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Greetings. Welcome to Artivion's First Quarter 2025 Financial Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that today's conference is being recorded. At this time, I'll now turn the conference over to Laine Morgan with Investor Relations. Laine, you may begin.

Thanks, operator. Good afternoon and thank you for joining the call today. Joining me today from Artivion's management team are Pat Mackin, CEO; and Lance Berry, CFO. Before we begin, I'd 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 risks 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 and in 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. Now I'll turn it over to Artivion's CEO, Pat Mackin.

Thanks, Laine and good afternoon, everyone. I'm very pleased to report that our first quarter performance despite the timing impact of our previously disclosed cybersecurity incident was largely ahead of initial expectation. Despite these headwinds, we delivered total constant currency revenue growth of 4% and adjusted EBITDA growth of 1% year-over-year. We also maintained momentum across several key clinical and pipeline initiatives aimed at growing our addressable market. As I will discuss, we're also making significant progress with our initial AMDS launch following the FDA HDE approval. Before detailing Q1 performance, I'd like to first provide an update on our previously disclosed cybersecurity incident and the residual impact discussed on our last call. At a high level, we're very excited about our Q1 with a near total return to normal operations, including across our manufacturing facilities and tissue processing operations. As we previously communicated in February, we anticipated that our Q1 performance would be unfavorably impacted by extended lead times in the tissue business as the team works through the supply backlog as well as in our On-X business as the manufacturing operations replenished on-hand inventory to support distributor sales. We have made great progress over the past 2 months. And overall, we are ahead of schedule to achieve a complete return to normalcy across both tissue and our On-X supply. For On-X, we exceeded our expectations on the supply side, returning to normal levels faster than we anticipated, enabling double-digit growth in the first quarter. We're continuing to ramp our On-X supply to capitalize on the tailwinds from positive clinical data presented at STS which I will detail shortly. We also made great progress on clearing the tissue processing backlog which drove most of the upside for the quarter. For context, as it relates to the impact on revenue, by the end of the first quarter, we had cleared about 1/3 of the backlog. Looking ahead, we anticipate we will fully be caught up by the end of the third quarter. While there's still more work to do and to be done, we're very pleased with the progress to date which we believe speaks to the hard work and dedication of our team and the differentiation of our xenograft products. Now on to the Q1 results. From a financial perspective, our Q1 performance was driven by continued growth across our product portfolio with the exception of revenue from our preservation services business. From a product category perspective, our stent graft revenues grew 19% on a constant currency basis in the first quarter compared to the same period last year. Our stent graft portfolio remains a key component to our growth strategy and we're encouraged by our strong results which are driven by our differentiated portfolio of products that are focused on more complex segments of the stent graft market. Today, the products in our stent graft portfolio are sold primarily in Europe, where we leverage our existing direct sales infrastructure to create significant cross-selling opportunities across our unique aortic product offering. Our pipeline consists largely of bringing some of these proven products to the U.S. and Japan, representing a significant growth opportunity. We're also pleased with the ongoing launch of AMDS in the U.S. following our receipt of the humanitarian device exemption in late 2024. As a reminder, there are 3 steps that each center has to go through to complete prior to implanting an AMDS as part of the AMDS launch process. First, each hospital will need to see -- receive a site-wide IRB before implanting the AMDS, except in the case of an emergency. Second, we'll need to have AMDS approved by the hospital value analysis committee. And third, surgeons and clinical staff will need to be trained on this device before they implant. Initial response to the HDE from the surgeon community has been extremely positive. As of today, there are approximately 150 facilities actively seeking IRB and value analysis committee approvals. In the first quarter, we gained valuable information, in particular regarding the IRB approval process that will enable us to more efficiently work through the process at new facilities going forward. Overall, I'm extremely pleased with the progress so far and the response from the surgeon community and our sales force during the first months of this launch of this breakthrough product. I look forward to providing updates on future calls. As mentioned, Q1 On-X revenue increased double digits at 11% year-over-year growth on a constant currency basis as we outpaced initial supply expectations and continue to take market share globally with the only mechanical heart valve that can be maintained at a low INR of 1.5 to 2.0. Based on the proven clinical benefits of the On-X aortic valve and the growing body of evidence supporting the use of mechanical valves in younger patients, we maintain our strong conviction that On-X is the best aortic valve on the market for patients under the age of 65 and we'll continue to take market share worldwide. BioGlue grew 9% on a constant currency basis compared to the same period last year as we continue to see growth in all of our major markets. Lastly, tissue processing which was the area most heavily impacted by the cybersecurity incident, declined 23% year-over-year on a constant currency basis in Q1. As discussed in February, a significant portion of our tissue revenue comes from our xenograft pulmonary valves for which the demand outstrips supply every quarter and therefore, we hold no inventory. Due to extended lead times for tissue that were in process or received during the period impacted by the cyber incident, there is a backlit of product that has not yet been released. However, as I mentioned earlier, our progress in Q1 reinforces our expectation that we will catch up our tissue backlog this year and we've now accelerated our time line with an expectation to complete this by the end of Q3. We remain confident that the tissue business can grow mid-single digits for the full year in '25 and over the long term. From a geographic standpoint, we continue to see results from growth initiatives across Latin America and Asia Pacific, primarily through new regulatory approvals and commercial footprint expansion. Latin American and Asia Pacific delivered constant currency revenue growth of 26% and 8%, respectively, in the first quarter. We continue to anticipate strong revenue growth for both regions over the coming years as we continue to leverage our industry-leading products in those regions. I will now turn my attention to our clinical programs. As we spoke during the Q4 call, there is new data that was presented at the Society of Thoracic Surgery meeting at the end of January that was also published in JACC, the Journal of American College of Cardiology which is very relevant for the On-X valve. Therefore, I'd like to highlight this data once more. The data showed that across 109,000 patients from the STS database, mechanical valves resulted in a statistically significant improvement in mortality compared to surgically implanted bioprosthetic valves in patients under the age of 60. We believe this data opens roughly a $100 million U.S. market expansion opportunity to convert bioprosthetic valves to mechanical valves. This is a significant opportunity for the On-X valves and gives us even greater confidence that we should be able to continue double-digit On-X growth for the foreseeable future. This past weekend at AATS in Seattle, Endospan presented late-breaking 30-day data from its U.S. IDE trial for NEXUS aortic arch stent graft system. This trial is the first FDA IDE trial for endovascular treatment of chronic dissections in the aortic arch and is focused on patients at high risk for open surgery. The data met its protocol-defined primary endpoints, demonstrating a 63% reduction in major adverse events relative to comparators. In our conversations with physicians at AATS, surgeons generally expressed that the 30-day results were extremely positive. Surges were particularly pleased with the performance across stroke and renal endpoints which was quite favorable compared to published data for alternative endovascular treatments. With these outcomes which represent a significant development, we believe NEXUS remains on track for an approval in the second half of 2026. Lastly, on our pipeline. With the HDE for AMDS, we are able to commercially distribute the device in the U.S. prior to the receipt of a PMA but we continue to focus on securing the PMA for AMDS. We are pleased to report that we've been informed by FDA that we have completed the review of the manufacturing quality management system module. We've also recently filed our clinical module with the FDA, representing the third of 4 modules required to be filed, keeping us on track for an FDA approval in mid-2026. In conclusion, we're extremely excited about the progress early in 2025 and remain confident in our ability to deliver sustainable double-digit revenue growth, drive EBITDA margin expansion and grow adjusted EBITDA twice the rate of constant currency revenue growth. With that, I'll turn the call over to Lance.

