Q4 2023 Integra LifeSciences Holdings Corporation Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Integra Life Sciences fourth quarter 2023 financial results presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star-one-one on your telephone. You will then hear an automated message advising your hand is ready.
Speaker Change: Good day, and thank you for standing by and welcome to the Integra Lifesciences fourth quarter 2020 financial results. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session will need to press star one on your telephone you will then hear an automated message a box in your hand is raised to withdraw your question. Please first.
Operator: To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Ward, Senior Director of Investor Relations. Please go ahead.
Speaker Change: Starwood in one again, please be advised today's conference is being recorded.
Speaker Change: Now I turn the conference over to your Speaker today, Chris Watt Senior director of Investor Relations. Please go ahead.
Chris Ward: Good morning. Thank you for joining the Integra LifeSciences fourth quarter 2023 earnings conference. Joining me on the call this morning are Yann DeWitt, President and Chief Executive Officer, Lea Knight, Chief Financial Officer, Mathieu Aussermeier, Senior Vice President of Corporate Finance, Investor Relations, and Trish. This morning we issued a press release announcing our fourth quarter 2023 financial year. The release and corresponding earnings presentation, which we will reference during the call, are available at integralife.com under Investors Factors that could cause actual results to differ materially are discussed in the company's exchange act reports filed with the SEC and in the release.
Chris Watt: Good morning, and thank you for joining the Integra Lifesciences fourth quarter 2023 earnings conference call.
Chris Watt: Joining me on the call. This morning are we got to wait President and Chief Executive Officer, We've got Knight, Chief Financial Officer, Matthew Awesome, IR Senior Vice President of corporate Finance Investor Relations and Treasurer.
Chris Watt: This morning, we issued a press release announcing our fourth quarter 2023 financial results.
Chris Watt: And corresponding earnings presentation, which we will reference during the call are available and type of life dot com under investors events and presentations.
Chris Watt: Named fourth quarter 2023 earnings call presentation.
Chris Watt: Before we begin I want to remind you that many of the statements made during this call maybe considered forward.
Chris Watt: That could cause actual results to differ materially are discussing the company's exchange Act reports filed but yet you can see in the release.
Chris Ward: Also, in our prepared remarks, we will reference Rewarding Organic Revenue Growth and Organic Revenue Growth Excluding BOSS. For 2023 results, organic revenue growth excludes the effects of foreign currency, acquisitions, divestitures, and discontinued products. 2024.
Chris Watt: Also in our prepared remarks, we will reference.
Chris Watt: We're an organic revenue growth and organic revenue growth excluding Boston.
Chris Watt: 1.3 results organic revenue growth excludes the effects of foreign currency acquisitions divestitures and discontinued products.
Chris Watt: 24.
Chris Ward: Guidance and Reporting, Organic Revenue Growth Will No Longer Exclude Discontinued. Organic revenue growth excluding Boston excludes the revenues from products manufactured in our Boston facilities. Management believes that excluding revenue from all products manufactured at the Boston plant provides useful information when evaluating the company's organic growth because of the unusual nature of the manufacturing stoppage. Unless otherwise stated, all disaggregated and franchise-level growth rates are based on organic growth. Lastly, our comments today will include certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures can be found in today's press release, which is an exhibit to Integra's current report on Form 8K filed with the SEC. And with that, I will now turn the call over to you. Thank you, Chris, and good morning, everyone.
Chris Watt: Guidance and reporting organic revenue growth will no longer exclude discontinued products.
Chris Watt: Organic revenue growth, excluding Boston excludes revenues from products manufactured in our Boston facility periods.
Chris Watt: Management believes that excluding revenue from all products manufactured at the Austin plant provides useful information when evaluating the company's organic growth because of the unusual nature of the manufacturing stoppages in voluntary.
Chris Watt: Unless otherwise stated all disaggregated from franchise level growth rates are based on organic wise.
Chris Watt: Lastly, our comments today will include certain non-GAAP financial measures reconciliations of non-GAAP financial measures can be found in today's press release.
Chris Watt: Which is an exhibit 20 papers current report on form 8-K filed with the SEC.
Speaker Change: And with that I will now turn the call over to you.
Speaker Change: Thank you, Chris and good morning, everyone.
Yann DeWitt: Before we dive into our financial results, I first want to acknowledge the commitment of our teams working to strengthen our operational capabilities while capitalizing on the growth of our market and Building Apps, Our Strategic Potential. Total sales for the fourth quarter were $397 million, representing a year-over-year organic decline of 1.2% or growth of 3.6% if we exclude the Boston program. Fourth Quarter Adjusted Earnings Per Share were $0.89.
Speaker Change: Before we dive into our financial results I first wanted to knowledge and commitment of our teams working to strengthen our operational capabilities, while capitalizing on the growth of our markets and building up our strategic potential.
Speaker Change: Total sales for the fourth quarter were $397 million, representing a year over year organic decline of one point.
Speaker Change: 2% or growth of three 6% if you exclude the Boston Province.
Speaker Change: Fourth quarter adjusted earnings per share were 89 sets.
Yann DeWitt: Both results were within our guidance at the low end. For the full year, sales were $1.54 billion. Flat on an organic basis, and up... 5.5% excluding Boston. The full year is just EPS of $3.10 per share, and Lea will take us deeper into these financials in a few minutes. So let's turn to slide number four to cover an update on Boston and our strategic highlights for the year. Although the Boston recall weighed on our financial results for the year, we're pleased with the significant and steady progress we have made towards bringing the Boston portfolio back on the market by mid to late second quarter. We restarted the factory in November, and in January, we successfully completed an initial external review following the factory restart, addressing rehearsals we referred to in earlier calls. We're now preparing for the external audit, which will take place in March.
Speaker Change: All results were within our guidance at the low end of the range.
Speaker Change: For the full year sales were $154 billion flat on an organic basis and up five 5% excluding Boston.
Speaker Change: Full year, adjusted EPS of $3 10 per share.
Speaker Change: Yeah, I will take us deeper into these financials in a few minutes.
Speaker Change: So, let's turn to slide number four to cover an update on Boston and our strategic highlights for the year.
Speaker Change: Although the Boston recall weighed on our financial results for the year, we're pleased with the significant and steady progress we have made towards bringing the Boston portfolio back on the market by mid to late second quarter.
When we started the factory in November and in January we saw.
Speaker Change: Excess fleet completed an initial external review.
Speaker Change: Going to factory restarts.
Speaker Change: The dress rehearsals, we referred to in earlier calls.
Speaker Change: But now preparing for the external audits, which will take place in March.
Yann DeWitt: Successful audits will allow us to start building finished goods inventory to resume distribution mid to late second quarter. When we look at the broader performance of our business, excluding Boston, we are encouraged by our results. The resilience of our markets and the strength of our broad portfolio. Full year growth in Codman's Specialty Surgical and Tissue Technologies was approximately 5% and 7%, respectively, in line with our growth expectations. We have made, and we continue to make considerable progress in our strategic initiatives. Our commitment to long-term growth has guided our actions, including the successful global relaunch of CeraLink with 510K clearance in the U.S. earlier this month. We have completed the successful integration of SIA into our Tissue Technology Division and advanced our implant-based breast reconstruction PMA strategy for both Surgiment, a collagen-based mesh, and Durasorb, a resorbable synthetic mesh.
Speaker Change: Access for all of this will allow us to start building finished goods inventory to resume distribution mid to late second quarter.
Speaker Change: When we look at the broader performance of our business. Excluding Boston, we are encouraged by our results and resilience of our markets.
The strength of our broad portfolio.
Speaker Change: Full year growth and Kaufmann specialty surgical and tissue technologies was approximately 5% and 7% respectively.
Aligned with our growth expectations.
Speaker Change: We have made and we continue to make considerable progress in our strategic initiatives.
Speaker Change: Our commitment to long term growth has got as our actions, including the successful global relaunch of settling with a five 10-K clearance in the U S earlier this month.
Speaker Change: We have completed the successful integration of <unk>.
Speaker Change: Into our tissue technologies Division and its all star implants based breast reconstruction PMA.
Speaker Change: <unk> for both surge events, a collagen based mesh enduro song.
Our resorbable synthetic mesh.
Yann DeWitt: Outside the U.S., we expanded our international portfolio and footprint and strengthened our commercial execution focus, fueling double-digit growth in our international business in 2020. In parallel, our In China for China strategy is taking shape with the ongoing build-out of our late-stage assembly capabilities in China. We also signed a definitive agreement to acquire Eclarent ENT, which we expect to close by the second quarter.
Speaker Change: Outside the U S. We expanded our international portfolio and footprint and strengthened our commercial execution focus fueling double digit growth in our international business in 2023.
Speaker Change: In parallel our in China for China strategy is taking shape with the ongoing build out of our late stage assembly capabilities in China.
Speaker Change: We also signed a definitive agreement to acquire <unk> <unk> business, which we expect to close by the second quarter.
Yann DeWitt: With this acquisition, we are adding an adjacent, highly complementary, and growth-creative platform to our neurosurgery sector. In addition to the advances in our portfolio and markets, we return value to shareholders with $270 million of share repurchase, remain focused on our drive for operational excellence and resilience, and Executive 2023 Better Positions. We have fortified our quality management system across our manufacturing and continue to invest in our operations, infrastructure, and process capabilities in order to create a more robust supply chain. This work will also continue in 2024.
Speaker Change: With this acquisition, we are adding an adjacent highly complementary and a girl for creative platform to our neuroscience for each segment.
Speaker Change: In addition to the analysis and our portfolio of markets, we return value to shareholders with $270 million of.
Speaker Change: Share repurchases.
Speaker Change: We remain focused on our drive for operational excellence and resiliency.
So that's 2023 better position for the future.
Speaker Change: We have fortified our quality management system across our manufacturing network.
Speaker Change: Continue to invest in our operations infrastructure and process capabilities in order to create a more robust supply chain.
Speaker Change: This work also remain in 2020 for folks.
Yann DeWitt: So with this introduction, let me now turn the call over to Lea to provide additional detail on our financial results and guidance for 2017. Thanks, Jan. We'll move on to our full year financial results starting with slide five. Two primary themes characterize our financial results for 2023. First, we have seen a full recovery in our markets and growth in line with our mid-single-digit growth expectations. There is strong demand for our broad and diverse portfolio of products, with several parts of our business growing by double digits, and we continue to make investments that will deliver value to shareholders. The second theme was the impact of the Boston recall, which drove significant operational challenges in 2020. Our full-year revenues were $1.542 billion, down approximately 1% on a reported basis, with organic growth flat for the year and within our guidance range communicated in October. The Boston Recall represented an approximate $67 million headwind to our results.
Speaker Change: So with this intro, let me now turn the call over to Leah to provide additional detail on our financial results and guidance for 2024.
Leah: Thanks, John.
Leah: Our full year financial results, starting with slide five.
Leah: Two primary themes characterize our financial results for 2023 first we have seen a full recovery in our markets and growth in line with our mid single digit growth expectations there.
There is strong demand for our broad and diverse portfolio of products with several parts of our business growing by double digits and we can.
