Good day, ladies and gentlemen, and welcome to the Artivion 3Q 2022 financial conference call. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Sam Benzinger from the Gilmartin Group. Sir, the floor is yours.
Good afternoon and thank you for joining the call today. Joining me today from Artivion's management team are Pat Mackin, CEO, and Ashley Lee, 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. Now I'll turn the call over to Artivion CEO, Pat Mackin.
Okay, thanks, Sam. I'm pleased to report that our solid business momentum continues as we've now delivered our fourth consecutive quarter of strong constant currency top-line revenue growth. Constant currency total revenue growth was 11% compared to Q3 in the first nine months of 2021. Further, we remain on track to deliver on each of our commitments we made at our investor meeting in March. For the third quarter, we saw top line growth across all of our product categories. More specifically, on a constant currency basis compared to Q3 of 2022 versus Q3 of 2021, On-X grew 19%, tissue processing grew 13%, BioGlue grew 9%, and stent grafts grew 7%.
For the first nine months of the year on a constant currency basis, stent grafts are up 22%, On-X is up 14%, tissue processing is up 10%, and BioGlue is down 4%, all compared to the first nine months of last year. Regarding BioGlue, we have secured derogation and derogation extensions that will allow us to continue selling in virtually all European countries through year-end, by which time we believe we should have the CE mark. In the third quarter, while our derogation extension requests were pending, it was unclear if we'd be able to continue to sell BioGlue into the U.K. and France in Q4. As a result, we estimated an additional $1.5 million in orders in Q3 that we believe typically would have been placed in Q4.
Fortunately, in October, we received these derogation extensions, by which time the Q3 orders for BioGlue to those countries has already been fulfilled. Therefore, we expect BioGlue's contribution in Q4 to reflect this increase in the Q3 orders. If customers had not made these increased BioGlue purchases in Q3, our total revenue growth in the third quarter and the first nine months of the year would have been 10%, both on a constant currency basis compared to the prior year. Our success on all these fronts has reinforced our confidence that we can deliver on our three growth initiatives we outlined in our investor day in March, which we continue to believe will drive double-digit constant currency revenue growth through 2024 and beyond. As a reminder, our three initiatives are as follows. First, we will drive continued growth in On-X and our aortic stent grafts.
Second, we continue to benefit from our investments in our commercial channels and new regulatory approvals in Asia Pacific and Latin America. Third, we will drive growth in 2023 and beyond through PMA approvals in the U.S. for PerClot and the On-X PROACT mitral low INR indication. As mentioned previously, On-X revenues grew 19% on a constant currency basis in the third quarter of 2022 compared to the third quarter of last year, driven by strength in the U.S., where revenues grew 21% compared to last year, and in Europe, where revenues increased 25% compared to last year, both on a constant currency basis. For stent grafts, revenue in the third quarter increased 7% on a constant currency basis compared to the third quarter of last year.
Even though our year-over-year growth in stent graft revenue was down sequentially compared to the second quarter, year-to-date growth through the end of the third quarter stands at 22% on a constant currency basis. Our next initiative is to expand our presence in Asia Pacific and Latin America through new regulatory approvals and commercial footprint expansion, which also remain on track. I'm pleased to report that we're continuing to execute very well on this strategy as demonstrated by the third quarter constant currency revenue growth of 25% and 22% in Asia Pacific and Latin America, respectively. We continue to expect these regions to be important growth contributors over the coming years. Regarding our third initiative, we remain on track to receive regulatory approvals for the low INR label of the On-X mitral valve and for PerClot by the end of the year.
If the low INR label is approved, we believe we will take significant market share in the U.S. with the On-X mitral valve, just as we've done and continue to do with the On-X aortic valve. If PerClot is approved by December 31, 2022, we will receive a $25 million payment from Baxter for that milestone under our divestiture agreement, and will begin to generate revenue for supplying PerClot to Baxter for approximately two years thereafter. In addition to our progress on each of these initiatives, we continue to make progress on the AMDS clinical trial. For AMDS, we have 11 patients enrolled in our PERSEVERE trial, which is a non-randomized clinical trial in up to 25 U.S. centers, 100 patients who have been experiencing acute type A dissection.
