LeMaitre Vascular Inc

NASDAQ:LMAT

Earnings Call Analysis

LeMaitre Q3 Performance: Strong Growth and Margins

LeMaitre Vascular reported a robust Q3 with 21% sales growth driven by strong performances across all regions and product lines. The company achieved 16% organic sales growth and a 36% rise in EPS. Efficient cost management led to a 49% increase in operating income. Expansion efforts continued with new offices in Bangkok and plans for a French sales office in H1 2024. Regulatory filings are progressing for European and Chinese markets. LeMaitre ended Q3 with $97 million in cash, signifying financial stability and options for strategic moves. Q4 guidance predicts continued strong performance, though Q4 sales guidance was slightly lowered due to external economic factors.

A Robust Quarter Amidst Operational Restraints

LeMaitre Vascular reported a solid third quarter of 2023, highlighting an equal performance with Q2 on the top line, featuring 16% organic sales growth, with an even stronger bottom line. Operating income increased by 49%, and earnings per share (EPS) jumped by 36%.

Product and Geographic Expansion Driving Success

The company's growth was quite uniform across different geographies with a reported sales increase of 21%. The Asia-Pacific region saw a 30% rise, Europe, the Middle East, and Africa were up by 24%, and the Americas experienced a 20% increase. Key product lines such as bovine patches and carotid shunts excelled, benefiting from competitors exiting the market, whereas valvulotomes' growth is thought to be spurred by a clinical trial's positive findings.

Pricing Strategy and Hospital Procedural Recovery

The growth in hospital procedures continued in Q3 2023, and the company's price increase from the start of the year was generally accepted by the market. The price was a more flexible factor due to inflation and ongoing supply chain disruptions. The 16% organic sales growth for the quarter comprised 11% from price and 5% from unit volume.

Strategic Investments in Sales Infrastructure

LeMaitre reinforced its direct international presence, ending the quarter with a historic high of 136 sales representatives. The opening of new sales offices in Bangkok and Madrid and the plan for a French sales office in the first half of 2024 are indicative of the company's strategic expansion efforts.

Regulatory Hurdles and Opportunities

The company is progressing on key regulatory filings, with expectations to have all submissions, including Artegraft and RFA in Europe and two XenoSure filings in China, with relevant agencies by H1 2024 and approvals anticipated within two years after submission. Additionally, the deadline extension by Brussels for the MDR to 2027 presents both challenges and opportunities for the approximately 17 product categories that must meet the new CE requirements.

Financial Discipline Leading to Growth

LeMaitre's operating expenses in Q4 2023 increased by 14%, showing a deceleration from the 20-25% range in the first half of the year, showcasing the company's focus on cost containment. This approach aligns with their internal goal to end the year with fewer than 625 employees, aiming at an enhanced bottom line.

Improving Manufacturing Efficiency

The company reported a gross margin of 65%, marking an increase due to higher average selling prices and direct labor efficiency. A previous hiring surge in manufacturing paved the way for a more timely and effective response to the increase in hospital activities.

Forward-Looking Guidance and Adjustments

Looking ahead into Q4, LeMaitre has projected reported and organic sales growth of 20% and 16%, respectively, with operating income and EPS growth both expected to be around the 44% and 43% range. However, a lowered Q4 sales guidance by $1.5 million reflects three emerging challenges: the strong dollar, supply constraints, and the U.S. export ban on sales to Russia.

Welcome Aboard to New Analyst Coverage Teams

LeMaitre Vascular welcomed new analyst teams from Oppenheimer and JMP, signaling growing interest and coverage in the investment community.

Earnings Call Transcript 2023-Q3

[Operator]

Welcome to the LeMaitre Vascular Q3 2020 Financial Results Conference Call. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]At this time, I would like to turn the conference over to Mr. J.J. Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.

[Joseph Pellegrino, executive]

Thank you, operator. Good afternoon, and thank you for joining us on our Q3 2023 conference call. With me on today's call is our 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 within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, 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, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, November 1, 2023, 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.During this call, we will discuss non-GAAP financial measures, which include organic sales growth as well as operating income, operating expense and EPS excluding special charges. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release, and is available in the Investor Relations section of our website, www.lemaitre.com.I'll now turn the call over to George LeMaitre.

