Q2 2025 Integra LifeSciences Holdings Corp Earnings Call
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I'd like to hand, the conference over to your first speaker today, Chris Ward Senior director of Investor Relations. Please go ahead.
Good morning, and thank you for joining the Integra Lifesciences second quarter 2025 earnings conference call.
With me on the call are multiple president and Chief Executive Officer, and Leo Knight Chief Financial Officer.
Earlier. This morning, we issued a press release announcing our second quarter 2025 financial results.
And corresponding earnings presentation, which we will reference during the call are available at Integra life Dot com under investor events and presentations in the file named second quarter 2025 earnings call presentation.
Before we begin I want to remind you that many of the statements made during this call maybe considered forward looking factor.
Factors that could cause actual results to differ materially are discussed in the company's exchange Act reports that are filed with the SEC and in the world.
Also in our prepared remarks, we will reference reported inorganic revenue growth.
Organic revenue growth exclude the effects of foreign currency acquisitions and divestitures.
Unless otherwise stated all disaggregated and franchise level revenue growth rates are based on organic.
Lastly, in our comments today will reference certain non-GAAP financial measures reconciliations of non-GAAP financial measure can be found in today's press release, which is an exhibit to integrity current report on form 8-K filed today with the SEC.
With that I will now turn the call over to Moshe.
Thank you Brad good morning, everyone and thank you for joining us for our second quarter 2025 earnings call I would like to start by acknowledging the tremendous work done by our teams across the company to deliver a strong second quarter performance, while advancing our U R.
Transformation is underway and I'm encouraged by the progress we're making in establishing the foundation for operational excellence and a culture of continuous improvement that will drive long term performance consistency and reliability across our business.
Today, I will walk through the progress, we're making on our compliance masterplan provide an update on our operational excellence efforts and close with an overview of our financial results and updated guidance.
We will then take you through the financials and our revised outlook in more detail.
Let's begin with our progress on our compliance Master plan, we continue to execute our compliance Master plan as a cornerstone of our turnaround I'm pleased to share that we completed assessments and all of our internal manufacturing site ahead of our original QC timeline with zero related ship holds identified or initiate it.
Since our last earnings call.
This is a key milestone in our risk reduction and operational readiness effort.
We have taken the learnings from our site assessments and have begun remediation planning and execution, our quality engineering and operations teams working closely with the newly formed transformation and program management office has built a detailed risk based execution roadmap that prioritizes efforts aligned with.
The FDA quality system regulation and previous observations.
Office overseas execution of the risk mitigation plan, including resource allocation timelines and deliverables.
Operator: 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 will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Christopher Ward, Senior Director of Investor Relations. Please go ahead.
Some of the remediation work will extend into 2026 with continuous improvement, becoming a standard element of operating in highly regulated industry.
cultural continuous improvements that will drive long-term performance consistency and reliability across our business
We remain fully committed to transforming our quality management system across our supply chain network and recognize there is still.
Today, I will walk through the progress, we're making on our compliance master plan. Provide an update on our operational, excellence efforts and close with an overview of our financial results and updated guidance.
Significant work ahead.
We are encouraged by the positive outcomes on recent FDA inspections at two of our facilities not covered by the 100 level.
Leo will then take you through the financials and our revised Outlook in more detail.
Christopher Ward: Good morning, and thank you for joining the INTEGRA LIFESCIENCES Second Quarter 2025 Earnings Conference call. With me on the call are Mojdeh Poul, President and Chief Executive Officer, and Lea Knight, Chief Financial Officer. Earlier this morning, we issued a press release announcing our second quarter 2025 financial results. The release and corresponding earnings presentations, which we will reference during the call, are available at integralife.com under Investors, Events, and Presentations in a file named Second Quarter 2025 Earnings Call Presentations. Before we begin, I want to remind you that many of the statements made during this call may be considered forward-looking. Factors that could cause actual results to differ materially are discussed in the company's Exchange Act reports that are filed with the SEC and in the loop. Also, in our prepared remarks, we will reference reported inorganic revenue growth.
Related to other warning letters, we continue to provide regular updates on our actions submitted to the FDA and.
The progress, we're making in quality compliance supports our advancements towards the operational strength and agility required to execute consistently across our global network.
Let's begin with our progress on the compliance master plan. We continue to execute our compliance master plan as a cornerstone of our turnaround. I'm pleased to share that we completed assessments at all of our internal manufacturing sites ahead of our original Q3 timeline, with zero related ship holds identified or initiated since our last earnings call.
Whether these capabilities are critical to delivering the reliability and performance our stakeholders expect.
This is a key milestone in our risk reduction and operational readiness efforts.
Moving to operations.
We remain focused on strengthening execution across our global network.
We have implemented a new supply chain control tower to drive enhanced visibility accountability and performance management throughout our global supply chain.
We are making good progress at our Braintree facility, which will support the relaunch of surgeon and biometrics.
Christopher Ward: Organic revenue growth excludes the effects of foreign currency acquisitions and divestitures. Unless otherwise stated, all disaggregated and franchise-level revenue growth rates are based on organic performance. Lastly, in our comments today, we will reference 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 8-K filed today with the SEC. With that, I will now turn the call over to Mojde.
We have taken the learning from our site assessments and have begun remediation planning and execution. Our quality engineering and operations teams working closely with the newly formed transformation and program management office have built a details. Risc-based execution roadmap that prioritizes efforts aligned with the FDA quality system regulations and previous observations.
We remain on track to bring the slides online in the first half of 2026 and plan to share our relaunch timeline by the end of this year.
This office oversees execution of the risk. Mitigation plan, including resource allocation timelines and deliverables.
The facilities quality management system is on schedule for implementation with equipment installation and qualifications underway.
Some of the renewal Edition work will extend into 2026 with continuous Improvement, becoming a standard element of operating in highly regulated industry.
In addition, the site staffing model has transitioned to its long term operating structure, ensuring readiness to resume manufacturing operations.
Mojdeh Poul: Thank you, Chris. Good morning, everyone, and thank you for joining us for our second quarter 2025 earnings call. I would like to start by acknowledging the tremendous work done by our teams across the company to deliver strong second quarter performance while advancing our priorities. Our transformation is underway, and I'm encouraged by the progress we're making in establishing the foundation for operational excellence and a culture of continuous improvement that will drive long-term performance, consistency, and reliability across our business. Today, I will walk through the progress we're making on our compliance master plan, provide an update on our operational excellence efforts, and close with an overview of our financial results and updated guidance. Lea will then take you through the financials and our revised outlook in more detail. Let's begin with our progress on the compliance master plan.
Turning to our financial performance in the second quarter, we delivered global revenue of $416 6 million.
We remain fully committed to Transforming Our quality management system across. Our supply chain Network and recognize there is still significant work ahead. We are encouraged by the positive outcome from recent FDA inspections at 2 of our facilities not covered by the 1.
Exceeding the high end of our guidance.
Reported an organic revenue growth were both down slightly versus the prior year, which was expected and previously communicated during our Q1 earnings call.
Related to our warning letters, we continue to provide regular updates on our actions committed to the FDA.
This was largely due to the impact of ship holds offsetting healthy mid single digit growth across the portfolio, which underscores the continued demand for our differentiated products.
The progress we're making in quality compliance supports our advancement towards the operational strength and agility required to execute consistently across our global network.
together, these capabilities are critical to delivering the reliability and performance or stakeholders expect
Adjusted EPS came in at 45 at the top of our guidance range, reflecting strong revenue execution on Opex management offset by higher remediation costs.
Moving to operations, we remain focused on strengthening execution across our Global 1 Network.
And standout this quarter was integra skin through our manufacturing resiliency and yield improvement effort, we achieved the company's highest ever production levels in Q2 and expect to maintain normal revenue run rate through the rest of the year. We are also rebuilding safety stock to improve supply reliability moving.
We have implemented a new supply chain control tower to drive enhanced visibility, accountability, and performance management throughout our global supply chain.
