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LeMaitre Vascular, Inc. (NASDAQ:LMAT)

Q1 2013 Earnings Call

April 30, 2013 5:00 PM ET

Executives

JJ Pellegrino – CFO

George LeMaitre – Chairman and CEO

Analysts

Charley Jones – Barrington Research

Jeff Frelick – Canaccord

Joe Munda – Sidoti & Company

Larry Hemowich – HMPC

Raymond Myers – The Benchmark Company

Operator

Welcome to the LeMaitre Vascular First quarter 2013 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. JJ Pellegrino, Chief Financial Officer of LeMaitre Vascular. Please go ahead sir.

JJ Pellegrino

Thank you, Philip. Good afternoon and thank you for joining us for our Q1, 2013 conference call. Joining me on today’s call is our Chairman and CEO, George LeMaitre. Our President Dave Roberts is currently presenting at the Needham & Company 12th Annual Healthcare Conference in New York.

Before we begin, I would like to read our Safe Harbor statement. Today, we will make some forward-looking statements, 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 belief, expect, anticipate, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today April 30, 2013 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 2012 10-K and subsequent SEC filings including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During this call, we will discuss non-GAAP financial measures, which include organic sales and growth numbers. A reconciliation of GAAP to non-GAAP financial measures is contained in our press release announcing this quarter’s results and is available on the Investor Relation section of our website at www.lemaitre.com.

I’ll now turn the call over to George LeMaitre.

George LeMaitre

Thanks, JJ. Q1, 2013 was a strong quarter. I would like to focus my remarks on three headlines. Number one Q1 sales grew 10% to $15.4 million a record and our second straight quarter of double-digit growth. Number two Q1 XenoSure sales grew 63%. This growth engine was primarily responsible for our recent double-digit growth. And finally number three, the $1.5 millimeter Expandable LeMaitre Valvulotome and MultiTASC have just launched. These two new products should spark their respective categories.

As to our first headline, we posted record sales of $15.4 million in Q1, 2013, a 10% improvement over Q1, 2012. Q1, 2013 was our second straight double-digit sales growth quarter. Geographically international sales increased 15% due to XenoSure, our sales force expansion and our renewed focus on open vascular. In Q1, our new Swiss and Canadian subsidiaries became operational posting 146% and 21% growth respectively. We are now direct to hospital in 16 countries and are evaluating going direct strategies in Brazil and Australia. Our international export business is also doing well up 28% in Q1 as we have increased our competitiveness in vascular commodity market such as grafts and catheters.

As to our second headline, the XenoSure has quickly become the growth engine at LeMaitre Vascular. XenoSure sales grew 63% in Q1, 2013 and we believe that it will grow approximately 40% in full year 2013 to $7.1 million. Since we began distribution in 2009, XenoSure has been growing at 69% a year. XenoSure is the first sizable product line at LeMaitre to exhibit such high growth rate and may become our third largest device in 2014. We believe that the worldwide 2012 vascular patch market was $30 million to $40 million and XenoSure had a 15% market share.

There were few reasons for XenoSure success. First it is frequently used in carotid endarterectomy and is able to leverage our Pruitt Carotid Shunts sales base. Second, vascular surgeons seem to increasingly prefer biological patches due to their belief that they cause less infection. Finally, this is just another example of paring a quality vascular product with a larger vascular sales channel. In-house XenoSure manufacturing should enable us to further develop this platform adding a variety of shades and sizes. As XenoSure becomes a larger percentage of our sale, I believe LeMaitre Vascular is more likely to post double-digit sales growth.

As to our third headline, our R&D efforts continue to feed next generation devices to our growing sales force. In the last two months, we have successfully completed beta trials and launched MultiTASC and the 1.5mm expandable LeMaitre Valvulotome by combining two of our previous devices into one, MultiTASC makes remote endarterectomy simpler and faster.

By downsizing the outer diameter of the Valvulotome, we may expand the patient population as surgeons can now perform in situ bypass on smaller veins. MultiTASC has already began to record solid sales results running in an annualized rate of $500,000, while the 1.5mm Valvulotome was launched just last Friday in our three major geographies North America, Europe and Japan. This is the first global launch in LeMaitre’s history. Valvulotome (kind of) they comprise 24% of our revenue so an upgrade in this category should be meaningful.

At this point, I would like to hand the call over to JJ Pellegrino, our CFO.