Leah: Continue to make investments that will deliver value to shareholders.
Leah: The second thing was the impact of the box, a recall, which drove significant operational challenges in 2023.
Leah: Our full year revenues were $1 $542 billion down approximately 1% on a reported basis with organic growth flat for the year and our guidance range communicated in October.
Leah: The Boston recall represented approximately $67 million headwind to our reported revenues.
Lea Daniels Knight: Including Boston, organic growth across the remainder of our business was approximately 5.5%, demonstrating the continued robustness of our diverse portfolio and the markets that we serve. Deliver double-digit growth across many product lines in our portfolio. CFS, we saw double-digit growth in KUSA Clarity Disposables, SIRTUS Programmable Valves, Durigen, Mayfield Capital, BactaSeal, Cerebroflow, EVD Catheters, and IACP Microsensors. Our specialty surgical instruments saw double-digit growth in our Jarrett and MicroFance ENT products, and Tissue Technologies delivered double-digit growth in Dorisworm, Gentri Our adjusted EPS for the year was $3.10, down 7.7% versus 2022 and within the guidance range communicated in October. The Boston Recall negatively impacted full-year adjusted EPS by approximately 42 cents, including the impact of spending reductions we implemented during the year.
Leah: Boston organic growth across the remainder of our business, but approximately five 5% demonstrating the continued robustness of our diverse portfolio and the markets that we serve.
Leah: With double digit growth across many product lines in our portfolio and CFS.
Leah: CFS, we saw double digit growth includes the clarity disposables service programmable valves, so Virgin Mayfield capital practice, CL cerebral float DVD catheters and ICP micro sensors.
Leah: Our specialty surgical instruments saw double digit growth in our Jarrett and micro France E&P products.
Leah: Tissue technologies, we delivered double digit growth in doors are gen tricks and meta honey.
Leah: Our adjusted EPS for the year was $3 10 down seven 7% versus 2022 and within the guidance range communicated in October.
Leah: The Boston recall negatively impacted full year adjusted EPS by approximately <unk> 42 cents, including the impact of spending reductions we implemented during the year.
Leah: Looking at the middle of the P&L, our gross margins were 66, 1% for the year down 110 basis points versus 2022.
Leah: The Busta recall impacted gross margins by approximately 150 basis points due to roughly $20 million and product returns.
Leah: <unk> mix from the lost revenue and remediation costs.
Leah: To realize our gross margin improvement potential we are stepping up resources to assess opportunities within our significant manufacturing sites and in our supply chain.
Leah: We expect to initiate additional projects in 2024 and will have a favorable impact on our margins beginning in 2025.
Lea Daniels Knight: Leading at the middle of the P&L, our gross margins were 66.1% for the year, down 110 basis points versus 2022. Boston Recall impacted gross margins by approximately 150 basis points due to roughly $20 million in product returns, unfavorable mix from the lost revenue, and remediation costs. To realize our gross margin improvement potential, we are stepping up resources to assess opportunities within our significant manufacturing sites and in our supply chain. We expect to initiate additional projects in 2024 that will have a favorable impact on our margins beginning in 2020. Turning to adjusted EBITDA margins, our full-year adjusted EBITDA margins were 24%, down 240 basis points compared to 2022.
Leah: Turning to adjusted EBITDA margins, our full year adjusted EBITDA margins were 24% down 240 basis points compared to 2022.
Leah: Adjusted EBITDA margin performance reflects the impact of the bottom recall along with the investments in key strategic priorities preserve throughout the year and the year one dilution from the CA acquisition.
Leah: We continue to make investments in key operational and product development priorities throughout the year to ensure that we are positioned for longer term success.
Operating cash flow for the full year was $140 million with a free cash flow conversion of 29%.
Leah: Right.
Leah: Our operating cash flow and free cash flow conversion rate decline versus 2020 to be invested in manufacturing infrastructure and inventory to improve supply reliability.
Leah: If you turn to slide six I will cover the fourth quarter financial results.
Leah: Our fourth quarter revenues were $397 million approximately flat on a reported basis.
Lea Daniels Knight: Our adjusted EBITDA margin performance reflects the impact of the Boston Recall, along with the investments in key strategic priorities preserved throughout the year and the Year One Dilution from the SEIA Acquisition. We continue to make investments in key operational and product development priorities throughout the year to ensure that we are positioned for longer-term success. Operating cash flow for the full year was $140 million, with a free cash flow conversion of 29.5%.
Leah: And it broke down one 2%.
Leah: Excluding Boston organic growth was roughly three 6%.
Leah: Our adjusted EPS for the quarter was 89.
Leah: Five 3% compared to 2022.
Leah: Looking at the middle of the P&L gross margins were 64, 7% for the fourth quarter down 160 basis points versus 2022.
Leah: Gross margins were impacted by approximately 50 basis points from the Doctor May call. It 60 basis points from a supply constraint on the integra skin.
Leah: During the second half of 2023, we saw strong demand for integra skin, which tightened our inventory and at the same time, we experience a capacity constraint, but one of the several production lines, we had for integra skin.
Lea Daniels Knight: Operating cash flow and free cash flow conversion rate declined versus 2022 as we invested in manufacturing infrastructure and inventory to improve supply reliability. Turning to slide six, I will cover the fourth quarter financial results. Our fourth quarter revenues were $397 million, approximately flat on a reported basis, with organic growth down 1.2%. Excluding Boston, organic growth was roughly 3.6%.
Leah: While we have continued to produce and ship. So we were not able to fully keep up with the strong demand. We saw at the end of Q4.
Currently we are resolving the supply constraints and rebuilding our inventory.
Leah: Turning to adjusted EBITDA margins for the fourth quarter, our adjusted EBITDA margins were 25, 3% down 230 basis points compared to 2022.
Lea Daniels Knight: Our adjusted EPS for the quarter was $0.89, down 5.3% compared to 2022. And in the middle of the P&L, gross margins were 64.7% for the fourth quarter, down 160 basis points versus 2022. Most margins were impacted by approximately 50 basis points from the Boston recall and 60 basis points from a supply constraint on Integra's skin. During the second half of 2023, we saw strong demand for IntegraSkin, which tightened our inventory, and at the same time, we experienced a capacity constraint on one of the several production lines we had for IntegraSkin. While we have continued to produce and shift, we were not able to fully keep up with the strong demand we saw at the end of Q4. Currently, we are resolving the supply constraint and rebuilding. Turning to adjusted EBITDA margins for the fourth quarter, our adjusted EBITDA margins were 25.3%, down 230 basis points compared to 2022. Our decline in adjusted EBITDA margins primarily reflects the decrease in gross margins that I mentioned earlier. Operating cash flow for the fourth quarter was $59 million, with a free cash flow conversion of $49 million.
Leah: Our decline in adjusted EBITDA margins, primarily reflects the decrease in gross margin that I mentioned earlier.
Leah: Operating cash flow for the fourth quarter was $59 million of free cash flow conversion of 49.
Speaker Change: I'll start.
Speaker Change: If you turn to slide seven I will take a deeper dive into our CFS revenue highlights for the fourth quarter.
Speaker Change: Reported fourth quarter revenues and CFO for 271 $6 million, an increase of 2.7% on a reported basis and two 3% organic basis from the prior year.
Speaker Change: Global sales in neurosurgery grew 2% on organic basis as a result of mid single digit growth in CFS management, driven by search plus valves mid single digit growth in dural access and repair driven by Georgia.
Speaker Change: Low single digit growth in neuro monitoring driven by back to school catheters and ICP micro sensors.
Speaker Change: Lower because the capital sales in the quarter drove a low single digit decline in advanced energy.
Speaker Change: The full year, our capital sales, excluding fairly monitors are up low single digits.
Speaker Change: With regard to our Coosa clarity performance in Q4, we are moving into the later stages of the capital refresh cycle, which impacted our year on year performance.
Speaker Change: We have grown our crews that installed base since the launch of course, the clarity and the funnel for Coosa clarity capital remains strong.
Speaker Change: 24, we expect to see fewer installs acoustic clarity compared to 2023 and still see an increase in our total installed base and growth in our disposables.
Speaker Change: Turning to instruments, we saw approximately 3% growth in line with our growth expectations for this business.
Lea Daniels Knight: If you turn to slide 7, we'll take a deeper dive into our CFS revenue highlights for the fourth quarter. Reported fourth-quarter revenues in CFS were $271.6 million, an increase of 2.7% on a reported basis and 2.3% on an organic basis from the prior year. Global sales in neurosurgery grew 2% on an organic basis as a result of mid-single-digit growth in CFS management, driven by service plus valve, mid-single-digit growth in neural access and repair, driven by DuraGen, and low-single-digit growth in neurals, Back-to-Field Capitors, and ICP Microsensors. Lower KUSA capital sales in the quarter drove a low single-digit decline in advanced energy; for the full year, our capital sales, excluding Fairlink monitors, are up those single digits. With regard to our KUSA Clarity performance in Q4, we are moving into the later stages of the Capital Refresh cycle, which impacted our year-on-year performance.
Speaker Change: Shifting to international we saw another strong quarter from our international business and CFS with low double digit growth strengthened in the quarter was driven by double digit growth in China, Canada, and Australia and high single digit growth in Japan.
Speaker Change: Link our tissue technology segment on slide eight.
Speaker Change: Does she.
Speaker Change: <unk> was down 6% on a reported basis and 8% on an organic basis compared to the prior year.
Speaker Change: Screen, Boston organic growth was up six 9%.
Speaker Change: Fourth quarter sales in the wound reconstruction franchise decreased by 11%, excluding the recalled products, we experienced organic growth of 5% driven by double digit growth in getrich, an amniotic and mid single digit growth in integra skin and medicine.
Speaker Change: We remain encouraged by the private resilience of our portfolio, which continues to provide us with confidence in our long term growth potential of our company.
Speaker Change: Reconstruction business.
Speaker Change: And private label sales grew two 2% versus last year, excluding the impact of the Boston recall private label sales were up 12, 5%, reflecting strong demand from our partners in the quarter.
Lea Daniels Knight: That said, we have grown our CUSA install base since the launch of CUSA Clarity, and the funnel for CUSA Clarity capital remains strong. In 2024, we expect to see fewer installs of KUSA Clarity compared to 2023, but still see an increase in our total installed base and growth in our KUSA disposable. Turning to instruments, we saw approximately 3% growth in line with our growth expectations for this business. Shifting to international, we saw another strong quarter from our international business and CFS, with low double-digit growth. Strength in the Quarter was driven by double-digit growth in China, Canada, and Australia, and high single-digit growth in Japan. Link our tissue technology segments on slide 8. Fishing Technologies was down 6% on a reported basis and 8% on an organic basis compared to the prior year.
Speaker Change: Finally international sales and tissue technologies were down low double digits due to the Boston recall.
Speaker Change: On to slide nine I will briefly update our balance sheet capital structure and cash flow.
Speaker Change: During the quarter operating cash flow was $58 $7 million and free cash flow was $34 $2 million, reflecting increased working capital primarily from investments in inventory and Capex.
Speaker Change: Free cash flow conversion was 29, 5% on a trailing 12 month basis.
