George LeMaitre - Chairman and CEO JJ Pellegrino - CFO Dave Roberts - President

Drew Ranieri - Stifel, Nicolaus & Company Jason Wittes - Brean Capital Chris Lewis - ROTH Capital Partners Jan Wald - Benchmark Company Mark Zinski - Uniplan Investment Counsel, Inc. Larry Haimovitch - HMTC

Thank you, Whitney. Good afternoon and thank you for joining us on our Q1 2015 conference call.

Joining me on today's call is our Chairman and CEO, George LeMaitre and our President, Dave Roberts. Before we begin, I'll read our Safe Harbor statement.

Today, we will make some forward-looking statements, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, forecast and similar expressions.

Our forward-looking statements are based on our estimates and assumptions as of today, April 28, 2015, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the Risk Factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied.

Any reconciliation of GAAP to non-GAAP measure discussed in this call, is contained in the associated press release and is available in the Investor Relations section of our Web site, www.lemaitre.com. I'll now turn the call over to George LeMaitre.

Thanks, JJ. Q1 2015 was a very productive quarter.

I'll focus on four headlines. Number one, Q1 record sales of $18.9 million brought leverage to our income statement.

Number two, Q1 Valvulotome sales grew 14% due to the HYDRO launch. Number three, Q1 Omniflow sales were better than expected and ran at a rate of $4.1 million per year.

And finally number four, our R&D and regulatory pipelines continue to bear fruit. As to our first headline, Q1 sales increased 13% to a record $18.9 million and this brought leverage to our income statement.

Q1 was our second best EBITDA quarter, $3.2 million versus $600,000 in the year-ago quarter. Q1 was our second best OP income quarter, $2.3 million versus a loss of $200,000 in the year-ago quarter.

Q1 net income was $1.4 million versus a loss of $200,000 in the year-ago quarter, and finally Q1 EPS was $0.08 per diluted share versus a year-ago loss of $0.01. As to our second headline, the 1.5 millimeter HYDRO LeMaitre Valvulotome features Hydrophilic coating in a smaller diameter.

Just six months into the launch the HYDRO represented 73% of all Valvulotome sales in Q1. Indeed the HYDRO launch perked up the entire Valvulotome category, which grew 14% in Q1.

As to our third headline, our August 2014 acquisition of the Omniflow Biologic Graft seems to be doing great. On our October 2014 earnings call, we projected 3 million of 2015 Omniflow sales, so we we're pleased to see a Q1 2015 run rate of $4.1 million.

We acquired Omniflow for three reasons. Number one, biologic grafts were associated with less infection than synthetic grafts.

Number two, biologic grafts are of $13 million niche market with limited competition, and finally number three, LeMaitre’s 31 sales reps in Europe are a superior channel than the previous patchwork of distributors. As to our fourth line, our R&D and regulatory groups have been quite active at LeMaitre recently.

We expect to see first in man usage of a long AnastoClip in Q2 2015 as well as first in man usage of our Pruitt shunt with electronic flow monitoring in Q4 2015. This will be LeMaitre’s first smart device.

Additionally, we’ve received XenoSure regulatory approval in Brazil and New Zealand now, and filings have been made in China and Australia. We are pressing ahead with a global XenoSure strategy as we’ve seen so much success in North America and Europe.

We also expect to receive our Chinese Trivex reapprovals in Q3. This allows us to activate our five-year $7.8 million Trivex distribution agreement in China.

Stepping back for a moment, our often stated financial objectives are simple, 10% annual sales growth and 20% annual OP income growth. Following our record Q1, our increased 2015 guidance implies 13% constant currency sales growth in 2015 and 30% OP income growth.

I’ll now hand the call over to JJ.

Thanks, George. We continue to be pleased with our ability to generate operating income at LeMaitre.

In the last four quarters we’ve reported our operating income of $2 million, $1.9 million, $2.7 million and now $2.3 million, representing operating margins of 11%, 11%, 15% and now 12%. These past four quarters have been characterized by increasing sales, improving gross margins, and lower operating expenses.

Our gross margin story has improved as well, increasing by 220 basis points in Q1 to 69.2%. The improvement was driven by XenoSure manufacturing efficiencies, average selling price increases and improved product mix, which were partially offset by the strengthening dollar and the introduction of the new HYDRO Valvulotome.

Going forward, we believe that we will continue to introduce the manufacturing cost of XenoSure as well as the new HYDRO Valvulotome. And we expect our gross margin to be 69.5% in Q2.