[George LeMaitre, executive]

Thanks, J.J. Q3 was an excellent quarter. Q3 was similar to Q2 on the top line, with 16% organic sales growth, but it was better on the bottom line. Through the year, we've gained control of op expenses. Spending growth was 26% in Q1, 19% in Q2 and now 14% in Q3. As a result, op income grew 49% in Q3 and EPS was up 36%.Reported sales growth was 21% in Q3, spread across all geographies. APAC was up 30%; EMEA, 24% and the Americas, 20%. By product, bovine patches were up 22%, valvulotome was 27%, bovine grafts 15%; and carotid shunts 24%. Our bovine patch and carotid shunts businesses continue to excel in Q3, as key competitors have left the market. Valvulotome growth might be due to the recent publication of the best CLI trial, which showed superior results of vein bypass versus stents, angioplasty and atherectomy.Hospital procedures remained elevated in Q3, as the 2023 return to hospital continued, and our January 1st price increase has largely been accepted. In the time of high inflation, supply chain disruptions and the CE Mark transition, hospitals are now more attracted to our long-standing no back order as promised, and price might have become a secondary topic. Our 16% organic sales growth in Q3 was 11% price and 5% units.Feet on the street and our growing international presence also helped. We ended Q3 with a record 136 sales reps, 15% more than a year ago. We generally have posted higher sales growth rates internationally, as we keep entering new markets. LeMaitre's new Bangkok office opened in August, and we began selling directly to Thai hospitals. We also opened a new expanded Madrid office in September, and now we're planning a French sales office for H1 2024. France is our sixth largest market. For a company with a French name, it's a bit odd that we've never had a dedicated French sales office. Paris will be our 14th sales office and we will now be able to serve the 5 largest European countries, with dedicated customer service reps in their country and their languages.Previously, our European customer service reps were centralized in Frankfurt. This relocalization of customer service tightens our hospital relationships and likely increases sales. Important regulatory projects underway include our Artegraft and RFA filings in Europe, as well as our 2 Chinese XenoSure filings for cardiac and peripheral. It's likely that all 4 of these signings will be at their respective regulatory agencies by H1 2024 and would expect approval 2 years after that.In H2 2024, we'll also file for Artegraft approval in Canada and Australia. These filings are in addition to the MDR CE transition in Europe. As you may know, Brussels has extended the MDR deadline to 2027. We have approximately 17 product categories meeting this new CE stamp or letters to file, so this is a considerable undertaking.To conclude, 21% sales growth in Q3 and 49% op income growth, resulted from price increases, restrained op expenses and the continued return to hospital by patients and staff. Our profitability and $97 million of cash on hand, provides safety and strategic optionality.With that, I'll turn it over to J.J.

[Joseph Pellegrino, executive]

Thanks, George. As George noted, operating expenses in Q4 2023 were up 14%, and operating expense growth has slowed from 20% to 25% in H1, to under 15% in H2. If the sales force ramp and post-COVID rehiring was our mantra in 2022, it's safe to say that hiring restraints and cost containment has been our 2023 theme.We had 450 employees at the end of 2021, 591 at the end of 2022 and now 613 at the end of Q3 2023. One of our notable internal goals throughout 2023, was to finish the year with fewer than 625 employees. This target seems achievable.Increased sales and cost constraints, has improved the bottom line considerably. In Q1, operating income growth, excluding special charges, was 3%. It was 8% in Q2, 49% in Q3, and now we're guiding 44% in Q4.In Q3, we posted a gross margin of 65%, up 80 basis points year-over-year. The increase was driven by average selling price increases and direct labor productivity improvements. The benefits of a larger and more efficient manufacturing team are starting to come to the P&L. In retrospect, our 2022 manufacturing hiring surge was well timed with the global return to hospital of patients and staff. Units are up and back orders are down.Cash at the end of Q3 2023 was $97 million, an increase of $6.8 million in the quarter. This increase was driven by cash from operations of $11.8 million, which was partially offset by dividends of $3.1 million and capital expenditures of $1.1 million.For guidance, please see our business outlook issued in today's press release. But a few Q4 highlights include, reported sales growth of 20%, organic sales growth of 16%, operating income growth of 44% and EPS growth of 43%. This $600,000 upward revision to our Q4 operating income guidance is largely due, to an improved gross margin and tighter expense control.Separately, we have lowered Q4 sales guidance by $1.5 million due to 3 topics which have evolved since our last guidance; the strengthening dollar, restored flow output constraints, and the continued U.S. export ban on sales to Russia.Finally, I would like to welcome 2 new analyst teams to the LeMaitre story. In September, Suraj Kalia and Shaymus Contorno from Oppenheimer initiated coverage. While in October, David Turkaly and Danny Stauder from JMP initiated coverage. Thank you to both teams, and we look forward to working with you.With that, I'll turn it back over to the operator for questions.