Thanks, Pat and good afternoon, everyone. Before I begin, 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. 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 $99 million for the first quarter of 2025, up 4% compared to Q1 of 2024. Adjusted EBITDA increased approximately 1% from $17.3 million to $17.5 million in the first quarter of 2025. Adjusted EBITDA margin was 17.7% in the first quarter of 2025, relatively flat to the first quarter of 2024 due to the lower revenue base from the preservation services business and investments in sales and marketing, including AMDS HDE launch costs. From a product line perspective, on a constant currency basis, stent graft revenue increased 19%. On-X grew 11% and BioGlue revenues grew 9%. As anticipated, tissue processing revenues declined in the first quarter due to the backlog caused by the previously disclosed cybersecurity incident. However, the amount of revenue we achieved this quarter was better than we expected as we accelerated our time line for clearing the backlog and we're able to release more of our high-demand product. On a regional basis, revenues in Latin America increased 26%, EMEA increased 14%, Asia Pacific increased 8% and North America declined 6%, all compared to the first quarter of 2024. Our as-reported expenses include approximately $4.7 million in Q1 associated with the cyber incident which are excluded from adjusted EBITDA. While we anticipate seeking insurance reimbursement for some of these costs, the process will take some time. We will exclude any insurance proceeds we receive from adjusted EBITDA as well. Gross margins were 64.2% in Q1, a decrease from 64.6% in the first quarter of 2024 due to the lower revenue from our higher-margin preservation services products. General and administrative and marketing expenses in the first quarter were $54.7 million compared to $30.7 million in the first quarter of 2024. Non-GAAP general and administrative and marketing expenses were $53 million in the first quarter compared to $48.1 million in the first quarter of 2024, reflecting a $3.7 million increase in noncash stock-based compensation expense and investments in sales and marketing, including AMDS HDE launch costs. R&D expenses for the first quarter were $6.7 million compared to $6.9 million in the first quarter of 2024. Interest expense net of interest income was $7.5 million, flat as compared to the prior year. Other income and expense this quarter included foreign currency translation gains of approximately $2.9 million. As of March 31, 2025, we had approximately $37.7 million in cash and $314.6 million in debt, net of $5.4 million of unamortized loan origination costs. We do not anticipate the need to raise additional capital to fund our debt obligations, our investments in our channels or our pipeline in the foreseeable future. Our net leverage at the end of Q1 was 4.0, down from 4.5 in prior year. And now for our outlook for the remainder of 2025. Given our momentum in the first quarter, we are raising the midpoint of our full year 2025 revenue guidance and now expect constant currency growth of between 11% and 14% compared to the previous range of 10% to 14%. We expect reported revenues to be in the range of $423 million to $435 million compared to our previous range of $420 million to $435 million. While current exchange rates would provide incremental upside to our guidance range, we are not revising our FX assumptions at this time given the ongoing volatility in the currency exchange environment. With our continued top line revenue growth and general expense management, we continue to expect adjusted EBITDA to be in the range of $84 million to $91 million for the full year 2025, representing an 18% to 28% growth over 2024 and over 200 basis points of adjusted EBITDA margin expansion at the midpoint of our ranges. As it relates to quarterly cadence, we anticipate that the unfavorable impact to preservation services in Q1 will be fully caught up by the end of Q3 with some quarter-to-quarter variability. We also anticipate AMDS sales will grow sequentially each quarter of 2025. While we do not plan to provide quarterly guidance on a regular basis, given the expected nontypical quarterly cadence, we are providing onetime guidance for 2Q 2025 revenue for clarity. We are forecasting our second quarter reported revenue to be in the range of $107.5 million to $109.5 million which represents approximately 13% constant currency growth at the midpoint. The midpoint of our full year guidance assumes an acceleration in constant currency growth for the second half of the year as compared to Q2. We are confident that we will see an acceleration in the second half due to ramping AMDS HDE sales in addition to an easy comparable in Q4. In summary, we made some great progress in Q1 on clearing our tissue supply backlog, catching up on our On-X supply and building our AMDS pipeline and have greater conviction on our ability to deliver our full year guidance. Before turning the call back to Pat, I'd also like to provide a few points to contextualize our relatively minimal exposure to the dynamic trade policy and tariff environment. First and most importantly, currently all products sold in the U.S. are also manufactured in the U.S. and less than 1% of our total sales are in China. Second, on the cost side, our U.S. facilities do not source any materials from China and source very little from outside the U.S. in general. For context, in 2024, our sourcing from outside the U.S. was in the single-digit millions of dollars. We are, of course, monitoring these dynamics closely but do not currently anticipate a material impact on our results from enacted and contemplated other tariffs. With that, I will turn the call back to Pat for his closing comments.

