Q1 2025 Integra LifeSciences Holdings Corp Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to Integra LifeSciences 1st quarter 2025 financial results call. At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
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To withdraw your question, please press star 1-1 again . .
Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to your host today, Chris Ward, Senior Director of Investor Relations. Please go ahead.
Chris Ward: Good morning, and thank you for joining the Integra LifeSciences 1st quarter 2025 earnings conference
Mojdeh Poul: With me on the call are Mojdeh Poul, President and Chief Executive Officer and Lea Knight, Chief Financial Officer.
Mojdeh Poul: Earlier this morning, we issued a press release announcing our first quarter of 2025 financial results.
Mojdeh Poul: The release and corresponding earnings presentation, which we will reference from the call, are available at IntegraLife.com under investors, events and presentations.
in a file named First Quarter 2025 earnings call presentation.
Mojdeh Poul: Before we begin, I want to remind you that many of the statements made during this call may be considered forward-looking [inaudible]
Mojdeh Poul: Vaptors that could cause actual results to different material layer discussed in the company's exchange act reports filed with the SEC and in the release.
Mojdeh Poul: Also in our prepared remarks, we'll reference reported in a organic revenue growth.
Mojdeh Poul: Organic Revenue Growth excludes the effects of foreign currency, acquisitions, and vestitures.
Mojdeh Poul: Unless otherwise stated, all the aggregator and the franchise level revenue growth rates are based on organic performance.
Lastly, a comments day will include certain non-GAAP financial measures.
Mojdeh Poul: Reconciliation 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 today with the SEC.
Mojdeh Poul: With that, I will now turn the call over to Mosher.
Mojdeh Poul: Good morning, everyone. Thank you for joining us on the call today. During today's call, I will provide the brief overview of our operating results for the first quarter followed by an update on our compliance master plan, new initiatives and key leadership appointments that will strengthen our operations, overall execution and enterprise discipline.
I will also provide remarks on the recent terrorist.
Mojdeh Poul: Lea will then walk through our financial results in more detail and provide commentary on our financial outlook for the second quarter and full year.
Mojdeh Poul: Our year has started out largely as we expected. On our first quarter performance, revenue came in at 383 million near the top end of our guidance range.
Mojdeh Poul: reported revenue grew 3.7% while organic revenue declined 3.5%. Primarily due to the expected impact of
Mojdeh Poul: Even with those constraints, we saw positive reported revenue contribution from McLaren and solid double budget growth across many product lines not impacted by supply availability, which speaks to the strengths of our underlying demand for our portfolio.
Mojdeh Poul: Adjust the GPS for the quarter, came in at 41 cents, also within our guidance range.
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Mojdeh Poul: We continue to operate in healthy end markets and remain confident in the long-term growth potential of our specialized product portfolio.
Mojdeh Poul: While we recognize we are not yet achieving the full potential of this business, our compliance master plan, along with targeted investments in our manufacturing infrastructure, are positioning us for long term sustainable growth through improved supply chain excellence.
Mojdeh Poul: Since our fourth quarter call in February , I've had the opportunity to dig deeper and spend more time with our teams across manufacturing, quality regulatory and commercial functions, as well as our customers.
Mojdeh Poul: I continue to be impressed by our team's strong commitment to our customers and our customers' consistent positive recognition of the value of our dispensated portfolio.
Mojdeh Poul: I have also gained a more nuanced understanding of where organizational inefficiencies exist and where improvements are needed.
Mojdeh Poul: I should be evident we have embarked on a turnaround here at Integra, and I see two foundational elements in executing a successful turnaround. The first element is driving the portfolio prioritization strategy that clearly defines the role and expectations of each part of our portfolio within the enterprise. Thank you very much.
Mojdeh Poul: This alignment and focus execution is the underlying intent for a newly established transformation and program management audit.
Mojdeh Poul: Our future is an organization that is disciplined and unified beyond successful execution of the highest most impactful priorities for the enterprise.
Mojdeh Poul: We must execute and reliably serve our customers today. We must transform our quality management system and we must create rooms to selectively invest in a few impactful innovation opportunities.
Mojdeh Poul: Going forward, these two foundational elements are portfolio prioritization and program management efforts, must be driven holistically and in relation to one another rather than individually.
