Artivion, Inc. (AORT) Q3 2026 Earnings Call Transcript

Operator: Greetings, and welcome to the Artivion's Third Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Johnston from the Gilmartin Group. Thank you. You may begin.

Brian Johnston: Good afternoon, and thank you for joining the call today. Joining me from Artivion's management team are Pat Mackin, CEO; and Lance Berry, COO and CFO. Before we begin, I would like to make the following statements to comply with the safe harbor requirements of the Private Securities Litigation Reform Act of 1995. Comments made on this call that look forward in time involve risk and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include statements made as to the company's or management's intentions, hopes, beliefs, expectations or predictions of the future. These forward-looking statements are subject to a number of risks, uncertainties, estimates and assumptions that may cause actual results to differ materially from these forward-looking statements. Additional information concerning certain risks and uncertainties that may impact these forward-looking statements is contained from time to time in the company's SEC filings as well as the press release that was issued earlier today. You can also find a brief presentation with details highlighted on today's call on the Investor Relations section of the Artivion website. Lastly, I'd like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Unless otherwise stated, all of our comments on today's call will be using our non-GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis. Revenue growth rates will be the adjusted constant currency rates and expenses as percentages of sales will be based on adjusted revenues. With that, I'll turn it over to the CEO, Pat Mackin.

James Mackin: Thanks, Brian, and good afternoon, everybody. In the third quarter, we delivered total constant currency revenue growth of 9% and adjusted EBITDA decline of 8% year-over-year. These results reflect continued execution of our strategy designed to deliver long-term profitable growth through an expanding and clinically differentiated product portfolio. From a product category perspective, stent graft revenues grew 12% on a constant currency basis in the third quarter compared to the same period last year. This performance is consistent with the growth rate we reported in Q2 and notably it came against a tougher AMDS prior year comparison this quarter. On AMDS, the number of U.S. implants increased in the second quarter, which we believe reflects the impact of our recent PMA approval and our efforts to drive adoption of this new technology. We continue to view implant increases as the most important indicator of AMDS adoption given it reflects the real-world use and the user experience that will drive growth in the long term. Meanwhile, U.S. AMDS set sales remain challenged. We view this dynamic as administrative and transient. We remain confident that the set sales will build as the benefits of our initiatives aimed at mitigating the barriers associated with the upfront $100,000 investment for starter set takes hold. Now for a brief update on NEXUS. We believe our preparations for U.S. commercial launch early next year are progressing well. For the remainder of 2026, our focus will remain on expanding manufacturing capacity and building inventory, working through value analysis committee processes, augmenting our U.S. sales team and preparing for broader surgeon training. Interest across the clinical community has continued to build, and we look forward to conducting our first surgeon training event in December. In the meantime, we're continuing to support some U.S. cases on a limited basis. Feedback from surgeons using the technology has been excellent, and we believe there is a significant demand for NEXUS ahead of the U.S. launch, which is expected in January of 2027. We look forward to providing additional updates on launch timing and readiness as we get closer. Ultimately, we see our comprehensive stent graft portfolio as foundational component of our growth strategy. We believe our competitive advantages and surgeon demand will drive greater sustainable adoption and utilization over the medium term. Turning to On-X. Our third quarter On-X revenue grew 13% year-over-year on a constant currency basis. This performance was driven by continued mid-teens revenue growth in the U.S., partially offset by lower growth internationally, which we view as a normal quarterly variation. Importantly, we exited the quarter in a strong supply position as a result of the investments we've made in our Austin manufacturing facility. We believe that puts us in a stronger position to meet demand globally as we close the year and enter 2027 with a product that we believe is the best aortic valve on the market for patients under the age of 65. Tissue processing revenue declined 0.3% year-over-year on a constant currency basis due to a difficult prior year comp, but was ahead of our expectations for the quarter. Regarding BioGlue, revenues increased modestly on a constant currency basis compared to the same period last year. As we discussed during our previous calls this year, this product line carries a meaningful amount of stocking distributor orders, which creates some normal quarter-to-quarter variability. Importantly, our long-term outlook for BioGlue remains unchanged. Lastly, revenue in our other category grew 93% year-over-year, driven by PerClot. As we've previously noted, our transitional manufacturing and supply agreement with Baxter will expire in February of 2027, and we expect the final purchase to be made in December of this year. Overall, the PerClot transaction has been a significant positive as it allowed us to turn a nonstrategic asset into cash. Although it has taken us longer than we would have hoped to get to this point, we're glad to be reaching the end of this transition services and to be able to completely focus on our ongoing business. Turning to our pipeline. We continue to make progress on the ARTIZEN clinical trial for our ARCEVO LSA product. We now have 56 patients enrolled in that trial, which is a nonrandomized clinical trial up to 132 patients in the U.S. and Europe and up to 30 centers for the treatment of aortic dissection and aneurysm aortic arch. We continue to anticipate completing enrollment in mid-'27. We are optimistic that the trial will be successful based in part on the positive clinical results from our current generation frozen elephant trunk called E-vita Open Neo, which we sell outside the U.S. Following a 1-year period of follow-up and assuming the trial meets its endpoints, we anticipate FDA approval for ARCEVO LSA in 2029, unlocking an incremental $80 million opportunity in the U.S. market. In conclusion, we continue to advance our overall strategy in the third quarter while generating solid financial and operational results. Stent grafts grew 12% for the second consecutive quarter. NEXUS launch preparations are on track. We exited the quarter with a much stronger supply position on On-X. We continue to believe the fundamentals that underpin our growth strategy remains strong, a comprehensive clinically differentiated portfolio, a focused commercial organization and a pipeline that stands to expand our total addressable market over time. With that, I'll now turn the call over to Lance.

