Q3 2019 Earnings Call

October 24, 2019

Good day and welcome to the Integra Life Sciences third quarter 2019 financial results Conference call Today's conference is being recorded.

Earlier. This morning, we issued a press release announcing our third quarter 2019 financial results.

We're leasing corresponding earnings presentation, which will reference during the call are available at Integra like Dot com under investors events and presentations in the final named third quarter 2019 earnings call presentation.

Before we begin I'd like to remind you that many other statements made during this call maybe considered forward looking statements.

Also the discussions will include certain non-GAAP financial measures reconciliations of any non-GAAP financial measures can be found in today's press release, which is an exhibit two entegris current report on form 8-K filed today with the FCC.

I'll now turn the call over to Pete banking, why you're seeing good morning, everyone.

Total revenues in the quarter were $379 million, representing organic growth of 4.7%.

The guidance we provided in July .

Third quarter adjusted earnings per share increased over 15% to 68 cents.

I also reaffirming our full year 2019, adjusted earnings per share guidance range of $2 and $72.75.

In RCM segment organic sales growth exceeded 7% in the third quarter due to broad based strength in nearly all of our franchises.

As you can imagine we're delighted to move past the heavy lifting up the cockpit acquisition with the integration substantially complete and our global presence while established we expect to deliver consistent execution launch new products and help our customers in patients achieve better outcomes.

I'd like to acknowledge all the great work that our integration teams along with our international colleagues have achieved to substantially complete this acquisition, while delivering on their financial commitments.

During the third quarter, we acquired Argus Bio sciences, and rebound therapeutics too early stage technology platforms in which we're making investments to drive future growth.

Rates towards the copper and how far long term guidance range.

Ladies and catheter based products this offering will complement our existing back to seal technology, which is designed to reduce the risk of bacterial infection. Together. These products will allow us to salt to the key challenges faced by neurosurgeons.

Rebound therapeutics will bring a platform of single use medical devices that enable minimally invasive access with enhanced lighting and visualization to the neurosurgery suite.

Organic sales in our regenerative portfolio were up low single digits with strength in our advanced wound care business and double digit growth in our surgical reconstruction channel.

2007% organic basis compared to the prior year.

Sales in flowing pressure monitoring increased high single digit driven by strong growth from the new programmable Dal configurations.

The benefit of the new electronic tool kit and our started its portfolio.

We continue to read too low to mid single digit growth in this franchise for the balance out the year.

Strength in our micro friends and Mayfield product line.

Based on this strong performance through the first three quarters of 29 team. We are increasing I see attach reported revenue growth guidance for the full year to approximately 3% and raising our organic revenue growth guidance to approximately 5%.

Let's move to where orthopedics and tissue technologies are all chichi segment on slide six.

Third quarter L. T T revenues were $126.1 million flat compared to the prior year.

Excluding private label sales within L. T T increased approximately 3%.

Third quarter sales at our private label business declined over 10% largely due to timing, which we discussed on our July earnings call.

In addition to timing we saw some softness in customer orders late in the quarter, which will have an impact on our fourth quarter as well.

As a result, we expect sales your private label to be roughly flat for the full year.

Again, I believe there was any fundamental change in this business beyond the short term and in fact, we have visibility into early 2020 schedules. They give us confidence it didn't franchise will return to with long term growth rate of mid single digits.

No wonder reconstruction and care.

Organic sales increased about 3% in the third quarter.

Strains coming for outpatient care and surgical reconstructive portfolios.

And during the third quarter, we continued investments to expand our manufacturing capacity for these key products.

Sales in our inpatient portfolio increased low single digits.

Our third party supplier has already addressed here, but the issue and we expect growth to return to our expected run rate in the fourth quarter.

Organic sales in our orthopedics business increased 3% in the third quarter.

Sales in the U.S. growing about 7%.

When you have shown a sequential improvement in our sequential business throughout 2019.