Of course in 2015, our results must been seen through the prism of the strengthening dollar. As you may know about 40% of our sales and 33% of our expenses are transacted in non-dollar currencies.

In Q1 2015, we estimate that the strong dollar decreased our revenues by $1.5 million and our operating income was similarly reduced by approximately $800,000. Looking towards full-year 2015, we estimate that the strong dollar will decrease sales by approximately $5.1 million, reduce gross margin by 190 basis points and reduce operating income by approximately $2.2 million.

Our guidance includes these effects. Turning to guidance, in Q2 2015, we expect sales of $18.9 million, a reported increase of 4% versus Q2 2014.

Excluding currency effects, this represents 12% sales growth. Excluding currency effects and acquisitions, this represents 6% sales growth.

We also expect Q2 2015 gross margins of 69.5% and Q2 2015 operating income of $2 million and 11% operating margin. For the full-year of 2015, we have increased our sales guidance to $75 million, a reported increase of 5% versus 2014.

Excluding currency effects, this represents 13% sales growth. Excluding currency effects and acquisitions, this represents 8% sales growth.

We also expect 2015 gross margin of 69.5% and are increasing our 2015 operating income guidance to $8.2 million and 11% operating margin and an increase of 30%. With that, I’ll turn the call back over to Whitney for Q&A.

Hi, guys. This is Drew Ranieri in for Rick.

Congratulations on a fantastic quarter. But I just had two kind of bigger picture questions.

The first is you ended the quarter with 81 sales reps. Can you just give us the mix and I think on your last call, you mentioned plans of getting bag up to about 90 reps by year-end, and is that factored into your operating income guidance at all?

Sure. I’ll take that and thanks for the call and question.

So the mix is the same with the last quarter, its 42 U.S and Canada, 31 European and 8 Pac Rim. One or two change for totaled 81 as you are pointing out.

We still do target 89 or 90 reps for the year and yes that’s baked into the OP income guidance.

Okay. And then, just following, just the success of Omniflow, right now you’ve a 15 product lines across the PBD space.

When we do think of M&A downstream there are more -- are there product line gaps that you want to sell or are we looking at more adjacencies?

Drew its Dave. Thanks for the question.

There are definitely plenty of product line gaps to still fill within the field of vascular surgery. We’ve focused primarily in open and there are plenty to fill there and also in endovascular.

So I’d say we’re going to focus there primarily in the near future and that’s where the acquisition pipeline is centered currently.

Okay, great. Thank you.

Hi. Thanks for taking the questions.

I wanted to ask about Omniflow. Its ahead of schedule, I mean, I think you said its running over $4 million and guidance release baked into -- got expectations or something around $3.5 million.

Is there stocking in there or is it -- are you just being conserved [ph] in the outlook and you, I mean, how do we think about that?

Sure. And then one detail on that, I know you didn’t asked this, but its running at $4.1 million for the year, even with the reduced currencies and if you stripped out the strong dollar, it really would running at about a $4.6 million run rate.

So this is something excellent that’s going on. You said is it stocking?

I don’t -- it’s unstocking, because we don’t have distributors really for the most part with this device. This is all sales to hospital.

So if that was your question, I don’t feel that it’s stocking to distributors.

So when I look at your guidance for the year, you’ve opted by about $0.5 million. Is it part of that Omniflow or are the Omniflow assumptions still or you said in the last quarter, which I believe is $3.6 million?

That’s a great question. When we were prepping the guidance, we weren’t dividing based on all these product lines.

We came up with the desire to what you guys know how Omniflow is doing simply as a check in on an acquisition that happened eight months ago to let you know things are going well with that. But I don’t think we made a big division between why guidance went up.

Okay. That’s fair.

Let me ask also the U.S did -- I think better than I at least I anticipated. Should that type -- should we assume this type of growth rate going forward for the year or was this an exceptional quarter for any specific reason?

Right. So when you look at Q4 and then into Q1, there is a big difference in the denominator of both those growth rates in the U.S., particularly.

And in Q1 2014 you had a particularly weak American quarter and that allowed us to pick up a 10% or 11% growth rate reported 12% for the quarter. So I would say we still generally feel much better about our European opportunities.

If I would break it out, Europe, Middle East, Africa, we saw reported growth rate of 20% adjacent in the quarter and the Americas was 12%. So if you look at all of that and you bake it into our organic growth rate of 8% this year, I’d still say that two thirds of that growth powered is going to come from overseas not in the Americas.

Okay. And then, maybe just one last question.