JJ Pellegrino

Thanks, George. I would like to take a few minutes to comment on our Q1, 2013 results, dividend programs, stockownership and liquidity in Q2, 2013 and full year 2013 guidance. With respect to the top line, Q14, 2013 sales were up 11% organically and 10% on a reported basis. In Europe, reported sales were up 19% versus Q1, 2012 with our German group increasing 17% and our Italian and Spanish subsidiaries increasing 11%.

In addition, XenoSure continues to ramp in Europe increasing over 160% versus the prior year quarter. Of note from Q1, 2012 to Q1, 2013 the Japanese Yen decreased nearly 17%. This change reduce reported sales by approximately $90,000 in Q1, 2013 and at current rate could negatively affect full year 2013 sales by nearly $500,000. Despite this rapid devaluation of the Yen, we are increasing our full year 2013 guidance on this call.

Moving down to P&L, we continue to invest in the business for the long-term. Gross margin in Q1, 2013 was 72.9% versus 70.9% in Q1, 2012 as reduced inventory write-offs improved and manufacturing efficiencies and higher average selling prices were partially offset by unfavorable product mix and XenoSure startup costs. Since our last call, we have completed the construction of our new XenoSure clean room in Burlington and we began to manufacture products for biocompatibility and other testing. We expect to be stocking Burlington made XenoSure onto our shelves by Q4, 2013.

Total operating expenses in Q1, 2013 were $10.1 million versus $900,000 in the earlier quarter. This 12% increase was driven by investments in our Canadian and Swiss subsidiaries, additional sales reps, increased worldwide sales (meeting) costs, R&D costs and $160,000 in taxes related to the Affordable Care Act. Despite these additional costs, our Q1, 2013 operating income was $1.1 million versus $850,000 in Q1, 2012.

Cash and marketable securities were $15.3 million at March 31, 2013, a decrease of $1.1 million during the quarter mainly driven by increased inventories, the payoff of 2012 annual employee bonuses, other working capital uses and capital expenditures largely related to the XenoSure transition.

Turning to other matters our Board of Directors recently approved a quarterly cash dividend of $0.03 per share of common stock to be paid on June 5, 2013 to shareholders of record on May 22, 2013. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the determination of the Board of Directors.

Separately in 2012 one of our long time and largest private equity shareholders Housatonic Partners distributed its 1.4 million LeMaitre shares to its limited partners. Housatonic’s approximate 9% stack in LeMaitre dated back to 1998. We believe that many of Housatonic’s limited partners have subsequently sold their LeMaitre shares and increased our outside shareholder float by approximately 20%. Indeed trading volume in Q1 was up approximately 30% over Q4 2012. We have been pleased our 13F institutional investor base grow significantly over the past three years increasing from approximately 20% in 2009 to 35% at December 31, 2012. Conversely insider ownership has declined from approximately 50% to 42% from April 2012 to April 2013.

Turning to guidance, we expect Q2 2013 sales of $15.6 million up 9% organically versus Q2 2012 and operating income of $1.2 million an 8% operating margin. We’ve also raised our 2013 full year sales guidance to $61.7 million up 9% organically versus 2012 and we reiterated our 2013 operating income guidance of $5 million an 8% operating margin.

Finally, I’d also like to let you know that we will be presenting at several upcoming Investor Conferences including the Three Part Advisors IDEAS Investor Conference in May in Boston, the Bank of America Merrill Lynch Health Care Conference in May in Las Vegas, the Microcap Conference in May in New York City, Sidoti & Company Microcap Conference in June in New York City and the Wells Fargo Securities Healthcare Conference in June in Boston.

With that I’ll turn it over to Philip for Q&A

Question-and-Answer Session

Operator

(Operator Instructions). And your first question comes from line of Charley Jones from Barrington Research. Please proceed.

Charley Jones – Barrington Research

Hi, good afternoon. Thanks for taking my questions. Great quarter.

George LeMaitre

Hey, Charley. Thanks a lot.

Charley Jones – Barrington Research

Yeah, really nice quarter George. So maybe let’s just talk about guidance for a second, was there any – what were the one or two things that maybe you could point to that gave you the confidence to increase your guidance or was it really kind of a no-brainer for you and you feel like you’re continuing to be kind of balancing that conservatism with optimism.