Mojdeh Poul: We made important progress this quarter on the compliance master plan, particularly in plant level assessments and early stages of remediation. Today, from its type assessment standpoint, we've completed ten of our manufacturing sites and remain on track to complete their remaining four sites by the end of third quarter.
Mojdeh Poul: We will need much of the court's order to develop remaining actions from the findings and complete assessments at our key finished group suppliers.
Mojdeh Poul: We anticipate that remediations will continue throughout 2025, and based on early findings, some remediations will continue into 2026.
Mojdeh Poul: While there is still a significant amount of work to be done, I am encouraged by the rigor of our process and confident in our ability to deliver sustained improvements in compliance and supply reliability.
Mojdeh Poul: We have made meaningful progress in addressing these holes and continue to expect they will be principally remediated in the second half of this year.
Mojdeh Poul: Late in the first quarter, we identified additional shipholes for certain products within the CSS and T-Shirt Technologies businesses.
which we are working diligently to resolve.
Mojdeh Poul: As we said before, our compliance master plan is designed to address the highest risk areas of our operations and not necessarily prioritized by our highest revenue products first.
Mojdeh Poul: Our plan is guided to address gaps and findings related to quality system regulations, FDA warning letters, and form 483 observations.
Mojdeh Poul: Based on the scope eyed lines in CMT, we are on track to complete the implementation of our actions outlined in the December warning letter by year.
Mojdeh Poul: While our quality, resilience, and capacity efforts move forward, my deep engagement across the organization has also revealed the need for more effective prioritization of our program at the enterprise level and a more disciplined approach to program management and execution.
Mojdeh Poul: This needs spans not only major strategic initiatives, but also the company's broader execution
Mojdeh Poul: To address this, I have established this transformation and program management office reporting directly to me.
Mojdeh Poul: Its office will lead efforts to instill a more rigorous enterprise-wide program management discipline, ensuring programs are properly prioritized, scoped and resourced with clear milestones, KPIs and oversight to ensure timely and complete execution.
Speaker Change: Rick Mavis will be leading our enterprise transformation and program management office and brings within strong expertise in leading complex business transformation, advancing operational excellence and driving financial performance.
Mojdeh Poul: With over 20 years of experience, including leadership roles at 3M and most recently at Solventum, he has a proven track record in business execution planning and program management.
Mojdeh Poul: This capability will be foundational to how we operate going forward.
Speaker Change: We have also further strengthened our operations and supply chain organizations with the appointment of Valerie Young as Corporate Vice President Global Operations and Supply Chain.
Speaker Change: Valories is a season executive with extensive global operations and supply chain experience across healthcare, automotive, industrial and consumer goods industry.
Speaker Change: In addition to her recent work in Supply Chain Strategy and Transformation Consulting, she served as Senior Vice President of Global Supply Chain Operations at VM, where she was responsible for manufacturing in Supply Chain Strategy and ERP deployment.
Speaker Change: I had the privilege of working closely with Valerie during my tenure at 3M, experiencing first-time her expertise in operation strategy, lean six sigma, as well as driving continuous improvement in safety, quality, service, cost, and working capital.
Speaker Change: Valorant mandate is to strengthen the operations and supply chain leadership team and culture, while also partnering with our quality organization to ensure successful implementation of the Compliance Matcher Plan.
Speaker Change: Valerie is also establishing a continuous improvement organization to drive operational excellence throughout our ensue and supply chain network, optimizing asset management, reducing total deliver costs, and most importantly delivering quality products to our customers.
Speaker Change: As part of our investments in operational excellence, we continue to make progress on the Brain Tree Facility, which will enable us to restart production of Surgeon Man and Primetric.
Speaker Change: Our goal is to bring the facility online in the first half of 2026 [inaudible]
Speaker Change: We plan to provide a project status and launch time-on-office for the five-think-a-clear product in Q4 of this year.
Speaker Change: We are also making investments to enhance production capabilities for Integra's game. As we shared on our fourth quarter call, scheduled maintenance and equipment upgrades prevented us from fully meeting the man in Q1. However, we did deliver production and revenue performance in line with our Q1 expectations.
Speaker Change: The comprehensive set of integral skin manufacturing resiliency programs initiated last year to include yields, upgrade equipment, and optimize flight utilization or beginning to pay off.