Thanks, Lance. So as you've just heard, we're extremely pleased with our first quarter performance which exceeded our initial expectations despite the timing impact of the cybersecurity incident. I'd like to take a moment to recognize our team's outstanding work in ramping up On-X supply which has now returned to normal levels and in clearing approximately 1/3 of our tissue processing backlog ahead of schedule. Also, the U.S. sales force is off to a great start on the AMDS launch. Our progress to date leaves us increasingly confident in our ability to deliver double-digit revenue growth and twice that rate for EBITDA. More specifically, we have the following key growth drivers that we expect to help us deliver on a continued revenue and EBITDA growth for 2025 and beyond. First, the AMDS HDE. We are currently commercializing AMDS in the U.S. and are starting to penetrate the $150 million annual market opportunity. Second, On-X heart valve data. We are marketing the JAK clinical data I discussed earlier, showing a mortality benefit in patients under 60 compared to bioprosthetic valves. This is a new $100 million annual market opportunity that we'll be pursuing with the only mechanical aortic valve that can be maintained at INR between 1.5 and 2.0. And third and finally, the NEXUS PMA positive 30-day data from the Endospan TRIOMPHE trial. This reaffirms our confidence that it remains on track for PMA approval in the second half of 2026. This data brings us one step closer to being able to access the annual U.S. market opportunity of $150 million. Finally, I want to thank our employees around the globe for their continued dedication to our mission of being a leader partnering to surgeons focused on aortic disease. With that, operator, please open the line for questions.

