Joseph P. Pellegrino - CFO David Roberts - President

Joe Munda - First Analysis. Mike Petusky - Barrington Research Jim Sidoti - Sidoti & Company Brooks O'Neil - Lake Street Capital

Thank you, Liz. Good afternoon, and thank you for joining us on our Q2 2018 conference call.

With me on today's call is our President; Dave Roberts, our Chairman and CEO; George LeMaitre is unable to be on the call today due to the death of his father and our founder George LeMaitre. Dr.

LeMaitre started the company back in 1983 after he invented the Valvulotome, which enabled a less invasive peripheral bypass procedure. He chared our Board of Directors until 2004.

Dr. LeMaitre was a father, a surgeon, and author and inventor and entrepreneur and a captain in the U.S.

Army. He will be missed.

Before we begin, I'll read our Safe Harbor statement. Today, we'll make 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 believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today July 26, 2018, and should not be relied upon as a dissenting 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. During this call, we will discuss non-GAAP financial measures, which include organic sales and growth numbers, EBITDA and operating income adjusted for nonrecurring events.

A reconciliation of GAAP to non-GAAP measures as discussed in this call as contained in the associated press release, and is available in the Investor Relations section of our website, www.lemaitre.com. I'll turn the call over to Dave Roberts.

Thanks, JJ. Q2 2018 was another productive quarter.

Our focus on 3 headlines: First, we posted record sales of $27 million; second, we've expanded our sales force to a 200 reps, a high watermark; and third, we continue to generate cash and in the quarter with $52.9 million, a record. As our first headline, we have record sales of $27 million in the quarter, posting 6% organic growth over Q2 '17.

Biologics momentum continue. The store flow set another record, up 24% in Q2, after posting 48% growth in Q1.

XenoSure also set a record, up 9%. As a group, our biologic products increased 9% and accounted for 36% of Q2 sales.

Geographically, Asia Pac Rim was the standout region, up 21%. In China, where we recently eliminated a layer of distributors, sales grew 25%.

Our delivering strategy seems to be paying dividends early on. As to our second headline, during the quarter we added 8 sales reps, reaching a high watermark of 102 in line with our previously stated goal.

We expect to have 105 sales reps by year-end. As a reminder, new reps typically take 6 to 9 months, to gain traction.

And we look forward to their contribution over the coming quarters. Increase in the size of our sales force, which we view as our principal asset will help us leverage future acquisitions, regulatory approval and new product launches.

As to our third headline, we ended Q2 2018 with a record $52.9 million in cash, up $7.5 million from the previous quarter, and up $11.3 million from December. With a sizable war chest, no debt in 2017 EBITDA of $25 million.

We're well-positioned to fund future acquisitions. We continue to pursue acquisitions that are complementary to our existing sales bag and the pipeline looks good.

Before turning the call back over to JJ, I'd like to remind everyone the company's financial goals. 10% annual reported sales growth and 20% annual operating income growth.

Joseph Pellegrino Thanks, Dave. Our Q2 2018 gross margins was 70.3% versus 68% in Q2 2017.

The 230 basis point increase was driven largely by decreasing [ashore] and Valvulotome manufacturing cost, favorable shunt and ProCol mix shift and improved gross margins from China as we streamlined our distributional channel in that country. Operating income in Q2 2018 was $11.5 million, up 108% versus the prior-year period.

As Reddick [ph] not been divested, we estimate operating income would have gone 13% versus the year earlier. We remain pleased with our decision to divest the Reddick product lines, which have been the only nonvascular devices in our sales bag, and we're dilutive to growth.

Q2 operating expenses were $7.5 million, and benefited from the one-time Reddick divestiture gain. As Dave mentioned, our sales rep count increased to 102 in Q2, up from 93 in the prior year.

In addition to investing in our sales force, we're also investing in regulatory approvals with a focus on high potential markets such as XenoSure in China, Japan, Australia and Korea. Our effective tax rate in Q2 2018 was 24.2%, generally in line with Federal and State statutory rates.

We expect our full year 2018 effective tax rate to be approximately 25%. We finished Q2 2018 with a record $52.9 million in cash and investments.

Increases in the quarter were driven by cash from operations as $5.8 million and the Reddick divestiture of $7.4 million, which were partially offset by dividends of $2.7 million and acquisition related payments of $2 million. On July 23, our Board approved a quarterly dividend of $0.07 per share, which will be paid on September 6.