Lance Berry: Thanks, Pat, and good afternoon, everyone. Before I begin, I would like to remind you to please refer to our press release published earlier today for information regarding our non-GAAP results, including a reconciliation of these results to our GAAP results. Additionally, all percentage changes discussed will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Total revenues were $123.8 million for the third quarter of 2026, up 9% compared to Q3 of 2025. PerClot had an approximately 1 percentage point favorable impact to our growth rate. Excluding PerClot, our constant currency growth rate was 8%. Meanwhile, adjusted EBITDA decreased approximately 8% from $24.6 million to $22.5 million in the third quarter of 2026. Adjusted EBITDA margin was 18.2% in the third quarter of 2026, an approximately 350 basis point decrease from the prior year, primarily driven by costs associated with the Endospan business and gross margin, which was impacted by mix and investments in the On-X and NEXUS manufacturing facilities. From a product line perspective, stent graft revenues increased 12%, On-X grew 13%, tissue processing revenues decreased 0.3% and BioGlue revenues increased 0.1% in the third quarter of 2026. On a regional basis, revenues in North America increased 8%, EMEA increased 11%, Asia Pacific increased 8% and Latin America increased 5%, all compared to the third quarter of 2025. Q3 gross margins were 61.4%, a decrease from 65.6% in the third quarter of 2025 as favorable pricing was more than offset by unfavorable mix and some higher costs in our On-X and NEXUS manufacturing facilities as we incur early costs associated with ramping production. General, administrative and marketing expenses in the third quarter were $63.2 million compared to $57.3 million in the third quarter of 2025. Non-GAAP general administrative and marketing expenses were $57.7 million or 46.6% of sales in the third quarter compared to $53.6 million or 47.3% of sales in the third quarter of 2025. Approximately 120 basis points of year-over-year improvement was driven through leveraging existing infrastructure, while absorbing costs associated with the acquired Endospan business and approximately 30 basis points of leverage from stock-based compensation, which were partially offset by approximately 80 basis points of deleverage from increased amortization expense following the acquisition of Endospan. R&D expenses for the third quarter were $9.8 million or 7.9% of sales compared to $8.1 million or 7.1% of sales in the third quarter of 2025. Interest expense net of interest income was $8.4 million as compared to $5.9 million in the prior year. Other income and expense this quarter included foreign currency translation losses of approximately $0.6 million. Free cash flow was negative $17.6 million in the third quarter of 2026 as compared to positive $17.7 million in the third quarter of 2025. This quarter's free cash flow was unfavorably impacted by $13.3 million for a portion of the AMDS PMA milestone payment that was required to be classified as operating cash and approximately $2 million of Endospan-related integration expenses. Excluding these items, remaining free cash flow was relatively neutral as anticipated as we continue to invest in the On-X manufacturing facility and incur costs to run the acquired Endospan business and to prepare for a U.S. NEXUS launch. As of September 30, 2026, we had approximately $48.4 million in cash and $363.8 million in debt, net of $6.2 million of unamortized loan origination costs. At the end of the third quarter, our net leverage ratio was 3.5x, reflecting the impact of the recent $25 million AMDS PMA milestone payment in July. And now for our outlook for 2026. We are narrowing our expectation for adjusted constant currency growth to now be between 8% to 10% for the full year 2026, representing a reported revenue range of $484 million to $492 million. This guidance continues to contemplate FX to have an approximate 1 percentage point tailwind on as-reported revenue for the full year. As a reminder, the guidance assumes inconsequential revenue from U.S. NEXUS sales in 2026 as we seek value analysis committee approvals and build supply for an anticipated January 1, 2027 U.S. launch. With these revenue expectations and including the impact of the Endospan acquisition, we are also narrowing our full year 2026 adjusted EBITDA to be in the range of $93 million to $98 million. As a reminder, this guidance included our expectation to incur approximately $8 million of expense associated with the acquisition of Endospan through 2026 associated with investments in launch costs and commercial infrastructure, while also accounting for the absorption of Endospan operating costs, including ongoing R&D and clinical expenses. Looking forward, we expect the first meaningful revenue contribution from NEXUS to begin in January 2027, and we anticipate our combined results to be EBITDA neutral for the full year 2027 as U.S. NEXUS revenue ramps over the course of the year and as we align combined R&D and clinical spending into our targeted range of 7% to 8% of sales. As we look into 2027, we are anticipating a 2 percentage point revenue growth headwind and a 4 percentage point EBITDA growth headwind attributable to the completion of our PerClot agreement with Baxter, as Pat mentioned previously. With that, I will turn the call back to Pat for his closing comments.