Which is consistent with our expectations on how this business was expected to ramp for the year.

Sales in our combined ankle and shoulder portfolios grew nearly 20% driven by the increasing effectiveness of our sales force in their respective territories. The addition of new users of our title reverse shoulder and new surgeons trained on her ankle portfolio.

We expect organic growth and where the Phoenix business to improve sequentially in the fourth quarter.

International sales within OLTP increased mid single digits.

And then like strength in our tissue portfolio in Europe .

Advising or organic revenue growth guidance to approximately 5%.

Based on year to date performance, we are reaffirming our full year guidance for adjusted gross margin of 67.5%, representing a 90 basis points improvement over 2018.

I mean year to date basis, our adjusted EBITDA margin has increased 40 basis points compared to the first nine months of 2018 and looking at the full year, we are reaffirming our guidance of 24.5%, which represents an increase of 130 basis point over 2018.

In the third quarter, we incurred a GAAP loss per share of 32 cents compared to GAAP income a 15 cents per share in the prior year.

The GAAP loss was primarily due to a 59.9 million in process research and development charge related to purchase accounting treatment for the rebound acquisition.

Adjusted earnings per share or 68 cents, representing growth of 15.3% compared to the prior year.

The improvement was the result of higher revenue improved operating leverage and lower interest expense.

For the full year 29 team, we're tightening our total reported revenue guidance to a range of 1.517 billion to $1.522 billion.

Which includes absorbing $13 million that foreign exchange headwind for the full year.

We are also being affirming our organic revenue growth guidance other approximately 5%.

Based on the full year guidance I guess provided.

Moving to earnings per share, we are revising our GAAP EPS guidance to a new range of 61 cents to 66 cents from our prior range of $1.46 to $1.53.

Well I appreciate your then by the rebound charge.

We are reaffirming our adjusted earnings per share range at $2.70 to $2.75.

Fourth quarter adjusted earnings per share, it's expected to be in a range 64 cents to 69 cents, which at the midpoint represents full year growth of approximately 13% over 28 team.

Turning to slide eight I'll now walk through our cash flow performance.

Our operating cash flow in the third quarter was $64.2 million a sequential improvement from the second quarter as expected.

Free cash flow conversion on a trailing 12 month basis as of September Thirtyth was approximately 48%.

We are reaffirming our full year guidance for operating cash flow in a range of 220 million to $230 million, but we are adjusting our capex guidance slightly higher for the year, reflecting increased investments in growth initiatives that I mentioned earlier.

As a result, we now expect our free cash flow conversion for the full year it should be approximately 65%.

As of September 30, yet our bank leverage ratio was just under three times, a slight increase from the second quarter, reflecting financing for the our kids and rebound acquisitions.

We really maintaining strong and flexible balance sheet with cash and cash equivalents of $208 million and capacity on our revolver of over $859.

And with that I'll turn the call back over to Pete.

Thanks, Gary if you turn to slide nine I'll close out our prepared remarks with a few thoughts on the progress we've made towards our 2019 key focus areas.

The successful completion of all significant common integration activities and the over performance in our CFO sub segment, both in the U.S. and the rest of the world give us confidence will we will achieve our 2019 organic growth targets.

As we continue to leverage are still in neurosurgery and tissue technologies to drive growth, we plan on optimizing our product portfolio and manufacturing footprint to deliver on margin expansion and profitability targets, we set a few years ago.

Based on our 2019 resolved we remain confident that organic revenue growth will accelerate above 5% 20 twond.

And we look forward to providing more detail financial guidance on our fourth quarter earnings call that concludes our prepared remarks. Thanks for listening an operator would you. Please open up our lines for questions.

He served if he would like to ask a question for you signaled by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off to allow your signaled to reach our equipment again. Please press star one to ask a question well pause for just a moment to allow everyone opportunity to signal for questions.

My first question will come from Ryan Zimmerman with BTG.