[Operator Instructions] And the first question is from the line of John McAulay with Stifel.

I wanted to start off with AMDS and the aortic stents and stent graft business generally saw really strong 19% growth this quarter, clear reacceleration from the last few. Just want to get a better sense of how much AMDS contribution or U.S. contribution was in that versus improvement OUS? And just beyond that, you mentioned 150 facilities seeking approval. Just generally speaking, would you expect to have all those up and running by the end of the year? Could we see a number higher than that? Just any sort of account goals would be helpful.

Yes. Thanks for the question. We were pleased with the growth, right? I mean we've accelerated. Obviously, there's some AMDS in the U.S. that's in that number. We are not going to be breaking that number out. We said that kind of last quarter. And then the 150 facilities, we've been very encouraged by the reception of the clinical community. And as we said in the Q4 call after we got approval, there is a degree of bureaucracy you have to move through in the hospital. There's an added step with this HDE where you have to get an IRB from the hospital and then go through value analysis committee. Every hospital has a different timing for their IRBs, a different timing for their value analysis committees. But of the places that we've targeted and closed, we've got 100% hit rate. So again, I'm not going to hypothesize what's going to happen to the 150 but so far, it's been extremely successful. So it's really more of a timing issue rather than, I think, whether it's going to happen or not. So I can't tell you whether they're all going to close because I don't know every hospital's time frame. Hopefully, that helps.

Yes, that's very helpful. And maybe just one for you, Lance, here. It was very helpful providing the 2Q guidance. Just wanted to get a better understanding of the tissue ramp that goes along with that. I mean we were sort of at -- if I'm looking at our model here, flattish to low-single digit growth for the year but you're talking about sort of full recovery of all the tissue sales. So just how should we be thinking about tissue growth for the year, maybe a return to mid-single digits? And then how that sort of contributes to the quarter as you sort of...

Yes. I think the one thing, right? So we were very clear about the impact of the cybersecurity event. It hit tissue the hardest. We talked about it in the Q4 call. and that we told you that for the full year, we expect it to be right back on track in the mid-single-digit range. We were pleased to get about 1/3 of the backlog out in the first quarter and we expect to get the remainder of the backlog from the cyber-attack out in Q2 and Q3. We're not going to break down quarters on tissue. What I'm saying is we -- for the full year, we expect to hit our tissue numbers. So I think we're not going to go further than that and we're real happy with the way things have progressed.

Our next questions are from the line of Frank Takkinen with Lake Street Capital.

So I'm going to start with one on AMDS. It sounds like you've had a couple of accounts onboarded and selling into in the first quarter. I was curious if you could provide any learnings? How is the actual onboarding of surgeons from a training perspective gone versus expectations? And then maybe as a second part also on AMDS. I know we've talked about the $150 million U.S. market opportunity being an estimate and there are some theories out there that the market could be larger. As you spoke with doctors who are interested in the product, any sense on where that market maybe can trend to over time once you better understand the size of it?