The combined primary efficacy and safety endpoints for the trial are the reduction in all-cause mortality, new debilitating stroke, myocardial infarction, and new onset renal failure requiring dialysis, as well as re-expansion of the true lumen of the aorta. We now anticipate completing the full enrollment in the first half of 2023. Following a one-year follow-up period, assuming the trials meets its endpoints, we anticipate that we should receive FDA approval for the AMDS in early 2025. In addition, our partner Endospan is making good progress on the U.S. IDE TRIOMPHE trial for its NEXUS aortic arch stent graft system. In that trial, there are approximately 29 patients already enrolled and treated in a total of 40 patients enrolled and approved for treatment. Endospan estimates trial completion in June of 2023 and a PMA approval in 2025, again, assuming the trial's endpoints are met.
To reiterate, if these PMA trials proceed as anticipated, we anticipate FDA approval for AMDS and NEXUS in 2025. At that time, assuming we exercise our option for Endospan, these products would increase our addressable market opportunity by an estimated $900 million. Regarding PROACT, while we were obviously surprised and disappointed by the termination of the trial as recommended by the Data Safety Monitoring Board, our number one priority is always and will be patient safety. I'd like to put into perspective what the impact of stopping the PROACT trial means for Artivion. First, if PROACT had been successful, we would not have seen any revenue impact associated from the positive trial outcome for another three years if the trial had remained on schedule.
Despite the termination of the trial, our current year revenue guidance and the three-year revenue outlook we presented at our Analyst Day has not changed. Second, we believe, as many KOLs believe, that our mechanical aortic valve is the best in the market. Our aortic valves have taken market share every year since we acquired On-X, and we do not expect that to change. No doubt, a positive trial outcome would have been beneficial in accelerating the pace of our market share gains for the aortic valve, but we fully expect the On-X valve business to continue to grow with or without a positive trial result due to its superior clinical benefits and indications over competitors. Third, our growth drivers remain unaffected, and our pipeline is poised to add more than $1 billion in addressable market by the time PROACT would have been completed.
We therefore still have the opportunity to substantially grow our revenues and earnings. Finally, there are positive financial implications from shutting down the trial. Majority of the $10 million we expected to spend on PROACT in each of the years 2023 and 2024 will now largely be redirected to offsetting the impact of inflationary pressures, enhancing cash flows and EBITDA. Clinical trial setbacks are unfortunately an inherent part of innovation, and our product portfolio exemplifies many successes as we continue to do so. We will continue to prioritize and support innovation as we seek to develop products that improves the lives of patients around the world. With that, I will now turn the call over to Ashley.
Thanks, Pat, and good afternoon, everyone. Total revenues were $76.8 million for the third quarter, up 6% on a GAAP basis and up 11% on a constant currency basis, both compared to Q3 of 2021. As Pat mentioned, we saw strong constant currency growth across all product lines. On a year-over-year basis in the third quarter of 2022, On-X revenues increased 17%, tissue processing revenues increased 13%, and BioGlue revenues increased 5%. Aortic stent graft revenues decreased 6% due to currency headwinds. On a constant currency basis compared to the third quarter of 2021, On-X revenues increased 19%, tissue processing revenues increased 13%, BioGlue revenues increased 9%, and aortic stent graft revenues increased 7%.
On a regional basis, third quarter 2022 revenues in Asia Pacific increased 24%, Latin America increased 20%, North America increased 12%, and Europe decreased 8%, all compared to the third quarter of 2021. On a constant currency basis, revenues in Asia increased 25%, Latin America increased 22%, North America increased 13%, and Europe increased 5%, all compared to the third quarter of 2021. Gross margins were 63.4% in Q3 compared to 66.2% for the third quarter of 2021. The decrease was driven primarily by inflationary impacts on materials and labor, as well as product mix within our aortic stent graft and BioGlue product lines. Inflation remains persistently high and will weigh on our gross margins.