I think you cited a few competitive dynamics.

In the quarter that could potentially disrupt growth, particularly in advance energy and dural repair maybe help us understand what you're seeing in the marketplace seems like it didn't impact during the third quarter.

Right.

Oh, you know in terms of the competitive dynamics really two areas and Rcs business, we're expecting to see increased competition.

That being advanced energy, along with a direct access and repair.

Third quarter, we didn't see much over the impact of that but having said that we are anticipating a figure in the fourth quarter and moving forward.

We feel quite good.

Oh I'm sorry.

Specifically drilling steel.

I haven't seen much of an impact yet we do anticipate that to increase in the fourth quarter and moving into 2020.

The key things to think about when we talk Arcturus yours. Once we have two indications both the creel speidel indication, where the competitor only has created an indication.

Second the bigger opportunity for US is to continue to go after it increase.

The opportunity around fibrin sealant would still be part of the market and we've got a study that was done at Johns Hopkins University that shows the benefits of using Jersey overdoses fibers.

Which includes things like significantly fewer leagues short or patients days fewer hospital readmissions and so forth.

So that's really we're pushing very hard.

And so those are the things that we're saying you expect to see more competitive pressure certainly.

Coming into the space in the fourth quarter, having said that you're going to prepared remarks around durgin in Japan. We're really excited about the launch it's got a much better than expected stretch it helps to bolster our draw access to repair franchise I just came back from Japan two weeks ago.

Got great receptivity from the Japan neurosurgery.

That's helpful. Thank you and then just in the fall for me for Ti you know.

What you're expecting in terms of their maturity post the assessed as there is there further opportunities for productivity enhancements and things like that as we move into 20 times 2020, especially in light of your commentary about organic gross kinds be north of 5% or is it into wanted one thank you.

Got it frankly up is why I'm glad you're walking the charges on this as well I would say from a United States standpoint.

We are altering support we have a two tiered structure. So as we roll out new products like the hydro project, which is growing at double digit to levels for our shop business.

With that models worked very well for us mainly because it creates intimacy with one individual and provides expertise when do you just want a transaction has got to take place. So that's kind of a model. It's worked out well I'd say outside the United States. There was a lot of disruption and challenges this year, because if we change the T systems that pretty much every time.

Right and I would say outside the U.S., we clearly have plans to expand our commercial teams and in particular, I highlighted Japan and China.

When we talk about exiting these t. assays, it's literally going through our ERP system.

Despite having to deal with the tier say exit.

The two tiered model in many cases, so we may add more specialization around crusa.

Assistant leads delivered.

20% or so growth for each of the last five years in China, and we see that is another very exciting and a fast growing market for us we're going to add more resources.

In Europe , I think there's still more opportunity to get better productivity of the team. We saw a lot of is this past quarter.

That's very helpful. Thank you for the question.

Normal type of a single digit type growth on the same thing with drill accessing repair we had a couple of pop searing heat jokes that nice growth, but little moderate a little bit there a and Glen mentioned in his comments about.

The thinking as we think about the full year and as we think about the D. P. S.

The other thing that I would mention that that's really important means that we did make too late quarter acquisitions, our kitchen rebound that he talked about those are all tweet revenue acquisition, so they're not going to add any revenue for us in 2019, and 2020 as well, but they have additional investment cost they do have incremental R&D in.

Got it okay.

But I guess relative to where you know us and the she was that it looks like it was a little bit softer than what we were hoping for US I guess is there any dynamic there that we should be looking at or is it just kind of like a little bit of a disconnect between our expectations I'm in your own internal forecasting.

Acceleration for me and ended the second quarter and we continue to expect a nice sequential acceleration of ortho performance in the fourth quarter. So all the things we've done over the last couple of years, we're starting to see play out for us, including a channel changes that we made moving to centers of excellence to Austin, Texas, where we have.

Trading that stayed in New York AOL facility for trading.

