Prepared remarks
Welcome to LeMaitre Vascular Quarter 2 2026 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir.
Good afternoon, and thank you for joining us for our Q2 2026 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, might and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, August 4, 2026, 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 such as organic sales growth. 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.
Thanks, Dorian. Artegraft grew 34% in Q2, accounting for 21% of sales. Grafts, up 23%, shunts up 18% and patches up 4%, each posted records as did EMEA, up 18%, APAC, up 18% and the Americas up 5%. Sales grew 10% organically in Q2, 7% from price and 3% from units. Catheters were down 11% in Q2 due to recall-driven overstocking in the year-earlier quarter. Excluding catheters, Q2 2026 organic growth was 12%, 7% from price and 5% from units. Notably, we underperformed our Q2 2026 sales guidance by $1.1 million for three reasons, each with roughly the same impact in the quarter: the strengthening of the dollar after we gave guidance on May 5; the impact of the Middle East war, which continues to delay export revenues; and cardiac allograft sales have been hampered by supply. Our guidance reflects these three items continuing to hamper sales in H2. Turning to the positive: Artegraft has become our fastest and largest product, and we're investing in the product in several ways. Number one, more international approvals; number two, longer sizes for leg bypasses, particularly for Europe; and finally, number three, building out our sales force and our commercial infrastructure. International Artegraft sales advanced sequentially from $2.1 million in Q1 to $2.8 million in Q2, and we now expect sales of $11 million in 2026 versus $4 million in 2025. Artegraft approvals were received in Vietnam, Morocco and Turkey in Q2, and we're now approved in 56 countries. We also expect three large approvals in 2027: Korea, Brazil and India. In July, we met face-to-face with Japan's PMDA and the initial response was positive. We might receive approval for the AV indication by 2029/2030 without a clinical trial. Canada approved Artegraft last year and the launch is set to occur this September. We're also working to make longer Artegraft available. Because European surgeons use Artegraft for leg bypasses, our longest Artegraft, which is 50 centimeters, is now in high demand, but the Artegraft packaging tube is just 53 centimeters long. So we plan to make approval filings for longer tubes in the U.S. and Europe in Q4 2026. Sales of these longer bovine grafts could start in H2 2027. Here's an update on the Quick Stick project. We made a pre-submission filing to the FDA for this indication. Unfortunately, we now believe that a clinical trial is likely. If we elect to follow this path, the timeline would be measured in years, not quarters. As a follow-up to the 2025 warning letter, the FDA reaudited our New Jersey facility in June 2026. At this audit, we believe that we adequately addressed three-quarters of their 2025 observations. On June 25, the FDA provided us an additional set of quality systems observations. As per standard practice, we responded on July 16. The observations from these audits have not disrupted our ability to produce, ship or invoice. As for RFA, allograft revenues grew 17% in Q2. We now distribute these cadaver tissues in four countries: the U.S., Canada, the U.K. and Germany. German surgeons have recently performed three implants. Our German sales force reports high levels of interest from German surgeons due to the quality and availability of our tissues. In Ireland, we have just responded to our first set of questions from the Irish Tissue Authority, and we await an inspection of our Dublin facility. Current expectations are for an Irish approval in H1 2027. Long-term, the Dublin facility is expected to be used for Irish as well as pan-European RFA distribution. Here's the timeline for when we expect to begin distributing tissues in several other countries: H1 2027, Austria, Holland and Spain; H2 2027, Australia and Switzerland. As always, we continue to hire sales reps and build out our commercial infrastructure. We ended Q2 with 163 sales reps, and we still plan to end the year with 170 to 180 reps. Nine reps have signed and are set to start in Q3 and 13 requisitions are currently open. In July, we signed a Polish go-direct term sheet and expect to sell direct to hospitals from a Warsaw warehouse this December. In addition to Dublin and Warsaw, we have five other warehouse projects underway. Our primary warehouse has tripled and moved to Billerica, Massachusetts. Madrid has doubled and now ships all products. Paris is doubling in Q3 and will ship all products. Toronto is moving and tripling in Q3. And finally, Hereford, U.K. is moving to the London area in Q4. In total, about seven new or larger warehouses opening in 2026/2027. We believe these infrastructure projects will help make a tighter connection between LeMaitre and its worldwide hospital customers. Higher ASPs, geographic expansion and disciplined spending produced 10% sales growth and 23% EPS growth in Q2 2026. Our 29% operating margin in Q2 as well as our 17% ROE underscores the strength and profitability of our business. Full year guidance implies 11% organic sales growth and 21% EPS growth. I'll now turn the call over to Dorian.