Speaker Change: Our balance sheet remains strong with ample liquidity to support our short and long term plans.
Speaker Change: As of December 31, net debt was $1 2 billion.
Speaker Change: And our consolidated total leverage ratio was three times.
Speaker Change: But he had total liquidity of $1 $5 billion, including $309 million.
Speaker Change: Cash and short term investments and the remainder available under our revolving credit facility.
Lea Daniels Knight: Excluding Boston, organic growth was up 6.9%. However, fourth quarter sales in the Woon Reconstruction franchise decreased by 11%. Excluding the recalled products, we experienced organic growth of 5%, driven by double-digit growth in Gentrix and amniotics and mid-signal-digit growth in Integra Skin and Medicine. We remain encouraged by the broad resilience of our portfolio, which continues to provide us with confidence in the long-term growth potential of our accomplished reconstruction business. Private Label sales grew 2.2% versus last year. Excluding the impact of the Boston recall, private label sales were up 12.5%, reflecting strong demand from our partners in the quarter. Finally, international sales and tissue technologies were down low double digits due to the Boston leak.
Speaker Change: Our balance sheet flexibility enabled us to return value to shareholders in the form of $275 million and accelerated share repurchases in 2023.
Speaker Change: If you turn to slide 10, I will provide our consolidated revenue and adjusted earnings per share guidance for the first quarter and full year 2024.
Speaker Change: First quarter revenues are forecasted to be between $360 million to $365 million representing reported growth in the range of approximately minus five 5% to minus four 1%.
Speaker Change: Organic growth in the range of approximately minus five 1% to minus three 7%.
Speaker Change: Our forecast performance reflects continued strong global demand for our products more than offset by an unfavorable $15 million comp Q1, 'twenty three Boston revenue.
Speaker Change: And the supply constraint on Integra skin.
Speaker Change: Excluding Boston, we are forecasting organic growth of approximately minus <unk>, 4%.
Lea Daniels Knight: If you plan to fly now, I will briefly update our balance sheet, capital structure, and cash flow. During the quarter, operating cash flow was $58.7 million, and free cash flow was $34.2 million, reflecting increased working capital primarily from investments in inventory and CapEx. Free cash flow conversion with 29.5% on a trailing 12-month basis. Our balance sheet remains strong with ample liquidity to support our short and long-term plans. As of December 31st, our net debt was $1.2 billion, and our consolidated total leverage ratio was three times.
Speaker Change: For the full year 2024 revenues are forecasted to be in the range of $1 six three to 161 8 billion and includes the return of the Boston portfolio beginning in the second half.
Speaker Change: At this time, we included only revenues from the <unk> and matrix relaunch in the second half of 2024.
Speaker Change: Toward to updating our guidance based on our progress and Relaunching the Boston products.
Speaker Change: Our guidance also reflects the return of thoroughly globally U S. Revenues included for 10 months as well as current FX rates.
Speaker Change: As we move past the first quarter headwinds, we expect to see organic growth.
Lea Daniels Knight: The company had total liquidity of $1.5 billion, including $309 million in cash and short-term investments and the remainder available under, [inaudible] Our balance sheet flexibility enabled us to return value to shareholders in the form of $275 million in accelerated share repurchases in 2020. If you turn to slide 10, I will provide our consolidated revenue and adjusted earnings per share guidance for the first quarter and school year 2024. First quarter revenues are forecasted to be between $360 and $365 million, representing reported growth in the range of approximately minus 5.5% to minus 4.1% and organic growth in the range of approximately minus 5.1% to minus 3.7%.
Speaker Change: As we relaunched Boston and resolve the supply constraint on Integra skin.
Speaker Change: We expect our reported and organic growth for the full year to be 4% to 5%.
Speaker Change: This guidance excludes the expected acquisition of acquiring.
Speaker Change: Turning to adjusted earnings guidance for the first quarter, we expect adjusted EPS to be 53% to 57% down from the prior year driven by the supply constraints referenced previously.
For the full year, we expect our adjusted EPS to be in the range of $3 15.
Speaker Change: The $3 25 per share, reflecting the positive organic growth of the business first quarter impact from the supply constraints modest gross margin improvement and Opex normalization.
Speaker Change: Slide 11 shows our key guidance considerations.
Speaker Change: During my first six months of Integra, CFO I've heard our investors and analysts requests additional detail into our financial results and projections.
Lea Daniels Knight: Our forecasted performance reflects continued strong global demand for our products more than offset by an unfavorable $15 million comp in Q1-23 Boston revenue and the supply constraint on Integra Skin. Excluding Boston, we are forecasting organic growth of approximately minus 0.4%. For the full year 2024, revenues are forecasted to be in the range of $1.603 to $1.618 billion and include the return of the Boston portfolio. Transcription by Trans-Expert at Fiverr.com. At this time, we have only included revenues from the Surgiment Imprint Matrix relaunch in the second half of 2024, and we look forward to updating our guidance based on our progress in relaunching the Boston project. Our guidance also reflects the return of Sarah Link Global. U.S.
Speaker Change: Following summarizes our guidance assumptions and modeling inputs.
Speaker Change: On the left side of the page Youll see key metrics, including FX rate share count and adjusted tax rates for your models.
Speaker Change: On the right side of the page we highlight the main drivers of Q1 revenues organic growth progression throughout the year <unk> gross margin and Opex assumptions.
Speaker Change: With that I will turn the call back over to Don.
Don: Thank you Leah please turn to slide 12 to conclude our prepared remarks.
Don: Looking back at 2023 bizarre unique technologies and commercial strength.
Don: Deliver a resilient growth across several parts of our portfolio.
Speaker Change: However, it does achievement was obscured by the Boston recall.
Speaker Change: Organic growth, excluding the impact from Boston, which landed at five 5% for the year.
Speaker Change: Continues to give us confidence in the growth potential of our markets and our portfolio.
Speaker Change: Although the recall has required a significant amount of our team's focus and attention.
Lea Daniels Knight: Revenues Included for 10 Months, as well as current FX rates. As we move past the first quarter headwinds, we expect to see our organic growth here as we relaunch Boston and resolve the supply constraint on Integra's skin. We expect our reported and organic growth for the full year to be 4-5%. This guidance excludes the expected acquisition of a, Turning to Adjusted Earnings Guidance.
Speaker Change: Confident we will bring this part of our portfolio back to our customers and their patients in mid to late second quarter.
Speaker Change: We remain committed to delivering a reliable long term business performance.
Speaker Change: Unfortunately, executing our commercial and operational plans and building our capabilities to achieve profitable growth.
Speaker Change: We have strengthened our quality management system with critical investments in talent and process capabilities across our manufacturing network.
Lea Daniels Knight: For the first quarter, we expect Adjusted EPS to be $0.53 to $0.57, down from the prior year, driven by the supply constraints referenced previously. For the full year, we expect our adjusted EPS to be in the range of $3.15 to $3.25 per share, reflecting the positive organic growth of the business, the first quarter impact from the supply constraints, modest gross margin improvement, and OPEX normalization. Slide 11 shows our key guidance considerations. During my first six months as Integra CFO, I have heard our investors and analysts request additional detail on our financial results and projections. The following summarizes our guidance, assumptions, and modeling. On the left side of the page, you'll see key metrics, including FX rates, share count, and adjusted tax rates for your model.
Speaker Change: We're also making investments across our manufacturing plants and supply chain.
Speaker Change: Ensure reliable supply for our commercial teams our customers and their patients.
Speaker Change: In parallel we lost projects to realize our operational efficiency opportunities and achieve sustainable margin expansion.
Speaker Change: We also continued building out our new product development capabilities and remain focused on leveraging organic and inorganic projects to drive improved business performance.
Speaker Change: We're executing our implant based breast reconstruction strategy progressing the Aurora minimally invasive neurosurgery platform and.
Speaker Change: In preparing to launch the back to seal Index show Combo, Canada.
Speaker Change: We continue to expand our international portfolio and commercial capabilities.
Speaker Change: And to work to close the it cloud with acquisition by second quarter remains on track.
Speaker Change: And we look forward to welcoming get clarity to integra.
Speaker Change: As we strengthen our operational resilience is false our organic portfolio.
Lea Daniels Knight: On the right side of the page, we highlight the main drivers of Q1 revenues, organic growth progression throughout the year, key gross margin, and op-ex assumptions. With that, I will turn the call back over to Xuyang. Thank you, Lea.
Speaker Change: And successfully execute on our M&A imports.
Speaker Change: We're well positioned to deliver strong top and bottom line growth.
And realize our full potential as a profitable innovator of lifesaving technologies worldwide.
Yann DeWitt: Please turn to slide 12 to conclude our prepared remarks. Looking back at 2023, we saw our unique technologies and commercial strength deliver resilient growth across several parts of our portfolio. However, this achievement was obscured by the Boston.
Speaker Change: Let me again take a moment to acknowledge the broader integra organization for their dedication to our customers and patients.
Speaker Change: And for delivering all the accomplishments that position integra for a strong future.
Speaker Change: Okay.
Speaker Change: Before opening the call for questions I'd like to take a moment to briefly touch on the leadership transition announcement, we made earlier this morning.
Yann DeWitt: Organic growth, excluding the impact from Boston, which landed at 5.5% for the year, continues to give us confidence in the growth potential of our markets and our portfolio, although the recall has required a significant amount of our team's focus and attention. We are confident we will bring this part of our portfolio back to our customers and their patients in mid to late second quarter. We remain committed to delivering reliable, long-term business performance, consistently executing our commercial and operational plans, and building our capabilities to achieve profitable growth. We have strengthened our quality management system with critical investments in talent and process capabilities across our manufacturing network. We're also making investments across our manufacturing plants and supply chain to ensure reliable supply for our commercial teams, our customers, and their patients.
Speaker Change: As you've seen by now have informed the board of my intention to retire as president and CEO of Integra by the end of the year and moved back to Europe.
Speaker Change: While we believe this is an important decision that we wanted to communicate that as early as we could.
Speaker Change: It does not change any of the focus that I and our executive leadership team will have over 2024.
Our firmly committed to ensuring a seamless transition I will stay on with the company until a successor is named.
Speaker Change: In the meantime, we look forward to delivering on our objectives for 2024.
While the immediate focus on further enhancing operational execution, particularly in our manufacturing and supply chain.
Speaker Change: We will continue to execute on our integrated growth strategy, while building capabilities.
Speaker Change: And investing in our programs to achieve commercial acceleration through improved product development and digital innovation.
Speaker Change: <unk> acquisitions in international market growth.
Yann DeWitt: In parallel, we launched projects to realize our operational efficiency opportunities and achieve Sustainable Margin Expansion. We also continued building out our new product development capabilities and remain focused on leveraging organic and inorganic projects to drive improved business performance. We're executing our implant-based breast reconstruction strategy. Progressing the Aurora Minimally Invasive Neurosurgery Platform and preparing to launch the Back-to-SEAL and Back-to-SHOW Combo Catalyst, we continue to expand our international portfolio and commercial capability.
Speaker Change: The bulk has engaged executive search firm Heidrick <unk> struggles for support and identifying a highly qualified leader and.
