We’ve got some great new products and a great sales team and we expect to keep doing more of the same. It’s a very proprietary portfolio in the fastest growing segments of the stent graft market. So again, we’re very, very bullish on that technology continuing to grow.
Joseph Stringer: Okay, yeah. Great. That’s helpful and makes a lot of sense. And then I guess, just one more thing. You guys laid out the expectations for this year in 2024 talking a lot about operating leverage, but I was wondering if you could maybe get into any potential gross margin expansion. I’ve seen in the slide deck. I guess the question essentially is, how much gross margin expansion is, and more, just back to some of the historic levels, you guys think you can go beyond that into even the higher 60s; 68, 69?
Pat Mackin: So, we are given — I mean, we keep coming back to this investor presentation that we did almost — it was March of 2022, so 18, 19 months ago, where we talked about — we’re going to — we committed at that point to double-digit top line growth and to $75 million EBITDA in 2024. We’re not giving — I’m not giving revenue guidance for 2024, I mean, the 75 is pretty much where we’re at on the EBITDA, but as far as gross margin, I mean we’ve had to swallow a lot on the inflation side between materials going up, between labor rates going up. So it’s really not going to be driven by margin increases next year. Now we’re going to be working to get them up but it’s not really a margin driven thing. It’s really a top line revenue, as well as some really nice performance in some of our product lines above what we originally thought they were going to do, where we have very strong positions.
And also, I think there are some pricing opportunities, but I’m just not — I’m not giving gross margin details yet. We’re not that far along in our planning process to get 2024 gross margin.
Joseph Stringer: Sure, okay. That’s fair enough. Well, congratulations on the quarter and continued progress to you guys.
Pat Mackin: Thank you.
Operator: Thank you. And we’ll take our next question from Frank Takkinen from Lake Street Capital. Please go ahead.
Frank Takkinen: Great. Thanks for taking the questions. I wanted to follow up on the double-digit growth guidance you put out there, Pat. I think it’s been talked about in a couple of different frameworks today. I wanted to ask a little bit more specifically on growth by product line. I know throughout the Investor Day it’s stents leading the way, then On-X and, then preservation and BioGlue in the single digits or lower single digit range. It feels like you add all that up and we can make 10% relatively easily achievable. If I can say that maybe it’s downplaying it too much, but just was hoping you could kind of walk through that thought process and how you think about growth from each line in 2024.
Pat Mackin: Yeah, no, it’s a good question, Frank. So I think the difference is, Frank, if you go back to that Investor Day, we basically said, we thought we could grow stent grafts 15 to 20. I think that holds. We’ve been at the upper end of that range of weight. We said On-X to growth 10 to 15, we’ve been at the upper end of that range of weight. BioGlue, we said it was kind of a low-single digit item, it was a little off this quarter, because of what Ashley commented on, it wasn’t anything material, it was because of the derogation last year, but I think that still holds. I think the big difference is we said kind of like 5% to 7% on tissue, I think that’s where there’s upside. Because of some of the things this Ross procedure, which is a great operation in patients under 60, for their aortic valve, the data that’s come out on that is phenomenal.
And there’s just a huge growth in that operation in all the major aortic cardiac centers. And we’ve — this year has been more — we’ve benefited more on the pricing side, but we’ve put things in place to significantly enhance our production, and to meet to meet the demands of that growth, so we expect that to be a major contributor. I think that’s the one segment that’s going to go up from what you have from the Industry Day last year, or 18 months ago.
Frank Takkinen: Yeah, that’s helpful color. And then maybe on On-X, more specifically, we’ve talked about this market in the past, but I think it’s been at least a couple quarters since we’ve talked about the entire mechanical aortic valve market clearly or do you continue to take share outpacing market growth? Can you maybe just talk a little bit where the market stands today, and kind of how much more market you think is available to take and how that’s going to compare to market growth or pricing increases over time?
Pat Mackin: Yeah, so the worldwide mechanical valve market is around 250 million, it’s not perfect data because it gets loose when you get to outside the US and Europe. It’s about a 250 million market for aortic and mitral. And depending on where you are in the world like, so far, for example, our market share in the USA is probably over 60 at this point. So we still got 40 more to go. It’s lower in Europe and it’s way lower as you get outside the US. So we’ve got lots of room to grow, internationally, as well as in Europe. And the data that we’ve got out right now clearly is a catalyst for continued On-X growth going forward.
Frank Takkinen: Perfect. And then maybe for the last one, just for Ashley, if you could talk about free cash flow, you guys have put a couple quarters together in a row now with the good cash generation, balance sheet looks better each quarter. So maybe talk about anything you’re comfortable sharing about free cash flow expectations on a go-forward basis.