Thanks, George. LeMaitre's Q2 organic revenue growth of 10%, consisting of 7% price growth and 3% unit growth, was impacted by the Q2 2025 stocking orders following our package-related catheter recall. As George noted, excluding catheters, organic growth across the remaining portfolio was 12%, consisting of 7% price and 5% unit growth. The 5% unit growth was highlighted by the strong unit growth of Artegraft and Cardiac RestoreFlow. In Q2 2026, gross margin was 72.1%. The 210 basis point increase year-over-year was driven primarily by higher ASPs, reduced shipping costs and positive product mix, supported in particular by growing high-margin Artegraft sales. We remain on track to transfer tissue processing from our Fox River Grove facility in Illinois to our Burlington, Massachusetts headquarters before the end of the year, and we have already yielded tissue in Burlington. In addition, we began shipping our core devices in June from our new 34,000 square foot high-bay warehouse in Billerica to U.S. domestic customers, our international subsidiaries and distributors. Operating expenses in Q2 2026 were $30.4 million, an increase of 5% versus Q2 2025, resulting from continued hiring restraint as full-time employees increased marginally from 658 at June 30, 2025, to 660 at June 30, 2026. We do anticipate continued 2026 investment in expanding our global sales force, including the new sales reps joining in Q3. Q2 operating income was a record $20.4 million, up 26% and resulting in an operating margin for the quarter of 29%. Net income increased 24% year-over-year to $17.1 million and fully diluted EPS was $0.74, up 23%. Our fully diluted EPS calculation for Q2 2026 triggered the if-converted accounting for our convertible debt, increasing the fully diluted share count to 24.5 million for the basis of this calculation. We ended Q2 2026 with $376 million in cash and securities, an increase of $9 million in the quarter. Cash from operations generated $16 million in Q2. We incurred $2.3 million in capital expenditures and paid $5.7 million in dividends to shareholders. We have updated our full year revenue guidance to $276.3 million and 11% reported revenue growth. Expected reported revenue has declined as we updated our FX assumptions for the strengthening U.S. dollar since our February and May guidance. In addition, we have reduced full year organic revenue growth from 12% to 11% to reflect our Q2 results and the revenue impact related to our export business and slowing growth for RFA, largely due to anticipated supply constraints. We anticipate full year gross margin of 72.4%, a 200 basis point improvement from adjusted 2025, full year operating income of $76.8 million, resulting in a 28% operating margin for 2026 and an op income increase of 19% from adjusted 2025. We have also updated our guidance of fully diluted earnings per share to $2.89, up 21% from adjusted 2025. Our guidance implies a fourth consecutive year of strong double-digit revenue growth and 20% plus EPS growth. We'll now take questions.
Questions and answers
The operator will now provide instructions for asking a question and open the line for Q&A.
I guess, George, just to start, you gave us the update on the Quick Stick claim, and we've got this timeline measured in years now. Can you give us a little more color on how you're thinking about allocating resources to that effort? And any updated thoughts on what you're going to do there?
Sure. We definitely see that as a nice piece of the market, Mike. And by the way, thanks for your question. I appreciate it. I think the news is fresh enough here that we just need to sit back and decide what to do next. We're not historically a clinical trial company, but we do have aspirations to get a little more R&D focused. So I think it will take us a little time to figure that out. But we do acknowledge it's an important piece of the market, particularly in the U.S.
Got it. And then just on the RFA supply constraints, how are you thinking about next steps here? Any timelines for when you could see some relief on those constraints?
Sure. As you can imagine, we're running around like crazy trying to solve this. When you're dealing in cadaver tissues, there are always threats to supply. There are a set of four or five to-dos that we're not going to bore you with today that we're in the middle of trying to do. If you want to think of this positively, when we first took over this company in 2016 for the first five years, we had tremendous difficulty having enough supply of the peripheral vascular tissues, the veins and the femoral artery and such. And we've definitely solved that. We feel really good about that. Now this is sort of the next frontier. I always tell the sales force: 95% of your products are good to go here. We have ample supply, and they always talk about the one that doesn't. So we want to get rid of that issue because it's tiring to sit there and listen to it from the sales force as much as we want the sales to come out.
Mike, this is Dorian. Maybe just to add on that: Cardiac allografts were up 39% quarter-on-quarter. So we're talking about a business that's performing very, very well; maybe the growth rate is slowing a bit from where we anticipated. One of the big things we're doing on supply is to move that processing to Burlington, Massachusetts, where we're all closer to it. So I think those are two important things to wrap up the question.
Our next question comes from the line of Brett Fishbin with KeyBanc.