And then the new product launches are all.

Taking hold here, having great success and that includes or ankle X T revision product that can be used to our angle as most competing ankles or pass it to now.

<unk>. These play for shoulder. So the combination of all the things it's taken us from a declining business to eight actually growing business and we expect to see more better performance as we go out here, but just into the fourth quarter going into 2020. So from our perspective, we're doing exactly as we thought when it comes store, though and we continue to drive better.

Warrants moving into 2020.

Got it thanks guys.

Thank you. Our next question comes from Dave Kelly with JMP Securities.

Hey, Thanks, good morning.

Those are our completed do you do get no incremental earnings or less.

The first part is the biggest benefited anytime that you switch over from.

Another call, but do you support services. There is always efficiency component that we're still ramping up through when I think you know the United States since it's over a year now pass we've gone through that in your though is only been that as an example, just a few months in case of Japan has only been 30 day. So that's probably the first step.

Oh, well your two largest ones or I guess, you want to make any other comments.

Would you say that the team is probably the bigger benefit when we get off the manufacturing agreement, but that's still a few years down the road.

On the T. Assai perspective, I would say there's been no unexpected costs surprises.

The most part you know the cost to stand up this business has been consistent with our deal models. When we first did the deal.

And I expect over time, the base point, though some efficiencies and synergies where we can actually generate.

Further improvements and bring down some of the cost, but we're still in the early days of the T. as he transitions and you didn't mention day two countries, but I would say you know there was a number of transition to date you countries that happened during Q2 in Q3 in substantially all of the major day. Two countries are now behind us that gives us additional controlling visibility into those channels. So.

Sales and a again forecast that ability and transparency in those markets.

Got it and then on no the private label front I think last quarter, we talked about $5 million being pulled forward into Two Q2 million coming from private label three three maybe from a new monitors but [noise].

Sure David squad I'll take that one you know you didn't mention that you're expecting to see a decline from the growth. We saw in the second quarter because of timing of some of the orders I think we quantified it to be around $3 million.

In addition, we do you see some softness though in addition to the timing here in the third quarter and we expect that to continue into the fourth quarter based upon the forecast we received from our key private label partners.

We've talked about the past private label can be lumpy between some of these quarters.

Full year performance out of private label, we're expecting it to be flat overall.

Having said that we have good insight now into some of the forecast for next year.

Yeah, just to add a little more color into kind of on the forecasting piece of it is is that some other partners are two or three steps back in the supply chain meeting, we sell to someone that actually sell to another person that incorporates another product and so if anything on how much supply of that component they have with vendor change back and change some of the.

Thank you. Our next question comes from Mr. <unk> with credit Suisse.

[noise] pouring Matt.

<unk>, please make sure it's not on mute.

So.

Congrats on a really solid quarter, I think and what shaping up to be a pretty solid earnings season, and turning the corner here into the back half or for Integra I, just maybe wanted to.

Ask about a couple of things.

First on just the portfolio a you know this comes up.

<unk> for names gross or universe, and and <unk> particular, just where are you on spectrum of either.

Certainly abuse.

Equalize the business, he and his team and I kind of ready to move into 2020.

You know with its sort of.

Run rate business again, after and rebuilding over the past few quarters, and then I have one follow up.

Yeah, we feel this confidence we ever did no. We didn't know CSS business, you know up towards the higher end of its range over time, mainly because of the scale that we've been able to create the products that we can bring out in the global reach and I think we saw a you know the first the launches of that opportunity here within Q3.

If you look at a g., particularly I'll just start with the other side of things our strategy here really is to get down to the basics. The arthroplasty type plays whether it be ankle reverse shoulder are really the bigger opportunities for us Michael fixation as well as I mentioned the pad.

So you know, we really haven't been trying to chase every screw in place that plays even into the fourth whats. There's a lot of players out there we've been focusing on some of these bigger items that we can add differentiation wasn't I think we've got a formula one coming together with a dedicated sales force relationships with third parties to it.