James Mackin: Thanks, Lance. Overall, we're encouraged with our Q3 performance and the key areas of progress we've made thus far in 2026. With NEXUS and ADS, we have strong conviction in our longer-term growth outlook. We continue to build our broader market expansion pipeline, particularly with the ARTIZEN trial enrolling on schedule. More specifically, we believe our future growth will be driven by 4 primary U.S. aortic growth platforms, which collectively represents $430 million in U.S. market opportunity today with an additional upside from expanding the innovation pipeline. First, AMDS. We're seeing strong implant increases with AMDS following the U.S. PMA approval and believe that set sale hurdles will prove transient as we further unlock the estimated $150 million annual U.S. market opportunity. Second, On-X heart valves. We continue to educate physicians on the compelling clinical data, demonstrating improved survival and lower reoperation rates for patients under 65 compared to bioprosthetic valves. We believe this data will continue to drive greater global adoption and market share gains for the On-X valve, representing an additional $100 million U.S. opportunity. Third, NEXUS. We're excited to acquire the NEXUS platform following the FDA PMA approval earlier this year. In addition to providing an estimated $100 million U.S. upmarket opportunity, the acquisition positions Artivion as a leader in the aortic arch repair and significantly strengthens our innovation pipeline with 3 additional PMA programs currently under development. And fourth, the ARTIZEN trial. We continue to make excellent progress enrolling our FDA IDE trial for ARTIZEN, our next-generation frozen elephant trunk platform. We believe this technology represents an additional $80 million U.S. market opportunity and further expands our long-term growth runway. Finally, I want to thank all of our employees around the globe for the continued dedication to our mission of being the leading partner to surgeons focused on aortic disease. With that, operator, please open the line for questions.

Operator: [Operator Instructions] Our first question comes from John McAuley with Stifel.

John McAulay: I wanted to start off on guidance, sort of a 2-part question. It looks like the implied rate growth rate in the fourth quarter, something like mid-single digits, maybe 6%, 7% if you add in the FX impact. It seems like that's the exit rate. I just want to clarify if there's any kind of dynamics with the slowdown versus what you're seeing in the third quarter? And then just looking ahead to next year, just again, wondering, you highlighted a couple of dynamics with PerClot. You also have comps that have a decent amount of AMDS set sales at least in the first half of the year. Just wanted to know sort of how we should maybe be looking at that exit rate in the context of the PerClot changes for next year?