George LeMaitre

Well I guess a couple of things. We obviously had a nice Q1 and that exceeded our Q1 guidance by a decent amount and that was driven by nice results over in Europe as well as with the XenoSure product line, Valvulotome clips really across the Board a lot of strong results and a lot of that coming through the European geographies. So I would say given that sort of Q1 setting we felt that their momentum was going to carry through to Q2 and beyond through the rest of the year so we picked up guidance for the full year not by a lot but a little bit just to signal that. We felt good about the way things were headed I would say, if we didn’t have the XenoSure going against us for the rest of the year and who knows where that’s going to turnout for the rest of the year but as it stands now maybe a $0.5 million headwind because of the yen but if we didn’t have that would probably have ticked up a little bit more.

Charley Jones – Barrington Research

Okay. And that $0.5 million is the total effect not just incremental effect from last quarter’s guidance right?

George LeMaitre

The total effect for the year.

Charley Jones – Barrington Research

Okay. And then your split up between unit and price I think in the last call George you talked about kind of a 70 30 unit of price, it seemed like it was maybe a little bit more than that in the first quarter for price on an organic basis, can you kind of split that up for us and give us an idea of how you’re tracking with that.

George LeMaitre

Sure.

Charley Jones – Barrington Research

And pricing in the U.S. and Europe.

George LeMaitre

Of course. Actually it’s kind of the same here we have this 11% and I think 7% of it comes from unit growth and 4% comes through price hikes. So I would say two-thirds unit one-third price and just to review what we did pricing wise on January 1st roughly speaking of 4% to 5% price hike in the U.S. roughly speaking a 1% to 2% price hike. In Europe if you ex the Swiss change of distribution and then as you know prices are basically frozen in Japan except every other year, you deflate by about 5% on two-thirds of our sales which are reimbursed.

Charley Jones – Barrington Research

Alright. And then I’ve got a few more questions, I’ll jump back in queue for but maybe you can you just talk a little bit about the market it sounds like Europe went well I don’t know that we heard that really from other companies I think it was mixed out there but little bit about the U.S. and European markets particularly and just how you did in your opinion relative to those. We heard a little bit about licenses in Q1 in the U.S. your results don’t really reflect that so if you can talk a little bit about maybe your market share taking.

George LeMaitre

Sure. It definitely feels like we did well on both sides the Atlantic maybe the one that stands out for me the most is over in Europe. We’re on a different cycle right now than everyone else because we had such a large restructuring of our European branch about 18 months ago and now we’re bearing the fruits of that change. And again to remind everyone we got out of stent grafts in mid 2011 and that’s been a major contributor to what’s been going on secondarily we’ve seriously ramped up the sales force over there on balance the growth and our sales reps has come over in Europe in and in Japan not as much in the U.S.

And then thirdly XenoSure which you have to take into account whenever you talk about LeMaitre now XenoSure had an extraordinary quarter over there it was up a 170%, Europe is earlier in its launch cycle for XenoSure it’s about two years old over there now whereas in the U.S. it’s about four years old and so we’re later in our launch cycle for XenoSure that’s what we saw in Europe, that’s what we’re walking the trend. I would say if you’re talking about European macro we did see in Q1 Spain and Italy are sort of our weak sisters over there and they were up sort of a 11% so nothing like the rest of the Europe. In the U.S. it felt like a normal quarter we were up 8% I believe on a reported basis for a sales and half of that is price and half of that’s units we have nice rebound in our Valvulotomes in the U.S. which is what drove up that market.

Charley Jones – Barrington Research

Then I’ve got a few more but I’ll jump back in queue.

George LeMaitre

Thanks, Charley.

Charley Jones – Barrington Research

Thanks, George.

Operator

Your next question comes from the line of Jason Mills from Canaccord. Please proceed.

Jeff Frelick – Canaccord

Hi, guys this is Jeff filling in for Jason. Thanks for taking the questions and congratulations on a great quarter.

George LeMaitre

Thanks, Jeff.

Jeff Frelick – Canaccord

George, I was hoping you could provide some more color on the global Open Vascular product market. And kind of more specifically if you could compare the company’s interest in available opportunities to consolidate the further complementary product lines.

George LeMaitre

Sure. I mean I think that’s what LeMaitre is all set up to do. We have 83 sales reps in major plank in our business plan is to go around consolidating open vascular and we feel like we can buy $5 million companies and we can buy $40 million companies, this platform is getting wider and wider. Every time you hear us talk about getting into a new market we are trying to set up so that we can shoot things down the channel more quickly, maybe on an R&D perspective you’re about to see that happen with the expandable 1.5 LeMaitre Valvulotome first time ever we’ve gotten four regulatory approvals U.S. Canada, Europe and Japan all at once and we’re about to take advantage of our entire 83 rep portfolio but more to your question I feel like we’re really teed up well for acquisition out of the most recent acquisition we did was of course XenoSure in October of 2012 but we’re hungry for acquisitions and we’re trying to remain price discipline and do the right thing on acquisition.