However, with the continued growth in our top-line revenues, general expense management, along with funds now available due to the cessation of the PROACT study, we still anticipate delivering on our adjusted EBITDA commitments we made in March at our Investor Day. G&A expenses in the third quarter were $41.1 million compared to $39.1 million in the third quarter of 2021. Excluding non-recurring acquisition-related and business development benefits and charges, G&A expenses were $39.9 million for the third quarter of 2022 compared to $37.3 million in the third quarter of 2021.
R&D expenses for the third quarter included a $4.7 million charge for estimated costs associated with the termination and wind down of the PROACT study as recommended by the Data and Safety Monitoring Board. The majority of these costs include future administrative and site costs that will be incurred during the fourth quarter of 2022 and the first quarter of 2023, as well as the estimated cost of clinical drugs purchased for patients participating in the study and not expected to be recovered. These costs are non-recurring, and we have excluded them for purposes of calculating adjusted EBITDA and non-GAAP earnings per share. On the bottom line, we reported GAAP net loss of approximately $13.7 million or $0.34 per fully diluted share in the third quarter of 2022.
Non-GAAP net loss was $1.9 million or $0.05 per share in the third quarter. GAAP and non-GAAP net loss includes a $3.7 million or $0.07 per share loss due to foreign currency revaluations. Excluding these amounts and the wind down costs associated with the PROACT Xa trial, non-GAAP income was $853,000 or $0.02 per share. As of September 30, 2022, we had approximately $38 million in cash, $315 million in debt, and the full $30 million available to us under our revolving credit facility. Adjusted EBITDA for the third quarter of 2022 was $10.4 million compared to $9.3 million for the third quarter of 2021.
Regarding our capital structure and the impact of a rising rate environment, as we've stated, we do not believe that we need to raise additional capital to fund our debt, our investments in our channels or our pipeline. Even if LIBOR or SOFR increases to approximately 5%, which would place our all-in rate on our debt at approximately 8.5%, we believe we will still be able to comfortably service our debt and continue to invest in growth. With the cessation of the PROACT Xa study, we will have an additional $10 million of funds for each of 2023 and 2024 previously allocated to the study, which can now be mostly redirected to earnings and cash flow.
Our Term Loan B contains no financial covenants that would place us in default unless we were to have more than $7.5 million drawn on our revolving credit facility at the end of any calendar quarter, which we do not. As of now, we have the full $30 million available under our credit facility and do not currently foresee the need to draw on the facility. Additionally, our convertible notes do not contain any financial covenants. Please refer to our press release for additional information about our non-GAAP results, including a reconciliation of these results to our GAAP results. Now for our 2022 outlook. In our last call, we stated we had faced a $10 million currency headwind in 2022 versus 2021. Since that time, the dollar has continued to strengthen, resulting in incremental FX headwinds.
For the fourth quarter alone, we face approximately $4 million in currency headwinds compared to the fourth quarter of last year, putting our prior year constant currency revenue comparator at approximately $75 million. With that in mind, our slightly narrowed full year constant currency growth guidance of 9%-10% implies full year revenues in the range of $313 million-$316 million. This contemplates our expectation for fourth quarter revenue to be in the range of between $78.5 million and $81.5 million, which accounts for the impact of the previously discussed $1.5 million in BioGlue stocking orders that we benefited from in the third quarter. I'll turn the call back over to Pat for his closing comments.
Thanks, Ashley. To summarize, our fourth consecutive quarter of strong execution continues to confirm our growth strategy is working and delivering the results we've envisioned. We continue to further expand our global commercial footprint and invest in our clinical programs. In the next three years, we expect revenue to grow double digits to approximately $400 million and to generate $75 million-$80 million in adjusted EBITDA, as well as reducing our net leverage to less than 3x, even despite the headwinds we face from inflation and its impact on gross margins. Our success in the third quarter positions us well to deliver on these metrics. To summarize, we saw 19% constant currency growth with On-X, 13% growth in tissue, 9% growth in BioGlue, and 7% constant currency growth with our aortic stent graft program.