Speaker Change: We can see this already in Q2 and have experienced steady yield improvements for this product since Q4.
Speaker Change: We expect production and revenue runways to return to normal this quarter and begin rebuilding safety stock in the second half of the year.
Speaker Change: Turning to our item, we expect second quarter revenue in the range of 390 to 400 million.
Speaker Change: Representing a reported decline of approximately minus 6.8 to minus 4.4% and includes based on the recent exchange rate movements and approximate 80 basis points tailwind versus the prior year due to foreign currency translation.
Speaker Change: As a reminder, we lost the acquisition of our Clarence on April 1. So, our Clarence revenue will be included in our organic growth metrics beginning in Q2.
Speaker Change: We are maintaining our full year in revenue guidance of 1.65 billion to 1.72 billion.
Speaker Change: While the newly identified ship holds at the end of Q1 will have an impact, the anticipated revenue headlines fall within the assumptions we made when setting the guidance range.
Speaker Change: We expect Adjust the DPS for the second quarter to be in the range of 40 to 45 turns [inaudible]
Speaker Change: For the full year, we now expect adjusted EPS between $2.19 and $2.29
Speaker Change: with the only adjustment to prior guidance being the impact of the recently announced global
Speaker Change: While the terrorist situation continues to rapidly evolve, we have incorporated the financial impact of the terrorist into our updated 2025 guidance based on what we know today, which is obviously subject to change based on any future announcement.
Speaker Change: Most of our manufacturing takes place in the United States and Europe . Still, we saw certain components and finished goods from Canada, Mexico, China, and other countries not subject to New
Speaker Change: Our tariff exposure in China includes receptical tariffs on products, manufacturers in the US, and exported into China, as well as tariffs on raw materials and components important from China into the US.
Speaker Change: Our China facility currently under construction is not yet operational and is designed to serve the local Chinese market.
Speaker Change: In response to the dynamic terrorist environment, we are proactively evaluating and implementing strategies to mitigate the financial impacts, including optimizing forcing, exploring pricing changes and serve charges, managing landed costs, and seeking potential terrorist exemptions.
Speaker Change: This includes discipline expense prioritization, closely monitoring discretionary expending, and strategically allocating resources while continuing to invest in Craig called the Disinitiative
Speaker Change: These strategies will take time to implement thoughtfully, but our focus remains on minimizing operational disruption and maintaining continuity of supply to our customers during this period of uncertainty.
Speaker Change: Lea will now provide more specifics on the first quarter financial results and share additional details on our guidance and the impact of parents. Lea?
Lea: Thank you most, let's take a more detailed look at our first quarter financial highlights starting on slide five.
Lea: Total revenues for the first quarter were approximately 383 million, representing growth of 3.7% on a reported basis, and a decline of 3.5% on an organic basis compared to the same period last year.
Lea: Reported revenues include approximately $29 million from the Appearant Acquisition and a 60 basis point FX headwind.
Lea: Organic Revenue Performance was negatively impacted by several supply disruptions provided for in our guide, including shipholds mounting to approximately 18 million, production timing impact to integral skin of about 5 million, and 4 million stemming from a private label component supply issue.
Lea: are just the EPS for the quarter with 41 cents down 25% compared to 2024.
Lea: As we look down the P&L, Growth margins for 52.2% for the first quarter, down 220 basis points versus 2024.
Lea: Gross margins in the first quarter were negatively impacted by manufacturing variances carrying over from supply challenges in 2024 in efficiencies related to our private label supply and an increase in network optimization spend.
Lea: are just that either the margins were 16.6% down 290 basis points compared to 2024, reflecting the decline in growth margins and increase investment in our quality organization.
Lea: Operating cash flow for the first quarter was negative $11.3 million $11.
Lea: Turning to slide six, we'll now discuss revenue highlights from our common specialty surgical segment.
Lea: CSS reported first quarter revenues of 281 million, which reflects growth of 9.4% on a reported basis, and is decline of 1.1% on an organic basis.
Lea: Global neurosurgery revenues declined 4.7% organically largely driven by the impact of ship holes.