Speaker Change: <unk> expects a new CEO to be named by the end of.
This calendar year.
Speaker Change: As part of this announcement.
Speaker Change: In order to drive improved shareholder value and ensure an effective transition both chairman Stuart Essig has been appointed executive chairman effective immediately.
Speaker Change: Stewart with whom most of you are very familiar is uniquely suited to take on this additional responsibility and having served as our non executive chairman for the past 12 years.
Speaker Change: And as you know prior to that.
Speaker Change: We look forward to updating you on the CEO search later this year.
Yann DeWitt: And the work to close the Eclarent acquisition by the second quarter remains on track, and we look forward to welcoming the Eclarent team to Angie's as we strengthen our operational resilience, advance our organic portfolio, and successfully execute on our M&A game board. We're well-positioned to deliver strong top and bottom lines and realize our full potential as a profitable innovator of life-saving technologies worldwide. Let me again take a moment to acknowledge the broader Integra organization for their dedication to our customers and patients and for delivering on the accomplishments that position Integra for a strong future. Now, before opening the call for questions, I'd like to take a moment to briefly touch on the leadership transition announcement we made earlier this morning. As you know, I have informed the board of my intention to retire as president and CEO of Integra by the end of the year and move back to Europe.
Speaker Change: So I'll close by saying that it's an honor and privilege to lead this fine organization and I look forward to a seamless transition.
Speaker Change: Our main firmly committed to this company our dedicated employees and the patients we serve.
Speaker Change: Thank you for joining us. This morning. This concludes our prepared remarks and operator.
Speaker Change: The lines for questions.
Speaker Change: Ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone. If your question has been answered reduced remove yourself from the queue. Please press star one again.
Speaker Change: Pulse for a moment, while we compile the Q&A roster.
Our first question comes from Victor <unk> with Wells Fargo. Your line is open.
Hey, good morning, and thanks for taking the questions.
Victor: Maybe just wanted to congratulate you on your retirement and I'm sure we will all Miss working with you.
Victor: It sounds like it's a personal decision I just wanted to see if you could shed some additional color on to that and then I had a follow up question. Please.
Yann DeWitt: Well, we believe this is an important decision that we wanted to communicate as early as we could. It does not change any of the focus that I and our executive leadership team will have over 2024. We are firmly committed to ensuring a seamless transition and will stay on with the company, and Phil's successor is named. In the meantime, we look forward to delivering on our objectives for 2024 with an immediate focus on further enhancing operational execution, particularly in our manufacturing and supply chain. We will continue to execute on our integrated growth strategy while building capability and investing in our programs to achieve commercial acceleration through improved product development and digital innovation, Strategic Acquisitions and International Markets. The board has engaged executive search firm Hydrochem Struggles for support in identifying a highly qualified leader and expects a new CEO to be named by the end of this calendar year, as part of this announcement. In order to drive improved shareholder value and ensure an effective transition, Board Chairman Stuart Essek has been appointed Executive Chairman, effective immediately.
Speaker Change: Yes. Thank you for taking my question, just it's a personal decision driven by family requirements.
Speaker Change: It's a decision that.
Speaker Change: We have discussed with the board over the past several weeks and given.
Speaker Change: Kevin I wanted to make a decision early to allow all of us to managing a very smooth transition.
Speaker Change: Over the year can you my main concern is to make sure that we execute our 2024 planned keep on track with our short and a longer term strategic.
Speaker Change: Strategic objectives.
Speaker Change: Yes.
Kevin: Great. Thanks, and there isn't a follow up regarding the Q1 guidance.
Kevin: It would be well below expectation can you maybe highlight some of the puts and takes and what gets you to the top versus the bottom end of the guidance range and how confident you are in resolving the supply backlog issue starting in Q2.
Kevin: You.
Speaker Change: Yep. Thank you Vik I appreciate the question so.
Speaker Change: So a couple of dynamics right as we as we look at kind of Q1 and the organic growth outside of Boston.
Speaker Change: That's where we're seeing the impact as a result of the integra skin supply constraint that I talked about in our Q4 results as well.
Speaker Change: So just kind of a bit of background on that we did have an issue that impacted the throughput on one of our production lines for integra skin, that's resulting in the supply constraint that I mentioned it.
Yann DeWitt: Steven Stewart, with whom most of you are very familiar, is uniquely suited to take on this additional responsibility, having served as our Non-Executive Chairman for the past 12 years, and I see you all prior to that. We look forward to updating you on the CEO search later this year. So I'll close by saying that it's an honor and a privilege to lead this fine organization, and I look forward to a seamless transition and remaining firmly committed to this company, our dedicated employees, and the patients we serve. Thank you for joining us this morning.
Speaker Change: It first appeared kind of isn't that far yet appeared in the December timeframe and continued into early Q1 tweet since resolved.
Speaker Change: That supply constraint and are starting to rebuild inventories, but as you can imagine it's going to take us a while to catch up to kind of the demand and so that's impacting the growth that we would have anticipated and in our portfolio outside of Boston.
Speaker Change: The other dynamic that I would call out is related to our coosa clarity.
Operator: This concludes our prepared remarks, and the operator can open the lines for questions. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered or you wish to remove yourself from the queue, please press star 11 again.
Speaker Change: As I mentioned, what we saw in Q4 is we're in the later stages of our refresh cycle.
Speaker Change: Clarity and so the rate of growth is slowing.
Speaker Change: On that for that part of the business.
Speaker Change: So that's an element, but also in Q1 of 2023, we had a fairly big comp we had some pretty large science.
Operator: We will pause for a moment while we compile our Q&A. Our first question comes from Vik Chopra with Wells Fargo. Your line is open. Hey, good morning.
Speaker Change: FERC Tusa clarity Q1 year ago that we're now Comping that is also impacting kind of the overall growth rate for the quarter.
Vikramjeet Singh Chopra: And thanks for taking the questions. Yeah, I just wanted to congratulate you on your retirement. And I'm sure we will all miss working with you. So it sounds like it's a personal decision. I just wanted to see if you could shed some additional color on that.
Speaker Change: And then I think so so those are the elements that are impacting tenant base growth outside of Boston. Obviously, we we also are lapping $15 million of a comp.
Speaker Change: It's having Boston revenue in a year ago not in in the first quarter of 2024.
Yann DeWitt: And then I had a follow-up question. Yeah, thank you, Vik, for the question. Yes, it's personal decisions driven by family requirements.
Speaker Change: And so so those are you know kind of the key.
Speaker Change: Key elements.
Speaker Change: I think just to just to follow on and I think you asked kind of as they progressed throughout the year in terms of supply.
Yann DeWitt: It's a decision that we've discussed with the board over the past several weeks, and I wanted to make a decision early to allow all of us to manage a very smooth transition over the year. My main concern is to make sure that we execute our 2024 plan, and keep on track with our short and longer-term strategic objectives. Great, thanks.
Speaker Change: Getting back into full supply because we now are in the position of resolving the supply constraints and you're building our inventories we would anticipate as we move into Q2.
Speaker Change: That we are from a growth perspective getting back into the mid single digit growth expectations for the business.
Speaker Change: And then certainly as we bring Boston portfolio back online and get to the back half of the year. That's why we would likely see kind of even stronger mid single digit growth.
Vikramjeet Singh Chopra: And just as a follow-up, so I think the Q1 guidance was obviously well below expectations. Can you maybe highlight some of the puts and takes and what gets you to the top versus the bottom end of the guidance range and how confident you are in resolving the supply backlog issue starting in Q2? Thank you. Thank you, Vic.
Speaker Change: For the balance of the year. So we do believe that youll start to see that turnaround in Q2.
Speaker Change: Yeah.
Speaker Change: Thank you one moment for our next question.
Speaker Change: The next question comes from Kristen Stewart with C. L. King Your line is open.
Kristen Stewart: Hi, Thanks for taking my question I was wondering if we could just discuss a little bit more in detail our gross margin.
Lea Daniels Knight: I appreciate the question. So a couple of dynamics, right? As we look at kind of Q1 and the organic growth outside of Boston, that's where we're seeing the impact as a result of the IntegraSkin supply constraint that I talked about in our Q4 results as well. And so just kind of a bit of background on that. We did have an issue that impacted the throughput on one of our production lines for IntegraSkin, which is resulting in the supply constraint that I mentioned. It first appeared kind of in that, or yeah, it appeared in the December timeframe and continued into early Q1.
Kristen Stewart: Just thinking about the cadence of when you guys think you can get back to more normalized gross margin and what you kind of see that ads.
Kristen Stewart: Okay.
Speaker Change: Yeah, certainly so and I'll talk about it through the lens of kind of from a I'll start first with kind of full year 2023.
Speaker Change: On a full year basis gross margins were down 110 basis points and as I mentioned big driver of that is due to the Boston recall as.
Speaker Change: As we move forward into 'twenty 'twenty four we are anticipating a modest improvement.
Speaker Change: Improvement in gross margin so.
Speaker Change: So well start to see some of the benefit come back as we bring the Boston portfolio back online, we won't see the full benefit and we won't see the full benefit for a couple of reasons one.
Lea Daniels Knight: We've since resolved that supply constraint and are starting to rebuild inventory. But, as you can imagine, it's going to take us a while to catch up to demand. And so that's impacting the growth that we would have anticipated in our portfolio outside of Boston. The other dynamic that I would call out is related to our CUSA clarity. As I mentioned, what we saw in Q4 is that we're in the later stages of our refresh cycle. QClarity. And so the rate of growth is slowing on that for that part of the business. So that's an element.
Speaker Change: Boston portfolio will only be backend for 'twenty 'twenty four for a portion of the year. So that higher gross margin portfolio again, we won't see the full benefit to come of remediation cost perspective, which is part of the reason why we were down in 2023, we're still incurring remediation costs until we're fully up and running.
Speaker Change: And so while that should be less in 2020 four its still going to be a factor.
Lea Daniels Knight: But also, in Q1 of 2023, we had a fairly big comp, we had some pretty large buy-ins for QClarity Q1 a year ago that we're now comping against, and then I think that so those are the elements that are impacting kind of base growth outside of Boston. Obviously, we also are lapping $15 million of a comp of having Boston revenue a year ago, not in the first quarter of 2024. And so those are, you know, kind of the key elements.
Speaker Change: And I think the other dimension is from some of the supply constraints on integra skin.
Speaker Change: So, creating a headwind for our gross margins. So net net we are starting to see some of the benefit come back from Boston, We won't realize the full benefit and that's why we're calling a modest improvement that.
Speaker Change: That said, though Chris said I think to your point, we are not waiting for the Boston portfolio to come back to drive overall growth.
Speaker Change: The improvement we are actively adding additional resources to.
Lea Daniels Knight: I think just to follow on, and I think you asked kind of, as we progress throughout the year in terms of supply, getting back into full supply, because we are now in the position of resolving the supply constraint, rebuilding our inventories, we would anticipate, as we move into Q2, that we are, from a growth perspective, getting back into the mid single digit growth expectations for the business. And then certainly as we bring the Boston portfolio back online and get to the back half of the year, that's when we would likely see kind of even stronger mid single digit growth for the balance of the year. So we do believe that you'll start to see that turnaround in June. Thank you. One moment for our next question. Our next question comes from Kristen Stewart with CL King.