Turning to guidance, we expect Q3 2018 sales to be $25.6 million to $26.4 million, a reported increase of 5% and an organic increase of 9% at the midpoint. We also expect the gross margin of 72% in the quarter and operating income of $5.3 million to $5.9 million, growth of 10% at the midpoint.

We're also guiding EPS of $0.20 to $0.22. Our full year 2018 sales guidance is now $105.3 million to $107.9 million, or reported growth rate of 6% at the midpoint and an organic growth rate of 7%.

Our full year gross margin guidance is now 71.3% and our operating income guidance is $27.6 million to $29.4 million, growth of 35% at the midpoint. Our annual EPS guidance is $1.04 to $1.11 per share.

Changes to our full year guidance were largely the result of changes of foreign exchange rate since our last call. In closing, I'd like to welcome our new analyst, Brooks O'Neil from Lake Street Capital Markets.

We look forward to working with Brooks in the quarters ahead. With that, I will turn the call back over to Liz for questions.

It's David [indiscernible] for Jason. Can you hear me all right?

We can, yeah.

First, Jason our team at Conccord wanted to convey our sincere condolences to George and his is family. If you guys can pass it along to him that'd be greatly appreciate in our part.

Thanks, very nice. It's very nice of you.

In quarter, did you say, XenoSure, I guess, is the first question, was 9% growth in the quarter?

XenoSure in the quarter grew 9% and in the first half of the year, it's up 11%.

Okay. Do you think you'd be a little, maybe, walk us through some of the other, kind of, product line growth rate in the quarter?

Sure. I'd be happy to.

This is Dave. RestoreFlow, Allograft grew 24% in the quarter.

And that was a record on the heels of 48% growth in Q1. Our carotid shunt product line grew 15% in quarter.

And net result is also a record. And then XenoSure, of course, up 9%.

And the Valvulotome, which is also interesting to folks because it's our second base product line, grew 4% in Q2, and it's up 7% in the first half.

Okay. Thanks.

And then, I guess, if we go back to XenoSure growth in the quarter, kind of, year-over-year, that growth has been slowing a little bit. And as we look forward to the second half of the year and going forward to full year guidance, what do you -- how would you comment on the little color on how we should think about slowing growth in this?

And what effects it would have on top line growth and gross margins? And kind of, what do you think is kind of the upside and downside to getting there.

Yes. So I'll say a bunch of stuff here, but it's really all piled up into our guidance, as you know.

And so we're looking at the guidance ranges that we talked about 7% organic for the year. And the high-level story on that is, it's sort of back half loaded.

So the first 2 quarters of the year organic growth rates, a little bit on the light side for us, as you know. And then in the back half of the year, pretty much on the strong side, coming in sort of 9% implied organic growth in the back half of the year.

And so that's the general story of the year, which is a little bit better in the back than you are in the front. And within that, I would say, XenoSure is going to benefit as well as all other products will benefit from the increase in the number of sale reps.

So we're in the low mid-'90s or so for quite some time in terms of sales reps. Now we're up to 102, we're thinking maybe 105 at the end of the year.

And I think, that would increase footprint a large part of it. The increase so far has been higher in the U.S.

And so I think they're going to benefit across all product lines, particularly XenoSure and RestoreFlow, where the dynamics are different but important in terms of a larger footprint. RestoreFlow with a lot of momentum, but to put our foot on the gas with more sales reps.

And XenoSure with growth rate is coming down. Let's combat that with more sales reps.

So I think you're going to see some improved answers in the back half of the year, and particularly, in those 2 product lines.

All right. Thanks.

And maybe one follow up specific to sales force. Do you have any commentary around hiring a new VP of Sales when also if you think about when are you kind of have guided the 105 by the end of the year?

Is there potential for any upside of that? Or any higher numbers than 105?

And also, kind of, what you think about going forward in the next 3 or so years? Can you, kind of, level for us from a higher level as far as what we might sort of think about as far as bringing out reps per year, would you see 10 to 20 reps for the year?

Just kind of level for that upfront?

Sure. With respect to our North American VP of Sales, we do have a search underway currently.

North America represents roughly 60% of our worldwide sales, so it's a very important hire for us. We do have a recruiter, who is assisting us.

And so far we had one candidate, who we liked to came -- we came close to hiring, but it ended up not working out. So we've decided to go back to the drawing board with the same recruiting form.