Lea: These hold particularly effective performance across our advanced energy, CSS Management, Drill Access and Repair, and Neural Minerary Potocolon Drill Access and Repair,
Lea: However, demand across the neurosurgery portfolio remains strong, particularly in areas not affected by these holes [inaudible]
Lea: We were encouraged to see double-digit growth in key products such as Dourjan and Nathaniel Capital Equipment.
Lea: In our ENT business, we continue to be pleased with the progress of the Eclarent integration, which contributed approximately $29 million in revenue for the quarter.
Lea: Organic growth in our E&T reporting segment was approximately flat due to supply constraints on microference E&T.
Lea: As a reminder, this organic growth reflects only the performance of the Micro France E&T instrument portfolio for the first 12 months following the close of the apparent acquisition.
Lea: First quarter capital sales declined by low single digits primarily due to a tough prior
Lea: Excluding Fairlink, the remainder of the capital portfolio delivered low single digit growth.
Lea: Our global capital funnel remains strong and well positioned to support future growth.
Lea: We also saw strong performance in our Instruments portfolio which delivered 15% growth driven by continued demand in both the hospital and alternate site setting as well as a favorable prior year comparable.
Lea: International performance within CSS declined by high single digits with the decline primarily attributable to the timing and duration of a shipboat.
Lea: The revolution of these hold has taken longer in the international markets than in the US, limiting our ability to fulfill customer demand.
Lea: Addressing these international delays is among our highest operational priorities and we have directed significant resources to meet the continued underlying demand from our international customers.
Lea: Failed in one reconstruction, were down due to Integra skin and chip holes on other products which were implemented late in the first quarter
Lea: We continue to see double digit growth for Durserb and our UDM platform.
Lea: In private label, sales were down 13% versus last year due to component supply delays.
Lea: Finally, international sales and tissue technologies were down low double digits due to the
Lea: Relicified 8th, I will now review our balance sheet, capital structure and cash flow.
Lea: During the first quarter, our operating cash flow was negative 11.3 million, and free cash flow was negative 40.2 million, reflecting higher capital expenditures as we continue to invest in key infrastructure.
Lea: As of March 31, net debt was 1.6 billion and our consolidated total leverage ratio was 4.3 times within our current maximum allowable leverage ratio of 5 times.
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Lea: The current maximum allowable leverage ratios remain at five through the third quarter of 2025, stepping down to 4.25 for Q4 of 2025.
Lea: We ended the first quarter with total liquidity of 1.2 billion, including 273 million in cash and short-term investments with the remaining liquidity available under our revolting credit facility.
Lea: If you turn to 5-9, I will provide our consolidated revenue and adjusted earnings for sheer guidance for the second quarter and full year 2025.
Lea: Before doing so, I'd like to take a moment to provide some background on the recently announced tariffs and how we're approaching them in our outlook.
Lea: Although there is still uncertainty surrounding the administration's ongoing global trade negotiations.
Lea: We have included the impact of the new tariffs in our second quarter and full year guidance.
Lea: We also believe it's helpful to quantify the specific effects and highlight the key drivers of the tariff in our eyes.
Lea: The majority of our manufacturing occurs in the United States and Europe , with key international fights in Ireland, Switzerland, France, and Israel.
Lea: We also contract a portion of manufacturing in Germany, Costa Rica, Japan, Mexico and Canada.
Lea: Approximately half of our global revenue is generated from products manufactured in the United States.
Lea: in China, which accounts for approximately 5% of our total revenue, roughly half of the product's sales are manufactured in the United States.
Lea: While we are building a China-based manufacturing facility to support long-term growth in the region, it is not expected to be operational in 2025.
Lea: The estimate and impact of approximately $22 million in 2025 or 22 cents per share on an after-tax basis
Lea: This estimate assumes the application of the global 10% tariff on goods entering the United States, with rates increasing to various country-specific rates following the 90-day pause on July 9.
Lea: Tariff Cost will be accounted for within our cost of good souls and will be catalyzed in inventory and recognized as those products are sold.
Lea: Inventory associated with products manufactured outside the U.S. and imported into the U.S., turn over in approximately four to seven months.
Lea: Finished goods imported into China from the US, turnover in approximately one month
Lea: We expect a progressive impact to our growth margin and adjust the ETS across the final three quarters of 2025 within the second quarter of approximately four cents.