We posted 25% constant currency growth in Asia Pacific and 22% in Latin America, while we continue to invest in these regions. Lastly, we have a very robust pipeline. We expect to receive PMA approval for PerClot and the On-X PROACT mitral by the end of the year, as well as we have two U.S. clinical trials enrolling the Endospan NEXUS TRIOMPHE and the AMDS PERSEVERE study. They are currently enrolling, and we expect to expand our total addressable market opportunity by $900 million by early 2025, assuming we execute on the Endospan option. At this point, we have all the essential pieces in place for sustained growth and continued focus on execution. In all, the future for Artivion is bright, and we solidify our position as a leading company in aortic repair.
I want to thank all Artivion employees around the world for continuing day in and day out to deliver on our mission. With that, operator, please open the lines.
Ladies and gentlemen, for any questions or comments at this time, please press star one on your telephone keypad. Again, that's star one for any questions or comments at this time. Our first question comes from Rick Wise with Stifel. Rick, please go ahead.
Hi, Pat. Hi, Ashley. This is actually John on for Rick today. So just first one for me, kind of on what you saw in the third quarter, how things trended throughout. It seems like European performance was a little lower than we were expecting. What kind of complications, if any, did you face over there? And generally, how did you exit the quarter in that regard? And then on the second count, I'm just curious kind of as we head into 2023, do you see these macro pressures in any ways easing, whether it be staffing, supply chain, FX, as you look ahead into next year? I know it's still early for that, but I'm just curious what your opinion is on that.
Yeah. I would say on the European side, I mean, the only real kind of softness we saw in Europe was on the stent graft side. That was primarily related to kind of staffing issues in our facility in Germany. We've seen as you know throughout the year- to- date, we're up 22% on stent graft. We had guided 15%-20%, so we're still ahead of you know, where we expected to be. It's really been kind of a growing pains exercise. We're growing very rapidly in Asia. We're growing rapidly in Latin America. We have huge demand on these products, and you know, we're challenged by getting stock on shelves and you know, we're hiring rapidly at our manufacturing facility in Germany. You know, that will abate.
The good news is that's a very high demand product. I mean, we're literally every time the products come available, they're kind of flying out the door. I think that was the biggest kind of, you know, slowdown in it from a European perspective. On the second macro question, I mean, clearly, you know, if you look at our gross margin, I mean, the inflationary impact on labor and materials has had a direct hit on our gross margins. You know, that's something that, you know, again, there's a good news, bad news. I think unfortunately those are probably here to stay. Whether or not it gets worse, you know, we'll see what happens with the Fed and how often they raise the rates.
Clearly, I mean, everything we're reading, it certainly looks like we're staring down the barrel of a recession. In a way that is, you know, our business is fairly recession-proof given that we treat, you know, severe aortic disease. Currency, I mean, again, a lot of it depends on the actions that these governments and states. I saw that the, you know, the U.K. just raised their rates by 0.75, which should, you know, buoy up the pound. As far as currency projections, you know, for next year, maybe I'll let Ashley comment on that headwind.
Yeah, I mean, we probably read the same information that you guys read. You know, from all indications, at least right now, you know, we anticipate that the dollar should weaken somewhat as we go throughout next year. Again, I mean, who knows, you know, what we'll actually end up seeing. As far as the interest rate environment, which Pat alluded to, you know, everything that we're seeing right now is that rates should hopefully peak sometime in the first half of this year and then slowly start to moderate. That's kind of, you know, the view that we have taken into account when we, you know, communicate our outlook for 2023, you know, in February.
Great. That's helpful. Then just kind of a quick follow-up on that and one quick more question. On the aortic stent graft side, could you quantify exactly how much of that, I guess, the shortfall that you saw this quarter was due to the supply issues? Do you have a number or some kind of percentage that would reflect that?
Yeah, it's hard to say. I will tell you that the demand is kind of through the roof. Again, you know, particularly given the conversations about the macro headwinds, I like where I'm sitting with what's going on with the economy when I have a product line that's got a super high demand on it. You know, we can solve that. That's a solvable problem. It's a lot harder to solve demand problems when they're going the other way. You know, we're confident with the hiring that we're doing and some of the streamlining we're doing on the kind of on the operations side. I mean, it's a complex product line. I mean, that's part of, I think, part of the challenge.
