LeMaitre Vascular, Inc. — 2021 Form 10-K
Business context and period. The filing covers the fiscal year ended December 31, 2021; it is an annual report, not a standalone fourth-quarter filing. LeMaitre develops, manufactures and sells vascular medical devices and provides human-tissue cryopreservation services, primarily for peripheral vascular procedures. Most sales are direct to hospitals; biologic products made up 48% of 2021 sales. The quarterly figures below are unaudited.
Financial highlights
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Net sales | $154.4 million | $129.4 million | +19% |
| Gross profit / margin | $101.4 million / 65.7% | $84.6 million / 65.4% | Profit +20%; margin +0.3 percentage points |
| Operating income | $36.4 million | $28.8 million | +27% |
| Net income | $26.9 million | $21.2 million | +27% |
| Diluted EPS | $1.25 | $1.04 | +20% |
| Operating cash flow | $35.1 million | $34.8 million | +$0.3 million |
Q4 comparison: Sales were $39.5 million versus $37.5 million in Q4 2020; gross profit was $26.0 million versus $24.4 million. Operating income declined to $8.3 million from $9.5 million, net income to $6.2 million from $7.0 million, and diluted EPS to $0.28 from $0.34. Management attributed weaker demand in late 2021 in some geographies to COVID-19 variants and deferred elective procedures.
Liquidity and debt: At year-end, cash and cash equivalents were $13.9 million and short-term marketable securities were $56.1 million, for combined balances of about $70.0 million, compared with about $27.0 million a year earlier. Current assets were $139.9 million and current liabilities $21.8 million. The company repaid its term loan and terminated its credit facility in 2021; reported debt at year-end was zero. Operating cash flow was offset by $61.1 million of investing cash outflow, largely reflecting purchases of marketable securities and $4.9 million of capital expenditures. The company reported $9.3 million of dividend payments for 2021.
Material changes and unusual items
- Sales growth was led by Artegraft bovine grafts, which contributed $14.1 million of incremental sales year over year; 2021 included a full year of Artegraft sales versus six months in 2020. Higher sales of valvulotomes, bovine patches, carotid shunts and allograft services also contributed. Weaker U.S. dollar exchange rates added an estimated $2.0 million to reported sales.
- Gross margin edged up year over year, helped by product mix and the prior-year impact of Artegraft purchase accounting, but was pressured by manufacturing inefficiencies and $2.3 million of higher excess and obsolete inventory expense, partly related to product-line discontinuations.
- Operating expenses rose 16% to $65.0 million as the company rehired staff, restored compensation and increased regulatory and clinical spending. Sales and marketing, general and administrative, and research and development expenses all increased.
- The company issued 1.15 million shares in 2021 and received approximately $58.7 million in net proceeds. It used part of the proceeds to repay debt. In February 2022, the board authorized a share repurchase program of up to $20 million through February 22, 2023; no purchases had been made under it as of the filing.
- The company discontinued or wound down TRIVEX, remote endarterectomy devices and surgical glue, together representing about $2.2 million of 2021 revenue. The 2021 Artegraft earn-out target was not met, so no payment was due for that milestone.
Outlook, commentary and risks
- The filing gives no specific 2022 revenue or earnings guidance. Management expects COVID-19-related disruption and unpredictable demand to continue into 2022, and expected to add personnel in the first half of 2022.
- Omniflow II manufacturing-transfer validation remained pending. The company said backorders could reduce or defer about $1.0 million of sales in the first half of 2022; further delays could affect European revenue.
- Transition to the EU Medical Device Regulation (MDR) is a significant regulatory and cost risk. The company must obtain new CE marks under more stringent standards. It estimated that restrictions on XenoSure indications could reduce annual sales by roughly $1.0 million and said approved European tissue sources increased costs and pressured gross margin. UKCA marking will also be required for U.K. sales after June 30, 2023.
- Other key risks include hospital access restrictions and elective-procedure volumes, supply-chain disruption and reliance on limited-source suppliers, product recalls and liability, competition and the shift from open to minimally invasive procedures, foreign exchange exposure, reimbursement changes, and acquisition integration. The filing cites a 2020 worldwide TufTex catheter recall due to a risk the balloon might fail to deflate.
- Management stated that available cash, investments and expected interest income should fund anticipated requirements for at least the next 12 months. The company reported no material litigation expected to adversely affect its financial position, results or cash flows. The financial statements received an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting.
Important facts for investors to verify
- How much of sales growth and profitability is attributable to Artegraft acquisition timing and pricing versus underlying demand and unit growth.
- Progress and timing of Omniflow II validation, inventory availability and the anticipated first-half 2022 sales deferral.
- CE-mark/MDR and UKCA approval status, including potential effects on product indications, supply sources, sales and margins.
- Whether COVID-related procedure disruption and supply constraints persist, and how inventory levels and obsolescence provisions evolve.
- Use of offering proceeds, future acquisition or deferred acquisition payments, and the effect of dividends and the authorized buyback on liquidity and share count.