Lea: Turning to our guidance for the second quarter of 2025, we expect revenues to be in the range of $390,000,000 to $400,000,000, representing a reported decline between minus 6.8%.
Lea: and minus 4.4%, and based on a recent exchange rate movement includes an estimated 80 basis point of tail-in versus the prior year from foreign currency translation.
Lea: We expect an organic decline between minus 7.5% and minus 5.1%.
Lea: Our forecast reflects continued strong global demand for our products, normal seasonal sequential improvement, and the benefit of improved production yields for integrity skin.
Lea: These gains will be more than offset by approximately 25 million and expected revenue impact from shipholes in the quarter related to execution of the compliance master plans.
Lea: For the full year, we are reaffirming our revenue guidance in the range of $1.65 billion to $1.72 billion.
Lea: To date, cumulative full-year revenue impact of identified Chipotle is approximately 55 to 70 million.
Lea: As a reminder, our full-year guidance range contemplated between $90 and $150 million of shipples associated with the compliance master plan.
Lea: Our updated guidance also reflects an approximate $10 million benefit from FX since our February
Lea: Based on our guidance range, we expect full-year reported revenue growth of 2.4% to 6.5% and organic growth of approximately 0.4% to 4.4%
Lea: Our 2025 Revenue forecast assumes four primary drivers of sequential improvements throughout the year. First, we expect a benefit from typical seasonal volume increases.
Lea: Turning to adjusted earnings per share, for the second quarter, we expect EPS to be in the range of 40 to 45 cents, reflecting the effects of the shipholds, increased investments tied to compliance initiatives, and the tariff impact.
Lea: For the full year 2025, we expect adjusted earnings for share in the range of $2.19 to $2.29 [inaudible]
Lea: This outlook reflects the underlying revenue growth of the business, compliance investments and manufacturing variances and our commitment to careful cost management to preserve key strategic priorities while maintaining profitability.
Lea: The only change to the full-year EPS outlook from prior guidance is to account for the impact of the recently announced CARA, which we estimate may be up to 22 cents per share.
Lea: For your reference, Slide 10 outlines the key assumptions supporting both our second quarter and full year guidance, along with relevant modeling inputs and initial assumptions regarding paraphernaly to impact in our guidance.
Lea: Before we move to Joanne, we want to see some moments to thank all of our employees for their hard work and the progress we continue to make together. Your dedication and perseverance are critical to driving our momentum and strengthening our foundation for the future.
Lea: We would also like to thank our investors for joining us today and for your continued support and partnership.
Lea: With that, we'll now open the line for questions. Operator, please open the line.
Speaker Change: As our reminder, if you'd like to ask a question at this time, please press star 11 on your touchtone phone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Please stand by when we compiled the Q&A roster.
Our first question comes from Matt Taylor with Jeffries
Speaker Change: All right, great. Thanks for taking our questions. This is actually a young lady in from that. I guess to start maybe just on the two guidance.
Speaker Change: You know, a little bit more than expected, but you know, some of that is related to the Sheppan delay.
Speaker Change: I wanted to hear a little bit more about you know what you found sort of late in 1Q for you to up that number even though it's within Andrew guidance.
Speaker Change: and then just the assumptions that come from the end of two Q's items and then just, you know, the confidence level for the second half of the year given that it'll be a bigger ramp.
Speaker Change: Certainly, thank you for the question. So, to your point on Q2, it does reflect the newly identified, the impact of the newly identified Chip Holds.
Speaker Change: which did bring down kind of our original expectation of Q2. That said,
Speaker Change: We did as part of our February call and the full year guidance. We did contemplate.
Speaker Change: So we saw that play out in Q2. It's reflected in the guide that you heard.
Speaker Change: for Q2. At the midpoint, the Q2 guy now reflects a step up of about $12 million versus Q1.
Speaker Change: That reflects improved Integra production, so we'll see that step up in Q2 versus Q1. It does reflect a little bit of normal seasonality that we see in Q2 versus Q1 of about 10 million. And then it is offset by kind of the net incremental shipping holds that I discussed.
Speaker Change: From a second half perspective, again, at the midpoint, our guide reflects a step up of about $125 million, second half versus first half.