Mojdeh Poul: We continue to execute our compliance master plan as a cornerstone of our turnaround. I'm pleased to share that we completed assessments at all of our internal manufacturing sites ahead of our original Q3 timeline with zero related shift holds identified or initiated since our last earnings call. This is a key milestone in our risk reduction and operational readiness effort. We have taken the learnings from our site assessments and have begun remediation planning and execution. Our quality, engineering, and operations teams, working closely with the newly formed Transformation and Program Management Office, have built a detailed risk-based execution roadmap that prioritizes efforts aligned with the FDA quality system regulations and previous observations. This office oversees execution of the risk mitigation plan, including resource allocation, timelines, and deliverables.
We are making good progress at our brain tree facility which will support the relaunch of Sergeant and Prime metrics.
All right.
As the reimbursement and access dynamic shifts in wound care, we are well positioned with a clear path to restore our full wound the construction portfolio.
We remain on track to bring the site online in the first half of 2026 and plan to share our relaunch timelines by the end of this year.
The facilities quality management system is on schedule for implementation with equipment installation and qualifications on the way.
Timing of our Integra skin production recovery, along with our preparations to restock biometrics next year align well with the recent proposed changes for wound care reimbursement in the outpatient and physician office setting.
In addition, the site staffing model has transitioned to its long-term operating structure, ensuring readiness to resume manufacturing operations.
The established clinical evidence across our portfolio strongly supports the opportunity for us to deliver care beyond the acute care setting.
Turning to our financial performance. In the second quarter, we delivered Global revenue of 415.6 million exceeding. The high end of our guidance.
Our continued investments in further clinical evidence will also provide additional support for broader reimbursement.
Reported on organic Revenue growth were both down slightly versus the prior year which was expected and previously communicated during our q1 earnings call.
Looking ahead to our financial expectations for the third quarter, we expect revenue between $410 million and $420 million, representing approximately 8% to 10% reported they book.
Mojdeh Poul: Some of the remediation work will extend into 2026, with continuous improvement becoming a standard element of operating in highly regulated industries. We remain fully committed to transforming our quality management system across our supply chain network and recognize there is still significant work ahead. We are encouraged by the positive outcomes from recent FDA inspections at two of our facilities not covered by the warning letter. Related to our warning letter, we continue to provide regular updates on our actions committed to the FDA. The progress we're making in quality compliance supports our advancement towards the operational strength and agility required to execute consistently across our global network. Together, these capabilities are critical to delivering the reliability and performance our stakeholders expect. Moving to operations, we remain focused on strengthening execution across our global network.
This was largely due to the impact of ship holds, upsetting healthy, Miss single digits growth across the portfolio, which underscores continue demands for differentiated products.
For the full year, we are updating our revenue guidance to a range of $1 $6 5 billion to $1 68 billion.
This reflects increased visibility into our ship hold and remediation outlook, including an expectation that we will not experience any material new holes related to the compliance Master plan for the remainder of the year.
Adjust the DPS came in at 455 cents at the top of our guidance range reflecting, strong Revenue, execution and Opex management offered by higher remediation costs.
For Q3, we expect adjusted EPS between <unk> 40 and 45.
A standout. This quarter was integral to our manufacturing resiliency and yield improvement efforts. We achieved the company's highest ever production levels in Q2 and expect to maintain a normal revenue run rate through the rest of the year.
And we are maintaining our full year EPS guidance range of $2 19.
We are also rebuilding 50 stock to improve Supply, reliability moving forward.
The $2 29.
Before turning the call over to Leah I want to emphasize the long term focus and initiatives. We are taking to drive additional shareholder value. We remain confident in our leadership positions in neurosurgery and tissue technology and a sustained demand in the attractive markets we serve.
As a reimbursement and active Dynamic shift in wound care. We are well positioned with a clear path to restore our full wound reconstruction portfolio.
We are laying the foundation for sustainable growth and profitability through strategic investments and disciplined cost management. This includes enhancing supply chain reliability and executing on our compliance masterplan.
The timing of our integral scheme production recovery, along with our preparations to restart PTX next year and line. Well, with the recent proposed changes for wound, hearing investment in the outpatient and Physician Office settings.
Mojdeh Poul: We have implemented a new supply chain control tower to drive enhanced visibility, accountability, and performance management throughout our global supply chain. We are making good progress at our Braintree facilities, which will support the relaunch of Surgiment and Pymetrix. We remain on track to bring the site online in the first half of 2026 and plan to share our relaunch timeline by the end of this year. The facility's quality management system is on schedule for implementation, with equipment installation and qualifications underway. In addition, the site staffing model has transitioned to its long-term operating structure, ensuring readiness to resume manufacturing operations. Turning to our financial performance in the second quarter, we delivered global revenue of $415.6 million, exceeding the high end of our guidance. Reported organic revenue growth was down slightly versus the prior year, which was expected and previously communicated during our Q1 earnings call.
The established clinical evidence across our portfolio strongly supports the opportunity for us to deliver care beyond the acute care setting.
Additionally, as part of our broader transformation, we are optimizing our operating model to accelerate decision, making strengthen accountability and enables scalable execution, while embedding a culture of continuous improvement.
Support for broader reimbursement.
These efforts will allow us to move with greater agility reduce complexity and unlock meaningful value in quarters ahead.
Looking ahead to our financial expectations. For the third quarter, we expect revenue between 410 million, and 420 million representing approximately 8 to 10% reported quote.
Based on our preliminary work in the initial phase of this initiative, we expect to deliver minimum annualized savings of $25 million to $30 million over the next 12 to 18 months by driving out inefficiencies and redundant costs.
For the full year. We are updating our Revenue, guidance to arrange a 1.655 billion to 1.68 billion.
Optimizing our cost structure is essential to maintaining long term competitiveness, particularly in light of the evolving cake and macroeconomic environment.
This reflects increased visibility into our ship, hold and Remediation Outlook, including an expectation that we will not experience any material, new holes related to the compliance matter plan for the remainder of the year.
This is a foundational first step in a larger strategic initiatives to drive sustained margin expansion I look forward to keeping you updated on this initiative in the coming quarters with that.
For Q3 we expect adjusted EPS between 40 and 45 cents. And we are maintaining our full year, EPS guidance range of $2.19 to $2.29.
Mojdeh Poul: This was largely due to the impact of shift holds offsetting healthy mid-single-digit growth across the portfolio, which underscores continued demand for our differentiated products. Adjusted EPS came in at 45 cents at the top of our guidance range, reflecting strong revenue execution and OPEX management offset by higher remediation costs. A standout this quarter was Integra Skin. Through our manufacturing resiliency and yield improvement efforts, we achieved the company's highest ever production levels in Q2 and expect to maintain normal revenue run rates through the rest of the year. We are also rebuilding safety stock to improve supply reliability moving forward. As the reimbursement and access dynamics shift in wound care, we are well positioned with a clear path to restore our full wound reconstruction portfolio.
I will now turn the call over to Leah.
Before turning the call over to Leah, I want to emphasize the long-term focus and an initiative. We are taking to drive additional shareholder value.
Thank you Moshe, let's take a more detailed look at our second quarter financial highlights starting on slide five.
Total revenues for the quarter were $415 $6 million, representing a decline of approximately 6% on a reported basis and one 4% on an organic basis comparison same period last year.
We remain confident in our leadership positions, in neurosurgery, and tissue technology. And the sustained demand in the attractive markets. We serve
We are laying the foundation for sustainable growth and profitability through strategic Investments and discipline cost management. This includes enhancing supply chain reliability and executing on our compliance master plan,
Put it revenues included a foreign exchange tailwind of approximately 80 basis points.
Organic revenue performance exceeded our expectations despite supply disruptions related to remediation efforts under our complaints most quickly.
Additionally. As part of a broader transformation, we are optimizing our operating model to accelerate decision-making. Strengthen accountability and enable scalable execution, while embedding a culture of continuous Improvement.
Adjusted earnings per share for the quarter was <unk> 45.
Representing a 29% decline compared to the second quarter of 2024.
These efforts will allow us to move with greater agility reduce complexity and unlock meaningful value in quarters ahead.
Mojdeh Poul: The timing of our Integra Skin production recovery, along with our preparations to restart Pymetrix next year, align well with the recent proposed changes for wound care reimbursement in the outpatient and physician office setting. The established clinical evidence across our portfolio strongly supports the opportunity for us to deliver care beyond the acute care setting. Our continued investments in further clinical evidence will also provide additional support for broader reimbursement. Looking ahead to our financial expectations for the third quarter, we expect revenue between $410 million and $420 million, representing approximately 8% to 10% reported growth. For the full year, we are updating our revenue guidance to a range of $1.655 billion to $1.68 billion.