Speaker Change: To launch our projects in 2024 aimed at extracting the value that we've talked about that exist in terms of improving our margins through better operational efficiency.
Speaker Change: As well as yield and productivity improvements and so that work is is also very much underway and so wed expect to see the benefits from that work along with the benefit from the full Boston portfolio coming back online as we move into 2025.
Speaker Change: Yeah.
Speaker Change: Hey, Thank you.
Speaker Change: Just a quick refresh on the Claret acquisition I know that's not in your guidance now, but do you still feel comfortable that that's going to be neutral to 2024.
Speaker Change: Yes, yes that was kind of what we shared at the time that we announced the acquisition. We are working diligently to close that still anticipate planning to close it by Q2.
Speaker Change: And at this point still project that it will be EPS neutral in 2024.
Kristen Marie Stewart: Your line is open. Hi, thanks for taking my question. I was wondering if we could just discuss a little bit more in detail gross margin and just think about the cadence of when you guys think you can get back to a more normalized gross margin and what you kind of see that as. Yeah, certainly. So I'll talk about it through the lens of kind of from. I'll start first with the full year 2023. So on a full year basis, gross margins were down 110 basis points.
Speaker Change: Okay perfect. Thank you for taking my questions.
Speaker Change: Well remember for our next question.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Ryan Zimmerman with <unk>. Your line is open.
Ryan Zimmerman: Oh good morning, Thanks for taking my question.
Ryan Zimmerman: Maybe just to start.
Ryan Zimmerman: You do expect to close a clearer than in <unk>.
Ryan Zimmerman: The end of <unk>.
Ryan Zimmerman: Right.
Ryan Zimmerman: And I just wanted to.
Ryan Zimmerman: Because.
Speaker Change: Sorry go ahead.
Thank you too bye Q2, right okay. Okay.
Speaker Change: So I mean, I recognize that we're not including in guidance.
Lea Daniels Knight: And as I mentioned, a big driver of that is due to the Boston recall. As we move forward into 2024, we are anticipating a modest improvement in gross margins. So we'll start to see some of the benefit come back as we bring the Boston portfolio back online. But we won't see the full benefit for a couple reasons.
Speaker Change: Our current.
Speaker Change: Estimates, but but just to just to be clear and just to ground everyone. We should expect something in the range of maybe $50 million to $60 million in sales in the back half of the year.
Speaker Change: Organic sales that is on our clearance.
Speaker Change: Based on kind of their current run rate in profile or are you expecting anything different just because of that integration.
Lea Daniels Knight: One, the Boston portfolio will only be back in for 2024 for a portion of the year. So that higher gross margin portfolio, again, we won't see the full benefit from a remediation cost perspective, which is part of the reason why we were down in 2023. We're still incurring remediation costs until we're fully up and running.
Speaker Change: Yeah. So we're not we're not providing guidance right now on what it will do to our overall call at this point I think what we have shared is revenue based on that business and J&J has hands at that point.
Speaker Change: <unk> thousand 22 within the order of magnitude of $110 million in revenue. So obviously, depending on when we actually complete the acquisition.
Have a partial year.
Speaker Change: And so.
Lea Daniels Knight: And so while that should be less than 2024, it's still going to be a factor. And I think the other dimension is some of the supply constraints on Integra's skin are also creating a headwind for our gross margin. So net net, we are starting to see some of the benefit come back from Boston. We won't realize the full benefit, and that's why we're calling it modest.
Speaker Change: Alright, well well well.
Put something in there for it.
Speaker Change: We assume you'll get it closed.
Speaker Change: Maybe just turning to tissue for a moment I mean, I recognize you guys have faced tremendous challenges and I think everyone in the.
Speaker Change: Street recognizes that.
Speaker Change: When tissue comes back though.
Speaker Change: Implied in your guidance net of a clearer and so forth is a sizable ramp in the back half of 2024 on tissue products and so.
Lea Daniels Knight: That said, though, Kristen, I think to your point that we are not waiting for the Boston portfolio to come back to drive overall growth versus margin improvement. We are actively adding additional resources to launch projects in 2024 aimed at extracting the value that we've talked about that exists in terms of improving our margins through better operational efficiency, as well as yield and productivity. And so that work is also very much underway, and we would expect to see the benefits from that work along with, you can benefit from the full Boston portfolio coming back online as we move into 2020. Okay, thank you.
Speaker Change: Appreciate some color on why.
Speaker Change: That happens and why it is not.
Speaker Change: Not more gradual and why it's a pretty competitive environment.
Speaker Change: People are probably season on the opportunity and so.
Speaker Change: Just help us understand kind of your thinking around the back half of 'twenty four in terms of the recovery in tissue.
So let me take that one.
Speaker Change: Right.
Speaker Change: I mean first big.
Speaker Change: A big part of that ramp.
Speaker Change: Is linked with Boston getting back yes.
Speaker Change:
Speaker Change: Our sales force is looking forward to that you are ready to take the projects when they're up and running they feel good about winning our customers.
Kristen Marie Stewart: And just a quick refresh on the Claren acquisition. I know that's not in your guidance now, but do you still feel comfortable that it's going to be neutral to 2024? Yes, yes, that was kind of what we shared at the time that we announced the acquisition. We are working diligently to close that, and we still anticipate planning to close it by Q2. And at this point, I still project that it will be ETF neutral in 2020. Okay, perfect.
Speaker Change: Back two factors playing that one.
Speaker Change: The relationship has been maintained over the past nine months plus given the breadth of our portfolio. Our sales force is still that with our customers serving them with other products in terms of getting the product back I mean, this is an area where you have customers now.
Speaker Change: I will then do trial other products and so they have no issues switching back.
Lea Daniels Knight: Thank you for taking my question. One moment for our next question. Our next question comes from Ryan Zimmerman with BTIG. Your line is open. Oh, good morning. Thanks for taking my question. Maybe just to start, um... I do expect to close a Clarence at the end of 2Q, is that right? And I just want to ask that because...
Speaker Change: No that's our products out of the Boston factory are differentiated different shades them from a strength of spies conform ability price perspective, our sales force feels.
Speaker Change: Strongly take him when their customers back based on the strength of that portfolio.
Speaker Change: Okay, Let me just sneak one more in.
Ryan Zimmerman: Sorry, go ahead. Bye Q2. Yeah, bye Q2, Ryan. So, I mean, I recognize that we're not including Clarin and Guy.
Speaker Change: And I'll hop back in queue real quick.
Speaker Change: Just because.
Speaker Change: China has been a growth area.
Speaker Change: Know that.
Speaker Change: China EVP, particularly in neurosurgery has been an area of focus can you just talk about what's happening in China the impact of pricing on your neuro business within China, and when Youre, China for China strategy can you.
Unknown Executive: Unknown Executive, Xuyang Li, Lea Knight, Matt Taylor, Integra LifeSciences Holdings Corp. $40 million in sales. Transcripts provided by Transcription Outsourcing, LLC. of that. Yeah, so we're not providing guidance right now on what Eclair will do to our overall call at this point. I think what we have shared is revenue based on the fact that the business in J&J's hands as of 2022 was in the order of magnitude of 110 million in revenue. So obviously, depending on when we actually complete the acquisition, we'll have a partial year. And so, All right, well, we'll... Put something in there for it, and we'll assume you'll get a, um, maybe just hurting the tissue for a moment. I recognize that you guys have faced tremendous challenges, and I think everyone does. When tissue comes back, though, implied in your guidance, net of a clearance and so is a sizable ramp in the back half of 2024 on tissue, and so. Appreciate some color on why that happened, why, you know, it's not more gradual, and why it's a pretty competitive environment. I mean, people are probably seizing the opportunity and so.
Speaker Change: You don't take hold.
Speaker Change: So on China.
Speaker Change: The big driver behind our China success is that one this is a big growing market, where we are geographically and from a penetration and hospitals were still have plenty of opportunity to further.
Speaker Change: Penetrates.
Speaker Change: And so that's what we're doing from perspective of strengthening our sales capability. That's also the backdrop to our in China for China strategy to be seen as a more local player doing high level or late stage Assembly. There Yep. That's factory by the end of this year.
Speaker Change: Should start to produce products for project qualification, so somewhere near the end of 2025.
Speaker Change: Yet we should be.
Speaker Change: Feeling part of the projects for debt markets out of our local factory.
Speaker Change: And so this is a dynamic that the China opportunity that you know as we look at New Hospital building new Geographics.
Yann DeWitt: Help us understand kind of your thinking around the back half. [inaudible] So let me take that one line. First, a big part of that ramp is linked with Boston getting back on. Unknown Speaker: Our sales force is looking forward to that, and they're ready to take on projects when they're up and running. They feel good about winning our customers back. Two factors playing there.
Speaker Change: Innovation over the next year show of going after that opportunity from a V. P perspective that we've seen limited impact that our products are differentiated.
Speaker Change: Number of local players plus yeah, it's not a massive market, where we play therefore not as much on the radar screen for the Pvp.
Speaker Change: Pressure.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Yann DeWitt: The relationship has been maintained over the past nine months plus, given the breadth of our portfolio, our sales force is still with our customers, serving them with other products. In terms of getting the product back, this is an area where customers now and then do trial other products, and so they have no issue switching back. We know that our products out of the Boston factory are different, differentiated from a strength, bias, conformability, and price perspective. Our Salesforce feels strongly they can win their customers back based on the strength of that. Let me just sneak one more in, and I'll hop back in line real quick.
Speaker Change: Our next question comes from Jason Bedford with Raymond James Your line is open.
Jayson Bedford: Good morning, Thanks for taking the question just a couple for me.
Jayson Bedford: I think there's a lot of moving parts here, but it does look like you've pulled back on your assumptions for the contribution from the Boston facility in 'twenty four relative to last call.
Jayson Bedford: I think on the call today, you made a comment referring to only including surge amend and prime matrix.
Jayson Bedford: Why is it a change if I.
Speaker Change: I am correct here.
Speaker Change: Yeah. Thank you, Jason and yes, you are correct. So our guidance right now reflects surge of men have probably matrix, which is pretty much the majority of which is our commercial business.
Yann DeWitt: Just because, you know, China has been a growth area. We know that Chinese VBP, particularly in neurosurgery, has been an area of focus. Can you just talk about what's happening in China, the impact of pricing on your neurobusiness within China, and when, you know, your China for China strategy can, video. So I'm trying to have the, The big driver behind our China success is that one, this is a big growing market where we are geographically, and from a penetration in hospitals, we still have plenty of opportunity to further penetrate. So that's what we're doing from the perspective of strengthening our sales capability. That's also the backdrop to our strategy in China to be seen as a more local player and doing high-level or late stage assembly there. Yeah, that factory should start to produce products by the end of this year.
Speaker Change: Out of Boston, we've excluded from the guidance for now is the private label business and so that describes why that's the tailwind that you may have been expecting a slower.
Speaker Change: And in our guidance and so let me kind of step back and explain why.