The good news is that we have a strong layer of regional sales managers in North America with an average tenure of 9 years (inaudible). So we will keep looking, we don't have a specific timeframe.

It's more important for us to hire the right person then to do it within a certain period of time, sort of, like acquisitions. On the topic of the rep hiring by the end of the year, 105 is our target.

As we discussed already, we increase from 94 at the end of March to 102, at the end of the June. So that's a surge of 8 reps in one quarter, which might be the most reps we've ever added in a quarter.

Could we go above 105? I'd say, if possible we could go above it or below it.

These things are always a little bit unpredictable. Sometimes you find really good candidates, as we did in Q2, and so we hired them.

So -- but I would say 105, you should think of as the goal. And beyond 2018, we're not really -- we don't really share how many reps, we're targeting in 2019 or beyond.

I think if you look at our corporate slide deck, you will see a headline that says that we added roughly 5 reps a year, but that's over the long sweep of time. And as you would see on that same chart, we had been around that 85 or 90 rep headcount level for several years.

So in a way, we're just catching up for last time. So I would say just sick with the 105 number at year-end.

And then we may give visibility on 2019 as we get in the next year.

I want to echo sentiments, please give George my condolences on his father's passing. So please, please pass it along, if you can.

Thank you, Joe. Thanks a lot.

First off, So I wanted to touch a little bit on Europe and the strength you guys saw there in Europe, Middle East region. Last quarter, you talked a little bit about some of the softness, maybe, in Germany.

And I was just wondering the strength that we're seeing from that particular region, is that more of a catch up from the last quarter? Or is there something else going on there?

Joe, that's a good question. You're right, (inaudible) Europe, Middle East Africa, which was up 12% for Q2 hit a record.

And Germany is in the middle of a very nice turn around. It was down, I want to say, 7% in Q1.

And it's recovered to a plus 14% in Q2. But frankly, the growth is much wider spread than that.

France grew 22% in Q2, the U.K. and Ireland grew 16%.

So I would say there is generally strength across Europe. You may recall that we did put a new VP or President of Europe, Middle East, Africa, sales in the back half of last year.

It could be the case that Frank Guenther is getting some traction with his team. It also could be the case that we've added a fewer sales -- we added a sales rep in Germany.

And so combination of things. But it's been a very nice recovery, and we're very pleased to see Europe, Middle East, Africa return to in double-digit growth.

Joseph P. Pellegrino - LeMaitre Vascular, Inc.

- CFO, Treasurer, Secretary & Director And Joe, I would add one thing about that from last quarter, if you remember, we had contest in Q4 that were point some of sales. We thought out of Q1 back into Q4.

And that's in the U.S. -- and U.S.

Some of that normalize as well, and you can see healthier growth numbers generally because of that.

Okay. I appreciate the color.

And then, I guess, sliding over to the U.S., it was flat for year-on-year. And the decision to hire more reps, I guess, their hires you had said are going to be predominantly -- more predominantly in the U.S.

I guess, can you walk me through some of the -- what cities or what areas of the country these new reps are going to be targeting? As well as the hiring, it did in response to flattish growth that you've seen, I guess, this quarter?

Or what you were seeing?

Right. So the flat reported growth in Q2, I guess, it is what it is.

Although, it could be a bit misleading because as you'll recall, right at the beginning of Q2, we divested the Reddick Cholangiogram Catheter. And that product -- the sales of that product were 97% in the U.S.

to that $3.3 million of sales. So if you undo that and you look at the organic growth in the U.S.

it was 5%. And so I would say, the fact that the hiring was tilted more to the U.S., and the hiring in the U.S., Joe, is I'd say, not focused on anyone region.

It was pretty evenly spread out. I don't think that hiring was particularly geared towards the 0%.

Because organically, we felt pretty good about the business. But as JJ mentioned, just a few moments ago, with the RestoreFlow growth that we're seeing and our belief that more reps could augment that growth in the future on the one hand, plus some of the faces, the challenges we faced with XenoSure and a couple of new competitors on the other, we felt like the U.S.

was a good geography to expand more quickly during the quarter. So I would say that -- those were the primary considerations.

Okay. So if we back out the impact for the Cholangiogram business from last year this time versus this year.

You're saying that U.S. grew organically roughly 5%?

5%. Correct.