On a GAAP basis, we recorded a goodwill impairment charge of approximately $511 million during the quarter discharge was identified through our goodwill testing and was primarily driven by macroeconomic uncertainties, such as tariffs and risk around the supply recovery efforts, which were reflected in the decline of our market capitalization.
Based on our preliminary work in the initial phase of this initiative, we expect to deliver minimum annualized Savings of 20 to 30 million over the next 12 to 18 months by driving out, inefficiencies, and redundant costs.
Over Q2.
I want to emphasize that this impairment charge is noncash and reflect the accounting requirements under GAAP. It has no impact on our cash position or liquidity and will not affect our ongoing operations or our ability to execute our strategic priorities.
Optimizing. Our cost structure is essential to maintaining long-term competitiveness, particularly in light of the evolving, Carrick and macroeconomic environment.
This is a foundational first step in a larger strategic initiative, to drive, sustained margin expansion. I look forward to keeping you updated on this initiative in the coming quarter with that, I will not turn the call over to Leah.
Gross margin for the quarter was 67% down 450 basis points year over year, primarily due to higher operational costs associated with ship hold remediation.
Thank you, Moshe. Let's take a more detailed look at our second-quarter financial highlights, starting on slide 5.
Mojdeh Poul: This reflects increased visibility into our shift holds and remediation outlook, including an expectation that we will not experience any material new holds related to the compliance master plan for the remainder of the year. For Q3, we expect adjusted EPS between 40 and 45 cents, and we are maintaining our full-year EPS guidance range of $2.19 to $2.29. Before turning the call over to Lea, I want to emphasize the long-term focus and an initiative we are taking to drive additional shareholder value. We remain confident in our leadership positions in neurosurgery and tissue technology and the sustained demand in the attractive market we serve. We are laying the foundation for sustainable growth and profitability through strategic investments and disciplined cost management. This includes enhancing supply chain reliability and executing on our compliance master plan.
Adjusted EBITDA margin was 17, 1% down 290 basis points, reflecting the decline in gross margin.
Total revenues for the quarter were 415.6 million representing, a decline of approximately 0.6% on a recorded basis, and 1.4%, on an organic basis, compared to the same period last year.
This was partially offset by disciplined expense management as we continue to prioritize investments in our quality systems and efforts to build operational resilience and execution capabilities.
Reported revenues included a foreign exchange Tailwind of approximately 80 basis points.
Operating cash flow for the quarter was $9 million.
Organic Revenue performance, exceeded our expectations, despite Supply destructions related to remediation efforts under our compliance master plan.
Turning to slide six let's review the revenue highlights from our common specialty surgical segment.
CSS reported second quarter revenues of $304 million, reflecting growth of 7% on a reported basis and a decline of 3% on an organic basis.
Adjusted earnings per share for the quarter were 45 cents. Representing a 29% decline compared to the second quarter of 2024.
Neurosurgery revenues increased 3% organically driven by strong performance in our Coosa platform, where a service goes Mayfield cranial stabilization system, <unk> backfill and sterilant monitors.
On a gap basis. We reported a Goodwill impairment charge of approximately 511 million during the quarter. This charge was identified through our Goodwill testing become as primarily driven by macroeconomic uncertainties such as Paris and risk around the supply recovery efforts, which were reflected in the decline of our market capitalization over Q2.
Mojdeh Poul: Additionally, as part of our broader transformation, we are optimizing our operating model to accelerate decision-making, strengthen accountability, and enable scalable execution while embedding a culture of continuous improvement. These efforts will allow us to move with greater agility, reduce complexity, and unlock meaningful value in quarters ahead. Based on our preliminary work in the initial phase of this initiative, we expect to deliver minimum annualized savings of $25 to $30 million over the next 12 to 18 months by driving out inefficiencies and redundant costs. Optimizing our cost structure is essential to maintaining long-term competitiveness, particularly in light of the evolving CAIF and macroeconomic environment. This is a foundational first step in a larger strategic initiative to drive sustained margin expansion. I look forward to keeping you updated on this initiative in the coming quarters. With that, I will now turn the call over to Lea.
This growth was offset by the impact of staples, which particularly affected our advanced energy dural access and repair and neuro monitoring franchises.
Despite these challenges demand across neurosurgery portfolio remains strong with mid single digit growth in products not experiencing supply constraints.
I want to emphasize that this impairment charge is non-cash and reflecting County requirements, under gas. It has no impact on our Academy position or liquidity and will not affect our ongoing operations or our ability to execute our strategic priorities.
In our E&P business, we remain encouraged by the ongoing integration of our clearance, which contributed approximately $30 million in revenue this quarter.
gross margin for the quarter was 60.7% down, 450 basis, points year-over-year, primarily due to higher operational costs, associated with ship polls remediation
We're pleased with the overall integration progress and prospects for this business growth for the quarter came in below our expectations. This was primarily due to reimbursement driven market pressure and the final part of the balloon segment as well as timing of capital equipment favorable these headwinds offset double digit growth in ore presentation to balloon dilation.
Just even the margin was 17.1% down, 290 basis points reflecting the decline in gross margin.
This is partially off back by discipline, expense management, as we continue to prioritize investments in our quality system in efforts to build operational, resilience, and execution capabilities.
Operating cash flow for the quarter was 9 million.
<unk> navigated disposable.
Second quarter capital sales grew low single digits, primarily due to coosa capital sale.
During the 56, let's review the revenue highlights from our common specialty, surgical segments.
Our global capital funnel remains strong and well positioned to support future growth.
Lea Knight: Thank you, Mojde. Let's take a more detailed look at our second quarter financial highlights, starting on slide five. Total revenues for the quarter were $415,6 million, representing a decline of approximately 0.6% on a reported basis and 1.4% on an organic basis compared to the same period last year. Reported revenues included a frying exchange tailwind of approximately 80 basis points. Organic revenue performance exceeded our expectations despite supply disruptions related to remediation efforts under our compliance master plan. Adjusted earnings per share for the quarter were 45 cents, representing a 29% decline compared to the second quarter of 2024. On a GAAP basis, we reported a goodwill impairment charge of approximately $511 million during the quarter.
And our instrument portfolio revenue declined low single digits, driven by a difficult comparison in the alternate site channel following strong performance in the prior year.
CSS reports, second quarter, revenues of 304 million, reflecting growth of 0.7% on a recorded basis and a decline of 0.3% on our organic basis.
This was partially offset by growth across our acute care business.
International performance within CFS declined by low single digits, primarily attributable to the ship holds which offset strong underlying demand from our international markets, including high single digit growth in China.
Ization system. Duracell back to seal and serial link monitors.
This growth with offset by the impactor ship holds, this particularly effective or Advanced Energy Durrell assess and repair and neural monitoring franchises.
Moving to our tissue technology segment on slide seven.
Tissue technology revenues were $111 6 million down approximately 4% on both a reported and organic basis compared to the prior year.
Despite these challenges the man across neurosurgery portfolio, remains strong with Miss single digit growth in products, not experiencing Supply constraints.
Within wound reconstruction, we saw strong underlying growth across the portfolio, including double digit growth from <unk> and integra skin.
In our ENT business, we remain encouraged by the ongoing integration of a clearance which can contribute to approximately 30 million 30 million in Revenue this quarter.
Lea Knight: This charge was identified through our goodwill testing and was primarily driven by macroeconomic uncertainties such as tariffs and risks around the supply recovery efforts, which were reflected in the decline of our market capitalization over Q2. I want to emphasize that this impairment charge is non-cash and reflects non-accounting requirements under GAAP. It has no impact on our cash position or liquidity and will not affect our ongoing operations or our ability to execute our strategic priorities. Gross margin for the quarter was 60.7%, down 450 basis points year over year, primarily due to higher operational costs associated with shift hold remediation. Adjusted EBITDA margin was 17.1%, down 290 basis points, reflecting the decline in gross margin. This was partially offset by discipline expense management as we continue to prioritize investments in our quality system and efforts to build operational resilience and execution capabilities.
Growth in Integra skin was supported by both continued demand strength and improved production output.