Could you give us a sense of how XenoSure did this quarter?

Sure. I'd be thrilled to.

It was 37% organic growth rate and 27% reporter growth rate and the delta is just the very strong dollar cutting down our reported sales from Europe.

Got it. Thank you very much.

Thanks.

Hey guys, thanks for taking the questions and congrats on the strong quarter here. Just a question on the guidance for the year, you beat the quarter by over a $1 million.

Only raise the revenue guidance by half of that, so can you just walk us through the different factors going in to that change and where the delta is?

Yes. Sure, Chris.

This is JJ. So, yes, we beat by over a $1 million.

But if you look at the change in FX since we last guided, it’s had about a $1 million down drag on that guidance we think. And so really in reality we think we're up about $0.5 million on that guidance.

So in constant currency it's sort of a 13% and 8% organic.

Understood. And were there some revenues or perhaps larger one-time orders that were pulled into this quarter that you were maybe expecting later in the year?

I'm just trying to understand kind of the cadence of revenues this year typically -- historically you had a stronger second quarter than first quarter guidance in place, basically a flat sequential outlook. So maybe this talk us through kind of the sequentially flat outlook into the second quarter and if there is any other factors we should be aware of?

I'm going to take the first part of your question before I go into sequential. The first part of your question was is there something special in Q1?

In fact, there is something unspecial, which is we got no Chinese orders. And so when you put that together with the fact that the dollar was creaming all these currencies, it was an extraordinary quarter by a lot of measures.

So I’d say Q1 just fell exceptionally strong and rugged all around the world for us. Going sequentially, you do have to remember that the dollar took another leg up from the middle of Q1 to Q2 -- to the middle of Q2.

I think what we’re looking at is a $1.13 is the normal euro rate in Q1 and a $1.09 is the normal euro rate in Q2. So when you look sequentially, you’re loosing all that again and I forget JJ what …

$200,000 plus.

Another $200,000, Chris. So I’d think that explain some of the sequential quote weakness although.

We are thrilled. If they weren’t for that, we’d be guiding for another record quarter next quarter as well.

Great. And then, on the HYDRO I believe the plan was to convert Europe and other international markets kind of throughout this year.

Can you give an update on the progress being made in those international markets?

I can't. So in a very high-level, we know that 73% of the Valvulotome sales are now HYDRO for the whole company, but of course there is high dollars in the U.S than in Europe.

The countries that are now switched over are what you call the Nordics and also Central Europe, although in Q1 Germany had not yet been turned over to the HYDRO. So you got Austria, Switzerland, Sweden, Denmark, and now in April you got Norway and Germany.

And I’d say I think the information [indiscernible] lies ahead of all of us about how it will be accepted in Europe. Although the very early reports from effectively Sweden and Denmark are very good.

Things are going fantastic there. But I think you don't quite yet have good information from Germany, Austria and Switzerland given what's happening in the U.S, Canada, Australia and the two Nordic countries I just mentioned, I feel very confident.

Things are going in the right direction. That’s all baked in the guidance.

Appreciate it. If I could seek one more in, following up on the earlier question regarding M&A.

Anymore detail that you can provide on maybe how far along you are with some potential targets? Thanks.

Hey, Chris, this is Dave. I usually don't add a lot of color at this point.

I would say we’ve done about one acquisition a year for the last 15 or 16 years and it’s an important part of the strategic plan. So we are always looking at things, I can’t -- I don't really want to say if we’re in the verge of something or not, because these things are inherently unpredictable, but it is just an important part of our plan.

So we will continue to look at targets and hopefully deliver good news at some point.

Okay. Thanks for the time and congrats on the strong quarter.

Thanks a lot.

Thank you. Great quarter.

Congratulations. I guess, I have a couple of questions on the gross margin.

You mentioned that XenoSure manufacturing efficiencies, pricing, and mix where sort of involved with the positive aspects of the gross margins. Could you talk a little bit about maybe the percentage or could you break that kind of little bit further, so we understand how important pricing versus efficiency versus mix was?

Sure, Jan. I would say sort of directionally the pricing is around 1% positive year-over-year.

The XenoSure piece maybe 2%, 2%-ish, and remember last year with XenoSure, we were just sort of get and going and ramping production, so there really were a lot of inefficiencies last year than we’ve wrung [ph] a lot of those out and we will continue to do that. Mix, which I don’t think I mentioned, was also a piece of it, maybe a 1% or so good guy.

And so then going the other way, we’ve got the strong dollar in the HYDRO which I talked about and the B&I acquisition that we did last year.

