its New Jersey Artegraft facility but reported "this has not disrupted our ability to produce, ship or invoice products."
* Management acknowledged "some management turmoil" in APAC, with new leadership in Korea and Japan.
* FX volatility and the aftereffects of the Q2 catheter recall were cited as key factors lowering organic growth guidance.
* Supply constraints for allografts in Europe and regulatory hurdles for new market approvals were noted as ongoing challenges.

FINAL TAKEAWAY

LeMaitre Vascular closed Q3 2025 with strong margin expansion, robust cash flow, and record profitability, driven by higher pricing, manufacturing efficiencies, and standout growth in biologics, notably Artegraft. Despite FX headwinds and temporary growth impacts from a catheter recall, management raised operating income and EPS guidance, underpinned by ongoing international expansion, a strengthened sales force, and sustained pricing power. The company remains focused on operational leverage and regulatory milestones as it targets a strong finish to 2025 and prepares for further growth in 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/lmat/earnings/transcripts]

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