While we're pleased with the overall integration progress and prospects for this business. Both for the quarter came in below our expectations.
<unk> performance was driven primarily by sustained market demand.
This is primarily due to reimbursement, driven by market pressure in the final plastic balloon segment, as well as the timing of capital equipment sales.
We also saw high single digit growth in micro matrix and cycle.
However, this growth was offset by the impact of previously announced ship hold specifically related promotion.
These headwinds are set double digit growth in error for the Station 2. Balloon violation and our treaty navigated disposable.
And our private label business sales declined five 9% year over year, primarily due to a component supply delays and softer commercial demand experienced by one of our private label partners.
Second quarter, Capital sales, grew low single digits primarily due to inclusive Capital sales.
Our Global Capital funnel remains strong and well, positioned to support future growth.
International sales in tissue technologies declined low double digits, reflecting strong growth in integra skin that was more than offset by the impact of the metal honey shingles.
In our instruments, portfolio Revenue declined, low single digits driven by a difficult comparison. In the alternate site Channel, following strong performance in the prior year,
This is partially off back by growth across our acute care business.
Turning to slide eight I'll now review, our balance sheet capital structure and cash flow.
During the second quarter operating cash flow was $8 9 million and free cash flow was negative $11 2 million.
International performance within CFS declined by low single digits primarily attributable to the ship holds which offset strong underlying demand from our International markets including high single-digit growth in China.
Lea Knight: Operating cash flow for the quarter was $9 million. Turning to slide six, let's review the revenue highlights from our common specialty surgical segment. DSS reported second quarter revenues of $304 million, reflecting growth of 0.7% on a reported basis and a decline of 0.3% on an organic basis. Global neurosurgery revenues increased 0.3% organically, driven by strong performance in our CLISA platform, in Aurora Surgicel, Mayfield cranial stabilization systems, Duraseal, Vactaseal, and Serilink monitors. This growth was offset by the impact of shift holds, which particularly affected our advanced energy, dural access and repair, and neuromonitoring franchises. Despite these challenges, demand across the neurosurgery portfolio remains strong, with mid-single-digit growth and products not experiencing supply constraints. In our ENT business, we remain encouraged by the ongoing integration of Acclarent, which contributed approximately $30 million in revenue this quarter.
Reflecting our continued capital investments in key infrastructure.
Moving to our tissue technology segment on slide 7.
As of June 30, net debt stood at $1 five 9 billion and our consolidated total leverage ratio was four five times, which remains within our current maximum allowable leverage ratio of five times.
Tissue technology revenues, were 111.6 million down, approximately 4% on both a reported and organic basis. Compared to the prior year.
This ratio expense for the second quarter of 2020.
Within Moon reconstruction. We saw strong underlying growth of the portfolio, including double-digit growth from dorso and Integra skin.
Following the amendment to our credit agreements executed during the second quarter.
We fully anticipate being well below our maximum allowable leverage ratio when the amendment expires.
Growth in Integra skin was supported by both continued demand cents and improved, production outputs. While duro's performance was driven primarily by sustained market demand,
We ended the quarter with total liquidity of $1 $1 billion, including $254 million in cash and short term investments with the remainder available under our revolving credit facility.
we also saw high single-digit growth in micromatrix and cycle.
However, this growth was offset by the impact of previously, announced ship holds specifically related to metehan.
As a reminder, we plan to use this facility to satisfy the convertible bond maturity in the third quarter.
If you turn to slide nine I will provide our consolidated revenue and adjusted earnings per share guidance for the third quarter and full year 2025.
In our private label business sales declined, 5.9% year-over-year primarily due to a component of Supply delay and software commercial demand, experienced by 1 of our private label partners.
For the full year, we are updating our revenue guidance to a range of $1 $65 5 billion to $1 $6 8 billion.
Lea Knight: While we're pleased with the overall integration progress and prospects for this business, growth for the quarter came in below our expectations. This was primarily due to reimbursement-driven market pressure in the sinuplasty balloon segment, as well as timing of capital equipment sales. These headwinds offset double-digit growth and error for Eustachian tube balloon dilation and are truly navigated disposables. Second quarter capital sales grew low single digits, primarily due to CLISA capital sales. Our global capital funnel remains strong and well-positioned to support future growth. In our instruments portfolio, revenue declined low single digits, driven by a difficult comparison in the alternate site channel following strong performance in the prior year. This was partially offset by growth across our acute care business.
International sales and tissue Technologies, decline, low double digits, reflecting, strong growth. And Integra scan that was more than offset by the impact of the meta. Honey shift. Hold
This updated range, reflecting more refined view of the full year impact from ship holds informed by the progress we've made in executing the compliance Master plan and the increased visibility that have come with it.
Turning to slide 8, I'll now review our balance sheet capital structure and cash flow.
When we issued our original guidance. We included a broad range of $90 million to $150 million to account for potential shipping impacts related to the compliance masterplan.
During the second quarter, operating cash flow was 8.9 million in free. Cash flow was negative 11.2 million reflecting our continued Capital investments in key infrastructure.
As we've said previously that range was intentionally wide given the early stage of our plan and the number of unknowns at this time.
As of June 30th. Next debt, stood at 1.599% and our Consolidated total leverage ratio was 4.5 times, which remains within our current maximum allowable, leverage ratio of 5 times.
Since then we've completed our final adjustments and now have a clearer picture of the full year impact.
This ratio extends through the second quarter of 2026, following the amendment to our credit agreements executed, during the second quarter.
We've refined our customer ship holds and related remediation for the year to be approximately $100 million.
Lea Knight: International performance with NCSS declined by low single digits, primarily attributable to the shift holds, which offset strong underlying demand from our international markets, including high single-digit growth in China. Moving to our tissue technology segment on slide seven, tissue technology revenues were $111.6 million, down approximately 4% on both a reported and organic basis compared to the prior year. Within wound reconstruction, we saw strong underlying growth across the portfolio, including double-digit growth from Durasorb and Integra Skin. Growth in Integra Skin was supported by both continued demand strength and improved production output, while Durasorb's performance was driven primarily by sustained market demand. We also saw high single-digit growth in Micro Matrix and Figel. However, this growth was offset by the impact of previously announced shift holds, specifically related to Medihoney.
We fully anticipate being well below our maximum allowable leverage ratio when the Amendments expires.
Which is $30 million more in reported last quarter.
This increase is solely due to the extended remediation timeline, where few of our previously communicated chip holds and we have not identified any new compliance masterplan related chip holds since our first quarter earnings call.
The end of the quarter with total liquidity of 1.1 billion dollars, including 264 million in cash and short-term Investments with the remainder available under our revolving credit facility.
Importantly, based on completion of manufacturing site assessments, we do not anticipate any new material shipments in the second half of the year.
As a reminder, we plan to use this facility to satisfy the convertible, bio maturity in the third quarter.
The lower end of our updated guidance range reflects extended timelines required to complete remediation efforts already communicated and in progress while the top end of our range reflects the potential for stronger demand a more rapid return to market for select products in our portfolio.
If you turn the slide 9, it will provide our Consolidated revenue and adjusted earnings per share. Guidance for the third quarter and full year 2025
For the full year, we are updating our revenue guidance to a range of $1.655 billion to $1.68 billion.
Based on this revised outlook, we now expect full year reported revenue growth of approximately two 8% to four 3%.
This updated range reflecting more refined view of the full year impact on ship holds informed by the progress we've made in executing the compliance master plan and the increased visibility that has come with it.
Ganic growth of approximately 6% to two 1%.
For the full year 2025, we are maintaining our adjusted EPS guidance in the range of $2 19.
Lea Knight: In our private label business, sales declined 5.9% year over year, primarily due to a component supply delay and softer commercial demand experienced by one of our private label partners. International sales in tissue technologies declined low double digits, reflecting strong growth in Integra Skin that was more than offset by the impact of the Medihoney shift holds. Turning to slide eight, I'll now review our balance sheets, capital structure, and cash flow. During the second quarter, operating cash flow was $8.9 million and free cash flow was negative $11.2 million, reflecting our continued capital investments in key infrastructure. As of June 30th, net debt stood at $1.59 billion and our consolidated total leverage ratio was 4.5 times, which remains within our current maximum allowable leverage ratio of five times.