James Mackin: So, I'll take that. So on Q4, I think, first of all, I think it's important for people to understand currency has been a tailwind for the first half of the year. It was neutral in Q3. In Q4, it flips to a headwind, at least 1 percentage point headwind in Q4. So when you look at the as-reported numbers, you need to keep that in mind. I'd say the other thing, too, we overachieved on the preservation services line in Q3 by a decent amount. I don't know if you remember on the Q2 call, we had really strong tissue performance, but said that we had expected that really to be timing and reverse in Q3. We were able to kind of keep it going and overcome that in Q3. But honestly, we think that's timing and it's going to reverse in Q4. So really, a lot of the overachievement in Q3 is just going to reverse in Q4 on that preservation services line. So that's really kind of noise between quarters that over the course of the year would even out, but does make the exit rate look a little lower for Q4, but it's really not as you think about it rolling into the full year next year. So that's one on Q4. And then I think we're not going to get into a bunch of details on '27. I think the easy way to think about it is if -- whoever you are, if you had not contemplated the fact that PerClot was going to go away, which I assume most people have not, whatever you were thinking on '27 for revenue, you should probably just take 2 percentage points off of that. And whatever you're thinking for EBITDA growth, you should probably take 4 percentage points off of that, and that's probably a good starting point as any.

John McAulay: That's super helpful. And just another one on AMDS here. You talked about increasing implant volumes, which is certainly an encouraging sign. But at the same time, obviously, still some headwinds on the set sales front. I guess my question is, you said specifically, I think that the set sales hurdles will prove transient. I just wanted to follow up on that point. I mean, is there something you're seeing in the field that makes you feel like these headwinds are lessening?

James Mackin: Yes. So yes, I would say on the good news is that these -- the bottlenecks for these starter sets is really an administrative problem, not a clinical problem, right, where people have to pay $100,000 to buy the starter set, and it's proving more difficult than we probably expected at the beginning of this. So it's -- we're getting back approvals and then it's taken us forever to get the POs, just it's different at every hospital. The part that's really encouraging is this implant activity is really moving in the right direction. We've had great clinical experience. There's a short physician learning curve. So that part of it, I think, is very encouraging. So we continue to see the implants doing better in Q3 than they were -- excuse me, in Q4 than Q3. And I think probably the most important thing is that even though getting these accounts started is challenging, we've got great evidence, and we continue to bring on new accounts and the implants are getting better. So the long-term opportunity is great.

Operator: Our next question comes from Bill Plovanic with Canaccord Genuity.

William Plovanic: Can you hear me okay?

James Mackin: Yes.

William Plovanic: Excellent. I want to focus in on the aortic stent grafts. I think in last year, the core underlying business saw like a mid-teens growth rate. I mean, if you're putting up 8%, I would assume that, that core underlying business is more in the mid-single digit at this point. That's my first question. And then just second question is on some of these challenges, I don't -- can you give us a feeling for kind of what the VAC backlog looks like? How many of those have pushed through and you're waiting to get the PO filled? And this is something you've been working on. I mean we've been talking about it for 4 to 6 months. Like how do you get the dam to break on this? What needs to happen here?

Lance Berry: Bill, this is Lance. Maybe I'll take the stent grafts and then Pat can comment more on the start sets. I think -- I mean I think it is pretty clear looking at the numbers that core stent graft certainly in some of the quarters this year is below the kind of mid-teens that we've seen in the past. You can kind of also see that if you just look at our international growth rates where a lot of our stent -- most of our stent graft revenue is. That has slowed down some. I think we still feel really good about that business going forward and that it being a solid double-digit growth rate business. It gets bigger every year, but we really have a good portfolio of products, a lot of which are very differentiated outside the U.S. And those continue to grow, and we think have great opportunity. So it may not be able to be mid-teens all the time. It may come down a little bit off of that, but we still see that as definitely a double-digit growth business looking into the future.

William Plovanic: Has it dipped into the single digits this year?

Lance Berry: It has in certain quarters, but not all quarters.

William Plovanic: Okay.