Jeff Frelick – Canaccord

Fantastic. And what is the company’s target operating margin rate in looking to the three years out and what makes the organic growth in M&A does this require?

George LeMaitre

I guess I would say we don’t guide on that that’s too far up for us but if you look at our sort of larger peers they get into the 15% to 20% operating margins and then the even larger peers may be in the 20% 25% margins but I would say those sort of low to mid-teens would sort of be your next half and that somewhere probably in the midterm I’m imagining that as you grow you get nice leverage on the G&A line you don’t need more CEOs and CFOs and I would say on the selling line we can probably get some more leverage there as we sort of get our rep platform sort of solidified. And then R&D line, I would say probably not a lot of leverage there we probably want to stay around 8% to 10% of sales being spent on product development and R&D but those first two certainly you could get some leverage and maybe get to show out of the high single-digits at some point.

Jeff Frelick – Canaccord

Perfect. Thanks again for taking my questions. And I’ll jump back in the queue.

George LeMaitre

Thanks, Jeff.

Operator

(Operator Instructions). And your next question comes from the line of Joe Munda from Sidoti & Company. Please proceed sir.

Joe Munda – Sidoti & Company

Good afternoon guys. Thanks for taking the question.

George LeMaitre

Hey, Joe.

Joe Munda – Sidoti & Company

Real quick, George you had spoke about the total number of sales people now being at 83, I was wondering if you could break that out for us international versus domestic.

George LeMaitre

Sure. I know for sure we had 8 in Japan I think we have 34 in Europe and that’s 41 and that would make 42 in the United States.

Joe Munda – Sidoti & Company

Okay. And then JJ I was wondering if you can give us a little bit more color on the gross margin it’s pretty impressive quarter-over-quarter sequentially as well as year-over-year, you guys did mention some XenoSure transfer start-up cost, I was wondering if you can kind of break that out for us and really where you were getting the leverage on the gross margin side?

JJ Pellegrino

Yeah. So year-over-year one of the big improvements was in inventory right offs if you recall a year ago we were having some AlboGraft and we wrote off a decent amount in the prior year quarter Q1 ‘12 but that didn’t happen this year obviously and we actually have pretty modest in this quarter so we had nice benefit there, those probably a big chunkier gain. We also just got better at manufacturing some of our core products some better efficiencies there. We also get some decent price increases every year as you know I’ve talked about that a number of times and that comes through the gross margin line. That good stuff was offset by XenoSure transfer that probably orchid to the tune of 1% or 1.5%.

And that should probably continue through Q1 2013 and then maybe when we get into Q4 and we start putting product on to our shelves for sale we’ll start seeing different dynamics there and trying to prove that improve that number over time and the cost of manufacturing XenoSure over time. And then a second sort of drag on the gross margin line was product mix and as we sell more XenoSure that actually have a lesser gross margin than our core product so that would be a little bit of a drag but overall those benefits obviously clearly out way the negatives, you can probably sort of see that happening over the next couple of quarters as well.

Joe Munda – Sidoti & Company

Okay. With that being said, can we look at gross margin as improving sequentially quarter-over-quarter of the year or I’m just trying to take a look I mean with the – based on your comments it seems like the fourth quarter gross margin even if you made some from the homemade products like you guys said the homemade XenoSure product. So are we thinking correctly here or?

George LeMaitre

Yeah, yeah. Yeah, I would say probably flattish for the next couple of quarters and then you get that bump maybe in Q4.

Joe Munda – Sidoti & Company

Okay. Okay, I’ll hump back in the queue. Thank you.

George LeMaitre

Thanks, Joe.

Operator

Your next question comes from the line of Larry Hemowich from HMPC.

Larry Hemowich – HMPC

It’s on a very nice quarter.

George LeMaitre

Thanks, Larry.

Larry Hemowich – HMPC

George, with the price increases and I think you’ve been putting in pretty much every year, have you noticed any price resistance at all or is these products just a strong surgeon preference and pretty much strong market share as to where you don’t get any competitive activity back at you.

George LeMaitre

Let me break my answer down into two distinct categories, one is that well I’ll call the differentiator product 70% of our sales are differentiated they’re very different they’re hard to find anywhere else. And on that yeah we still have to deal with committees and our reps are getting barked on a little bit more red tape but in general you get your price hikes on those and then on the 30% that are commodity items like XenoSure like AlboGraft like LifeSpan on that part of our portfolio definitely we see pricing pressures. And I think you see to a certain extent LeMaitre has a harder time in getting back to the 75% gross margin number that we used to record probably as a result of that so yeah little bit of pricing pressures more localized in the commodity type products.