When we issued our original guidance, we included a broad range of 90 to 150 million dollars to account for potential shipping impacts related to the compliance master plan.
To two hours in 2009.
This outlook incorporates our updated revenue expectations remediation costs ongoing compliance and manufacturing costs and increased interest expense.
As we have said, previously that range was intentionally wide given the early stage of our plan and the number of unknowns at the time
These pressures are being offset by disciplined cost management and updated tariff related policy changes and mitigation since our may guidance.
4 year impact.
For the third quarter, we expect revenue to be in the range of $410 billion to $420 million, representing reported growth between seven 7% and 10, 3%.
We've refined our assessment of ship holds and related remediation for the year to be approximately 100 million dollars which is 30 million more than reported last quarter.
We expect organic growth between seven 3% and nine 9% or.
This increase is solely due to Extended remediation timeline for a few of our previous communicated ship holds we have not identified any new compliance faster. Plan related ship holds since our first quarter earnings call.
Our forecast reflects continued strong global demand for our products normal second half seasonal sequential improvement and the benefit of improved production yields for integra skin and other supply recovery.
Importantly, based on completion of manufacturing site. Assessments, we do not anticipate any new materials in the second half of the year.
For the third quarter, we expect EPS to be in the range of 40 to 45.
Lea Knight: This ratio extends through the second quarter of 2026 following the amendments to our credit agreement executed during the second quarter. We fully anticipate being well below our maximum allowable leverage ratio when the amendments expire. We ended the quarter with total liquidity of $1.1 billion, including $254 million in cash and short-term investments, with the remainder available in our revolving credit facility. As a reminder, we plan to use this facility to satisfy the convertible buy maturity in the third quarter. If you turn to slide nine, I will provide our consolidated revenue and adjusted earnings per share guidance for the third quarter and full year 2025. For the full year, we are updating our revenue guidance to a range of $1.655 billion to $1.68 billion.
Reflecting the effects of longer remediation and the impact of <unk>.
For additional detail please refer to slide 10, which outlines the key assumptions supporting both our third quarter and full year guidance.
The lower end of our updated guidance range requests extended timelines required to complete remediation efforts already communicated and in progress, while the top end of our range reflects the potential for stronger demand and a more rapid return to markets for select products in our portfolio.
I will now turn the call over to Moshe to conclude our prepared remarks.
Thank you Leah.
Closed this quarter was all about focus execution and momentum we made real measurable progress in building the foundation for what comes next.
Based on this revised Outlook. We now, expect a full year, reported Revenue growth of approximately 2.8 to 4.3% and organic growth of approximately 0.6 to 2.1%.
For the full year. 2025, we are maintaining our adjusted ECS guidance in the range of $2.19 to $2.29.
While there is more work ahead on transformation of our quality management system. The compliance Master plan is proceeding as planned and remediation efforts are underway at the same time, we're focused on restoring supply reliability strengthening operational discipline and delivering on our financial commitments.
This Outlook with corporate or updated Revenue, expectations or mediation costs ongoing compliance and Manufacturing costs and increased interest expense.
These pressures are being offset by discipline cost management and updated tariff related policy changes. And mitigations, since our May guidance
We're also driving cost efficiencies to restore the earnings power of the business and generate margin expansion reinforcing our ability to deliver meaningful returns for our shareholders.
Lea Knight: This updated range reflects a more refined view of the full year impact on shift holds, informed by the progress we've made in executing the compliance master plan and the increased visibility that has come with it. When we issued our original guidance, we included a broad range of $9,450 million to account for potential shifting impacts related to the compliance master plan. As we have said previously, that range was intentionally wide given the early stage of our plan and the number of unknowns at the time. Since then, we've completed our site investments and now have a clearer picture of the full year impact. We've refined our assessment of shift holds and related remediation for the year to be approximately $100 million, which is $30 million more than reported last quarter.
This marks a significant step in our shift from stabilization to transformation and the opportunity ahead is exciting we operate in highly attractive markets with strong fundamentals and durable long term demand for our differentiated portfolio.
for the third quarter, we expect Revenue to be in the range of 410 million to 420 million representing reported growth between 7.7% and 10.3%.
We expect organic growth between 7.3% and 9.9%.
Our plan for obtaining PMA approval for <unk>. The results are underway unlocking our potential and implant based breast reconstruction. In addition, the proposed Medicare payment and LCD changes will favor evidenced back cost effective wound the construction product positioning us well for future growth in multiple.
Our forecast reflects continued strong, Global demand for our products, normal second half seasonal, sequential Improvement and the benefit of improved production yields for integer Spin and other Supply recoveries.
For the third quarter, we expect EPS to be in the range of 40 to 45 cents reflecting the effects of longer remediation, and the impact of sales.
For additional details. Please refer to slide 10 which outlines the key assumptions supporting both our third quarter and full year guidance.
Type of kit.
I remain energized by the significant opportunities to position the company for sustainable growth and long term value creation.
Lea Knight: This increase is solely due to extended remediation timelines for a few of our previously communicated shift holds, as we have not identified any new compliance master plan-related shift holds since our first quarter earnings call. Importantly, based on completion of manufacturing site assessments, we do not anticipate any new material shift holds in the second half of the year. The lower end of our updated guidance range reflects extended timelines required to complete remediation efforts already communicated and in progress, while the top end of our range reflects the potential for stronger demand and a more rapid return to market for select products in our portfolio. Based on this revised outlook, we now expect full-year reported revenue growth of approximately 2.8 to 4.3% and organic growth of approximately 0.6 to 2.1%.
I will now turn the call over to Moshe to conclude our prepared remarks.
Foundational work, we're doing today will allow us to fully realize the value of our portfolio accelerate growth and drive long term value for our shareholders. Operator. Please open the line for questions.
Thank you, Leah to close. This quarter was all about Focus execution and momentum, we made real measurable progress in building. The foundation. For what comes next?
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced.
Your question you can press star one again.
While there is more work ahead on transformation of our quality management system. The compliance master plan is proceeding as planned and Remediation efforts are underway at the same time. We're focused on restoring Supply reliability, strengthening operational, discipline and delivering on our financial commitment.
Please stand by our composite Q&A roster.
And our first question comes from the line of Vik Chopra of Wells Fargo. Your line is now open.
We're also driving cost efficiencies to restore the earning power of the business and generate margin expansion reinforcing. Our ability to deliver meaningful return to our shareholders.
Hey, good morning, and thanks for taking the questions two for me.
First I would love to get your thoughts around the CMS has proposed 2026 reimbursement changes.
Lea Knight: For the full year 2025, we are maintaining our adjusted EPS guidance in the range of $2.19 to $2.29. This outlook incorporates our updated revenue expectations, remediation costs, ongoing compliance and manufacturing costs, and increased interest expense. These pressures are being offset by discipline cost management and updated tariff-related policy changes and mitigations since our May guidance. For the third quarter, we expect revenues to be in the range of $410 million to $420 million, representing reported growth between 7.7% and 10.3%. We expect organic growth between 7.3% and 9.9%. Our forecast reflects continued strong global demand for our products, normal second half seasonal sequential improvement, and the benefit of improved production yields for Integra Skin and other supply recoveries. In the third quarter, we expect EPS to be in the range of 40 to 45 cents, reflecting the effects of longer remediation and the impact of errors.
Aim to control over utilization and spending on skin substitutes can you maybe just remind us what impact this has on integra and what percentage of your products are exposed and then I had a quick follow up please.
This marks, a significant step in our shift from stabilization to transformation, and the opportunity ahead is exciting. We operate in highly attractive, markets with strong fundamentals and durable, long-term demand for our differentiated portfolio.
Thank you for your question Greg Good morning.
Yes, so just want to make sure that I.
<unk> mentioned on the first of all that.
Under that majority of our business is in the in hospital setting in the acute care.
Our plans for obtaining PMA. Approval for surgeon, and Pandora's work are on their way. Unlocking, our potential in implant-based breast reconstruction. In addition, the proposed medicare payment and LCD changes will favor evidence back. Cost-effective wound, reconstruction products, positioning as well for future growth in multiple sites of care.
And so we don't see any.
Immediate short term impact of these changes however, long term for sure.