James Mackin: And then, Bill, on the kind of the starter sets, I think what's interesting is that we thought getting through the VACs, and we're not having any problems getting through the VAC. In fact, I don't think there's any VAC that we've not gotten through. The new piece is getting the PO actually in the $100,000, right? So it's different in every single hospital. There just aren't a lot of examples where most companies come into a competitive market and there's consignment on the shelf from the competitors, so they just put consignment on. And we chose not to do that because this is a very unique technology, a lifesaving only has 4 SKUs. So we're having people buy for upfront for $100,000. So what we're finding is that's becoming quite a challenge in these kind of bureaucratic hospital systems, and it's different at every center. So we're working on different programs to knock down the barriers of getting that initial starter set. And we've seen some progress in that area. But again, it's taken a long time in some places, longer than we would like.

William Plovanic: Okay. And then on this On-X, it seems like last year, you had a really good run. The growth rates accelerated significantly and it desealed significantly this year. I mean you're now coming into the low teens. Is there something that's happened like you got the first bump or first wave of adopters and now the heavy lifting kind of kicks in with marketing and creating awareness? Or just any clarity around that would be helpful.

Lance Berry: Yes. Maybe I'll start with some numbers and see if Pat wants to add on to that. We said at the beginning of the year, we thought On-X would grow in the mid-teens, and it grew a little faster than that in the first half of the year, but it had easier comps. I still think we'll get to mid-teens for the full year this year. And we also said specifically in the script that North America or U.S. specifically grew faster. It did grow in the mid-teens and really the lower growth rate this quarter was more about normal kind of international fluctuations. Now I will say that we exited Q3 probably in the best supply position for On-X than we've had in several years. So that's not going to immediately turn into revenue for international. The international team now has to go out and go get new business, but they are in a position where they can now do that with confidence, and we think that will drive to better international growth going forward. So we still feel really good about On-X, and I'll let Pat talk about.

James Mackin: Yes. No, I think the supply things don't underestimate the supply piece, right, which is, as Lance commented, we grew U.S. On-X in the high teens and international was less than that. There's some quarter-to-quarter variation. But also, they've been supply constrained. We've invested, as we've talked on previous calls, significantly in our Austin manufacturing facility, and we're now at a point where we can get way more aggressive. So, yes, we're very bullish on this On-X opportunity. And every month, a new paper comes out that talks about how great mechanical valves are compared to either tissue surgical valves or TAVR valves in patients under 65. So we've got data on our side and now we've got supply. And so we're going to keep going after this opportunity.

Operator: Our next question comes from Suraj Kalia with Oppenheimer.

Shaymus Contorno: This is Shaymus on for Suraj. Just to start, NEXUS, we know some of you have been working on back approvals and committees and whatnot. Just can you frame up kind of how we should expect from our side the launch? You guys have kind of been working at this for a few months. January 1, you kind of are turning on the lights. Just how should we kind of think of that initial jump? Is it kind of opening up the spigot a lot? Or is it going to be kind of slower through '27?

James Mackin: Yes. So we -- first of all, we're very excited about NEXUS. We just got the PMA and closed that acquisition in the last quarter. We have done cases in the second half. And the most important thing there is the surgeon feedback has been extremely positive, and we see a lot of opportunity with NEXUS going forward. We've been taking this time to basically build inventory for the U.S. launch, hire our reps, build up the sales channel. We've got a launch meeting in 2 weeks at VEITH, and then we have our first surgeon training in December. So this is going to roll out in a typical fashion, right? Once you train your surgeons, we got to get their cases on the books and start doing cases. This will build throughout the year as we bring on those new cases. So it's also a very different model than AMDS that will make it, I think, easier from a adoption standpoint because we don't have the starter set issue, right? These are elective cases. There is no consignment, but there is no inventory. They don't have to buy anything upfront. They basically bring the devices in for the procedure with our rep. They do the case and then we get the PO. So I think all that having to buy the upfront set isn't going to exist and should make it a lot easier. The other thing we've been very surprised by is that we've done a bunch of cases in hospitals that haven't had to go through VAC. We're getting them as we go through. I mean we're obviously building up our position with these VACs. But we've got a bunch of cases where they've been able to kind of sidestep the VAC approval because it's such a unique technology for treating patients with aortic arch disease with a minimally invasive catheter system.