Speaker Change: Another 30% of that has to do with stronger demand that we're seeing from parts of our portfolio that have not been impacted by supply.
Speaker Change: We see about a 15% of that lift driven by a net supply improvement, so while we did see supply shipholds in Q1 and Q2, we'll start to update a bit in the second half, so we'll see improvement there, and the final 25% driven by our seasonal demand. We'll see about a 15% driven by our seasonal demand, so we'll see about a 15% driven by our seasonal demand.
Speaker Change: You know, you're getting very helpful. And then I guess to follow up on a certain question on tariff in past
Speaker Change: You know, you called out $22 million, $0.22 impact for $0.25.
Speaker Change: and this kind of wonder, you know, how much mitigation efforts are built into that.
Speaker Change: Thank you for your question. So we have several mitigations that we're pursuing when it comes to tariffs, you know, in the near term obviously we're applying we're continuing to apply for
Speaker Change: Terrific exemptions and we're considering pricing, selected pricing increases as well as surcharges were appropriate and possible.
Speaker Change: And then when it comes to longer term actions it's about sourcing optimization and also optimizing our supply chain network and value streams and obviously we do have the manufacturing facility in China that we are building.
Speaker Change: We are actively pursuing all these mitigations, both short and long term, but we haven't built the impacts of them into our guide at this point. Lea, if you want to. Yeah, let me take the second part of the question. So, to your point, the 22 million that we characterized is specific to 2025.
Speaker Change: At this point, we think it's a little premature to provide guidance specific to 2026. We'll need to wait to understand more about how the task policy is finalized in the coming weeks and months.
All right. Thank you very much.
Our next question comes from Ryan Zimmerman with BTIG.
Speaker Change: Hi everyone, this is Izzy on For Ryan. Thanks for taking the questions. I heard your commentary on the expectation for private label to step up in the back half of the year, but I was just curious what kind of line of fight you have into demand and what is contributing to your confidence there.
Speaker Change: Thank you for the question. Yes, we do anticipate a second half step up. The order of magnitude is about a $10 million step up, step up second half versus first half. On a full year basis, we are adjusting our private label forecast down a bit. So we are now calling it to be about a low single digit decline. Previously, we thought it'd get back to flat.
Speaker Change: That said, we still believe as this business is for it into 2026, it will continue to perform at a mid single digit growth trajectory.
Speaker Change: Thank you for watching. Please subscribe to my channel. I hope to see you again soon.
Speaker Change: Thank you, that's helpful. And then, instruments had pretty strong growth this quarter with the double digits. We were curious if there was any pull forward in demand that in that line from tariffs.
Speaker Change: Not necessarily driven by tariffs per se, on a full year basis we would expect that business to continue to be kind of the low mid single digit gross trajectory that we typically see on that business.
Great. Thanks for taking the questions.
Our next question comes from Vik Chopra with Wells Fargo .
Vic Chopra: Oh, hey, good morning and thanks for taking the question. Mojdeh, you know, you've been there for I guess about a quarter and I just love to hear kind of what has surprised you to the upside to the downside and then I had a quick call of question please.
Our Hayberg, it's good to hear your voice.
Mojdeh Poul: Yes, I'd like to answer that question in the context of the what and the how, what in the sense of...
Vic Chopra: Did I know everything that was going on here regarding the supply chain challenges and quality work that's being done?
Vic Chopra: So the answer to what, what was the part of the challenges that we were facing? Yes, that was not a surprise to me. The board had been very transparent with me about that. I think my findings during the time that I have been here...
Vic Chopra: is more around how we operate and move forward our priorities.
Vic Chopra: So, to me, that's about execution. I think that's where I see the opportunities for significant improvement and that's why I have actually established the Office of Transformation Program Management
because what I'm trying to drive is...
Vic Chopra: to have prioritization of our key initiatives and programs at the enterprise level.
Vic Chopra: So the organization has clarity and around what's the most important for us to drive short and long term performance for the company
Vic Chopra: and then how do we scope those programs, how do we resource them adequately and how do we put in place the governance that's required to make sure we manage them to the key milestones and deliver girls that they have to deliver in order to execute those programs and initiatives on time and info.