We're encouraged by the changes that they are proposing because obviously, it's going to favor the products that are cost effective as well as having strong evidence behind them. So we are encouraged by that and long term.
I remain energized by the significant opportunity to position the company for sustainable growth and long-term value creation. The foundational work we're doing today. Will allow us to fully realize the value of our portfolio, accelerate growth and drive long-term value for our shareholders operator. Please open the line for questions.
A lot more opportunity for our wound reconstruction portfolio.
As we leverage the clinical evidence that we.
Thank you. At this time, we will collect the question and answer session as a reminder, to ask a question. You'll need to press star 1, 1 on your telephone and wait for your name. To be announced to withdraw your question. You can press star 1 1 again.
Have been putting behind this product lines as well as continuing to strategize as we move forward into our long range plan.
Please stand by while we compile the Q&A roster.
Lea Knight: For additional details, please refer to slide 10, which outlines the key assumptions supporting both our third quarter and full year guidance. I will now turn the call over to Mojde to conclude our prepared remarks.
The longer term opportunity would be for us to be able to leverage.
And our first question comes from the line of Victor Chopra of Wells. Fargo, your line is now open.
The changes that are being proposed.
Mojdeh Poul: Thank you, Lea. To close, this quarter was all about focus, execution, and momentum. We made real, measurable progress in building the foundation for what comes next. While there is more work ahead on the transformation of our quality management system, the compliance master plan is proceeding as planned and remediation efforts are underway. At the same time, we're focused on restoring supply reliability, strengthening operational discipline, and delivering on our financial commitment. We're also driving cost efficiencies to restore the earnings power of the business and generate margin expansion, reinforcing our ability to deliver meaningful return to our shareholders. This marks a significant step in our shift from stabilization to transformation, and the opportunity ahead is exciting. We operate in highly attractive markets with strong fundamentals and durable long-term demand for our differentiated portfolio.
So that's the best way, we see the opportunity right now it'll be mainly in the future and we're building towards that.
Great. Thank you and then my follow up question. Your Q3 EPS Guide I think came in below the street, but you've maintained your guide for the full year that implies a pretty significant step up in the fourth quarter, maybe just walk us through what's going on there and how we should think about modeling the back half of the year, specifically Q4. Thank you.
The percentage of your products are exposed, and then I had a quick follow-up, please.
Yeah. So thanks for the question. So a couple of things. So let me talk about a little bit about the revenue step up in the back half and then and then address specifically in the EPS.
Question. So as you look at our Q3 guide from a revenue perspective.
We're guiding to.
That is consistent with what we delivered in Q2.
And that's actually very consistent with what we've seen in the past in years, where we haven't had significant supply disruption.
Mojdeh Poul: Our plans for obtaining PMA approval for Surgiment and Durasorb are underway, unlocking our potential in implant-based breast reconstruction. In addition, the proposed Medicare payment and LCB changes will favor evidence-backed cost-effective wound reconstruction products, positioning us well for future growth in multiple types of care. I remain energized by the significant opportunity to position the company for sustainable growth and long-term value creation. The foundational work we're doing today will allow us to fully realize the value of our portfolio, accelerate growth, and drive long-term value for our shareholders. Operator, please open the line for questions.
As we get into Q4, we are calling a revenue step up of about $38 million going from Q3 to Q4, that's driven by two factors, 60% of that is going to be driven by the normal seasonal lift that we see on our business combined with the very strong momentum that we've been seeing on integra skin.
The other 40% is going to be driven by the high recovery. So we've talked about <unk>.
First of all, that a reminder, that majority of our business is in the in hospital setting in the acute care. Um, and so we don't see an immediate short-term impact of these changes. However, long term for sure. We, um, we are very encouraged by the changes that they're proposing, because obviously it's going to favor. The products that are cost effective as well as have having, um, strong evidence behind them. So, we are encouraged by that and long term. There's definitely, uh, a lot more opportunity for our wound reconstruction portfolio. Um, as we Leverage The Clinical evidence that we have been putting behind this product lines, as well as continuing to strategize, as we move forward into our long-range plan. Uh, what the longer term opportunity would would be for us, to be able to leverage, um, the the changes that are being proposed. Um, so that's the, that's the, the
Earlier in the year when do you anticipate.
We sustained recovery on some of those items and that will help contribute to the lift that we're expecting for Q4.
The way we see the opportunity right now, it'll be mainly in the future and we're building towards it.
And think that sort of step up behind a supply recovery is not unusual we did also see that in Q4 a year ago.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, you can press *11 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Vic Chopra of Wells Fargo. Your line is now open.
So it is going to be the revenue lift that drives kind of that also the EPS lift that we're seeing in the back half.
Also get beyond some of the headwinds that we saw from a gross margin perspective that will contribute to overall EPS.
Great, thank you. And then my follow-up question, you know, your Q3 EPS guide. I think came in, uh, below the street, but you maintain your guide for the full year that implies a pretty significant step up in the fourth quarter. Maybe just walk us through, you know, what's going on there and how we should think about modeling. Um the back half of the Year specifically Q4. Thank you.
In total EPS for Q4.
Yeah, so thanks for the question there. So, a couple things. So let me talk about a little bit about the um, Revenue step up in the back half.
Order of magnitude not too different than where we were a year ago.
Vik Chopra: Hey, good morning, and thanks for taking the questions too for me. First, I would love to get your thoughts around the CMS's proposed 2026 reimbursement changes aimed to control overutilization and spending on skin substitutes. Can you maybe just remind us what impact this has on Integra and what percentage of your products are exposed? And then I had a quick follow-up, please.
Thank you.
Thank you one moment for our next question.
And our next question comes from the line of Matt Taylor of Jefferies. Your line is now open.
Alright, great.
Young Li in for Matt Thanks for taking our questions.
Mojdeh Poul: Thank you for your question, Vic. Good morning. Yeah, so just want to make sure that I mention, first of all, that a reminder that the majority of our business is in the in-hospital setting, in the acute care. And so we don't see an immediate short-term impact of these changes. However, long-term, for sure, we are very encouraged by the changes that they're proposing because obviously it's going to favor the products that are cost-effective as well as have strong evidence behind them. So we are encouraged by that.
I guess to begin.
On the ship holds.
And.
The related.
Compliance programs I mean, those things like the manufacturing review came in.
And then, um, and then address specifically the EPS. Um, question. So, as you look at our Q3 guide, from a revenue perspective, we're um, guiding to, um, Revenue that is consistent with what we delivered in Q2. So, and that's actually very consistent with what we've seen in the past in years, where we haven't had, um, significant Supply disruption. Um, as we get into Q4, we are calling a revenue Step Up of about, uh, 38 million going from Q3 to Q4, that's driven by 2 factors. Um, 60% of that is going to be driven by the normal seasonal lift that we see on our business combined, with a very strong momentum that we've been seeing on Integra skin.
A little bit earlier and better than expected.
I wanted to get a better sense about.
Related to the shareholders.
How much lenders and packs.
Can happen for.
<unk> 25, and exiting the year.
Potential risks is there to 2026.
The other 40% is going to be driven by the, um, Supply recovery. So, we've talked about chip holds, um, earlier in the year, we do anticipate, um, seeing recovery on some of those items and that will help contribute to the lift that we're expecting for Q4, um, and seeing that sort of Step Up behind a supply recovery Is Not Unusual. We did also see that in Q4 a year ago,
Mojdeh Poul: And long-term, there's definitely a lot more opportunity for our wound reconstruction portfolio as we leverage the clinical evidence that we have been putting behind this product line, as well as continuing to strategize as we move forward into our long-range plan, what the longer-term opportunity would be for us to be able to leverage the changes that are being proposed. So that's the way we see the opportunity right now. It'll be mainly in the future, and we're building towards it.
So thank you for the question so to your point and Thats most of shared in her prepared remarks.
<unk> seen great progress from.
That perspective, we are kind of a little more than halfway through the year. At this point, we've completed those final assessment and that has given us greater confidence.
Um, so it's going to be the, the revenue lift that drives kind of that. Also, the EPS list that we're seeing in the back half. Um, we'll also get Beyond some of the headwinds that we saw from, uh, gross margin perspective, that will contribute to overall EPS. Um, and in total EPS for Q4,
And the estimate that we provided again, our current estimate is about $100 million.