Okay. And then, I guess, my last question.

I'll get back into the queue. You took down the guidance a little bit for [ForEx 4x], I was just wondering if you could give us the little bit more color, what sort of geographies are impacting you guys most as far as the currencies are concerned?

Or you think it's going to impact you? And are we seeing a more -- I guess, the growth that's occurring, in the OUS market.

I'm assuming it's, again, continue to be outsize as far as U.S. versus OUS.

Yes. So there's a lot there, Joe.

I guess, I would start by framing it as -- so we made guidance in Q2 $27 million, but that's in constant currency we beat by $225 million or a little bit more. So the FX since our last call has gone against us.

And by $225 million, maybe, $250 million, we still got the $27 million, which is good. And we kept that sort of CC, constant currency gain, if you will, for the rest of the year.

But for Q3 and Q4, you can, kind of, think of our guidance as unchanged. So for the year, we're bringing down the dollars by 800k or a little bit more, but in the organic growth, Joe, actually went up from 6% to 7% from last guide to this guide.

And that's really a function of the Q2 beat. We kind of kept that, and said okay, we'll be fine, we'll keep our H2 guidance the same and keep that second quarter gain.

So that's sort of the high level on sort of what we did around FX and that is FX impacts for the full -- sort of, Q3 and Q4 as close to $1 million since our last call the change in FX. And I said about $225 million, $215 million Q3.

And then if you wanted a little bit of "hey, where geographically do that really -- is that really happening?" And I would say, "it's mostly euro, because we're largely -- European operations are $30-plus million [ph] or so there's a large component there."

And then there's the U.K. as well and Canada, sort of, maybe in the [$3-ish million] range, in terms of revenues and FX impact.

And Japan as well you can throw in there.

But you should get a -- you should -- I'm sorry, you should get a benefit on the expense line, right? Because.you're...

Yes.

Okay. Okay.

And it's where, Joe. So it depends on what, we have to be really careful about what periods you're talking?

And is it a year-over-year or sequential? But if you're talking to year-over-year, FX helped for the first half, but where we stand now is it's going to hurt for the second half that sales And then the reverse for OpEx.

And then if you're talking since the last call then it's FX is hurting and hurt $225 million or [$215 million] in Q2 and about $950 million for Q3 and for Q4. And we'll help commence really for OpEx.

It's Drew on for Rick. Just the start, you've had several quarters in the single-digit growth.

And for the lease in the call, you can need to pursue the 10%, reported growth construct. Just over the next couple of quarters, can you return to, kind of, that growth trajectory?

You get some lift with the divestitures, but kind of, what's the roadmap for getting you back on track to the 10% growth?

Sure. Drew.

I'll take that. Good question.

So of course, in the prepared remarks, we reiterated that [10 20] goal. And because you filed, when wait for long time, you're aware that, that 10% revenue growth is made up of, let's say, historically 8%, or 7% to 8% organic, plus 2% to 3% acquisition.

So for the full year, the guidance, which has provided it's 7% organic growth for the full year. And in fact, in terms of the roadmap in the back half of the year, Q3 and Q4.

The employ guns in Q4 is 9% organic growth. So in terms of the organic growth component of 10 20 , we feel like for the full year were sort of at the lower end of the range.

But in the back of the year, we're solely in the range that has always helped us deliver 10 20, if not slightly above it. And then, of course, the missing component is of that 10% growth, normally 2% or maybe 3% or more, has been driven by acquisitions.

And we had not completed an acquisition, as you and other folks recognized since November 2016 when we acquired RestoreFlow. So the $64 question is will there be an acquisition in the back half of the year?

And I'm sure you recognize that we announce the acquisitions when they're complete. But in terms of the model in 10 20 , certainly, we feel like we're returning up to the higher organic growth as we push into the back half of the year.

And then on the bottom line, the 20% up income growth. If you exclude the all effects of Reddick acquisition, I've seen that the Reddick divestiture, op income growth for the year would be 14%, again, a little bit light versus the 20.

But as you also know the acquisition, one of the key criteria is that it'd be accretive. And so we feel like there's the missing link on the 14 to 20 as well.

And so we feel the 10 20 construct is intact. And we're just going about our business.

And at some point, you will hear about another acquisition. And then in the meantime, we're pleased that the organic rates are recovering.

And Drew, that's the higher level concept. And you asked about specific drivers, I think, as well.