Shaymus Contorno: Got it. Appreciate all that info. On AMDS quick, I mean, I know we've kind of talked about a lot about there being kind of barriers to that $100,000 net sales. I guess 2 little points you could on it. When do you kind of see that kind of starting to subside? Is this kind of another 6 months another year? Like when do you kind of -- we should expect that kind of to open up a little bit better? And then just how did kind of new accounts kind of track on your end quarter-over-quarter? Do we see kind of that barrier that's just holding? Or is it kind of consistent? Or has it lessened?

James Mackin: Yes. So I look at the kind of the big picture with AMDS, right? We've got these tremendous clinical results. And those have been kind of reaffirmed throughout the launch. So I think that's very important. I just went to a surgeon training a couple of weeks ago, and every surgeon walked out of there was a believer in AMDS, right? So we got to go back and get their starter set. But if you look at the big picture, there's probably 800 centers that do acute Type A dissections in this country. The high-volume ones are probably in the 300 to 400 range. So we've got a lot of runway on bringing accounts on through this kind of starter set. And as we do that, we're seeing the implants follow and ramp, which is what we're seeing. So I think we're going to be opening new starter sets for the next couple of years. We're going to obviously try to knock down those barriers and make it faster. But I think the opportunity is intact, and we're very confident about the ability to go after this market.

Operator: Our next question comes from Frank Takkinen with Lake Street Capital.

Unknown Analyst: Yes, it's [indiscernible] on for Frank. Kind of building off of Shaymus' point here, with Q3 being that first quarter of AMDs under full PMA, what are you guys seeing with the new adoption in accounts versus utilization in existing ones? And as the approval has changed, have we seen any pace of conversions with centers that have been waiting on the sidelines going forward?

James Mackin: Yes. So I would say the PMA didn't do anything for the administrative burden in getting the PO. I mean, to me, that's we get through a VAC committee, whether it's a PMA or an HD, it really -- it hasn't mattered. So that -- I don't think we saw much help on the PMA from that. I do think we've seen -- I mean the numbers show that we've seen the implants have actually accelerated. And I think it also creates opportunity for accounts that weren't necessarily interested in an HDE now that we have a PMA to bring on those accounts. So I think it's a net positive, but it's going to take us some time to kind of bring those accounts on that we're not going to go through the whole IRB process.

Unknown Analyst: Got you. And I just got one more follow-up here. Looking back at the end of 2025, you're at about 1.8x net leverage before acquiring Endospan. I know you've mentioned wanting to get back to that 2x leverage point. What's a reasonable time line? And what do you think needs to be executed to get back to this level?

James Mackin: Yes. I think the main driver of that is going to be EBITDA growth. We do expect to next year over the course of the year, flip to being more meaningfully free cash flow positive. But we do need -- we need that cash flow to pay earn-outs for AMDS and NEXUS in 2028 and 2029. So realistically, the leverage reduction is going to come primarily through EBITDA growth.

Operator: Our next question comes from Michael Sarcone with Jefferies.

Michael Sarcone: I guess just to start, Pat, you mentioned you're working on different programs to knock down some of those starter set barriers for AMDS. I believe you had also mentioned some education initiatives in your prepared commentary. I guess could you elaborate a little more on the efforts you're taking there? And just given that things remain challenging, I guess, what do you think isn't resonating here for folks?

James Mackin: Yes. Well, one that's -- I guess it makes sense because it's the dissemination of information always takes longer than you'd like. I think one of the biggest is this DRG-209 that went in place October last year, which provides a significant increase in reimbursement for complex arch work, which covers AMDS. It's amazing to me that hospitals more and more -- like just hospitals don't -- aren't aware of the information. So I meet with some of the top surgeons in this field all the time. And getting that information into the administration is -- takes some time. So I think that's another great kind of -- to not have that barrier and have it be a positive is a real big plus. We're also doing a number of things from -- I mean it's like any launch, you learn as you go and you make adjustments. It doesn't always go in a straight line. And so we've done a number of things from kind of the surgeons we're targeting, how deep we go into accounts. And we're all over this from kind of an adoption standpoint. So it's a real focus of ours, and we're starting to see the fruits of that focus.

Michael Sarcone: Got it. That's helpful. And my follow-up, maybe for Lance. You talked about some gross margin headwinds now as you're ramping some of the manufacturing facility build-out. When you look at 2027, I guess, can you talk to us, I guess, high level or qualitatively about the moving pieces or the puts and takes for gross margin? And I guess the underlying question is really, do you think you can expand gross margins in '27?