Um, will be, uh, order of magnitude 2, not 2, different than where we were. Um, a year ago,
Of an impact in this year.
That confidence is also supported by the strong execution of our teams.
thank you.
Thank you. 1 moment for our next question.
We prioritize the highest work stream areas first that's how we've said we would execute that's how we did and that also is contributing to our confidence coupled with the fact that we didn't find any.
Vik Chopra: Great, thank you. And then my follow-up question is, you know your Q3 EPS guide, I think, came in below the street, but you maintained your guide for the full year. That implies a pretty significant step up in the fourth quarter. Maybe just walk us through what's going on there and how we should think about modeling the back half of the year, specifically Q4. Thank you.
And our next question comes from the line of Matt, Taylor of Jeffrey's your line is now open.
New CMP related halt in Q2, so all of those things are allowing us to identify what we believe the impact for 2025 will be which is a $100 million.
Lea Knight: Yeah, so thanks for the question, Vic. So a couple of things. So let me talk about a little bit about the revenue step up in the back half, and then address specifically the EPS question. So as you look at our Q3 guide from a revenue perspective, we're guiding to revenue that is consistent with what we delivered in Q2. So, and that's actually very consistent with what we've seen in the past in years where we haven't had significant supply disruption. As we get into Q4, we are calling a revenue step up of about $38 million going from Q3 to Q4. That's driven by two factors. 60% of that is going to be driven by the normal seasonal lifts that we see on our business, combined with the very strong momentum that we've been seeing on Integra Skin.
And at this point aren't projecting any additional unidentified homes as part of that number the increase that we are reflecting this quarter of about $30 million from what we communicated last quarter is purely due to remediation timelines for the homes that were already identified as of Q1.
All right, great. Um, this is the Young Lee in for math. Thanks for taking our questions. Um, I guess to begin just, um, on the ship holds. Um, and um, you know, the the related, um, uh, compliance programs. I mean, it seems like the manufacturer and review came in, um, but a little bit earlier and better than expected.
um, wanted to just get a better sense about
It speaks to basically for the balance of the year.
What we will see a delay in some of the supply recovery, but again as I mentioned in our second half left we do expect Q4 to see a step up in part due to some of those shipments being released.
You know, related to the ship holds, you know, really how much lingers and impacts um can happen in 425 and exiting the year and um how much potential risks is there to uh 2026.
As we from a remediation standpoint, as you talk about 2026.
Do you see.
There will be some carryover remediation work into 2020.
This point, we're not providing any additional.
Lea Knight: The other 40% is going to be driven by the supply recovery. So we've talked about shift holds earlier in the year. We do anticipate seeing recovery on some of those items, and that will help contribute to the lift that we're expecting for Q4. And seeing that sort of step up behind a supply recovery is not unusual. We did also see that in Q4 a year ago. So it's going to be the revenue lift that drives kind of that also the EPS lift that we're seeing in the back half. We'll also get beyond some of the headwinds that we saw from a gross margin perspective. That will contribute to overall EPS. And in total, EPS for Q4 will be order of magnitude not too different than where we were a year ago.
We're not providing guidance today on 2026, we'll do that as part of our Q4 call in February.
At this from a shipment perspective, given the greater visibility and clarity that we now have around the CMP.
We don't plan to continue to talk about simple separately, but it will be kind of <unk>.
First, that's how we said we would execute, that's how we did. Um, and that also is contributing to to our confidence coupled with the fact that
That is part of how we guide going forward.
Now that we have a better view of what's in front of us.
If I can add a couple of points to us.
Answer.
We have spent and come a long way.
So far this year in terms of focusing our efforts on mitigating risks and also <unk>.
Work on improving the predictability that we have on our performance.
And I think we are at this stage right now.
Vik Chopra: Thank you.
<unk> explained that they feel comfortable about our line of sight for the rest of the year come 2026, my expectation of our entire team is to continue the momentum that we built in Q2 in order to deliver first of all our commitments on the second half and then bring in Q2 in 2026.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Matt Taylor of Jefferies. Your line is now open.
Young Lee: All right, great. This is Young Lee in for Matt. Thanks for taking our questions. I guess to begin, just on the shift holds and you know the related compliance programs, I mean, it seems like the manufacturing review came in a little bit earlier and better than expected. I wanted to just get a better sense about, you know, related to the shift holds, how much lingers and impacts can happen in Q4 and Q25 and exiting the year, and how much potential risk is there to 2026?
related holds in Q2. So all of those things are allowing us to identify what we believe the impact for 2025 will be, which is a hundred million dollars. Um and at this point aren't projecting any additional unidentified holds as part of that number. Um, the increase that we are reflecting, um, this quarter of about 30 million. From what we communicated, last quarter is purely due to remediation timelines for the holds that were already identified as of q1. So that that speaks to, you know, basically for the balance of the year, um, you know, we'll, we'll see a delay in some of the supply recovery. But again, as I mentioned in our second half lift, we do expect you forward to see a step up in part due to some of those shipments being released.
Even a more ramped up accelerated momentum in order for us to be able to reliably predict the results that and the expectations that.
standpoint, as you talk about 20,
Our streets should have us so just wanted to make sure that I mentioned that.
Alright, great. That's very helpful. And then I guess a follow up wanted to.
In your view.
Basically your ability to win back customers and accounts.
um, we do see, um, there will be some carryover remediation work into 2026, but at this point we're not providing any additional. Um, we're not providing guidance today on 2026, we'll do that as part of our Q4, call in February. Um, but at this, from a shitload perspective, you know, given the greater visibility and Clarity that we now have around the CMP. Um,
The amount of.
Investment you might have to potentially do to do that.
The feedback so far from.
Lea Knight: So thank you for the question. So to your point, and as Mojde shared in her prepared remarks, we've seen great progress from a site assessment perspective. We are kind of a little more than halfway through the year at this point. We've completed those site assessments, and that has given us greater confidence in the estimate that we provided. Again, our current estimate is about $100 million of an impact in this year. That confidence is also supported by the strong execution of our team. We prioritize the highest work stream areas first. That's how we said we would execute. That's how we did. And that also is contributing to our confidence, coupled with the fact that we didn't find any new CMP-related holds in Q2.
We don't plan to continue to talk about shiple separately. This will be kind of um, baked in as part of how we guide going forward. Um, now that we have a better view of what's in front of us,
Some of your reps as well as customers and sort of the confidence after supplier.
Shows.
To win back some of these lost customers.
Yeah, Great question. Thank you.
When if youre considering the products that we.
We put on a ship holds we have seen consistently quarter after quarter that launched the products come off ship holds we see the product unless they have been products that get us immediately on it on a particular case, where you may have lost that case, but for the most part as we have production and supply available.
<unk>.
We have not.
Counteract any problems being able to get that business back now when you talk about products like prime metrics surge demand that had been off the market at all.
Lea Knight: So all of those things are allowing us to identify what we believe the impact for 2025 will be, which is $100 million, and at this point aren't projecting any additional unidentified holds as part of that number. The increase that we are reflecting this quarter of about $30 million from what we communicated last quarter is purely due to remediation timelines for the holds that were already identified as of Q1. So that speaks to, you know, basically for the balance of the year, you know, we'll see a delay in some of the supply recovery. But again, as I mentioned, in our second half lift, we do expect Q4 to see a step up in part due to some of those shift holds being released. As we, from a remediation standpoint, as you talked about 2026, we do see there will be some carryover remediation work into 2026.
Of course Theres other substitutes that are being used they can use instead of them.
If I can add a couple of points to Leah's, um, um, answer we have spent and come a long way in the so far this year, in terms of focusing, our efforts on mitigating risks and also, uh, work on improving the predictability that we have on our performance. And, and I think we are at a stage right now as Lex explained that we feel, you know, comfortable about our line of sight for the rest of the year come 2026. My expectation of our entire team is to continue the momentum that we built in Q2 in order to deliver first of all, our commitments on the second half and then bring in Q2 uh, in 2026. Even a more ramped up accelerated momentum in order for us to be able to reliably predict the the results that uh, and the expectations that you you, the street should have of us. So just wanted to make sure that I mentioned that.
And we have more work to do that once we bring those products in.
And to the market reintroduce them.