[Operator]

[Operator Instructions] And our first question is going to come from the line of Brooks O'Neil with Lake Street Capital Markets.

[Brooks O'Neil, analyst]

I'm curious -- I guess I'd like to ask David, if you don't mind, if you could comment at all on the M&A environment? It seems to me like the cash balance is robust and perhaps some of the challenges that are affecting the world may be freeing up some tasty morsels from some of the big medical companies out there with whom you talk. Any update would be helpful.

[David Roberts, executive]

Brooks, thanks for the question. Yes, obviously, having a building cash balance is very helpful. In the quarter, we increased the cash $6.8 million, and we're up to $97 million. When you combine that with our -- over $40 million of EBITDA, it gives us a pretty big war chest to go after acquisitions. In terms of the environment, I would say, of course, valuations are down. They're up about 20% since our last call on August 1. And small and mid-cap companies, as you know, are trading at less than 3x EV to next 12-month sales. So in terms of public multiples, the valuations have come down. I think it always takes private sellers a little while to digest and get the e-mail. But yes, so that's the environment.In terms of targets, I would say we're continuing to stay disciplined, focusing primarily on targets in the middle of the fairway, which are these open vascular targets with more than $5 million or $10 million of revenue. We like these nichey open vascular markets. But we have been hunting adjacently. I'd say probably more a little bit in the cardiac surgery market, and we have ongoing discussions at various stages with different potential sellers. And so we're out hunting. We know it's been a little while since we've done an acquisition a little over 3 years. But we're waiting for a deal that we feel really good about, that deserves our capital. So we're out hunting, and at some point, you'll see something pop out of the toaster.

[Operator]

[Operator Instructions] And our next question comes from the line of Michael Petusky with Barrington Research.

[Michael Petusky, analyst]

And J.J., sorry if you mentioned this, I did not catch it. Did you mention cash flow from ops in the quarter?

[Joseph Pellegrino, executive]

In the quarter, it was $11.8 million. If I recall, let me check that, Mike. Yes, it was. $11.821 million.

[Michael Petusky, analyst]

Okay. All right. Great. And let me just follow up on Brooks' question around M&A real quick. Dave, obviously, we're hearing more targets, more attractive targets, but also cost of capital is materially up as well. So I'm just wondering how you guys, how you MBAs think about the cost of capital and especially what that means for larger deals? Obviously, your balance sheet and cash flow support, small or maybe even midsized deals. But you guys have repeatedly suggested, hey, we had a great success with Artegraft, we're more than open to larger deals. How does cost of capital and larger deals sort of compute to you guys at this point?

[George LeMaitre, executive]

Yes. I would say, obviously, the cheapest form of capital is the cash on the balance sheet. If we're up near $100 million in cash on the balance sheet at the moment, we probably have $80 million of dry powder. And when you put that in the bank and earn a 5% money market return, it's not that expensive. So I would say, of course, we'll use our cash first.Secondly, absolutely, debt is more expensive than it used to be, but it's cheaper than using our own equity. And so we go to that next and as I mentioned, the EBITDA is north of $40 million, probably you are going to easily borrow 3x that, and that's excluding pro forma EBITDA. So we normally do accretive acquisitions, and so the borrowing capacity could be higher.Of course, in this environment, we're not going to overlever the balance sheet and then I would say, third, and I'll let J.J. add any color when I'm done on this. Third would be issuing equity. That would have to be a much larger deal. Of course, our resolve would have to be much, much higher. There are deals out there where I could picture doing that. There aren't that many, but there are some. So that, for me, I guess, would summarize the pecking order of how we would access capital to do larger deals.

[Michael Petusky, analyst]

Okay. Great. And I guess, George, you mentioned that some key competitors left some markets in which you guys compete. Could you just sort of tease out whatever details you're willing to share there?