Thanks, Frank. We've been very pleased with the launch. And like with any new product that you're familiar with, we trained our sales force in January. We did our first training in February. We did our second training in March. We've had phenomenal training sessions. And I think those have gone better than I expected. great engagement from the customers. People are leaving super motivated going back to their IRBs and their value analysis committees. And we're seeing literally a quick kind of response once they come out of training. So that will be continuing throughout the year. So -- and the sales force has done a fantastic job. So we're very bullish. I mean, we talked about there's 600 accounts in the U.S. that do 80% of the volume. And we are actively engaged with probably half of those accounts with our commercial team. And we got 150, as I said in my comments, that are currently going through IRB and value analysis committee. So I think things are -- as we talked last quarter, we expected this to take some time. If you look at any company that launches, getting through a value analysis committee takes time and we've been very pleased with how well it's gone in the first quarter. And we have learned some stuff on the IRB because that is unique to an HDE. That is not normal. They're very rare. The reserve for very important products that are life-saving and the FDA thought it was important enough to get us in the market earlier. So we have learned some lessons on the IRB and that has accelerated some of our accounts.

Got it. And then maybe the second half of that, just kind of market opportunity, any initial feedback?

Yes. I mean, if you think about it, we basically used kind of the STS database where they have actual captured literature. The mortality of an acute Type A with malperfusion which is where AMDS is primarily indicated, the mortality is 35% within 30 days. The PERSEVERE trial for AMDS was less than 10%. So just by nature, if everybody starts using AMDS, there are going to be more patients, right? I hear that all the time that a lot of people die on the way or they are sitting on the table and they don't have a treatment for malperfusion and they die. So I think by just looking at the mortality outcomes between a malperfusion not -- if you don't get an AMDS and malperfusion mortality if you do get AMDS, is a huge difference. And that would mean there's more patients. So we'll -- this is still evolving. We're 1 quarter into the launch. But I think it's all been very encouraging.

Got it. That's helpful. And then maybe just one more for Lance. I was hoping you could comment on maybe cash flow expectations. Looked like Q1, there was a little more burn. Obviously, it's a seasonally high expense quarter. And I assume there was some cybersecurity in there that hasn't yet been reimbursed by insurance, as you alluded to. But maybe talk to kind of cash flow expectations for the year.

Yes. We still expect to be free cash flow positive for the year. Q1 is seasonally always the worst free cash flow quarter of the year for a number of reasons. Annual bonuses paid, you have all your sales meetings and it's usually very industry meeting intensive. Then on top of it this year, we had some AMDS launch costs and then some of the cyber costs. So there's a lot of stuff going on in Q1. I think actually the bigger thing, though, was a lot of the invoicing we did during the cyber event was really more in a manual type nature and collections on that has dug out a little longer than normal. And I think you can see that if you look on the balance sheet, the accounts receivable balance is up quite a bit. No issue with flexibility on that. It's really just been a timing thing. We expect that we get a lot of that cleared out by the end of Q2 and we'll get back more to normal and certainly don't see any impact for the full year.

Our next questions are from the line of Suraj Kalia with Oppenheimer.

Pat and Lance, congrats on a great start to the quarter. You hear me all right?

Yes. Hear you fine.

So Pat, you guys are back on the trajectory of beating and raising, so kudos. A couple of questions for you, Pat and one for Lance. Lance, if I could -- and I'll just kind of say it upfront. Lance, FY '25 guide, can you give us some directional color on what the implied growth for On-X and stent grafts is as the year progresses? That's for you, Lance. Pat, a couple of questions for you. So NEXUS showed a 60% reduction in MAEs, right? How does that stack relative to your internal expectations? And what do you define as the key threshold at the 1-year mark that would make NEXUS like you have to have it in the bag? And Pat...

Yes, let me take the NEXUS one first and then Lance can take the growth by segment. So we just -- as I mentioned in my remarks, we just presented or Endospan just presented the NEXUS 30-day data which is the pivotal kind of arm of the FDA trial. That is the clinical data that's going to be used for the submission. They will do just like AMDS PERSEVERE, there will be a 1-year follow-up where we look at imaging of the stents. So really, the 30-day in this patient population is really the critical endpoint, again, just like it was for AMDS. I think the results were extremely positive. I had a chance to meet face-to-face at ATS with probably 20 cardiac and vascular surgeons and got their reaction to the data. Comments like extremely impressed, very impressive results, better than -- you have better stroke rates than any other endo device on the market, very good results, especially as it relates to renal and stroke. It was consistent across the board. So I think NEXUS, it's the only device that's specifically designed for the aortic arch. I think this clinical data is extremely positive. They obviously have to get an FDA approval. So our option doesn't trigger until they get the approval. But I would think with this data that, that makes it very likely that they will get an FDA approval. And we're very bullish on the technology because the results from some of the top aortic vascular and cardiac surgeons in the world was extremely positive.