Just had a quick one first on Q2. The geographical performance versus our model at least looked pretty good in Europe and in Asia, and Americas was a little bit softer than expected. I was hoping you could just touch on what you're seeing in the Americas region, given some of the mixed reads on procedural growth this quarter domestically, or if that was mostly driven by the catheter issue.
I would say we should start with the catheter issue. If you exclude the Aziyo matter that occurred last year, we get to a 6% organic number for the Americas. Then if you also strip out the catheter topic, you get to 8% organic in the Americas. It probably feels more normal to us that that's our business. Your second part of your question was about procedure volume. We tend not to lean on that in these calls. One specific reason is the policy dynamics we see in the news are not really our customers. Our customers are 70-year-old men and women, and they're not necessarily impacted by those programs. So we don't want to lean too hard on that. Internal issues aside, if you exclude those two issues, you can get to 8% organic growth for the quarter.
Right. Great. And then just one follow-up. You talked more today about the warehouse expansions and the magnitude and number of them. Could you elaborate a bit more on this overall initiative, and is there any long-term read into either margin expansion upside or working capital?
Okay. Thanks for giving me the platform to talk about this. This is one of my serious initiatives inside the company called relocalization. Historically, we tried to address Europe just from Frankfurt because of the EU and Schengen zone. Over the last five years, we've gotten much more serious about a Spanish hospital wanting to talk to a Spanish customer service rep located in Madrid with the product sitting right next to them and get it shipped directly. That's the hypothesis of relocalization. We are going to have, when Warsaw opens up, seven offices in Europe versus one 15 years ago. There's also a shipping-cost benefit we didn't fully anticipate: shipping a package from Frankfurt to Madrid cost $55, while shipping from Madrid to the Madrid hospital costs $5. So there's a huge shipping savings aligned with Artegraft being much bigger in Europe. There's an explosion of gross margin in Europe — I have never seen this in my career — it's been 5 to 9 percentage points year-over-year in gross margin, full points not basis points. It's been satisfying to see, even though we spent money on these places, the gross margin is exploding there. The focus of the company's success in Q2 clearly was Europe, whether from sales, growth or profitability perspective. The profitability of that segment was up significantly. It's really going nicely over there, and it's intertwined with the relocalization project.
Our next call comes from Rick Wise with Stifel.
This is Annie on for Rick. My first question is on Artegraft in Europe. When we spoke with you last, we heard Artegraft was seeing early success in some European countries with shorter sales cycles, while the more tender-based countries were likely to come further down the road. Can you update us on where those tender processes stand today and whether the updated back half outlook depends on those wins converting before year-end?
Okay. When we gave the Q1 call, we were wondering if it would be $10 million or what. We're happy to say Q2 seemed a little better than expected in Europe for Artegraft. As to tenders, when it first started in Q3 and Q4 of 2025, it felt very Central Europe-focused: Holland, Belgium, Germany, Austria. In the last three or four quarters, it has spread out. It's become a big topic in France, Italy and Spain and a big topic in the U.K. The tender-driven markets of the Nordics are maybe a little slower, but the tender-driven markets in Southern Europe are doing really well right now. It's helping the business post records every month and every quarter.
Great. Maybe a follow-up on the RFA supply constraints and the longer-term opportunity outside the U.S. Are there any plans to build out tissue processing outside the U.S., and what might that entail in terms of timing, investment and regulatory work?
Annie, it's Dave. It's a great question. It is something we think about on a long-term basis. But I think we still have a long way to go in the U.S. to rationalize and improve our supply of cardiac tissue. We're focused on that in the near-term. As Dorian mentioned, we're moving processing from the Chicago area to Burlington. All the management will be concentrated here, and we are taking steps to improve supply. Certainly, as we see sales start growing outside the U.S., the topic of supplying outside the United States becomes more relevant, but I don't think it's a near-term project for the company at this point.
Our next question comes from the line of Danny Stauder with Citizens.
My first question is on the guidance. If we're looking at the guide below the top line: gross margin was in line with the quarter, you raised it a bit for the full year, and then full year operating income guidance was lowered a bit more than this quarter's performance versus the quarterly guide. Could you help us with some of those dynamics? Is it simply a function of the lower sales base or some product mix? How should we think about these metrics moving in opposite directions in the back half and how to model them?
Danny, I think you're right that the decrease in operating income guidance flows directly from the revenue decline. That's a function of the three factors George walked through in the prepared remarks: about one-third of the miss was related to FX, one-third is the hangover on the export business from not being able to ship to the Middle East — we had $400,000 of orders ready to go that just can't go out because of the conflict — and the final third is that while we did post a 39% growth rate on cardiac allografts, that growth curve is coming down a bit from our expectation related to supply. Those three factors explain Q2 and drive the change in guidance, and the flow-through to the bottom line is the impact on operating income.