[George LeMaitre, executive]

Yes, of course. And one of -- they're both sort of old stories here, maybe 1 to 1.5 years old, maybe 1 half year old. But Becton Dickinson has completely left the shunt market over in Europe. Dragged down by Europe, they've done it for the whole world. So they're out of the shunt market. And I would say they were either the key competitor or the second competitor over there. So our market shares over in Europe in shunts are now approaching 70s, 80s and 90s in the various countries over there.And then in the bovine patch world, we've had one Canadian guy, BioIntegral has been taken off the market. They could not re-up their CE marks. And then Abbott has left the large patch, more of the cardiac patch market, and that is providing crazy growth rates for us in our cardiac patch market. That product line for us is called CardioCel. You've heard us talking for years about the product. XenoSure that's more the peripheral patch in cardio cell is more of our cardiac patch. And of course, the new Zio patch is also a cardiac type patch.

[Michael Petusky, analyst]

And since you mentioned it and before I jump off, the Zio partnership, I mean, how you guys have now, I guess, been involved in that, at least a couple 2, 3 quarters it feels like -- how is that working out? Any commentary just around that relationship?

[David Roberts, executive]

Yes, Mike, it's Dave. I'll take that. I'd say it's going fine. The sales are probably running a little bit less than what we provided as guidance on the last call. I would say that as we look here over the next couple of few months, at the moment, our North American -- our U.S. sales organization is compensated really outside of their quota system on this patch and starting in January, the patch will be included in their quotas. So we're sort of interested to see will that affect the revenue. Let's see how that effects or doesn't affect that revenue.But the good news is we've got 6 months at least to think about whether we want to acquire this. The soonest we could exercise that option would be in April of next year. And as I learned way back in business school, you should never kill a live option. So we're thinking about this, right? And then if we do exercise it, it would certainly be accretive, right? And so it's something we're paying very close attention to. But at the moment, I know you're not asking this. We don't have further thoughts about would we exercise it or not. But yes, I would say it seems to be going well. One spin-off benefit is, as George mentioned, it's used mostly around cardiac surgery. We picked up a lot of customers, a couple of hundred customers which has helped us actually sell some of our other cardiac surgery products. So there are some nice spin-off benefits occurring as well.

[Operator]

[Operator Instructions] And our next question is going to come from the line of Jim Sidoti with Sidoti & Company.

[James Sidoti, analyst]

The first one, a lot of talk in the last few weeks about Ozempic and the other GLP-1 drugs and its impact on some other names. Are you seeing any impact on your business?

[George LeMaitre, executive]

Hey Jim, thanks for the question, it's George. No, clearly not at this time.

[James Sidoti, analyst]

Okay. And do you expect any impact over the next 2 to 3 years?

[George LeMaitre, executive]

I mean it's a long thing, and there's still a lot more to learn about that. My sense is, our answers won't really add to this, but I'm happy to run through some stuff. We knew there'd be questions on GLP. So if you want, I can give you a little blurb on sort of where we came at. Would you like that?

[James Sidoti, analyst]

Sure.

[George LeMaitre, executive]