Larry Hemowich – HMPC

On XenoSure has it becomes a more and more important product for you obviously its gross margin will have a bigger effect on the overall corporate average. Is it, is it now or will it be as you buildup the manufacturing and above average corporate gross margin product?

JJ Pellegrino

No I don’t think so. We’ve a hard time seeing that Larry.

Larry Hemowich – HMPC

Okay and that’s because of competitive pressures or…

JJ Pellegrino

Yeah. The pricing we see out there again I mentioned it’s a little bit more of a commodity device and so you have three or four other folks that can deliver something like that. You have one, which is the Synovis Baxter device, which is very similar to what we’re selling. And then you have some inert patches made out of polyester and PTFE, which sort of do the same thing except without the biological twist.

Larry Hemowich – HMPC

And then and when you look at the rest obviously you guys are feeling good, you raised guidance things are going well. Is there anything in the back of your mind that worries you aside from some big global meltdown or big global slowdown that could have an effect on the company from what you can see right now?

George LeMaitre

I mean we still struggle with our trading volume of our stock so there is some technical aspects about LeMaitre stock that are bothersome to JJ and Dave and I but I mean things are going quite well here as you can hear from the tone of our voices.

Larry Hemowich – HMPC

Absolutely, absolutely. Well congrats you are doing a great job.

George LeMaitre

Thanks, Larry.

Larry Hemowich – HMPC

You are welcome.

Operator

(Operator Instructions). And your next question comes from the line of Raymond Myers from LeMaitre. Please proceed.

Raymond Myers – The Benchmark Company

Thank you but I’m with The Benchmark Company not LeMaitre but thank you for (inaudible) questions. George and JJ I was hoping you might give us an overview of the opportunity from three of your major products that you are either in the process of merging and will be soon the XenoSure, the MultiTASC and the 1.5mm Valvulotome. Could you give us a sense of how big those markets are? And how much market share you think, you could get in a reasonable timeframe of say three years?

George LeMaitre

Hi, Ray. Thanks for the question that’s a great question. Actually I need to reiterate Ray is at Benchmark Company not at LeMaitre Vascular. So, Ray the first part of your question or the three products that you (want to go) XenoSure, we feel like it’s a $30 million to $40 million market. We feel like, we right now have about 15% of the market maybe a little bit more given the progression we’ve been making. I don’t know what the reason is, why we wouldn’t do really well in that market the growth is outstanding and we haven’t even started to fight really over in Europe or say Australia and Japan. So, we’ve a long ramp on that product I believe.

In terms of the Valvulotome, we’ve been added – we’ve been in this market for a longtime. We’re the leader. We feel like it’s a $30 million worldwide market maybe $35 million, $40 million and we feel like, we’ve about 40%, 45% of the market. We’re the only competitor in the space that’s really trying to change the product and the procedure and we’re doing a great job doing it. You noticed the launch of the over the wire last year, the lunch of the 1.5mm this year and we even have some more stuff up our sleeve for 2014 in this category. So, we’re clearly the technological leader in the category. There is no reason why we can’t have 75% of that market. We’re clearly the best performing device and we’re the only company that’s really taken a focus on valvulotomy. So, you go where you want with that. Our growth rate in the first quarter I’m grasping a little bit here but I believe it was around 10% or 15% in sales dollars.

And then as far as the second product the MultiTASC that one is a little different. There are no other remote endarterectomy companies in the whole world no one else participates in that space unless you think the space is defined latterly by atherectomy and then of course there is a lot of competitors. But with remote endarterectomy it’s a $2.5 million segment for us. It’s quite small. We own the whole segment. However, we’ve just revolutionized the segment. We put two catheters. We’ve taken them and turn them into one product and we made it a lot more convenient for the doctor. The surgeon only needs to get access once now, whereas in the old days with the two products last year they needed to get access twice and that sort of a painful item for them. So, to make it short, maybe we can double the category with this – with this MultiTASC and I can’t give you a timeframe on that I don’t know when that will happen.

Raymond Myers – The Benchmark Company

Okay, Thanks. That’s helpful, George. And maybe one other thing, could you touch upon what happens to your gross margin once XenoSure is ready to be manufactured through the Burlington facility?