Speaker Change: As you know we've been partnering with our private label partners about how to keep them apprised of our timelines progress on the remediation.
Speaker Change: And that's giving them access to kind of.
Speaker Change: S F.
Speaker Change: The progress, we're making at our manufacturing site in Boston.
Speaker Change: But at this point, we are not producing salable finished goods yet.
Speaker Change: Don't have orders from our private label partners and so we have not included in guidance.
Speaker Change: But anticipate that as we get closer to our commercial relaunch, we'd have an opportunity to update this that's kind of.
Yann DeWitt: So somewhere near the end of 2025, we should be feeding part of the products for that market out of our local factory. And so this is a dynamic, the China opportunity that as we look at new hospital bills, new geography, it's a continuation over the next years of going after that opportunity. From a VBP perspective, we've seen limited impact, our products are differentiated, and there are a limited number of local players. Plus, it's not a massive market where we play. Therefore, not as much on the radar screen for VBP pressure.
Speaker Change: Audience and our guide as appropriate based on what transpires between now and then.
Speaker Change: And I would expect that timing to be in or around our Q1 earnings call.
Speaker Change: Okay, but to date, there hasnt been any private label relationships that have been discovered that fare.
Speaker Change: Okay.
Speaker Change: Fair to say, we are continuing to discuss we know that our private label customers are evaluating their difference.
Speaker Change: Options that they have in terms of.
Speaker Change: Deciding on final option I think that will happen to the moment, where we really get into commercial shipping and that both they and us have more certainty on what's.
Yann DeWitt: One moment for our next question. Our next question comes from Jayson Bedford with Raymond James. Your line is open. Good morning. Thanks for taking the question. Just a couple for me.
Speaker Change: What's coming up one.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you just one quickie I apologize if I missed it what's the expectation for the first quarter gross margin.
Speaker Change: We did not provide gross margin guidance for the quarter just for the year.
Jayson Tyler Bedford: I think there's a lot of moving parts here, but it does look like you pulled back on your assumption. Contribution from the Boston facility in 24 relative to the last call. I think on the call today, you made a comment referring to only including surge amended primatrix. Why the change, if I am correct here? And thank you, Jason.
Speaker Change: And part of it.
Speaker Change: 24 over 23.
Speaker Change: Okay. Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Robbie Marcus with Jpmorgan. Your line is open.
Robbie Marcus: Oh, great. Thanks for taking the questions and I'll I'll add as well sorry to see you go wish you all the best.
Speaker Change:
Robbie Marcus: Maybe a couple of questions again on the guide just to help clarify because there are a lot of moving pieces here.
Lea Daniels Knight: And yes, you are correct. So our guidance right now reflects Surgiman and Prime Matrix, which is pretty much the majority, which is our commercial business out of Boston. What we've excluded from the guidance for now is the private label business.
Robbie Marcus: Maybe if you start with first quarter.
Robbie Marcus: And the full year and you look at sell side numbers and you look at your current expectations.
Lea Daniels Knight: And so that describes why the tailwind that you may have been expecting is lower in our guidance. And so, let me kind of step back and explain why. As you know, we've been partnering with our private label partners throughout to keep them apprised of our timeline, progress on the remediation, and to assess, you know, the progress we're making at our manufacturing site in Boston. But at this point, we are not producing saleable finished goods yet. And we don't have orders from our private label partners, and so we have not included them in guidance.
Robbie Marcus: Now what do you think are the biggest deltas.
Robbie Marcus: Between it because the EPS came in fairly materially lower as did.
Robbie Marcus: First quarter, particularly so what are you assuming.
Robbie Marcus: For the supply constraint headwind in first quarter, and where do you really see the biggest delta versus sell side numbers right now.
Robbie Marcus: Oh.
Speaker Change: So let me break that down into a couple pieces again from a from a first quarter perspective.
Speaker Change: And actually let me start from kind of how we ended 2023, so on a full year basis the portfolio outside of Boston grew in that mid single digit range that we said is kind of the right place for this business right.
Lea Daniels Knight: But anticipate that as we get closer to our commercial relaunch, we'd have an opportunity to update this, this kind of audience, and our guide as appropriate, based on what transpires between now and. And I would expect that timing to be in and around our Q1 earnings call. Okay, but to date, there haven't been any private-label relationships that have been severed. Is that fair?
Speaker Change: So as you move into 2024, I think that becomes the starting point of what this business has the potential to do what we what we're seeing in Q1 as I mentioned earlier was the impact of the supply constraints.
Speaker Change: There's also the impact of the kind of KUSA clarity dynamic that I mentioned for Q1, that's lowering the growth rate that we're experiencing on the business outside of Boston.
Jayson Tyler Bedford: Okay, that's fair, fair to say we are continuing to discuss. We know that our private label customers are evaluating their different options that they have in terms of deciding on the final option. I think that will happen at the moment when we really get into commercial shipping, and both they and us have more certainty on what's coming out when. Okay, thank you. Just one quickie, I apologize if I missed it.
Speaker Change: And so that kind of describes why we have a lower start to the year as we move into Q2, and we resolved the supply constraint, we get back into a mid single I'm sorry, Yeah mid single digit growth of the business and continue through the balance of the year, that's when we'll really see that.
Lea Daniels Knight: What's the expectation... We did not provide first margin guidance for the quarter, just for the year. Improvement 24 over 20. One moment for our next question. Our next question comes from Robbie Marcus with J.P. Morgan, your line-in is Morgan, your line-in is Morgan, your line-in is Morgan, your line-in is Morgan, your line-in is, Oh, great. Thanks for taking the questions. And Jan, I'll, I'll add as well.
Speaker Change: This operating back at the levels that we were operating in 2023, so I haven't seen the largest kind of deviation between what you were anticipating and what youre seeing.
Speaker Change: Revenue top line basis.
Speaker Change: Has to do with that clearly there is a profitability implication because the nature of.
Robert Justin Marcus: Sorry to see you go. I wish you all the best.
Speaker Change: The gross margins on skin are are are definitely kind of higher gross margin products in our portfolio.
Robert Justin Marcus: Maybe a couple questions again on the guide just to help clarify because there are a lot of moving pieces here. Unknown Speaker, Maybe if you start with the first quarter and the full year, and you look at cell side numbers and you look at your current expectation, you know, what do you think are the biggest deltas between them?
Speaker Change: So that is a contributor to why there is likelihood got from an EPS perspective.
Speaker Change: And then the final thing I'd mention as we are bringing Boston back up online. We are returning to more normal opex levels, probably about a quarter sooner than we had originally anticipated. We see are the Boston relaunch has the opportunity to take an aggressive kind of.
Lea Daniels Knight: Because the EPS came in fairly materially lower, as did the first quarter, particularly. So what are you assuming for the supply constraint headwind in the first quarter, and where do you really see the biggest delta versus sell-side numbers? So, let me break that down into a couple pieces. Again, from a first quarter perspective, and actually, let me start from kind of how we ended 2023.
Speaker Change:
Speaker Change: Yeah marketing.
Speaker Change: Advertising approach to getting back into the market.
Speaker Change: With our products and so.
Speaker Change: That is fueling kind of becoming operating at more normal levels prior to what we'd originally anticipated.
Speaker Change: Great.
Speaker Change: Maybe just as a follow up.
Speaker Change: On.
Speaker Change: On free cash flow you guys did about a 40% conversion rate in 2023.
Lea Daniels Knight: So, on a full-year basis, the portfolio outside of Boston grew in that mid-single-digit range that we said was kind of the right place for this business, right? So, as you move into 2024, I think that becomes the starting point of what this business has the potential to do. What we're seeing in Q1, as I mentioned earlier, was the impact of the supply constraints. There's also the impact of the kind of KUSA Clarity dynamic that I mentioned for Q1 that's lowering the growth rate that we're experiencing on the business outside of Boston. So, I would say the largest kind of deviation between what you were anticipating and what you're seeing on a revenue top-line basis has to do with that. Clearly, there is a profitability implication because of the nature of... [inaudible] We see the Boston relaunch as an opportunity to take an aggressive kind of, you know, marketing, and advertising approach to getting back into the market with our products. And so that is fueling a kind of becoming, operating at more normal levels prior to what we originally anticipated. Great.
Speaker Change: There were a lot of exclusions that lowered the cash flow how should we be thinking about cash flow in 2024 here and not just the full year, but also the progression through the year and if I could just squeeze one more.
Speaker Change: On the last question you talked about the difference between the prior commitment or what products and youre leaning out.
Speaker Change: Label I believe before it was 100% run rate of sales within 12 months now excluding the private label do you know what that percentage of sales is thanks.
Speaker Change: So let me deal with the cash flow question first.
Speaker Change: To your point cash free cash flow for the quarter.
Speaker Change: In 2023, it was about $34 million or free cash flow conversion rate on a trailing 12 month basis was 29 and a half a percent as we move into 'twenty 'twenty. Four we do we will have to overcome some of the headwinds that I talked about in Q1.
Robert Justin Marcus: Maybe just as a follow-up, on free cash flow. You guys did about a 40% conversion rate in 2023. There were a lot of exclusions that lowered the cash flow. How should we be thinking about cash flow in 2024 here, and not just for the full year, but also the progression through the year? If I could just squeeze one more.
Speaker Change: Which will actually drive our trailing 12 month conversion down slightly so think of it being kind of you know in.
Speaker Change: And the low Twenty's and then as we progress through the year, we you know.
Speaker Change: Resolved the supply constraint on Integra relaunch, Boston, we start to.
Speaker Change: Some of the.
Lea Daniels Knight: On the last question, you talked about the difference between the prior of what products and you're leaping out. Private Label, I believe before it was 100% run rate of sales within 12 months. Now.
Speaker Change: The lower growth periods that we saw in 2023 and specifically in Q4, that's when we would expect our trailing 12 months to get back up to about 58% by the end of the year. So it's a progression up.
Robert Justin Marcus: Including the private label, do you know what that percentage of sales is? So let me deal with the cash flow question first. To your point, cash, pre-cash flow for the quarter in 2023 was about $34 million. Our pre-cash flow conversion rate over a trailing 12-month basis was 29.5%.
Speaker Change: With Q1 being kind of the low point and then improving every quarter.
Speaker Change: Thereafter.
Speaker Change: So that's the cash flow I think your other question was with respect to <unk>.
Speaker Change: How to think about the Boston business.
Speaker Change: Through the lens of how long, it's going to take us to get the Boston business back right now that we've removed private label.
Speaker Change: There is actually knows yeah. There is no change to that thinking because again previously what we've talked about our relaunch and talked about regaining kind of R. R.
Lea Daniels Knight: As we move into 2024, we do, we will have to overcome some of the headwinds that I talked about in Q1, which will actually drive our trailing 12-month conversion down slightly. So think of it being kind of, you know, in the low 20s. And then as we progress through the year, we, you know, resolve the supply constraint on Integra, we relaunch Boston, we start to comp some of the, The lower growth periods that we saw in 2023, specifically in Q4, that's when we would expect our trailing 12 months to get back up to about 58% by the end of the year. So it's a progression up with Q1 being kind of the low point and then improving every quarter. Thereafter.