What's going to help you grow in the back half versus the front half unfortunately, it's a back half loaded near in terms of organic growth. But certainly the reps are just as one piece.

More reps are going to help take some maybe a quarter or 2 to start ramping up and we should get some benefit from them in the back half of the year. RestoreFlow doing really well.

We expect that to continue. And maybe, increased growth rates are a little bit, we'll see.

Germany, as Dave said, had a really nice turnaround, Q1 to Q2, a negative growth in Q1, 14% growth in Q2. If we can keep Germany moving, that's a really important part of the puzzle of new acquisitions, as Dave mentioned.

Obviously, a little wild card. And then, we actually have a little bit lighter comps in the back half for the year, so year-over-year comparisons are a little bit easier.

China was weak in the back half of 2017, and so -- and some other topics there's well maybe so. Maybe a little bit easier comps as well.

So all of that conspires roughly to give us the guidance that we talked about.

Great. Thanks for the color.

And I know the story to the component has been acquisitions in your ability to grow those sales over time. But we've just noticed that over the past few quarters, you've been spending a bit more on R&D.

So I know you have a few trials but could you just maybe talk to us about some of the newer products that we should be paying attention to or clinical trials? What are you guys excited about in your pipeline?

Sure. To contextualize it.

In Q2 2018, we did spend 7% of sales on R&D. And we spent $2 million, which is a record that was up 22% over a year ago.

And LeMaitre, when we think about R&D, we're thinking about both the new product development pipeline and the regulatory pipeline. So what we have our eyes on in terms of the regulatory pipeline, I'd say our -- we're focused on high-potential markets from a product standpoint, that XenoSure, from a geographic standpoint, that's Asia Pac Rim.

So of course, the first thing I'll talk about is the clinical trial in China, where -- now we're near 60% enrollment, we're at 167 patients enrolled at the 288. We expect and hope to complete enrollment by the end of Q1 of next year.

And we hope to get an approval for that product in 2021 a few years off. We're also focused on XenoSure approvals in Australia, Korea and Japan.

Japan is probably a longer timeframe, Australia and Korea near term. And then China will also pursuing an approval of our PTFE graph called lifespan.

So that as well as another version of the grip clip in the U.S. that's the regulatory pipeline.

But frankly, I'd say, we've been investing probably a little bit more heavily than sort of the new product development pipeline. But we had been investing there as well.

And there we're not really getting in the specifics of which projects we're pursuing just for competitive reasons. But I will tell you that we are focused on the biologics segment of our business, because that we think is the highest growth and the highest potential.

Got it. And just 2 last housekeeping question.

Can you just talk about what price volume and mix contributed in the quarter. And then just to sneak in the last one.

I heard you talk about XenoSure and RestoreFlow growth, but could you break out on the flow and protocol as well?

Yes. So in the quarter, volume was sort of in the 1% range and ASP more in the 5% range.

It's a little bit of a red herring, because we do have product line that have a lot of volume, obviously, unit wise. And very low ASPs like Tape, for example.

So that's a little bit of an odd metric for us. Typically, it's sort of half-and-half units in ASP this quarter turned out to be a little bit secute.

And then on the Omniflow and ProCol, I don't have those exact numbers but biologics, which is comprised of RestoreFlow, XenoSure, Omniflow and ProCol was up 9% in the quarter and now represents 36% of sales.

I had a [indiscernible] briefly. So forgive it, if you guys have covered it.

But did you guys give any update on the China transition in terms of your distribution structure? Did you talk about that?

Or could you briefly talk about any update there?

We didn't. So as you know we've been working to transition from 3 master distributors to a number of sub-distributors.

And essentially, be more direct to hospitals or not direct to hospital. At this point, we've terminated the 3 master distributors.

We've signed up about 35 sub-distributors. We think that's paying some nice early dividend sales for China.

We're up 25% in the quarter. And so it was a nice, strong.

And so we'll see if that continues. That bet, it's still a little bit herky jerky, as we go forward.

But it will certainly be nice to have 35 to 45 customers as we move forward instead of 3. And a lot of that heavy lifting has happened, and we'll continue to work on that channel.

Okay. Great.

And then, I guess, just following on, on the last question regarding mix. Volume growth has been pretty weak, not just in this quarter but through the first half.

I mean, are there any concerns around that? Or how do you guys -- obviously, you're getting pricing, and you had some currency tailwind.