Danny, to pick up on the second half of your question about the bottom line and op expenses: as you compare H2 2026 to H2 2025, we were in belt-tightening mode for Q3 and Q4 of 2025. So you'll see, even though we haven't raised operating expenses dramatically, it will look like a lot as we come into Q3 and Q4 because the company was tight-fisted last year. We're investing in sales reps and other projects we want to get involved in, so you're going to notice a lack of op leverage a bit. That may help you on modeling the bottom part of the guidance.
That's great color, I appreciate that. Just one more on modeling: are there any dynamics beyond gross margin and OpEx we should think about for EPS guidance? You talked last quarter about tax being below historical rate due to FDII. We saw it step up a bit this quarter. How should we think about tax in the back half, and anything else below the operating income line we should model?
If you get below operating income, one positive is a better yield on our invested cash as yield curves have come up a bit, so we're getting better earnings on that cash balance in July versus where we were forecasting in May. On the effective tax rate, we still get benefit from FDII, but the rate is impacted by discrete items, particularly around stock-based compensation and timing of option exercises. There were fewer of those in Q2. Overall, our ETR for the year hasn't changed much in the guidance, but you'll always see variability. We cautioned last quarter not to read too much into the 20.3% as a long-term rate. It will probably be a little higher than we anticipated in Q2 and settle out more normalized throughout the year.
Our next question comes from the line of Jim Sidoti with Sidoti & Co.
George, you've dealt with shortages for allografts before. What did you do then, and are you going to do something similar now?
We pride ourselves on being a no-backorder company. We've addressed peripheral vascular supply shortages over the years through hard work and process improvements. The big move now is bringing processing to Burlington, near our Head of Ops and Head of Regulatory, so it's closer to management oversight. We have AI in the background with a new program called Donor IQ. We had put constraints on some purchasing because we were nervous about purchasing too much and only using a piece of it — we've removed those constraints. There are a number of moves we can pull. I think it will get better. Dorian pointed out that we still grew cardiac allografts 39% in Q2, so the business is performing well even with supply constraints. It's on us to fix it.
So it sounds like you have a sufficient number of organ procurement partners that you're dealing with to get the product, you just have to get better at processing it?
I would say it's both. We also consider from time to time bringing on more recovery groups. There's a limited number in the whole country, and we're already dealing with about half of them, but we do consider bringing more of them on from time to time. That might be an avenue as well.
Okay. And then just a quick one for Dave. Any update on the pipeline and what you're seeing on acquisitions?
Jim, thanks for the question. It's a pretty active pipeline right now. I don't usually disclose how many deals or the size, but we are busy. In fact, we're adding a fourth member to the business development team this coming Monday. The target zone we've focused on in the past remains roughly two dozen businesses in open vascular that are big enough for us, or expanding into cardiac surgery where we had about 13% of our Q2 revenue. The sweet spot is anywhere from $15 million to $150 million of revenue. So it's a pretty active pipeline, we're building the team, and stay tuned.
Our next question comes from the line of Keith Hinton with Freedom Capital Markets.
Apologies if this has already been addressed. Jumping around a bit here. On catheters in the quarter, was that just a tough year-over-year comp, or is there any durable change in competitive dynamics?
Sure, Keith. In Q2 of 2025, we had a big recall on a simple product-line packaging issue for catheters. We pulled in a lot of product, and customers went and hoarded, buying a lot of devices. That produced huge catheter sales in Q2 last year. Now in Q2 this year, catheter sales were down 11%. If you strip catheters out of the company's performance, instead of a 10% organic growth rate you'd have a 12% organic growth rate. It's an important topic and we believe it's transient; you shouldn't have that brutal comp again as you go into H2.
Okay. And did you talk at all about plans for Artegraft Quick Stick in terms of potential trial design or timeline?
We did. Unfortunately, the news from our FDA meeting — and we addressed this in the prepared remarks — is that the FDA seems to be leaning toward requiring a clinical trial. That puts us back to a decision point: do we go forward? It's a significant investment and a multi-year timeline. We're still thinking it through. Mike, it's George in Burlington. I think you're up if you're still hanging on to the call. Operator, if he isn't here, you can either go to the next questions or wrap up the call, whatever you see is the right next move.
It looks like we have no further questions. That does conclude today's conference. I'd like to thank you for your participation, and you may now disconnect. Have a great day.