Yes. So Suraj, I'll answer -- the question was on stent grafts and On-X growth rates and what type of commentary can we give on those throughout the remainder of the year? So I guess just walk you through the things that we've said is, first of all, we said excluding the impact of the AMDS HDE, we would expect stent grafts and On-X to continue to do what they have been doing which is think about stent grafts as for the full year, a mid-teens growth rate business and On-X for the full year, a double-digit growth rate business. We also said on the last call that we expected AMDS HDE to improve the total company growth rate by 1 to 2 percentage points for the full year. And then we also said today that we expected stent graft growth rate to increase sequentially throughout the year as there's more benefit from AMDS in the U.S. So I think that's kind of the puzzle pieces that we've provided to help you try and think about how those product lines are going to progress throughout the year. I'd also say On-X has been growing double-digits for an extended period of time. Obviously, there's been some very favorable clinical data that's come out recently. If we are able to use that tailwind and drive further growth, that would be upside to what the comments we provided previously are.

Fair enough. And Pat, if I could quickly sneak in one last one.

Sure.

150 AMDS sites, Pat, would I be too optimistic in saying, let's say, by Q3 end, all these sites are on board multiplied by X number of implants in the final quarter by the size, multiplied by X. Would I be too optimistic in trying to do that kind of math? Or is there something...

Yes. Look, I think that -- I would say a couple of things. One, I'm extremely encouraged by the clinician community reaction and them pushing through IRBs and value analysis committee. So that's -- I think it's all good news. The thing we talked about at the very beginning of the year, we've given guidance for the year. that contemplates the AMDS taking up our overall growth rate by 1% to 2%. So we're very comfortable with that. Really, what this boils down to is how long does it take an individual hospital to get through an IRB and a value analysis committee. And it's all over the board. So to sit here and tell you, I know you guys love your models but to sit here and tell you I can project how those 150 accounts are going to layer in each week, I can't do it. I would just tell you, we're very comfortable with our guidance and there's potentially upside if we can move these through faster and we're going to be working to do that. But I can't really give you a number because it's still -- we're still 3 months into the launch.

Our next question is from the line of Mike Matson with Needham & Company.

So the NEXUS data looks good and it seems like it's probably going to be on track to get the PMA in the second half of next year as you talked about. So at what point do you have to make a decision on whether or not you want to acquire Endospan? And then maybe you could just quickly remind us of the terms of that agreement. I know they were updated. And then how would you expect to finance that? I mean your leverage ratio has come down but it's still like 4x, I think, right now. I mean in the year, maybe it will be substantially lower but...

Yes. Let me take the first part about timing and I'll let Lance take the second part about kind of financing. And so on the -- I think it's pretty clear on the timing. Now again, this is all predicated upon an FDA approval. So we -- our option does not trigger until they get FDA approval. Based on the data we've seen, based on the time lines, you got to get your 1-year follow-up and then submit your PMA, it looks very probable that the second half of 2026 that they would get approval. That triggers as soon as they get approved, the day they get approval triggers our option and then we have 90 days to decide if we want to buy it. Maybe I'll pivot over to Lance now and let him take the other parts of that question.

Yes. And so then as far as cost, so net of the loans we've already provided them, the upfront cost is $135 million. And then we have an earn-out that's payable post year 2 of the deal closing at 2.5x essentially year 2 incremental revenue. So the real number that is the focus is the $135 million upfront. And I think given what we expect to do with our EBITDA and improving cash flow, we really don't think we're going to have any issue having -- giving availability to fund to execute that upfront if we exercise our option, we're really not concerned about it.

Okay. And then I know it's Endospan's product but you guys kind of surprised us with the HDE. So -- sorry, for AMDS. So I mean, is there any potential that they could get an HDE for NEXUS to kind of get the product onto the market sooner in the U.S.?

Yes. From my understanding, Mike, they're not pursuing an HDE.

Okay. All right. And then just on the On-X, I mean, it's good to see the 11% growth. Is that -- was that still kind of constrained by the cyber issue? I mean, could that have grown even faster in the quarter if you had more supply or...

Yes and yes.

Okay.