The portfolio and the right way on tissue side.

But the demand is actually great I mean, I think our broader contracting agreements we've had a that have driven amniotic sales.

We continue to do well we had this one small blessed began in the corridor.

But we see that coming back and we see that being a strong growth vehicle for us in the future Andas products surgery minute Primatrix, we're quite optimistic about for new markets opening up in the plastic and reconstructive area. So I I again, I think across the board we feel good at the same time, there's areas, where we can pruning the portfolio.

So to optimize it so we spoke last quarter about some dental accessories and other products that we took out a portfolio that we're you know lower gross margin products. We have some other products in the portfolio that will probably consider as well and I would say the focus on to the M.D.R. work around the globe.

Precipitated into a very strong look at what products, we want to keep which ones are worth doing the out at work with to streamline the portfolio and I think to resolve that will be is ultimately a stronger gross margin and stronger faster next what then a faster growth Max within our overall portfolio.

So I think we're in a good spot here as we make the turn.

Into 2020 odd to really drive the longer term numbers, which we laid out which is again being in its 5% to 7% range I've talked about being above five we've talked longer term about moving closer to about 70% gross margins and we've talked about our longer term targets are being above 20% to 30% EBITDA all those are in.

I guess, you know maybe you could and I realize it's it's hard to maybe see that are.

And product integration and you you know assessment et cetera, but you know maybe help us understand like what what's the what's the investment opportunity. There in terms of is you talked about sort of deciding which funds.

And you're going to put their investment behind and what's the return opportunity maybe in terms of you know, especially for Integra, where you have a pretty broad portfolio and I would assume a lot of smallish.

And that kind of have one or two products you know the opportunity for consolidation and sort of leaning out.

You know some of your end markets.

Ladies where you're you're capturing more share and maybe in a higher.

Price point.

Yeah I was just say I think we're not really prepared now to kinda talk through kind of AMDR and a guy the scope, but as you know there's somewhat of a potential moving target there, but the point being is is that the products that are most critical for those markets.

Well make sure that we get all the registration zones in many cases, we have at the same time are taking a look at it for active.

As a portfolio management glad you may want to comment I do think this this is point about the larger.

I have stable channels being the number one player in neuro and the fact that we are investing a lot in this business creates opportunity for us in my mind. When you look at some of the U.M.D.R. and in the competitive landscape.

The piece, where we still have more work to do across the entire portfolio, we're not ready to talk about all those pieces just yet.

But I wouldn't say that probably when I look at next year. The level of discontinued products is probably going to be higher than what you're seeing here in 2019 as we get into this so just to set the level expectation will probably have a higher amount of discontinued products and again. These are lower margin products that don't fit into the portfolio longer term and in many cases have over.

The last working transition to higher margin escape is.

No that's helpful. Thank you.

Can you talk about what you're seeing from the seller link roll out in.

How the interest in pipeline of potential customers is looking.

[laughter] question I think in general the new product launches have been extremely successful concertis plus the small configuration. The tool kit that goes along with that Val.

And we just launched the surgical had bad and Electrosurgical generator, coupled with the new product registration of Durgin in Japan that we mentioned earlier, so I would say on all those are going quite well.

If you remember circling back in the second quarter, we had.

Generate a strong interest got great feedback in the third quarter, though he found an issue with one of the components on this or like.

So we're addressing the issue.

Put up greater than 7% organic growth in C. S. S lot of it coming from the success of new product launches why did it coming from that benefits for saying with the cognitive business, especially outside the U.S., we feel really good about how the CSS physicist forming overall.

Thank God and it sounds as though based upon that timing that the the a time to correct that that when issuance airlink is is not if it's not a elongated seems pretty pretty quick.

Correct, we were not expecting anything in terms of additional sales for Q4 Q1, but mid next year, we're expecting to show the ramp to growth again for Sterling.