Right. Okay.

And second question, I guess, just in terms you have new products coming out, this year AnastoClip and the Pruitt shunt. How do we -- how should we think about them?

Are they going to come out half way through the year or few quarters away through the year? When should we expect revenues to start and what kind of revenues should we expect, just [multiple speakers]?

Right. Sure.

So Jan, certainly for the Pruitt shunt that’s going to wind up being you will get first in man in Q4 and then that’s certainly a 2016 topic. But the long AnastoClip which launches in May, June here first in man, you could see some revenues in Q3, Q4.

I'll always say it’s baked in the guidance. We thought about -- we didn’t think it should standout enough were we would give you separate revenue numbers for right now.

My guess is by the end of 2015 we will have a much better idea to know whether we should start trumpeting this thing as a major revenue piece going into 2016.

Okay. Thank you.

Thank you very much.

Thanks, Jan.

Yes. Congratulations on the quarter.

I just had one question. And forgive me if I’ve asked this previously when talking to you guys at conferences, but do you have an interest and/or how difficult would it be to get into the neurovascular space?

Hey Mark, this is Dave Roberts. Thanks a lot for the question.

I’d say our business plan very basically is to stick with the vascular surgeon, because we can cross-sell all of our products to that one specialist. Now of course not exactly a 100% of our sales go to the vascular surgeon.

Some go to maybe the cardiothoracic, maybe a little bit goes to neurovascular, I think they do some carotid shunt work. And some may goes interventional radiologist, but at a high-level I’d say our interest in moving into the neurovascular field is -- excuse me neurological, neurosurgery field is quite low.

We are not really that interested in the brain or the heart particularly, we do veins and arteries outside the brain, outside the heart in the peripheral. So that’s really our sweet spot.

Okay. Would your thinking change given the sort of the change in procedures for going in and relieving clots in the brain versus using medication?

That’s potentially a huge market. You guys wouldn’t have an interest in that or it would be difficult to get into that?

Yes. I mean, it’s really a separate call point for us.

And again, removal of clot is an area that we’re interested in although when you get into the brain you’re discussing smaller caliber devices and most importantly different call point it’s a slightly different pathology. And so never say never, but I’d say really our intension is focused on the vascular surgeon rather than neurovascular in particular.

Okay, great. Thank you very much.

Thank you.

Good afternoon, gentlemen. Lot of my questions had been answered.

George, you mentioned in your prepared remarks that Trivex expected to approval later this year. And you mentioned something I hadn’t heard or remembered before which was some sort of five-year data or some sort of sales boogie [ph] or something.

Could you just review that for me please?

Sure. And I believe about nine months ago over in Beijing or 12 months ago I forget exactly, we signed a continuation with the current distributor opening up of five-year deal.

Once we got the reapprovals of Trivex which is we always knew we’re going away, that new deal starts the day these reapprovals are received and we think we’re going to have the approvals in June, July, August, something like that and the deal is a five-year minimum volume $7.8 million deal. So we’ve always known about that.

We probably talked about in the call, once or thrice over the years although I feel like its been a while since we’ve said something about it, Larry.

So they’re committed to $7 million plus in purchases for you over that five-year period?

Very much so, and one of the things you can see that our business is they’re thirsting for products. That particular distributor is a high quality dealer.

They’re waiting for products. Remember, they had a nice flow until these approvals shut off and we knew they will shut off when we bought the company, but they did shut off and so we fed them a little bit with refurbished boxes in the middle of last year and they’re really thirsting for new boxes.

We can’t ship them until we get the approval.

And George, any other products that now considered to flow into China now that you have a distributor that you’re particularly happy with?

No, they all -- well, we do have a runway of approvals. We think we will have six products approved by the end of 2016, Larry.

And I don’t know which distributor these products will go through. And you know we have that office over there now and we’re searching for another general manager over there.

So we have our own efforts over there and we’re pushing on what are the right distributors for each device.

Okay. And roughly speaking, JJ, what will Chinese sales be as a percentage of total sales in 2015?

Larry, you’re probably talking about a couple of percent. I mean, not too big, 1.5 million probably.

Oh 1.5 million or something like that. But probably growing very faster in the future than the rest of the business, I would think?

Yes, I mean, we hope some as we get these new approvals. When we get a staff in place over there and situated and some reps and maybe regulatory person over there as well helping out, I think things should accelerate.

Great. Well, congrats.

You had a very nice quarter.

Thanks, Larry. End of Q&A