Okay. So I guess the recent 20% major adverse cardiovascular event reductions from GLPs, these headlines really got some attention on Wall Street, the elephant in the room in most of these medical device conference calls. I don't really know how much JJ, George and Dave are going to add to your folks understanding of this, but we'll take a swing at it. And to start with before we get into this, of course, everyone here is rooting for ways to reduce cardiovascular disease. I'll call it CAD and PAD just for brevity here.But our take is that any GLP impact on CAD or PAD revenues seems very uncertain and very far away. This 20% headline, which is, I think, what most people are taking away from this whole thing, it quickly turns into a 6% a year headline, because those events, the 20% events, right, the cardiovascular major adverse cardiovascular events, we'll call them MACE, if you will, they took place over 3.3 years. So if it's a 20% reduction, that's -- pretty quickly turns into it.You're looking at the revenues of the company, you probably want to mark that down to 6%. And then you get that down to 4% because 1/3 of those events are death by heart attack and of course, I hate to get technical or a little bit grim, but if we can manage to prevent death, it's a great outcome for both the patients and then also a little oddly here for the companies that sell devices to those patients who live longer.So roughly speaking, you can pretty quickly get the headline down to 4% per year. That's assuming that the 42% -- and that would be on the whole company, if all 42% of adult obese Americans were on the drugs, were on the GLPs, and that's 108 million people. So we keep coming back to, it's really unlikely that, that many people are going to be on these drugs. But never say never, you don't know -- none of us on this call know in 10 years if this is going to be another statin or what it's going to be.I think Abbott has come out on a couple of calls saying, they think it's about 12 million Americans who will be on these GLPs. And this sort of aligns with that. We've all heard this $80 billion in revenue for the analyst estimate this peak revenue for the GLPs out there, and I don't know, X years, no one is putting a number on it, but -- and so that will be $12 million being on it.Just for sort of comparisons, so we can discuss this. Lipitor launched in 1997. So maybe the GLPs are another statin, right, who knows? 40 million Americans are on statins. And I would say maybe the most important topic that you could think about is that, even though the statins have been out there and lots of us, lots of us 59-year-old men are on statins. The need for CAD and PAD devices has only increased over this quarter of a century. So I think maybe this could be like that. But again, I don't know -- I don't think any of us knows.The Jefferies analysts who are covering us have written some really nice pieces on this. They might be on this call, I don't know if they are. They published 3 -- and I'll close up here. I know this is a bit of a long ramble Jim, and you probably didn't ask for all this, but I'll close up quickly here. They published 3 lengthy GLP reports in the month of October. And they go all around, they make good proofs everywhere, and they come back to this mantra that they repeat over and over. GLPs are indeed -- so I'm definitely stealing this from their report, GLPs are indeed a big drop in the bucket, but the bucket is much bigger and the bucket wins. And I think what they're trying to say is, cardiovascular disease is the #1 cause of death in the world. It's a very big bucket. It's unlikely that it goes away because of this.In all of this, we didn't talk about the fact that 40% of LeMaitre is O-U.S. And I think we all know that maybe this comes to the U.S. and Germany, but I don't think it's off in Japan and Thailand for a very, very long time.So I hope that's a good swing out of Jim. I'm happy to go in any direction you want with it on that, but that's sort of what we got to.

[James Sidoti, analyst]

Okay. No, that was exactly what I was asking [indiscernible]. You said you ended the quarter with 136 sales reps. You think you're at the right number now or do you think you'll continue to add in the fourth quarter?

[George LeMaitre, executive]

Right. So we feel like we're going to end the year between 135 and 140. So we maybe pick our way down the field and grab 1 or 2 more, but we're good for now. I do think that the growth of the sales force is a continuing objective and I'm not going to give what are we going to do next year, but I definitely feel like it's a growth vehicle for us. We're really -- I don't know, feeling our oats is a wrong word, but we're feeling really good about the growth of these offices and the growth of these reps around the world everywhere. I mean it's -- we're growing everywhere with reps.

[James Sidoti, analyst]

All right. And then the last one for me, you indicated the theme for 2022 was to build up the staff, get capacity going for 2023, was to get operating margins improved. What would you -- do you want to tell us what you think the theme for 2024 [ will be ]?

[George LeMaitre, executive]

Right. You want an advanced copy of our planks. We are deep in discussion at lots of bureaucratic, long meetings trying to figure out. We published this thing called the Planks, Jim. We have 9 objectives every year and it's on our walls. If you visit our facility, I know it's been COVID and everything, but if we came up here, you'd see they are all on our walls. We'll have that posted. I think the last meeting is actually -- it's this Friday or next Friday? I think its next Friday is the last meeting. So we'll have that all sorted out by next Friday, but it's a little early to share.

[Operator]

And our next question is going to come from the line of Suraj Kalia with Oppenheimer.

[Suraj Kalia, analyst]

Can you hear me all right?

[George LeMaitre, executive]

Yes.

[Suraj Kalia, analyst]

Yes. Perfect. So one of the key things -- and forgive me, I joined a little late, what was the contribution of price in the quarter?

[Joseph Pellegrino, executive]

11% and 5% a unit Suraj.

[Suraj Kalia, analyst]

Got it. That's fair enough. And George, following up on commentary on GLP-1, on a relative basis, just given the categories and how you'll compete in the different product segments, am I wrong in thinking that [ you all ] should be or LeMaitre, should be relatively more insulated than other cardiovascular companies? I understand your pushback on the 4% and so on and so forth. But just on a relative basis, either way, shouldn't we also look at it, that LeMaitre is relatively insulated and hence the impact, if at all, should be de minimis?