Lance Berry: Yes. I guess we're not getting into details on '27 other than the PerClot comments we mentioned earlier. I'd say qualitatively, the things that weighed on gross margin this quarter, I put into kind of 3 categories. One was kind of normal mix. We talked a little bit about overachieving on the preservation services business, which is never great for gross margin, although it doesn't hurt EBITDA margin. We have definitely made some big investments in our On-X facility and are just now starting to see really the capacity improvements that are going to end up getting that cost back down to where we want it to be and ultimately below where it was. And then same thing with NEXUS. We're investing money for a launch, but the volume is just not quite there yet. So that I really view as all timing. It will clear itself out. In the end, both those plants will have significantly higher volume than they had in the past, which is really a good opportunity to improve unit cost. But right now, we're on the other side of that. And then lastly, I will say it in the prepared comments, but we did have a few period charges this quarter that really should be things that shouldn't repeat that weighed down. I would say those were not as big a deal as the other 2 items, but we did have a little bit of that as well.

Operator: [Operator Instructions] Our next question comes from Keith Hinton with Freedom Capital Markets.

Keith Hinton: Just 2 quick questions. I'll ask them both upfront. Starting with just on the gross margin side of things, I think you talked about 3 issues, mix, some of the On-X and Endospan manufacturing and then some one-timers. So I'm just curious if those latter 2, if you could kind of quantify that and particularly on the On-X and the Endospan investments, how we should think about that in 4Q and going into 2027, will that continue to be a headwind? And then the second question, real simple one, just on ARTIZEN since this is a open-label single-arm trial, any chance we see data on some early enrolled patients before 2028? So that's it, and I'll hop back in queue.

Lance Berry: Yes. Keith, on gross margin, I'm not going to get into the nitty-gritty details other than I would say Q4, we definitely expect to be more in line with the full year average number for gross margin. So -- and that's through a combination of the period costs not repeating and then starting to see the volume ramp in both facilities. So current expectation is, we would see something more in line with the full year average. It might be a little bit below, but I don't think -- we don't expect to see something like we saw this quarter.

James Mackin: And then for ARTIZEN, we are going to be our first 30 patients. So as I mentioned in my prepared remarks, we've enrolled 56 to date. The first 30 patients are going to be presented at the AATS Aortic Symposium 2 weeks from today on Thursday, November 19, by the Chief Aortic Surgery from Cleveland Clinic, Dr. Eric Roselli. So you will see the first kind of 30 at that presentation. It's a late-breaker main stage presentation.

Operator: Our next question comes from Jeff Cohen with Ladenburg.

Destiny Buch: This is Destiny on for Jeff. Just one quick one for us. I know it's still relatively early. I'm wondering, well, if you could speak to the demand or level of interest you're seeing from surgeons ahead of the NEXUS commercial launch in January.

James Mackin: Yes. No, I mean it's been very encouraging, like I said, we are -- we were not in an inventory position after the acquisition to launch in the U.S. So we've been doing a handful of cases and really, really excellent surgeon feedback. And as I mentioned earlier, we're going to be doing our big launch meeting in 2 weeks at VEITH. We then have surgeon training in December. And we've got our reps already ramped up. The inventory is ramping up, and we launch on Jan 1. So as I mentioned, it will build through the year. We've got a lot of VAC committees already done, and a lot of these early cases have been done without VAC because of the uniqueness of this technology. So we're very excited about NEXUS for 2027.

Operator: Mr. Mackin, there are no further questions at this time. I would now like to turn the floor back over to management for closing comments.

James Mackin: Yes. Well, thank you very much. And I guess I would just close on -- we meet with aortic cardiac and vascular surgeons all the time from the largest centers. And one of the things that gives me a lot of confidence is we're working on all the things that they're interested in, right? So acute type A dissections with AMDS and our frozen elephant trunk, ARCEVO that's currently in trials, our mechanical aortic valve On-X in patients under 65. They've got a new minimally invasive technology with NEXUS to treat those patients. So we're very much aligned with our key customers on where we're taking this company and our growth platform. So we look forward to continue to build the company and look forward to reporting out again in February. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful afternoon.