For us and we'll see even faster growth.

And even with that there's still a little ways out works, what posting a really strong.

Overall numbers and shoulder to shoulder actually to growth above 20%. This past quarter. So we're quite pleased around how that's progressing.

I am more efficient way actually traded ramp up users as we expand this I think this piece tied with the CFO relationship is one of the things that we want vans going forward and I think what are the team has done a very nice job in Austin with as well, we look forward and pyrocarbon with success of that product.

Actually having it'd be a modular play into the current Ah shoulder base. So he learned how to do the shoulder procedures on ours now in the short based plays comps to saying a fundamental platform. One of the Pyrocarbon have jobs same platform I think that philosophy is now having people look inside.

To get onboard now.

These new upgrades and changes come I can advance with it and so that's the strategy, we've been implementing and thus far it's been helping drive some of this faster growth rate.

Great.

Thanks, guys.

Thank you. Our next question comes from crack the zoo with Cantor Fitzgerald.

[noise], Thanks, guys for taking the questions one to start with the organic growth expectations for both Cod, we know t. So they're built around 5% for 2019, and obviously that wasn't what do you guys expected at the beginning of the or.

T T was supposed to be.

Significantly higher gross then then cod men. So just wanted to get your thoughts on how that growth mix plays out over the next couple of years, especially with some of the shrink that you're seeing a in common recently.

I would say that went on a at a place to give guidance for 2020, yet I think it for the here again I guidance as both franchise segments being around for 5%.

The way we would expect obviously, we've had some really nice train coming out of CFS and put it on the high end that that long term growth range at 3% to 5% for C. S. S.

Turning to see a set aside and Oh Gee I think again, we've had a temporary dip here in the third quarter related to private label and as well as does a lot of.

Correct.

Try to that point between whether it be on the plastic and reconstructive side, the amniotic pipeline or all of our traditional products.

We moved it to an unconstrained demand model and so what does that what that means is our ability to aggressively go after new accounts or convert Coutts goes up so had just getting back to what would be our normal growth rate as Carey said, we feel quite good about.

Helpful guys, maybe just one follow up on new T.T. and I know you talked about the visibility Glenn in a private label business.

With some of the you know the onetime or temporary issues that you guys had seen during the different quarters.

Thus far in 20 Nike.

Though.

We feel quite good at the orthopedics business will continue to show sequential improvement.

That should help predictability go into next year and also help overall business performance.

This quarter, but going forward, we're not anticipating things like this to create some of the you know choppiness in the numbers. So I would say overall, we feel good around.

The numbers, we've communicated for both this year and longer term you know getting into the 9% to 12% for OTI to.

Okay. Thanks for taking the questions guys.

Okay.

He OTI to be really become the growth driver next year.

She has has delivered over 7% in Q3 I think if you do the math on our year to date guidance that would put you something lower than in the fourth quarter as some of those franchises a moderate back when they expected. So I'm a run rate growth rate. So I would I would say that you'll see CSS my am I getting moderate back in the fourth quarter I know T T.

I think you get to that 5% they got to go up in the fourth quarter compared to where they were in the third quarter, even with private label thing.

Not a contributor for us in the fourth quarter, and that's really about a improving supply. It's obviously working through that sterilization issue that hurt us in the third quarter a lot of those things Oh, our freeing up some additional capacity for us in the fourth quarter and again, we're seeing sequential expectations of gross and net worth.

Yes, as well so that wed, let's say that whole teach he said that.

You know be higher than their their year to date number to get to the 5% Oh yeah.

Okay. That's helpful. Then just maybe one on sticking on the TT It sounds like you'll have.

Patsy, especially on the amniotic side exiting Q1, so maybe could you just frame up what that can do to the model for many of the year, maybe talk about how much demand you're seeing out there relative to what you've been able to supply and maybe what that can actually due to the margin profile as well. Thank you.