Speaker Change: Run rate trajectory it was through the lens of the commercial business right and so that's that's kind of the frame that we've talked out and we still anticipate well, we think there's a slightly longer ramp and initially.
Speaker Change: For 'twenty in terms of the 2024 impact as we get into 2025, and we have all products.
Speaker Change: Relaunched out of Boston, that's when we think in kind of that Q3 timeframe is when we'll be back at the run rate we left it at in 2022.
Speaker Change: I appreciate it thank you very much.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from Ron sooner with Oppenheimer. Your line is open.
Speaker Change: Hi, This is Steve lichtman.
Steven Lichtman: Yeah I was wondering if you could provide some more color.
Lea Daniels Knight: So that's the cash flow. I think your other question was with respect to How to Think About the Boston Business through the lens of how long it's going to take us to get the Boston business back, right, now that we've removed the private label. There is actually no, yeah, there is no change to that thinking because, again, when we talked about our relaunch and talked about regaining kind of our Run Rate Trajectory, it was through the lens of the commercial business, right?
Steven Lichtman: Coming out of the the external review in Boston.
Steven Lichtman: The learnings there and why that gives you confidence on the presumptions of sales starting in the second quarter.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: So on <unk>.
Speaker Change: Awesome and just a reminder, we haven't started that factory.
Speaker Change: In November.
Speaker Change: November Okay, and then in January had an external.
Speaker Change: U K, which we called the dress rehearsal.
Lea Daniels Knight: And so that's kind of the frame that we've talked out. And we still anticipate, while we think there's a slightly longer ramp initially, in terms of the 2024 impact, as we get into 2025, and we have all products launched out of Boston. That's when we think in kind of that Q3 timeframe is when we'll be back at the run rate we left it at in 2022. Appreciate it. Thank you very much. One moment for our next... Our next question comes from Ron Siener with Oppenheimer. Your line is open. Oh, hi, this is Steve Lichtman.
Speaker Change: I call it the successful dress rehearsal because once we got the order confirmations, but also the learnings that we hoped.
Speaker Change: To guests based.
Speaker Change: Based on the work done.
Speaker Change: Its guidance the learnings have been guiding us since the end of January over February into the preparation for that external audits.
Speaker Change: Which will take place in March.
Speaker Change: The audits yep pretty much covered.
Speaker Change: Every aspect of our quality management system.
Speaker Change: I mean from from beginning to end.
Ron Siener: I was wondering if you could provide some more color coming out of the external review in Boston, what some of the learnings there were, and why that gives you confidence on the presumptions of sales starting in the second quarter. So on Boston, just a reminder, we restarted that factory in November and then in January had an external review, which we call the Dress Rehearsal. I call it a successful Dress Rehearsal because what we got were the confirmations but also the learnings that we hoped to get. Based on the work done and its guidance, the learnings have been guiding us since the end of January through February into the preparation for that external audit, which will take place in March. The audit pretty much covered every aspect of our quality management system.
Speaker Change: Got it.
Speaker Change: Let's say limited observations all things that we could have improved the main learnings in fact, we're now on how.
Speaker Change: People at we're conducting the interactions with the different auditors.
Speaker Change: Yes, that's why we called it a dress rehearsal.
Speaker Change: Parts of successful all of it it's not just having your quality measurement system processes documentation.
Speaker Change: It needs to be it's also making sure that in the question and answering but your officers you'll make sure that all that work is readily physicals.
Yann DeWitt: I mean, from beginning to end, got, [inaudible] You make sure that all that work is readily visible. So overall, like I said, since the end of January, we're now, let's say, finishing on the lessons learned, preparing pretty much in a straight line for that external audit, which will start in the first week of March. Got it. Um, great.
Speaker Change: So overall like I said since end of January we're now, let's say, finishing.
Speaker Change: On the lessons learned then.
Speaker Change: Preparing pretty much on a straight line to that external audits, which will start to.
Speaker Change: First week of March.
Speaker Change: Got it.
Lea Daniels Knight: And then what are you assuming with regard to incremental SeraLink sales in 24, you know, with the 510KMC market hand now? And can you remind us of that opportunity sort of over the medium to long term now that it's back on the market? Thank you for the question. So Saralink, as you saw, we did achieve clearance in the U.S. in early February, and so we are relaunching that in the U.S. market. Because of the timing of when we got the clearance, we're assuming about 10 months of U.S. sales in our guide.
Speaker Change: Great and then.
Speaker Change: What are you assuming with regard to incremental.
Speaker Change: <unk> link sales in 'twenty four.
Speaker Change: With a five 10-K T. Mark in hand, now and can you remind us of that opportunity through over the medium to long term now that it's back on the market.
Speaker Change: Thank you for the question, so thoroughly and get to as you saw we did it.
Speaker Change: Achieved a clearance clearance in the U S and early February and so we are launching that in the U S market.
Speaker Change: Because of timing of when we got the clearance, we're assuming about 10 months.
Speaker Change: U S sales and our guide and so.
Lea Daniels Knight: And so, just as a reminder, on an annual basis, what we've said is the monitors are about $12 million globally. And so, you know, a portion, so, with the U.S. market being the largest market. So, [inaudible] What the 2024 implication is. In terms of that business going forward, I think, you know, annually, we would expect monitor sales to be in and around that same level, with the real opportunity being on the disposables that we'd be able to sell through as a result of increasing our install base for the monitor. And in past experience, we've seen that businesses grow at about kind of high single digits, those double digits, and we would expect similar performance. But maybe just one addition to that, looking over the next couple of years, because you've seen when we talk about strategy, Fairlink is one of those multi-year, Yeah, global growth catalysts.
Speaker Change: Just as a reminder, on an annual basis. What we've said is the monitors are about $12 million globally.
Speaker Change: So a portion.
Speaker Change: And the U S market being the largest market. So hopefully that's enough to dimensionalize kind of.
Speaker Change: The 2024 application is.
Speaker Change: In terms of that business going forward I think you know annually, we would expect a monitor sales to be in and around that same level with a real opportunity being on the disposables that we'd be able to sell through as a result of increasing our install base for the monitor.
Speaker Change: <unk>.
Speaker Change: And I cant and past experience, we've seen that business grow at about kind of high single low double digit and we would expect a similar performance here.
Speaker Change: Okay, maybe just one one addition to that looking over the next couple of years, because you've seen when we talk about strategy settling.
Speaker Change: Is one of those multi year yet.
Speaker Change: Global growth catalyst I think we've learned scheduled to recall that this is a great product customers that we had.
Lea Daniels Knight: I think we've learned to recall that this is great for the customers that we had.,,,,,,,,, that we had here before the recall also waited because, yes, Serolink is pretty much the most innovative product in the market. And so we see our sales force now picking up those leads and those prospects that they had before. We're at this point focused on the US, Okay, and Europe; Satellink will be launched in probably two plus years in Asia, with China being another important market for Satellink.
Speaker Change: States with us because they like the micro sensors and were willing to wait for settling back prospects that we had before the recall.
Speaker Change: Also weighted because just several ink is pretty much at the most innovative products.
Speaker Change: In the market and so we see our sales force now picking up those lease and those prospects that they had before.
Speaker Change: We're at this point focused on U S.
Speaker Change: And Europe settlement will be launched.
Speaker Change: Probably two plus years in Asia, with China being an another important market for settling at that point.
Richard Samuel Newitter: Got it. Thanks, Jan and Lea. One moment for our next question. The next question comes from Richard Newitter with Truist Securities. Your line is open.
Speaker Change: Got it thanks, John Omeara.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Next question comes from Richard <unk> with true Securities. Your line is open.
Richard: Hi, Thanks for taking the questions.
Lea Daniels Knight: Hi, thanks for taking the questions. Maybe just going back to Kristen's gross margin question. I think you had suggested that by first half 25, gross margin should be more normalized. First, did I hear that correctly? And then, I guess, just looking beyond second half 24, is there any reason that you wouldn't be back to historical levels, say 22 margin levels? And then follow up.
Richard: Maybe just going back to Kristin gross margin question. I think you had suggested that by the first half of 'twenty five gross margins should be in a more normalized first did I hear that correctly and then I guess just.
Richard: Looking beyond the second half 'twenty four.
Richard: Is there any reason that you wouldn't be back to historical levels say 'twenty two margin levels.
Richard Samuel Newitter: Yep, certainly. So just to be clear, we are not providing guidance with respect to 25. So our stated guidance is that we would expect a modest improvement in gross margin in 24 over 25. For 25... Again, as we bring the full product portfolio back online for Boston, we'd expect some of the headwinds that we saw in 2023 to reverse, right, especially from a mixed perspective. So that's the improvement that I was referencing. On top of that, there are these additional projects that I mentioned that we're launching in 2024 to extract additional value out of our supply chain and operational efficiency that should also contribute to gross margin improvement in 2025 over 2024, but at this point, I would not dimensionalize exactly how much that value would be. We have more work to do before we're in a position to determine that. Okay, thank you. I'm sorry; go ahead.
Richard: Follow ups.
Speaker Change: Yeah, certainly so and just to be clear, we are not providing guidance with respect to 'twenty five.
Richard: So our stated guidance is that we would expect a modest improvement in gross margin in 'twenty for over 23.
Richard: For 25.
Richard: And as we bring the full product portfolio back online for Boston, we'd expect some of the headwinds that we saw in 2023 to <unk> to reverse right, especially from a mix perspective.
Richard: So that that's the improvement that I was referencing on top of that there are these additional projects that I mentioned that we're launching in 2024 to extract additional value out of our supply chain and operational efficiency that should also contribute to gross margin improvement in 'twenty.
Richard: <unk> over 'twenty four.
Richard: But at this point, we're not dimensionalize exactly how much that value would be we have more work to do before we're in a position to determine that.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: I'm sorry go ahead.
Speaker Change: Yeah.
Lea Daniels Knight: I thought there was a second part to your question. Oh, yeah. Sorry.
Speaker Change: I thought there was a second part to your question Oh, Yes, sorry, yes, so just.
Richard Samuel Newitter: Yeah. So just one on KUSA, is that all just comps year over year, or are there competitive pressures potentially to be considering as well? And does that mean that growth snaps back in the back half on easier comps?
Speaker Change: Just one on on Pizza is is that all just comps year over year or are there competitive pressures.
Speaker Change: Centrally to be considering as well and does that mean that gross snaps back in the back half on easier comps and then also just if you I'm not sure if I heard you indicate whether or not youre or timing of FDA.
Lea Daniels Knight: And then also, just if I'm not sure if I heard, did you indicate whether or not your timing for the FDA PMA inspection for Surgiment? Thank you. So I'll take the CUSA comp question and then I'll let Yann respond on the MPA surgeon. From a CUSA perspective, so in Q1, yes, what we are seeing are much more difficult comps based on what happened in Q1 2023. And that is the primary driver. There is, because we are in the later stages of our refresh cycle, the growth rates do naturally slow as a result of that.
Speaker Change: FDA PMA inspection for sure demand. Thank you.
Speaker Change: So I'll take the cause the comp question and then I'll, let John respond on the east regimen from our Coosa.