I've worked in businesses like this in other companies and, you know, we have, you know, folks that work here that have worked at other companies. It's a pretty challenging supply chain. We're growing fast in a lot of places, and it just puts pressure on. But I don't have a number for you. You know, the number you can look at is, I mean, we're growing 22% for the year. We told you we were gonna grow 15%-20%. I mean, I think the quarter was a little off. But, you know, it's just more of a growing pain issue than anything else.
You know, one thing I'll add to that, John, is that, you know, fortunately, we've made the investment in the facilities. You know, we've talked about that over the last several quarters. You know, the investments in the facilities have been made. You know, most of the equipment purchases have been made. As Pat alluded to earlier, you know, we've made some changes to our compensation structure to address the labor issues. We've been recently having some very good success in getting people into the facility. You know, we think that these issues are going to abate, and we'll be able to catch up with the demand that we're seeing.
That's great color, guys. Let me just sneak in one more on operating leverage here. R&D expenses, you kind of faced an incremental cost this quarter from the trial shutdown. As we look ahead into the fourth quarter and next year, I mean, what should we expect to see there? Sales growth maybe could be a bit limited by FX next year. On the R&D and SG&A lines, I mean, should we expect to start to see more meaningful leverage and more creation of EBITDA ahead?
Yeah, I think we made some comments in the prepared remarks that kind of guide you in that direction, right? We were spending $10 million a year on On-X PROACT. That's now out. If we were spending $40 million on R&D, you know, that's gonna be around $30 million. You see a direct kind of drop-through with that expense not being there. You know, the other thing is we've expected to get leverage in our three-year plan. If you look back at what we presented in March in New York, you know, we had EBITDA of $45 million this year going to $75 million-$80 million in 2024, and we believe we can deliver that.
We think we're gonna, you know, grow EBITDA significantly faster than revenue next year, even in the face of these headwinds. We'll give more communication on that in February. In this market environment, one of the benefits of being a profitable company is we can control what we have in front of us, and we realize the importance of EBITDA and cash flow, and we will see a significant increase in our EBITDA next year.
Appreciate the color, guys. Thanks.
Okay, our next question comes from Frank Takkinen from Lake Street Capital. Frank, please go ahead.
Great. Thanks for taking my questions. Wanted to maybe start on PRO
ACT Xa. It looked like a really solid performance there. I was hoping you could share any anecdotal feedback you've heard from any of your accounts and, specifically speaking about with PROACT Xa being halted, any negative feedback around future demand. If there's any commentary you can talk to around ordering patterns, if those have been impacted since PROACT Xa.
Yeah, I mean, I realize that the trial was stopped late in the third quarter, but we did post 19% revenue growth with the On-X valve in the quarter and 21% growth in the U.S. The anecdotal comments have been actually. I've talked to a lot of surgeons that were in the trial, and I've heard words like, "You guys were bold to do this trial. The way you stopped it so quickly with patients at the forefront does nothing but build trust and confidence in your company.
It's the best mechanical valve on the market." You know, I've had some, you know, big aortic surgeons say, "I hadn't used your valve before the trial, but I started enrolling patients in the trial and using your valve, and I like your valve. I'm gonna keep using your valve." Last but not least, I mean, we're the only company in the U.S. market with a low INR label that reduces bleeding by 60%, so it doesn't change that. That paper will be published, and I think it will show. Although, you know, the drug Eliquis failed with the On-X valve, the On-X valve didn't fail. I think what you'll see is the On-X valve performs extremely well with Coumadin.
you know, that data will be coming out probably in the spring. It is the best mechanical valve on the market and, you know, we expect to continue to grow that business going forward.
Got it. That's helpful. Then maybe just one more on the comments around inflationary pressures. Curious if you could just run the gauntlet on all your products and talk to pricing power and if you intend to pass through some of those inflationary pressures into the selling price next year.