Yeah, I was just say, we're seeing really strong demand it antibiotics, especially in the wound care space. You know as we came into the are we made a lot of investments to upgrade our Memphis facility or part of it was increasing the networks supply of Percentto recovery, increasing raw material supply, adding clean rooms.

Adding three shifts to the plan and improving the yield that facility at all in all we've made great progress to significantly now start to ramp up in that facility, even as we exit 29 chain or the first out of 2020 were still not gonna be meeting unconstrained demand from the field. We plan is to do additional clean rooms are not facility in it.

First half of 2020 was it which are that put us in a position to meet all the end market demand. So I wouldn't just expect to see continued strong growth in that business and then probably did have a hockey stick in the back half of the year as we increase capacity at that facility, but yes. This is a big opportunity for us we're seeing.

Very nice growth in this part of our business and we expect it to accelerate especially in the back half of 2020.

Well I was just emphasize the biggest chunk of your regenerative business here all of the IDR GDP all of our classic products fundamentally your and your in great shape now and so that will be probably the biggest levers to start the year.

At this point everything they data plans there on the regenerative products the skin products. We're in great shape from a supply perspective heading into 2020, and so that should be Ah.

Thank you.

You're welcome.

Sure. Good morning, I would say give me a couple of thoughts here at all as Carey and glad to jump in with a other color.

So first weren't we're not going to give a really any guidance yet for next year will will clarify that when we do our February Q4 call. I think is we've got as discussed we feel quite good at we'll we'll finish up here at 5% organic for the year and I don't think we're being overly conservative I think we're being realized.

We haven't really seen the effects of a large competitor in aerospace yet we believe there a little slower to market onto products and so we're calculating that that will have a little bit of effect and in the fourth quarter. If that doesn't happen, obviously, we do a little bit better, but we think that's the right estimation.

And on the orthopedic side, we believe or because of the private label component.

I will be the main main drag while we're picking up a growth within the tissue space. So that's those are the basic dynamics.

As we go into next year, you heard as boasts a comment on that we'll get back to our normal growth ranges for GE and also for C. S. S to your question on on the technologies. I think these are emblematic of types of acquisitions that we can do now that we couldn't.

Dilutive R&D deal to bring good but very very good data that shows that just coating technology can reduce thrombus or clogging and if it's a shines or it's an easy catheter or I'd say, a catheter on a monitoring product for a neural ice you'd want to biggest issues is that.

Sometimes they stopped functioning because they get clock. So if you can crack the code on that and as I've mentioned in my remarks complement that with an anti microbial play we're the only game in town that would have obviously it is like logging and combine we'd be the only game in town globally for that so these are the kind of thing.

And there's other technologies in our space like that I think expect to see US talk again, what's interesting about rebound for us.

Is this triple play and its change and what's happening in the technology space, which is that you kind of a fully disposable device something that's a one use device that has a high resolution camera on it has high output intensity lighting on it.

It is done in the elegant designed that you don't really need all sophisticated imaging tower endoscopes to be able to get the specialization and so it does open up interesting opportunities instead of having a larger craney odd to me that you get actually do a barrel and perform some of the procedures that are now done in an old.

The procedure, which would reduce costs reduce risks to the patient.

Clearly changes the profile of how you might think about needs within a certain exam. So again this will take US a couple of years to develop evolve, but pretty exciting and you had mentioned I T H.

There's a couple of players in the space that are looking at different studies. We think this is quite interesting because there's a significant amount of unmet need you know today as you know in stroke. If you can reach it via a femoral upon sure radio access Theres, great companies out there doing all kinds of stuff with Oh intervention.

And the critical time period could be significant game changer, what's interesting for US is this technology or forms there could be a clickable forever I asked minimally invasive neurosurgery also the same platform could be available for IC age.

Tertiary big Big centers outside of that so again more to calm and I think in next year, we'll be able to talk more about it. These are both platforms that in the 20 122 time period will will be accelerators to our pipeline and again why were pretty pumped up about CSS is all the products we launched the.