But I mean, can you just speak to that the first 6-month performance (inaudible) unit volume growth?

Sure Mike. This is Dave.

The unit growth answer is an interesting statistic because, for example, it's skewed heavily by some of our lower-priced products. And for example, in this quarter, I rattled off, which products did well.

The one product that really didn't have a very good quarter was our radiopaque tape, vascu tape, which was down 14%. And if it's not our highest volume product, it's right up there because a piece of tape cost, let's say, around $50 or less to the hospital.

So the tape answer can skew the answer on unit. So I would say, we pay a little bit of attention to it.

But we pay more attention probably to the -- to -- where the dollars are going. And of course, we're pleased with the price increases, we're able to command in this niche market.

Okay, great. And then just last one, Dave, on M&A.

In a backdrop like this, does anything change in how you source deal or how you a source product? Or ways that you can be accretive and try to uncover assets that aren't valued at levels.

That aren't -- are particularly attractive. I mean, does anything change in this backdrop?

Or you just sort of just keep beating the bushes and see what you can find?

I would say about 2 years ago, we doubled the size of the acquisitions' department from 1 to 2 people. And we're very active.

We have a very good network of deal sources on the whole. I would say, things don't really change.

There's a decent amount of brute force. We're very careful about where we spend our time with which parts of the network.

Evaluations are a little bit high these days. But on the other hand the pipeline is good right now.

And just to give a little bit of color on that, I'd say, I've got 2 to 3 active deals in the pipeline. And maybe another deal or 2 in the bullpen.

And that's after over the course of the last year, having one deal that came literally within days of closing, not close, which is why I'm always reluctant to announce the deal until the day closes. But I would say -- I understand your question, I would say, we're doing what we're doing.

And I feel good about where the pipeline is at. And at some point, everybody will wake up one morning, there will be a press release from LeMaitre.

Excellent. Let me just ask real quickly.

And I don't know, if you're willing to characterize. But are any of the 2 to 3 are active?

Or any of those size beyond your traditional, kind of, smaller deals? Or are they all kind of more incremental health, but not necessarily (inaudible) ?

Yes. I'd say, I hope you don't mind the evasive answer, but I'm going to keep the size of the deals in the pipeline.

I'm not going to disclose that at this time.

Dave, I think, I'm the only one on this call that feels a little bit of relief when you don't do a deal that's maybe a little bit too expensive. I appreciate your discipline you guys are doing.

I know it's not with $53 million, but it a whole in your pocket not to pull the trigger. But I really think that you're wise to wait till you get the right deal.

Appreciate the comment. Thank you.

The one question I had, just comparing the quarter over a year ago, R&D was up a little bit you address that. And G&A was quite a bit lower a year ago.

Was there a onetime issue in the second quarter 2017 that lowered G&A?

Yes. Good pick up, Jim.

So if you exclude the one-timer, up expenses were up 11% year-over-year. There was a decent amount of OpEx that went into this quarter.

And last year, George stopped taking his salary and bonus in the quarter. So there's a little bit of an odd low comp from last year.

And then this year, we had the Reddick divestiture, and there was a commission associated with that and the legal fees associated with that. And Dave talked about the deal that got pretty close to the alter, and didn't make it.

And their Illegal fees associated with that. We had recruiting fees going around and around on those VP hires and some more folks in the finance group.

And then in the clinical side, we were up pretty sharply as well investing in that China trial and Australia for regulatory approvals there as well as the Japan regulatory approvals, too. So a lot's going on, sort of behind the scenes, if you will.

For the year, we've given you guidance of OpEx being up, again, I guess, 7% or 8%, something like that. So it's kind of okay.

On middle and high end, but kind of okay for the year. But definitely, a little bloated in the quarter.

I think the easy comp from last year when we went to cost-cutting, had something to do that as well.

Just want to wish my condolences to you guys offer what happened. So just want to quick question on acquisitions, I know we're not going to hear anything of size, but just in direction, do think you move more likely to be in the biologics direction?

Or could you go somewhere else? Or do you think it could be a whole number of different things?

Good question, David. We do like biologics.

It is the a faster growing part of our portfolio, but frankly, there are more nonbiological targets out there than there are biologics. So could go in various direction.

The key for us is that their products used by vascular surgeons and that there are niche low ivory markets and that the deals are accretive.