[George LeMaitre, executive]

I mean the thing about LeMaitre that you have to keep knowing, is that we're really diversified by product categories, by disease state and by geography. And again, 40% of our revenue is O-U.S. is that right? Yes, 61% USA. So this is a very -- even though we seem like a small company because I think our guidance here is $193.6 million in revenues. We do -- we seem like a small company, because it's only $193 million in revenues. But I think we act and feel like a very diversified larger midcap, because we're everywhere with a lot of different devices.So I think you're right. But again, I'm not sure anyone knows, right? This is all we're going to -- we're all going to work down the field here and figure this out. The thing about these studies is, not much information has come out yet, right? We really don't know much.

[Suraj Kalia, analyst]

So a fair point and the key studies will be released I believe it's next Friday. So I'm sure there'll be a lot of discussion. George, in terms of just following up a final question, in terms of the 40% O-U.S., again, maybe I'm just stretching it here, forgive me if I am, how do you all think through the various offers for risk mitigation O-U.S., just given everything going on; geopolitical, FX, things seem to be ramping up, and given your exposure, just kind of talk to us, as to the buffers from a risk management perspective?

[George LeMaitre, executive]

Okay. Okay. Yes, it's a great question. And maybe it goes back to how do we choose to get into the markets that we choose to get into internationally, I think, is your question. And I would say we've been very cautious, maybe with the exception of Thailand, which is not exactly what I would call a Western democracy, but we've been very cautious in trying to sort of follow what I would call, to be pithy about it, the British rule of law. So you go to places like Canada, you go to places like Japan, you go to places like the U.K., Singapore, places where you wouldn't be -- you'd be nervous, but if you got to put up on some crime in some of these countries, you get a jury and you get a trial by jury.So I think most of the places we've gone have been those type of places. And so I think the 40% that we do drive overseas, is in fairly safe places like Spain, France, Germany, Italy, the U.K., Japan and Canada. And I just railed off in the U.S. Those are the 7 biggest countries in -- of our revenue. We don't go to places like Russia. We stayed away from Saudi Arabia. We stayed away from South Africa.So we've been -- it is very thoughtful. I'd say the one slightly odd duck here would be the Thailand thing, which is new, but we had a very big distributor there, and we felt it would be worth taking a risk in what, again, I would not categorize that as a voting democracy right now. But that's the only one.

[Operator]

And our next question is going to come from the line of Michael Sarcone with Jefferies.

[Michael Sarcone, analyst]

Great. And thank you for the shout out before.

[George LeMaitre, executive]

You're more than welcome. Thanks for the nice research. Very thoughtful.

[Michael Sarcone, analyst]

Great to hear. Just a first question, you have the 11% ASP contribution this quarter. I was wondering if you could comment on what's baked into the 16% organic growth guide for 4Q from a price standpoint? And then looking forward, how do you think about the sustainability of that ASP contribution going forward into 2024?

[George LeMaitre, executive]

Okay. So first answer is not going to be very helpful to you, which is we try not to -- we're guiding, what, 16% organic for the quarter. We try not to break that out by units or price. Looking backwards, though, you could make some logical inferences, which is I feel like -- I don't have the exact numbers right now, but the relationship between price and units has been a bit stable this year for these 3...

[Joseph Pellegrino, executive]

13% ASP in Q1, 9% in Q2 and now 11% in Q3.

[George LeMaitre, executive]

Going forward, which is part of your question, you're trying to break into 2024, which we always try not to go into, but we'll play along a little bit here. Going forward, I think that the LeMaitre story has been about try to get into niche markets where you have big market share, and I name -- [indiscernible] valvulotomes, the shunts, XenoSure, we're #1 player there. Be in markets where you have pricing power and be in markets where you think worldwide pricing is set in Burlington, Massachusetts. And so I don't -- that's not gone away. You haven't seen us change up our segments here with acquisitions here. So there's a lot of segments, including Artegraft here, where I do feel like you're setting prices in Burlington and Frankfurt, and we don't have to go to Arizona with Gore and duke it out with them about what the PTFE price is. That's their issue.But I do think this is -- a bit of LeMaitre as a price play, and we keep having pricing power. And the good thing here is if you want more pricing power, Brussels is about to give it to you in spades here. They keep making these regulatory barriers higher and higher with the MDRs and the people -- the competitors are falling off like fleas. In the smaller markets, they're just going away, and so therefore, it gives us more pricing power. And to which -- the shunt pricing that we've had in the last 3 years, the power they've gotten has been largely because Becton Dickinson left the market, and they left the market because Brussels has put up regulatory barriers that are too high for people to climb over.So I think the story continues unchanged. I won't project what 2024 will look like, but I don't think the story is changing that much.