Yeah, I mean, in some ways it's, you know, it's kind of by product, by region. You know, where we have and it's not rocket science, it's where we have, you know, very proprietary patented products, we obviously have a lot more pricing power. I'll give you an example. Our SynerGraft pulmonary valve, which is growing very rapidly. I mean, our tissue business is growing 13% right now. We've had significant growth with our pulmonary valve with the Ross procedure growing very rapidly. We're the market leader. The SynerGraft has no competition, and it won't have any competition. That's an example of where you can raise price. You know, in the tissue area of the vascular business, we have a couple competitors. There's not a lot of differentiation.
You know, if you raise price, you run the risk of potentially losing market share. The other thing is a lot of our—I think one of the pieces of good news here, a lot of our newer products, our E-vita Open Neo frozen elephant trunk, our E-nside thoracoabdominal system, our AMDS system, those are all very high gross margin products, right? Those are, you know, in the 75%-85% range. Our newest, most differentiated products are very high gross margin, and that is a mantra for us going forward, is that products that you see come out from us are gonna be very high gross margin. Some of our legacy products like tissue are a lower gross margin.
Depending on which product you're talking about in the stent graft portfolio, if it's in more of a competitive market, it'd be a lower gross margin. Our newer cutting-edge technologies are very high gross margins, which is, you know, reassuring. We will be, you know, passing along price and, you know, where we have differentiation, where we have open contracts, we will be looking to pass price on to offset some of these inflationary pressures.
Perfect. That's helpful. Thanks. I'll stop there.
Thanks, Frank.
Our next question comes from Mike Matson from Needham & Company. Mike, please go ahead.
Hi, guys. This is Joseph on from Mike. We've heard some commentary from some companies indicating that cardiac surgeries are more or less being prioritized over other surgeries. Just wanted to know if this is consistent, I guess, with what you guys are seeing currently.
Yeah. We just had a big training program this past weekend, and I had a chance to talk to a number of heart surgeons, and their comments were, yeah, there are staffing issues at the hospitals, but the aortic cardiac cases are getting done. I mean, one, as you can imagine, the seriousness of the disease, you know, they get prioritized. Two, these are, and I've said this a number of times, the procedures that we're in are typically the most profitable in the hospital.
Both from a, you know, the sickness and the disease of the patient and the importance of the procedure to that patient as well as the reimbursement and the importance of that to the hospital, we don't really see us getting affected by some of the staffing issues that are, you know, definitely out there that we hear about. You know, they're finding a way to staff up these procedures.
Okay, great. Thank you. I guess just turning towards Asia Pac and Latin America, it's great seeing the strong growth in the quarter. Just wondering where you guys are at in progress or, you know, what inning are you in terms of the sales force expansion, some of the investments in that, any kind of, like, timeline, when do you think that you can start to leverage these investments?
Yeah. We clearly we've invested a lot. I think, you know, per my earlier comments, it was kind of laid out in our three-year plan when you look at our EBITDA. We've expected to accelerate EBITDA on that plan pretty rapidly, going from 2022 to 2024. We're gonna start getting leverage in 2023 from those markets. We will still invest, but not at the levels we've been investing. We'll be getting kind of positive drop through out of those markets kind of going forward.
Okay, great. That's very helpful. Thanks very much.
Yeah.
Next on the line for a question we have Suraj Kalia from Oppenheimer & Co. Suraj, please go ahead.
Pat, Ashley, can you hear me all right?
Hey, Suraj.
I hope everyone is safe and healthy. Hey, Pat. You know, now that PROACT Xa has been stopped and you'll talk to your physicians either involved in the trial or otherwise, are you getting an inkling knowing full well that y'all don't have access to the data, that there could be potentially, you know, any subgroups that y'all could parse through where the benefit of switching to Eliquis could be evident? Is there anything salvageable in PROACT Xa? Are y'all getting any indications of that?