Speaker Change: Some perspective, so in Q1, yes, what we are seeing are much more difficult comps based on what happened in Q1 2023 and that is the primary driver.
Speaker Change: There is because we are in the later stages of a refresh cycle the growth rates do naturally slow as a result of that and so that's a contributing factor as well again it doesn't impact the.
Yann DeWitt: And so that's a contributing factor as well. Again, it doesn't impact the size of our installed base. That is still growing. It's just growing at a lower rate than what we've seen previously. Okay, on the surge inspection, so the pre-approval inspection. We still expect that to happen in the second half of this year in light of getting PMA in 2025 or so.
Speaker Change: The size of our installed.
Speaker Change: Install base that is still growing it's just growing at a lower rate than what we've seen previously.
Speaker Change: Okay.
Speaker Change: The surgery inspection so do we.
Speaker Change: Approval inspection, we still expect that to happen in the second half of this year in light of getting PMA in 2025 or <unk>.
Yann DeWitt: Thank you. One moment for our next question. Our next question comes from Craig Bijou with BFA Securities. Your line is open. Good morning.
Speaker Change: Thank you.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Craig Bijou with Bofa Securities. Your line is open.
Craig William Bijou: Good morning, Thanks for taking the questions. So I wanted to go back to the Boston impact and just kind of what you guys are assuming for the second half surgery and prime Prime matrix I mean, if I look at the numbers, including the Q1 impact and then the full year.
Craig William Bijou: Thanks for taking the question. So I wanted to go back to the Boston impact and just kind of what you guys are assuming for the second half, Surgeon and Prime Matrix. I mean, if I look at the numbers, you know, including the Q1 impact and then the full year impact, it looks like it may be $25 million or so in the second half, but $25 million in revenue in the second half. So I wanted to see if that was right. And then, if I remember correctly, the Boston products were, you know, running a little bit over $80 million, I think, as of, you know, in 22. So I wanted to know what piece or what percentage of that was private label. I think you've talked about that in the past. Yep, so and so, let me back up and just frame it out.
Craig William Bijou: It looks like it may be $25 million or so in the second half.
Speaker Change: $25 million of revenue in the second half so I wanted to see if that was right and then if I remember correctly the Boston products.
Speaker Change: Run rating a little bit over $80 million I think as of in 'twenty. Two so wanted to know what piece of what percentage of that was private label I think you've talked about that in the past.
Speaker Change: Yep Yep, so and so let me back up and.
Speaker Change: Just frame out so you're right the business in Boston, we size at about kind of 5% of our total business, which is roughly the $80 million within that the private label piece is about 20% and commercial business is about 80% right.
Lea Daniels Knight: So you're right, the business in Boston is about 5% of our total business, which is roughly 80 million. Within that, the private label piece is about 20%. Social business is about 80%. When we first talked about the potential impact in 2024 as a result of Boston, we framed that out as a $50 million investment. So off of an $80 million starting point, you get to an expectation that for 2024, about 30. But that, and the guidance we're providing now, takes out of that the private label, which is why our guidance in terms of the tailwind that Boston is providing in 2020 is 60 basis points versus what should have been closer to or could have been closer to 150 to 200 basis points.
Speaker Change: When we when we first talked about the potential impact in 2024 as a result of Boston, we frame that out as a 50 million dollar impact.
Speaker Change: So off of an $80 million starting point, you get to an expectation that for 2024, you're about $30 million.
Speaker Change: But that and in the guidance, we're providing now.
Speaker Change: Out of that the private label piece, which is why our guidance in terms of the tailwind that Boston is providing in 2020.
Speaker Change: Is 60 basis points versus what should have been closer to or could have been closer to 150 to 200 basis points.
Lea Daniels Knight: Got it. Thanks. That's helpful. And then on to Codman, so understand and appreciate the color that you're given with CUSA and the comps and where you are in that replacement, or the placement cycle. How should we think about Codman growth in 24? Is it going to be at the lower end, given some of the dynamics, the lower end of your LRP, that three to 5%, I believe? Yeah, so Codman actually had really strong growth.
Speaker Change: Got it. Thanks, that's helpful and then on <unk>, so understand and appreciate the color that you've given with tusa and the comps and where you are in the replacement or the placement cycle how.
Speaker Change: How should we think about Kaufmann growth and 24 is it is it going to be at those lower end given some of the dynamics and the lower end of your L. RP that 3% to 5% I believe.
Speaker Change: Yeah. So common actually had really strong growth again, if I could just step back and look at 2023 on a full year basis, our growth across that division was $4 eight per cent, especially at the higher end.
Craig William Bijou: Again, if I could just step back and look at 2023, on a full year basis, our growth across that division was 4.8%, exactly at the higher end of the range that we anticipate for that business. And as we continue into 2024, we'll continue to see that business operate in that strong mid-single digit sort of area. And so yeah, definitely don't anticipate any kind of slowing down, if you will, for that part of our question. Great, thanks for taking the question. One moment for our next question. Our next question comes from Dave Turkaly with Citizens A&P. Your line is open. Hey, good morning. I think last quarter we talked about expecting sort of a 10 to 15 percent replacement rate, maybe for the products that were off. And I was just curious, you know, based on the comments and maybe even on skin, are you running a little bit below that, or any update you could give us there? Yeah, that replacement rate is still around that range, definitely in the woods.
Speaker Change: The range that we anticipate for that business and as we continue into 2024. It will continue to see that business operates in that strong mid single digit sort of.
Speaker Change: Area and so yeah definitely don't anticipate any kind of slowing down if you will for that part of our business.
Speaker Change: Great. Thanks for taking the questions.
Speaker Change: And then for next question.
Speaker Change: Our next question comes from Dave correctly with citizens. The MP. Your line is open.
Dave: Hey, good morning.
Dave: I think last quarter, we talked about.
Dave: Expecting sort of a 10% to 15% replacement rate maybe for the products that were off and I was just curious based on the comments and maybe even a skin.
Dave: Are you running a little bit below that or any update you can give us there.
Speaker Change: Yeah that replacement rate is still around that that range definitely in the in the woods and yes. It's one of the factors that drove our strong skin at the mountain why are inventories.
David Louis Turkaly: And yes, it's one of the factors that drove strong skin demand and why our inventories for the past several quarters have further depleted made us a bit more vulnerable to some yield effects on, Yeah, overall, that replacement was in. And then maybe for Lea, the, um... I appreciate the headwinds in one cue, but if you look at the skin supply and then CUSA... and I was wondering if you might rank them or quantify them maybe in terms of that revenue and or you know the EPS impact you think they're going to have in that first quarter again recognizing that that EPS member was certainly the most impacted. Yeah, so I think if I could dimension the impact, the skin impact is probably the larger And again, be part of that being calm. Great, thanks.
Speaker Change: Over the past several quarters, yet further depleted made us a bit more vulnerable to some.
Speaker Change: Some yield effects on the line.
Speaker Change: Overall that replacement Jeff was in that range.
Speaker Change: And then maybe for Lance.
Speaker Change: Appreciate the headwinds and <unk>, but if you look at the skin supply and then KUSA.
Speaker Change: And I was wondering if you might [laughter] ranked them or quantify them maybe in terms of that revenue.
Speaker Change: The EPS impact do you think theyre going to have in that first quarter again recognizing that.
Speaker Change: <unk>.
Speaker Change: EPS number was certainly the most of that back to them.
Speaker Change: Yeah, So I think if I I had.
Speaker Change: [laughter] Dimensionalize for you the impact of the skin impact is probably the larger determinant for why on a Q1 basis our growth outside of Boston is not.
Speaker Change: What we would anticipate in terms of mid single digit growth with coosa clarity being kind of the next.
Speaker Change: Element and again, a big part of that being the comp year on year.
Speaker Change: Great. Thanks.
Yann DeWitt: One moment for our next question. Our last question comes from Joanne Wuensch with Citi. Your line is open.
Speaker Change: One moment for our next question.
Speaker Change: Our last question comes from Joanne Wuensch with Citi. Your line is open.
Joanne Karen Wuensch: Thank you very much for taking the question. And congratulations on your retirement. I'm sort of curious, as you go about the search, what you think the next CEO should bring to the table and what he or she may do differently. And I'll toss my second question in now.
Joanne Karen Wuensch: Thank you very much for taking the question.
Joanne Karen Wuensch: And congratulations on retirement I'm sort of curious as you go about the search what Youre thinking the next CEO should bring to the table and what he or she may do differently and then I'll pass to my second question in now and there was commentary during the call about it sounds like a refocus and increased focus on.
Yann DeWitt: There was commentary during the call about it sounding like a refocus or an increased focus on international opportunities. Can you sort of frame that and how you think about funding it and the time frame to accelerate that? So at the CO6 session, like we communicated, the board has put a search committee in place. We're working with hydro construction to do a thorough and deliberate search to find a CEO successor that, on the one hand, comes with proven records of driving profitable growth businesses and, at the same time, further building out a high performing organization. From a strategy perspective, the strategy that we've been driving over the past couple of years, the strategy that we built with the executive leadership team and our board, I'm going after commercial acceleration with new product development, digital, building out our position in the care pathways, both organic and inorganic, and driving international.
Speaker Change: On international opportunities can you sort of frame that and how you think about funding it and the timeframe to accelerating it. Thank you.
Speaker Change: So on the CEO succession.
Speaker Change: We communicated them into board.
Speaker Change: A search committee in place, we are working with Hydra constructional struggles to do a thorough.
Speaker Change: And deliberate search to find a CEO successor debt.
Speaker Change: On the one hand comes with proven track records of driving profitable growth businesses and at the same time.
Speaker Change: Further building out a high performing.
Speaker Change: Organization.
Speaker Change: Yes from a strategy perspective.
Speaker Change: The strategy that we've been driving over the past couple of years had we built 20 executive leadership team and our board yet.
Speaker Change: Going after yes, commercial acceleration and with new product development digital.
Speaker Change: Building off our position into care pathways, both organic and inorganic and driving international's, okay that that strategy remains intact and my focus this year with the leadership team is making sure that not just to deliver the 2024 plan, but also further drive that momentum behind that strategy.
Yann DeWitt: That strategy remains intact. My focus this year with the leadership team is making sure not just to deliver the 2024 plan but also further drive that momentum behind that strategy. And the expectation is that it will continue in that direction. In terms of international business, we had a great international year; it is one of the strategic levers, and it will remain one of the strategic levers where we can further drive our penetration and commercial execution, not just in China but in the breadth of international countries outside.
Speaker Change: And expectation is that we'll continue in that.
Speaker Change: Action.
Speaker Change: In terms of in international.
Speaker Change: Yeah, we had a great international a year. It is one of the strategic levers and it will remain one of our strategic levers, where we can further drive our penetration in commercial execution.
Speaker Change: Just in China, but you're interpreting of international countries outside the U S.
Joanne Karen Wuensch: Thank you. Thank you. Ladies and gentlemen, this concludes today's presentation for today. You may now disconnect and have a wonderful day.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change #101: Thank you.
Speaker Change #102: Thank you ladies and gentlemen, this does conclude today's presentation for today you may now disconnect and have a wonderful day.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Okay.