[Joseph Pellegrino, executive]

Mike, this is J.J. Another way to think about Q4 and one of the many ways we think about it is sequentially what's going on. And so those price hikes that I talked about for Q1, Q2 and Q3 are kind of the same and at around 10%. So you're kind of thinking probably you're going to do about the same in Q4 and then what else is different. And so the things that kind of stuck out from Q3 to Q4 this time around, where one is FX. The FX has moved a lot. And so sequentially, from Q3 to Q4, it's like a $600,000 headwind. And so that's one topic you have to take into consideration.The number of days in a quarter, those matter. We take those into consideration. Seasonality matters a lot for us as well. Q3 is generally the slower quarter and Q4 is sort of behind Q2, if you will, in terms of seasonality and so there's an uptick there. And what does that mean, what it has been historically? And so what will it be this year? And then we look into specific stories like we've had a restore flow sort of back order topic in Q3 that we're working our way out of, hopefully, in Q4. And as we get into Q1, what does that mean? Well, maybe that adds an extra whatever, a few hundred thousand dollars.There's the Thailand story that we went direct there in Q3. The Thailand distributor stuffed the channel essentially. So we didn't get the sales we thought we were getting in Q3, but we'll get them in Q4, and maybe that's a couple of hundred thousand dollars or so. So sequentially, I think the ASPs you can think of as consistent, but other topics coming and going to get to the sort of $49 million we guided.

[Michael Sarcone, analyst]

Got it. That's really helpful. And just a follow-up on that, J.J., I think you and I have spoken about in the past, historically, the price algorithm has really kind of been in that mid-single-digit level. But I guess, given the regulatory considerations that you're mentioning, is it fair to think that maybe kind of the new paradigm is above what we've seen historically?

[Joseph Pellegrino, executive]

I think we'll take it year by year. But I think the cycle you're in right now, at least for this year, and then maybe we can talk a little bit about next year, but not too much. This year, it's all about mostly valvulotomes and shunts. And so one of our valvulotomes was priced below one of our other valvulotomes. We brought that price up to essentially match it and being the premier provider of these devices, the customers said fine. And so we got really nice price hikes in valvulotomes.And then shunts, the topics George was talking about with other competitors going off the market certainly helps our share and our leverage in those spaces. And so we've gotten nice price hikes there, particularly in Europe. And then the third thing we did this year was we put in, and we've done it before, but I think we really did it a little more forcefully this year, was put in pricing floors in some of these product lines. And so you may not discount beneath whatever that pricing floor is, if you're a sales rep, whereas in the past, you could have.And so to the extent that we use pricing floors in the future, you might get outsized ASP growth versus your 5% historical. To the extent there's other product lines in the bag that are mismatched in terms of pricing that can be fixed, you might get outsized pricing in the future. So we'll see where that goes. But right now, we're certainly in a nice spot in terms of pricing.

[Operator]

And our next question is going to come from the line of Daniel Stauder with JMP Securities.

[George LeMaitre, executive]

Hi Daniel, you're up. If you want to ask us the question, it's George.

[Joseph Pellegrino, executive]

Operator, they might have bad phones out in San Francisco. Why don't we move along?

[Operator]

Alright. Just one moment, please. And our next question is going to come from the line of Scott Henry with ROTH Capital.

[Scott Henry, analyst]

Just a couple of very quick questions. First, if you don't mind, could you give me the mix between biologics and non-biologics?

[Joseph Pellegrino, executive]

Biologics was 51% of sales in the quarter.

[Scott Henry, analyst]

Okay. And then looking at the numbers, Sales and marketing was kind of down sequentially with employees up. Any thoughts of why -- and even on similar revenues to Q1 -- or yes, similar revenues to Q1, it was down significantly from Q1. How should I think about sales and marketing in Q3 and how that should be indicative going forward?

[Joseph Pellegrino, executive]

Yes. So one of the reasons selling and marketing has been elevated in the first part of the year is, because sales results were so strong versus quotas. And I think as we get through the year a little bit, quotas start to ramp up a little bit. And so even with the 16% consistent organic growth in each of the quarters, the [ answer ] versus quota changed a little bit. And so commissions and [ concepts ] were down a little bit.Q3 is also seasonally a time where selling and marketing goes down a little bit. There's a little bit of a best travel and conferences and all that kind of stuff. And so down there as well. And so I think there's a couple of good reasons for that. And then in Q1, the weird answer there is we had a sales meeting. And so that's sort of a, I don't know, a $600,000 or $700,000 event globally. There's one for each of the main geographies. And so you can see in absolute dollars sort of coming down from 10.9% to the 10.2% from Q1 to Q2. So maybe that's how that cadence works throughout the year.