Last year, you don't really have peak your sales about three years out and we're only about nine months into them. So just a great opportunity with C.S.S. and our ability to continue to grow it.

Sure sure Yeah look I think wound care reimbursement is it's in a in flux at some level as you know it's been pretty much bid on a a a fee for service kind of structure, we have been playing a lead role as well as others communicating with CMS, our views as well as other bodies around the world how we.

She played out.

All of those needs, but we remain firm believer that if you have a product that can actually cure a patient faster with less caused that should be a winner and and so we've been active in communicating that and demonstrating why some evolution within the.

Payment structure would make sense for a the U.S. and as well as other countries around the world.

Thank you.

Thank you. Our next question comes from Jason Bedford with Raymond James.

Hi, good morning.

Yeah, Hey, Pete just a few questions and I'll try to be quick here.

Just to clarify the fourth quarter implied organic growth is 5% correct.

Yes, it's just a little bit higher than 5%.

Okay I wanted to ask you a few questions about three Q and specifically few growth rates and CSS durable was up high single digit in Threeq, you next quarter expected to be low to mid single Similarly precision tools and instruments was up I think 9% in threeq.

[laughter] RPC, we just had an overall so what are we do have some lumpiness in this business as well as we've talked about in the past.

So strong growth in our specialty instruments everything is my girlfriend's.

We didn't get some a large orders on Mayfield really outside the U.S. I think its combination of seeing the benefits of the carbon deal now it seems getting much more comfortable on upgrading some of the capital outside the U.S.

It was a real nice quarter on these deals are kind of moderating in that our expectations for Q4.

And we had really strong growth coming out of our new surgical has left and so.

Those are covering some of the key drivers I would not expect that we'd be growing 9% P.T. night, you know going forward you may have some quarters, where you see some really strong high single digit growth.

But maybe field is more a capital item and that was a timing wise a big item for us and it's really about drove most of my for sure.

Glenn what is the end market growth of P.T. and I know, it's difficult, but what is the approximate end market growth and we think it is like 2% some or would you want to 3% its low single digit growth for sure and we've consistently demonstrated our ability to grow at least a point or two higher than that we've had some quarters were flat some quarters, where.

You know, we're going to be up like you saw here at a high single digit ranch, but we view it as kind of a low single digit.

Market overall.

One asking also about Oh patient wound care I thought last quarter was a bit of the highlight with double digit growth. This quarter. It looked like there was a deceleration to mid single digit growth realize that there is always comp dynamics, but what what happened there why did the growth or slow a little bit in threeq you relative to twoq.

I would say was generally in line with our expectations overall our growth.

You know for that for the full quarter with 4%. So we knew that sequentially from Q2, Q3 that we see a little bit moderation. So I think largely outpatient I was in line.

And mid single digits and sell some really nice strength and surgeon ending anionic products and and Primatrix, but again it adds a.

Glenn mentioned, they still are not meeting the underlying demand in the market. So incrementally we'll see some additional supply relief here in the fourth quarter that we'll continue to help us need that that underlying market demand in the fourth quite easily we would expect to see some nice sequential improvement between Q3 in Q4 any outpatient it's.

While at the inpatient side.

Okay. Thank you.

Thank you. Our next question comes from Travis Steed with Bank of America.

Hi, Thanks for squeezing me on this or just one question for me I. Just wanted to see are you still committing to double digit earnings rather than 2020 on.

Yeah, I would say at this point, where I'm not prepared to give guidance beyond what Peter talked about is the acceleration of the topline growth above 5%, so well be more prepared to give you guidance on that into line into ask in February and traveled to be nothing's changed within our long term maturation targets that we blow.

It out there so that hasn't changed but here again at the Gerry's point well, we just February will give you all the break out your for 20 Twond.

Okay. Thanks, a lot.

Thank you.

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