Yes. I mean the great news is our team and they were hit pretty hard by the cyber incident. They did a phenomenal job kind of clawing back out. And we're back up to -- as I mentioned in my comments, back up to normal. They were -- they actually had an overperformance in the quarter on the supply side and we sold every single valve. We could have sold a lot more valves. So it was definitely a constrained growth rate. And as I mentioned, I think the more important part is this -- I keep pounding the table on this STS presentation on -- that was published in JAC about the benefit of mortality benefit to a mechanical valve versus a tissue valve in patients under 60. We're seeing acceleration based off of that. And we haven't even started fan in the flame yet. So we're focused on the AMDS launch and we're working to ramp up our supply on On-X. So we're extremely bullish on the On-X platform.

Our next question is from the line of Daniel Stauder with Citizens JMP.

Congrats on the quarter. So just first on guidance, just on the commentary around the FX piece in terms of total revenue. I appreciate that it's still a fluid situation. It's difficult to forecast this. And I may be off here but I believe you outlined in 4Q that it was contemplated to be a 2% headwind from foreign exchange. And is that still in the range as we sit here today? Or is there anything new?

Yes. So obviously, the rates have changed pretty significantly from when we gave that guidance back in the fourth quarter. So if current rates were to hold today, it would be closer to neutral for the full year. So -- but I mean, at this point, it's very difficult to predict. We're just mainly focused people on that constant currency revenue growth rate. If FX holds where it is, that's definitely potential upside on as-reported revenue and a little bit on EBITDA but we're pretty naturally hedged.

Okay, great. And that kind of gets to the core of what I was trying to understand. So that's perfect. And I guess just on EBITDA guidance. I think last quarter, we discussed that there was 100 bps from gross margin expansion, 200 bps from SG&A leverage and then some offset from higher R&D spend. Has that changed at all for 2025 in terms of these line items? Or how should we think about that? And then any more color on the cadence for 2025 or maybe it should be in line with revenues? So anything else there would be great.

Yes. So for full year comments still stand. We expect the AMDS launch in the U.S., we can get about 1 point of gross margin expansion through mix and we can get our normal leverage on SG&A despite the launch costs from AMDS. And then it is a little bit higher spend on R&D this year as a percent of sales. But within our range, we said that we kind of have a goal of spending 7% to 8%, so probably towards the higher end but still within our range. So we still expect all that for the full year. Our quarters are a little different than we would have normally expected but the full year is still the same. And then if you think about rolling into 2026, definitely not giving 2026 guidance but a lot of those same dynamics should still be in play as we think about next year.

The next question is from the line of Jeffrey Cohen with Ladenburg Thalmann.

Just one from our end. I wonder Pat and/or Lance, if you could comment any on APAC and LATAM and it looks like, again, very solid for the quarter and any specific call-outs there as far as products or countries or geographies or commercial folks?

Lance, why don't you take that one?

Yes. So we continue to see really good growth. Both of those do fluctuate a little bit quarter-to-quarter. I think APAC is a little bit lower than we expect the full year. I think they were the ones that probably got shorted a little bit on On-X supply this quarter and we'll be catching them up through the remainder of the year. Still seeing really good growth out of both of those geographies as we continue to get more products approved. And yes, it's really kind of just more of the same there as we just continue to get our whole portfolio approved in these various geographies where we have built out sales force. And so I feel really, really good about that as a continued growth driver.

At this time, we've reached the end of the question-and-answer session. And I'll turn the call over to Pat Mackin for closing remarks.

Yes. Well, first, thanks for attending the call. And just a couple of quick comments. I mean, we're very excited about, as I mentioned on the call, as Lance and I talked about, tissue is recovering. We expect to kind of have this whole backlog resolved through Q2 and Q3 and get it back on track. On-X did a great job recovering with supply, delivered double-digits in the quarter and we've got more we can do there. And we've got this new $100 million opportunity to go after bioprosthetic valves because of the mortality benefit in patients under 60. AMDS launch is off to a great start. We're in 150 accounts right now. And so far, we've had like a 100% hit rate on the ones we've gone after. And then the NEXUS data that was just presented 2 days ago was extremely positive. And that's our next wave of growth, assuming they get a PMA approval and we acquire them in the fourth quarter of 2026. That's another $150 million opportunity. So, I think it just gives us more confidence than ever that our ability to continue to grow double-digit on the top line and twice as fast on the bottom line for a long time to come is well intact. So, thank you for attending the call and look forward to reporting out the next quarter.