Yeah. In my conversations, and I've talked to a lot of the investigators, in my conversations, I mean, the first priority, as you can imagine, is to, you know, cross over the patients on Eliquis back to Coumadin from a patient safety standpoint. That'll be done in the next 30 days. They will then wrap up the information, crunch the data, and we're looking to have it presented probably in the spring, maybe AATS in May. There's obviously a lot of people interested in that data, where you know, because I've heard from physicians that, you know, in big centers that all their patients did fine and there was no issues. Unfortunately, when you look at the aggregate, that wasn't the case.
Clearly we're all interested to see why that was. I think the other thing, the silver lining here is that the On-X performed extremely well in the Coumadin group. And that data, I think is gonna be, you know, reinforcing how strong the On-X valve is, and we're gonna wait till that data comes out. I think that will be something even though this trial failed, I think it'll reinforce that this is the best aortic mechanical valve on the market.
Got it. Pat, sorry, jumping in between multiple calls. Did y'all talk about NEXUS in Europe? You know, the status, how things are going?
Yeah. We mentioned the only thing we really mentioned about NEXUS was the U.S. pivotal trial. I would say you know, NEXUS has been kind of under our expectations thus far. One of the limitations, and you and I have talked about it, is we've been you know, it's a single branch device at this point, which is
Mm-hmm
you know, still a big advance over, you know, doing an open surgery. This quarter we're actually launching our dual branch device, which I think will make a meaningful impact. It gets into some technical surgical details, but I think that the appetite for people who are looking for a dual branch to not have to do some of the anatomical bypasses required for a single branch. I'm very excited to see the uptake of this dual branch device, and I think it'll make a meaningful difference on the NEXUS portfolio in Europe.
Got it. Ashley Lee, if I could just throw this in there, I'll hop back in queue. You know, just the debt structure, especially in the current environment, how are you all thinking? Just give us a roadmap, you know, over the next two years. Gentlemen, thank you for taking my questions.
Yeah. I mean, you know, we alluded to it a little bit earlier in the commentary, but you know, our expectations for
You know, interest rates over the next year, we saw that the funds rate were going, you know, peaking out around 5%, and that's consistent with, you know, everything that we're reading and hearing right now, and gradually tapering off, you know, in the second half of 2023 and beyond. Taking that into consideration, you know, we believe that we can comfortably service all of our debt obligations without having to raise any capital or draw on our credit facility going forward. As it stands right now, you know, we are comfortable with where we are and seeing no issues with addressing our capital structure.
Yeah, I know you were jumping between calls, Suraj. Ashley goes through the script in pretty much, you know, a lot of detail around. I think there's a misunderstanding sometimes about our debt. Our convert has no covenants. In our Term Loan B, the only covenant is we can't have more than $7.5 million drawn down at end of a quarter from our credit facility, which we've not ever touched, and we have no plans to touch it. You know, I think this whole idea that we can cover our interest expense payments out of operations, even with raising rates, we don't really have any financial covenants. We're not that concerned.
We said in our three-year plan, you know, as we accelerate our EBITDA and drive our top-line growth, even in these inflationary headwinds, we're expecting our EBITDA to get up to $75 million-$80 million in 2024, which at that rate, we're gonna have a less than 3x net leverage. Like I said, I mean, I get the concern, but I think if you look at the performance of the business and the fact that we've got EBITDA, and we're gonna accelerate EBITDA next year, I think this leverage is gonna become a non-issue in the next 24 months.
Fair enough. Thank you.
There are no further questions at this time. I would like to turn the floor back over to Pat Mackin for any closing remarks.
Well, thanks for joining. Again, we were pleased with the quarter. We saw another quarter with 11% top-line growth. Our EBITDA is on track for the year. As you said, even with these inflationary headwinds, we have a lot of levers we can pull. You know, we'll look forward to the next call where we'll give out our guidance for 2023. You know, we're definitely gonna be looking to keep our double-digit revenue growth and accelerating our EBITDA. You know, we're looking forward to closing out the year and kicking off a strong 2023. Thanks for joining and have a good rest of your day.
Ladies and gentlemen, this does conclude today's teleconference. You may now disconnect your lines at this time and enjoy the rest of your day.