Vic Chopra: So for us, it's about advancing the foundational capabilities that are required to make performance and operational excellence part of the fabric of what we do and how we do things at Integra.
Speaker Change: I've got it. Thank you. That's very insightful. My follow-up question is for Lea. Do you have a convert in maturing in August of this year? Any thoughts on how you plan to satisfy that commitment? Thanks for taking the questions.
Speaker Change: That portfolio will allow us to fix about over half of our debt outstanding at that time.
Thank you. Thank you. Thank you.
Our next question comes from Robbie Marcus with J.P. Morgan .
Speaker Change: Hi, this is Ashley Lillian for Robbie. Thanks for taking the question. One follow-up on tariffs. I was wondering if you could break down the different components of the tariff impact and what's assumed in the guide. How much of that 22 million is from your exposure to China and how much of it is from Europe and other international imports?
Thanks for watching!
Speaker Change: Let me answer that by giving you a sense of how tariffs are showing up in the P&L, and I think that will give you a sense of relative side things.
Speaker Change: 2. The tariffs on goods imported into China from the U.S., we recognize also through cost of goods sold as those products are sold and that's typically with a one-month horizon. [inaudible]
Speaker Change: So as you'll see, the costs associated with goods exported to China will be realized on a much more immediate basis.
Speaker Change: In Q2, we're seeing about a force and impact, which is largely China. As we progress throughout the balance of the year, you'll see more of that cost start to be reflected from the goods that we...
Speaker Change: We import into the U.S., but in the immediate it will be more so China-based
Speaker Change: Got it, and just as a follow-up on the guide, the 55 to 70 million in shipholds, they're pretty big stuff up from the 27 million previously. So I'm just trying to get a sense for how conservative you feel this guide is, how do you risk, do you think this updated outlook is, and what gives you the confidence in the ramp of the rest of the year? Thanks so much.
Speaker Change: Yep, no worries. So, to your point, our guide that we communicated back in February did allow us was constructed with the intent to allow us to absorb about 90 to 150 million in supply disruption.
of our guide. So the high-end remains.
Speaker Change: Our expectations on how private label supply constraints will be alleviated along with strength and demand that we're seeing from other parts of our portfolio that aren't impacted by supply.
Speaker Change: That momentum also gives us confidence that the high end of our range is still possible. So, in short, just felt it was too premature at this point to bring down the high end of the guide.
Great, thank you.
Our next question comes from Richard Neuwetter with Truist.
Speaker Change: Hi, good morning, this is Ravi for Rich. Thank you for taking the questions.
Speaker Change: Is there a goal, or is there any color that you can give around remediation being completed by the time Brain Tree goes live? Can we, I guess what I'm trying to ask is, can we have a clearing event by that time potentially?
And then I have a follow-up.
Hello.
Speaker Change: Thank you for your question. So, a couple of parts to your question regarding our efforts on...
Speaker Change: and the remaining four are going to be completed by the end of the third quarter.
Speaker Change: And then also in Q4, we are doing the assessments in our key finished goods suppliers. And so all the assessments are going to be completed by the end of the year and
and we are already working towards making sure that…
Speaker Change: with delivering to the key action items that we have provided to FDA that's outlined in the warning letter and we are running on track with those.
Speaker Change: and we have been in regular dialogue with USDA, we have submitted.
Speaker Change: One update to them actually in March and there's another update that we're providing to them on our progress in the middle of May. So we've been with dialogue with them, working diligently to address all the findings.
Speaker Change: Great, thank you, though, super helpful commentary. And then, I guess my second one is...
on schedule. Thank you.
Speaker Change: Skin Substitudes and LCD pushouts, I guess, that were supposed to go into effect about a month ago, but not anymore. So can you maybe talk about, you know, what you're seeing in that space, maybe what the...
Speaker Change: The overall kind of view of the industry looks like right now what you may be doing to get some more of your products on that list if you think that it's going to be coming back into effect potentially next year or later on in the future. Thank you.
Thank you. Sure. Thank you for your questions.
Speaker Change: We just a reminder that majority of our business is in the inpatient and not outpatients, you know, even though we have products that are on the list but
Speaker Change: Majority of our revenue is inpatient. However, we definitely think this is a positive that...