[Scott Henry, analyst]

Okay. Great. And final question, you mentioned how you were losing some competitors in some international areas, and it benefited some of the products. Are there any new product launches internationally into any specific countries that we should be factoring into our model going forward? Any levers that would kind of change the trajectory of any of the lines in the near term, right?

[George LeMaitre, executive]

Scott, it's George. I'll take -- that's a great question. I'll take that. We read out in the script these regulatory approvals, but they're kind of longer in the -- it takes a while to get through there. But RFA in Europe at some point, will add something. We don't know when we'll get the approval outside of the U.K. So we don't want to get on the hook for changing anyone's models here as you're suggesting.Artegraft is a biggie in Europe, maybe 2 years from now, 3 years from now, but I wouldn't -- we haven't even filed for the regulatory approval. When we get that in, maybe we'll have more details on timing and things like that and then, of course, Artegraft in Canada and Australia. But in short answer, I'd say, no, there's nothing that I'd change my model for here. Things are going along. We're getting tons of little regulatory approvals over in Asia-Pac that we don't talk about on these calls because they're kind of smallish, but the machine keeps going.

[Operator]

And our next question is a follow-up question from the line of Michael Petusky with Barrington Research.

[Michael Petusky, analyst]

A few quick ones. George, I didn't catch us if you said this earlier, forgive me, but the CE Mark filing for Artegraft, is that targeted by year-end still? Or I think at one point it was?

[George LeMaitre, executive]

Yes. It has been for a long time. It's on one of our 'planks' for this year, is to put it in by December 31. So definitely, that will go in by December 31, and it's been on our radar screen for 2 years or so.

[Michael Petusky, analyst]

Okay. Great. And then I want to -- just make sure I understand, what you're doing in Paris? That's the first time you've had direct sales folks in France, is that correct?

[George LeMaitre, executive]

I'm glad you're asking us, so we can sort of redistinguish it for everyone. No, we've had sales reps in France since, I think, 2007. But this is the first time we're going to have an actual customer service office with French customer service -- and all that, to give the hospitals a little more [ hand ] treatment. We have 8 reps in France, and I would say that's on the high end of what we usually have, maybe we had 6 or 7, but we always had them.

[Michael Petusky, analyst]

Okay. Yes. Because when you said that, it was sort of confusing to me that, that was the -- okay. Got it. Got it. And then just last one for JJ...

[Joseph Pellegrino, executive]

Depreciation and amortization, $2.395 million, SBC $1.313 million; CapEx $1.053 million.

[Michael Petusky, analyst]

Okay. And then...

[Joseph Pellegrino, executive]

[ Usual things ].

[Michael Petusky, analyst]

And then just, JJ, on gross margin and 1 quarter, I know does not make necessarily a trend, but I think you and probably investors are really hoping that it is. I mean do you feel like -- it looks like gross margin may end up being flat for this year. I mean, do you feel like you guys have sort of hit bottom on this and are on the right -- or sort of on the right side of momentum here, I guess, as we look forward?

[Joseph Pellegrino, executive]

Yes. No, it's a great question. I mean, of course, I want that to be the answer, but I'll give you some more color behind that. I would say the manufacturing efficiencies from the folks getting more efficient in the [ seats ], making devices, that's been super helpful and it started to come through the P&L. Obviously, price increases help a lot. That's sort of a 3% benefit year-over-year with these nice price hikes coming through.And I would say those 2 things are sort of fighting against, I would say, one quality costs historically. Those increased a lot over the last 4 years. But I would say we really started focusing on those. So maybe we can make some headway on that topic as we move forward. And then the other piece would be the transition of manufacturing for Omniflow and for CardioCel, and those start out pretty inefficient as we've discussed before. And hopefully, and we think we can make some good progress on those as we move forward through the quarters. So we might get some good answers there as well. So we'll see where that all winds up for next year when we give the guidance.

[Operator]

Thank you. Ladies and gentlemen, this does conclude today's conference. We would like to thank you for participating, and you may now disconnect. Everyone, have a great day.