And then just one more question on (inaudible) a different topic just trade. Solid talk with the trump trade wars and everything.

How is that impacting your outlook on international sales, both in China and other regions?

So I haven't read that they've actually enacted anything around med devices at this point. I think that's true, although I might be out of touch.

I've been in the conference room for a couple of days preparing for this call. But I think the answer is unchanged right now, unless you know of something differently that's going on.

And then just one last housekeeping question. Do you I get the breakdown of where the salespeople are added in which region?

Sure. So we added 8 sales rep during Q2.

In the Americas, we added 6 sales reps on the United States. In Europe, Middle East, Africa, we added one sales rep in Germany.

And then Asia Pac Rim, we added one sales rep, and that was in Australia.

Being the newest analyst and from the Midwest, I'm going to ask you a fishing question. So last quarter you talked about the opportunity to catch some whales, I think in the biologics business, I was hoping perhaps you could give us some anecdotal color about whether you're having success with your fishing efforts?

Brooks, it's Dave. And as a fellow of Minnesotan, I just want to make sure I understand your fishing question.

Are you referring to acquisition target or customers, when you're discussing whale?

To be honest with you, I think, it was George last quarter. You I don't think were on the call, but George was talking about selling to doctors in the biologic -- biologics area and the potential they have.

Okay. I've got it.

Right. So what George was referring to was when we acquired RestoreFlow, Allograft, there were a couple very large accounts that we picked up.

And so the nature of Allografts we found can be a little bit different from the nature of customers who purchase, let's say, Valvulotome and other products. And that because the average selling price of (inaudible) spain Allograph is $7 or $8.

If a single customer uses a lot of these, they can become a very large customer very quickly. And that's what we call a whale.

I would say, despite the fact that we had record sales of Allograph in Q2, I think the nature of our business is a little bit geared less towards whales so far and the revenue is more spread out. That being said, part of the reason as JJ mentioned, they were adding more reps in the Americas is because we recognize there is a big opportunity with RestoreFlow.

So we might want to go after some of those customers, who would be more akin to muskies than funnies.

There you go.

[indiscernible] first I won't even go further with that which is to say part of the thesis of the acquisition was startup company with a limited sales resources, take a great product line and put it on top of 50% in growing sales force at LeMaitre. And you get nice diversity of customer base over time instead of relying just on whales.

If we pick some whales up in the interim, fantastic, but really our business plans, it's better with a nice broad customer base. And nobody sort of swinging things too much, quarter-to-quarter.

Real quick. Dave, JJ, the RestoreFlow growth that you're seeing.

I mean, is that a function of you guys taking share from another player? Or is it the market growth?

I mean, can you give us some sort of color there? It's pretty nice outsize growth for this product.

As well as, JJ, I was wondering, if you could give us some sense of what CapEx was for the quarter? I think, I might missed it.

Joe. It's Dave.

I'll take the first half of that question. I'll give JJ the second half.

I would say, we are taking share because we just quoted a couple very high growth rates in Q1 and Q2 in 24% to 48% range. I think -- i would say the purpled vascular surgical allograph market is probably going like the rest of open purpled vascular surgery in low single digits range.

It could be a little higher, but I would say low single digits range. So I would say that we're taking shares.

And there are really 2 competitors in the United States. I can't really comment on exactly who were taking share from.

But I do believe we are taking share from either one or both competitors.

And the other question in CapEx...

Okay. I just [indiscernible] getting back to that is a function of product or is it a function of pricing do you think?

It's a function, I would say, predominantly of sales channel, which is the competitors in this space are cryo light, which was really the pioneer in the space and then life net health. And cryo-life has a good sales channel, LeMaitre Vascular has a good sales channel as well.

We have a very deep sales channel. So I think that in terms of -- and certainly compared to life net who sales their purple allographs through distributors.

I would say, we come to the table with 53 now American sales reps of whom, I believe, 50 are in the United States. And so a very wide network of reps.

and each sales rep has 20 or 30 vascular surgeon customer house accounts. So very deep networks.

In terms of the product, I would say at a high level, Joe, the product is pretty similar from one of the companies to the next. You could probably argue details but at the end of the day these are Allograft.

And so these products are manufactured by in our own bodies. And there they come from cadavers.

And so they all start from the same place. I'm not sure if price plays a big role in this, it could play a little bit of a role.

But I think your real answer is the sales force.