George LeMaitre

Yea. I guess, I would say the startup costs associated with the XenoSure transition should go away sometime in Q3, Q4 as we start putting product on the shelves that should be a benefit to the gross margin. Then there maybe there is funny period where we’re actually making them in-house at a price or at a cost it’s not so beneficial as we sort of get better at making them in a cost efficient manner and squeeze costs out of the manufacturing process. Hopefully that happens fairly quickly sometimes it takes a little bit of time. So, then overtime, you are going to actually start to get better costing on the XenoSure after sort of that, that initial manufacturing phase. So, I guess, I would say instead of rolling through the quarters to get to putting it on the shelves, when you do maybe you make it a little less efficiently and then you improve that over time.

Raymond Myers – The Benchmark Company

Okay. Can you give us a sense of how high the gross margin would get or how much improvement in gross margin versus what you are manufacturing now that you went…

George LeMaitre

So, we’ve been, we’ve been buying the product now and call it a sort of a 45%, 50% distributor gross margin. And when we start manufacturing them hopefully we’ll be sort of in that range maybe a touch better and then hopefully we get into the 60s at some point over time as we start to manicuring them even better. I don’t know that we’re going to get this product line to sort of 70%, 75% corporate gross margin range it’s not out of the question but it would be after a lot of work to get there.

Raymond Myers – The Benchmark Company

Okay but 60s is good. Thank you.

George LeMaitre

Yeah.

JJ Pellegrino

Thanks, Ray.

Operator

Your next question comes from the line of Joe Munda from Sidoti & Company. .Please proceed.

Joe Munda – Sidoti & Company

Hey, George. Just a quick follow-up. I know, you have been talking about the offices in Switzerland and Japan and if I think back to the Analyst Day you had here in New York Brazil was a significant part of the presentation as far as expansion of the sales effort is Brazil back on the table now that you guys have little bit of comfort here and things – things are quite down is Brazil back on the table?

George LeMaitre

Right. I think you are recognizing for exactly what it was. In Q3 and Q4 as the Affordable Care Act pack became more and more real to us and the fact that it wasn’t not going to repeal before January 1st as well as the fact that we did finally execute that XenoSure acquisition on October 29th. We started thinking that it might be better to show a little bit of operating leverage going into 2013 rather than just go ahead and do all of these projects. So, we were fully ready to do Brazil and Sao Paulo Dave and I spent a lot of time down there during the year to recruit a general manager and we pulled up short because we wanted to be on these phone calls talking about a little bit of operating leverage rather than making excuses why the operating margin was going down because of the Sao Paulo office.

So, yes it’s back on the table. We sort of thrown Australia into the mix here recently as well you noticed that we mentioned Brazil and Australia in this phone call. And we did that because we just feel like we keep finding that’s a nice market, where we haven’t gone anywhere and that seems like a lot of blue sky there. And the regulatory pathways in Australia to us seem a little bit more understandable than in Brazil a small detail on Brazil that we found out, while we’re down there last year effectively new approvals for medical devices for foreign companies cannot be had unless ANVISA, which is the Brazilian FDA comes and visit your facility in your hometown, which will be Burlington for us. And we’re basically in a queue of about three years there and so our Brazilian approvals have been shut off for quite a while and they won’t turn back on until a fellow from Brazil comes up a regulator comes up and looks at our factory and so that also made us hesitate why open up a Sao Paulo office if there would not be additional approvals coming.

So, we might look at how they feel before we make the final leap into Brazil. But Australia seems like an open topic for us right now and we would love to get into Brazil as soon as possible. One of the issues at LeMaitre to improve our and to continue to post double-digit sales growth quarters, we feel like, we must get into the BRIC markets and we’re not the BRIC markets and Brazil represents the most digestible chunk for us right now of the BRIC market.

Joe Munda – Sidoti & Company

And George if – when and if I mean, would you follow the similar model of distributors and then possibly the distributor does well you buyout the distributor is that’s something that you guys are looking at?

George LeMaitre

Actually that’s ongoing, that’s what we’ve been doing for the last 15 years. We’ve had one and then two distributors down there and you probably say follow the same model, which is attempt to buyout the distributor to work with them to use the four or five regulatory approvals that they have already gotten for us and then to setup shop down there alongside them for a little while but (fully) plan on being direct as soon as possible.

Joe Munda – Sidoti & Company

Great. Thank you.

George LeMaitre

Thanks.

Operator

At this time, there are no further questions and that will conclude today’s conference. I would like to thank you for your participation and you may now disconnect. Have a great day.

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