Speaker Change: The products with the proven clinical evidence would be called out for being the products that get used. We think that's a great move and we look forward to the implementation of it in January , hopefully.
Our next question comes from Joanne Wuensch with City [inaudible]
[inaudible]
Speaker Change: Hi everyone, this is Anthony Amford, Joanne, just one from us.
Speaker Change: with the tariff mitigation strategies, particularly the more disciplined expense management. How confident are you that this isn't going to impact any of your immediate efforts and the ability to get for entry up by next year? Thanks. Thank you.
Speaker Change: Yeah, Anthony, thanks for the question. So to your point, again, we are in the process of implementing those tariff mitigation actions and given kind of the nature and materiality of it. Yeah, there definitely is a high priority for us.
Speaker Change: At this point we don't believe it will get in the way of our ability to do that as well as continue our progress on the CMPs.
Speaker Change: or those remediation efforts. Again, as a reminder, our tariff mitigation actions are around pricing, sourcing, logistics.
from local in China for China production ultimately.
Our next question comes from Jason Bedford with Raymond James James.
Jason Bedford: Good morning, just a couple questions that probably require quick answers, I think they're all for Lea. First, on the 22 million in tariffs, is it fair to say that half of the impact is China, if I just carry the four cents through?
for 2025, directionally that's close, that's about right, yeah.
Jason Bedford: Okay, and then on the guide for the year, the revenue guide, Lea, I think you mentioned change in expectations for private label, any other notable segment changes embedded in the 25 revenue guide.
No, not based on what we see right now [inaudible]
Jason Bedford: Okay, and then last one, is there a 2Q revenue impact from from skin and private label that the component apologizes if I missed it earlier?
Jason Bedford: So for Q2, actually for Integra scan, that's what we'll start to see a pickup based on the production that we're seeing already. So we'll start to see that business pickup compared to Q1. Private label though, we'll still not see the lift in Q2. That lift will begin in Q3.
For more information visit www.FEMA.gov
Thank you.
We're going to talk about this in a minute.
Speaker Change: As a reminder to ask a question, please press star 1-1 on your touch-tone phone.
Speaker Change: Our next question comes from a line of Craig Bijou with Bank of America.
Speaker Change: Lea, I guess I just want to understand. So is the shiphold increase that you guys saw or that you're expecting this year? Is that roughly $10 million? And then I did notice that organic growth for the full year in the guide.
Speaker Change: Thanks for the question, Craig. So the incremental shipples that we identified late in Q1.
Thank you. Bye.
Speaker Change: So if you recall in our February call, at that point in time, we had identified annual impacts.
at about 27 million [inaudible]
Speaker Change: When you add on top of that, what was newly identified, that's how you get to the range that we call that in a prepare remarks of about 55 to 70 million is what we're currently projecting as the annual impact for shipholtes. So I hope that answers that part of the question.
Speaker Change: And then your second question, Craig, or second question? Yeah, organic growth, I think in the bridge it goes from 3 to 2.4 so is that just the ship hold impact?
Speaker Change: Yes, so we held the reported range of our February Guide flat and it does reflect a $10 million tailwind from FX.
and Jan Witte. Thank you. Thank you.
that was absorbed into their organic piece.
Okay, but the organic…
Speaker Change: I guess I'm just asking because I think in the bridge you have organic growth, you had organic growth of 3% for 25% and now it's 24% so I don't know if it was just a shipholder or if there was something else that we should be considering on the underlying growth. Thank you very much.
Speaker Change: Yeah, it was more just, we kept our reported range flat and the offset is FX became a tailwind so the offset is the organic growth to come down slightly.
Speaker Change: Okay, and then one quick follow-up on your debt leverage, and I believe that you said that the covenant goes to 4.25 and Q4, and I think you said at the end of Q1, you were at 4.3, so
Speaker Change: to manage profitability very closely. We do have the ability, if necessary, to drive incremental op-ex reduction. Should that become...
Speaker Change: necessary and then we're also keeping open transparent dialogues with our bank partners and lending groups long standing investors that we've had.
Speaker Change: to make sure that they also understand how we're closely managing the business for profitability this year. And so for all those reasons, fully believe we'll be able to remain within our covenant levels, even with the shutdown that you noted in Q4.
Great, thanks for taking the questions [inaudible]