Artivion, Inc. (NASDAQ:AORT) is a leading provider of innovative medical devices and implantable human tissues used in cardiac and vascular surgical procedures for patients with aortic disease. The company has reported strong financial results, with annual revenue of $354,004,000 and annual net income of -$30,567,000 in its most recent fiscal year. Additionally, the company generated annual operating cash flow of $18,576,000 and annual free cash flow of $11,146,000.

Business Overview

Artivion's product portfolio is focused on four major areas: aortic stent grafts, surgical sealants, On-X mechanical heart valves and related surgical products, and implantable cardiac and vascular human tissues. The company's aortic stent grafts include aortic arch stent grafts, abdominal stent grafts, and synthetic vascular grafts, which are used in endovascular and open vascular surgery for the treatment of complex aortic arch, thoracic, and abdominal aortic diseases. Artivion's surgical sealants include BioGlue Surgical Adhesive, which is used as an adjunct to standard methods of achieving hemostasis in adult patients during open surgical repair of large vessels. The company's On-X products include the On-X aortic and mitral heart valves and the On-X ascending aortic prosthesis for heart valve replacement. Additionally, Artivion provides preservation services for cardiac and vascular tissues.

Quarterly Performance

In the first quarter of 2024, Artivion reported total revenues of $97,431,000, representing a 16% increase compared to the same period in the prior year on a constant currency basis. This growth was driven by strong performance across the company's product lines, including a 26% increase in preservation services revenues, a 19% increase in aortic stent graft revenues, an 11% increase in On-X product revenues, and a 1% increase in surgical sealant revenues.

Geographically, the company saw revenue growth of 22% in Latin America, 18% in North America, and 17% in Europe, the Middle East, and Africa (EMEA), while the Asia Pacific region experienced a 3% decline, primarily due to timing of distributor orders.

Gross margin for the first quarter of 2024 was 64.6%, consistent with the same period in the prior year. The company's non-GAAP adjusted EBITDA increased by approximately 60% from $10.8 million to $17.3 million, resulting in an adjusted EBITDA margin of 17.8%, a 480 basis point improvement over the prior year.

Aortic Stent Grafts

Artivion's aortic stent graft revenues grew 19% on a constant currency basis in the first quarter of 2024, driven by increased volume and the impact of foreign exchange rates. The company's portfolio of aortic stent grafts, including the E-vita Open NEO, E-vita Open Plus, AMDS, the NEXUS Products, E-vita Thoracic 3G, and Artivex products, are used in endovascular and open vascular surgery for the treatment of complex aortic arch, thoracic, and abdominal aortic diseases.

On-X Products

Revenues from Artivion's On-X products, which include the On-X aortic and mitral heart valves and the On-X ascending aortic prosthesis, increased 11% on a constant currency basis in the first quarter of 2024. This growth was primarily driven by an increase in the volume of units sold and the impact of average sales prices and foreign exchange rates.

Surgical Sealants

Artivion's surgical sealant revenues, which are primarily comprised of BioGlue products, increased 1% on a constant currency basis in the first quarter of 2024. This increase was primarily due to an increase in average sales prices due to a favorable sales mix in direct markets, partially offset by a decrease in the volume of milliliters sold.

Preservation Services

Artivion's preservation services revenues, which include external service revenues from processing cardiac and vascular tissues, increased 26% in the first quarter of 2024. This growth was primarily due to an increase in average sales prices and, to a lesser extent, an increase in the volume of tissues shipped.

Outlook

For the full year of 2024, Artivion is now expecting constant currency revenue growth between 9% and 12%, up from the previous range of 8% to 12%. The company expects reported revenues to be in the range of $386 million to $396 million. Additionally, Artivion is maintaining its adjusted EBITDA guidance of $68 million to $72 million for the full year of 2024, representing a 26% to 34% growth over 2023 and 280 basis points of adjusted EBITDA margin expansion at the midpoint of the range.

Risks and Challenges

Artivion faces a variety of risks and challenges, including competition from large, well-established medical device companies and tissue service providers, regulatory and quality risks associated with its highly regulated products and tissues, and potential supply chain disruptions. The company is also exposed to foreign currency exchange rate fluctuations, which can impact its revenues and profitability.

Liquidity

As of March 31, 2024, Artivion had approximately $51.1 million in cash and $313.3 million in debt, net of $7.1 million of unamortized loan origination costs. The company's net leverage at the end of the first quarter was 4.5%, down from 6.8% in the prior year. Artivion expects its net leverage to be closer to 3.5% by the end of 2024 and to continue to decrease in 2025.

The company's free cash flow was negative $9.1 million in the first quarter of 2024, which is typical for the company's most cash-intensive quarter due to the payment of annual bonuses and other seasonal activities. However, Artivion continues to expect free cash flow to be positive for the full year 2024.

Conclusion

Artivion is well-positioned to continue its growth trajectory in the aortic health market, driven by the strength of its product portfolio, including its innovative aortic stent grafts, On-X mechanical heart valves, and preservation services. The company's recent clinical data and regulatory approvals have further validated its market-leading position, and its geographic expansion efforts in regions like Asia Pacific and Latin America provide additional growth opportunities. With a strong financial position, Artivion is poised to capitalize on the growing demand for its specialized products and services, positioning the company for continued success in the years ahead.