Not underestimating the net that's going to be required for us to get in some of that business back all of that business back, but we're very confident it's a very strong market $800 million market. It's growing at high single low double digits, we have a great position with the products that have that in clinical.
All right, great. That's a very helpful and then, I guess the follow-up, um, wanted to, you know, get your view on, um, you know, basically your ability to win back customers and accounts and, um, uh, you know, the amount of um, investment you you might have to, uh, potentially do
Paul.
Our support behind them.
And we are confident in our ability to be able to do it. It may take us somewhat some time, but we're very confident in our ability to be able to take share.
To do that. Um, you know, how's the feedback so far from, um, you know, some of your reps, as well as customers and sort of their confidence, that after Supply, uh, shows up, um, they'll be able to win back some of these uh, loss customers.
Yeah. Uh, great question. Thank you. Um,
The share back.
Lea Knight: But at this point, we're not providing any additional, we're not providing guidance today on 2026. We'll do that as part of our Q4 call in February. But at this, from a shift hold perspective, you know, given the greater visibility and clarity that we now have around the CMP, we don't plan to continue to talk about shift holds separately. This will be kind of baked in as part of how we guide going forward now that we have a better view of what's in front of us.
Alright, Thank you very much.
Alright.
Thank you Ms for next question.
Yeah.
And our next question comes from the line of Robert Marcus of Jpmorgan. Your line is now open.
Hi, This is lilly on for Robbie Thanks for taking the question.
Maybe just starting on revenue growth the reported range is moving up but on an organic basis, the midpoint as moving a meaningful step lower so can you talk through that a bit.
Mojdeh Poul: If I can add a couple of points to Lea's answer, we have spent and come a long way so far this year in terms of focusing our efforts on mitigating risks and also work on improving the predictability that we have on our performance. And I think we are at a stage right now, as Lea explained, that we feel, you know, comfortable about our line of sight for the rest of the year. Come 2026, my expectation of our entire team is to continue the momentum that we built in Q2 in order to deliver, first of all, our commitments on the second half and then bring in in 2026 even a more ramped up accelerated momentum in order for us to be able to reliably predict the results and the expectations that the street should have of us.
It sounds like you have better visibility into supply there shouldn't be any incremental shackles, so what's driving the step down for the full year.
Thanks, Willie further question so to your point from a ship all our previous range.
Did allow for a range of about $90 million to $150 million and chip bulbs are now at 100.
And which puts us kind of slightly below our previous top end of our range and so that was the reason to adjust it down to your point.
When if you're considering the products that we we put on ship holes, we have seen consistently quarter after quarter that once the products come off ship holes. We we see the product move unless they have been products that you get used immediately on a on a particular case where you know, you may have lost that case but for the most part as we have production and Supply available, we have not in card countered, any problems, being able to get that business back. Now, when you talk about products like Prime metrics and Sergey men that have been off the market, uh, of course, there's other substitutes that are being used, use the instead of them, and we have more work to do there. Once we bring those products, um, into the market, reintroduce them, we are not underestimating. The, the lift that's going to be required for us to get gain some of that business back, all of that business back, but we're very confident it.
In addition to that we also have reflected about a $25 million to $30 million.
Market demand.
Decline expectation.
And that is a combination of a few things and a slowdown that we've seen in.
In private label related specifically to one of our private label partners who were seeing.
A very uh strong Market 800 million dollar market. It's growing at uh hi single low, double digit. We have a great position with the products that have that a clinical, um, uh, support behind them. And we are confident in our ability to be able to do it. It may take us some some time, but we're very confident in our ability to be to be able to take the the share uh the share back.
Mojdeh Poul: So just wanted to make sure that I mentioned that.
All right. Thank you very much.
Demand headwinds due to competitive pressures.
Young Lee: All right, great. That's very helpful. And then I guess to follow up, I wanted to, you know, get your view on, you know, basically your ability to win back customers and accounts and, you know, the amount of investment you might have to potentially do to do that. You know, how's the feedback so far from, you know, some of your reps as well as customers and sort of their confidence that after supply shows up, they'll be able to win back some of these lost customers?
Coupled with the Q2 performance, we saw on A&P and while we still believe the back half will drive higher growth than what we saw in Q2.
And our next question, comes from line of Robert Marcus of JP Morgan. Your line is now open,
All entirely overcome that headwind and so that's factored in as part of that and then the last piece was just slightly slower ramp on market recapture for our supply recovery again part of our ship hold increase is a reflection of longer remediation timelines on some of the recoveries and so we've also put in there and.
For Robbie, thanks for taking the question.
<unk>.
Well, we'll have slightly slower market recapture on that.
Maybe just starting on Revenue growth. The reported range is moving up but on an organic basis, the midpoint is moving a meaningful step lower so can we talk through that a bit um it sounds like you have better visibility into supplies there shouldn't be any incremental ship holds. So what's driving this stuff down to the full
Mojdeh Poul: Yeah, great question. Thank you. If you're considering the products that we put on shift holds, we have seen consistently, quarter after quarter, that once the products come off shift holds, we see the product move. Unless they have been products that you get used immediately on a particular case where, you know, you may have lost that case. But for the most part, as we have production and supply available, we have not encountered any problems being able to get that business back. Now, when you talk about products like Pymetrix and Surgiment that have been off the market, of course, there's other substitutes that are being used instead of them. And we have more work to do there.
Got it that's helpful.
And then just as a follow up gross margin came in softer than you're pointing to a lower number for the full year as well.
Can you talk about the softness in the quarter and what's changing on a full year basis. When tariffs are better than when you last reported in supply should hopefully continue to improve thanks Ken.
Absolutely. So for Q2 gross margins the decline was driven largely by manufacturing variances, we were down about 450 basis points year on year about 400 basis points of that driven by manufacturing variances and that's largely attributable to overhead inefficiencies that we saw related to our support from <unk>.
Option due to the private label volume changes that I mentioned.
Mojdeh Poul: Once we bring those products into the market, reintroduce them, we are not underestimating the lift that's going to be required for us to gain some of that business back, all of that business back. But we're very confident. It's a very strong market, $800 million market. It's growing at high single, low double digit. We have a great position with the products that have that clinical support behind them. And we are confident in our ability to be able to do it. It may take us some time, but we're very confident in our ability to be able to take the share back.
Coupled with tariffs from a year on year perspective.
We also saw higher and scrap again associated with the remediation work that's underway and that was slightly offset by some favorable mix specifically on integra skin with a strong much stronger performance in Q2, this year versus a year ago.
Thanks Lily for the question. So to your point, from a ship, all our previous range um did allow for a range of about 90 to 150 million in chip BS. We're now at 100, um, and which puts us kind of slightly below our previous, um, top end of the range. And so that was the reason to adjust it down to your point. Um, in addition to that we also have reflected about a 25 to 30 million dollar, um, market demand, uh, decline expectation. Um, and that is a combination of a few things. It's the slow down that we see, um, in private label related, specifically to um, 1 of our private label Partners, who is seeing um uh demand headwinds due to competitive pressures. Um, coupled with the Q2 performance, we saw on ENT and while we
So to your point, we expect our second half gross margins to remain largely flat to what we've seen in the first half as we continue to work through our remediation efforts.
On a full year basis, we are now projecting gross margin to be down by about 300 basis points versus 2024.
Still believe the back half, will, um, Drive higher growth than what we saw in Q2, it won't entirely overcome that headwind. And so that's factored in as part of that. And then the last piece is just a, a slightly slower ramp on Market recapture for our supply recovery Again, part of our ship. Hold increase is a reflection of longer remediation timelines and some of the recoveries. And so we've also put in there an assumption that um we'll we'll have slightly slower Market recapture on that piece.
That said I think it's also noteworthy that the headwinds we experienced in gross margins for Q2.
Young Lee: All right, thank you very much.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Robert Marcus of JP Morgan. Your line is now open.
Offset by much better.
Opex management, which allowed us to deliver EBITDA margins that were very consistent with our expectation and that also will largely be true for the balance of the year.
Lily: Hi, this is Lily on Ferrabi. Thanks for taking the question. Maybe just starting on revenue growth, the reported range is moving up, but on an organic basis, the midpoint is moving a meaningful step lower. So can you talk through that a bit? It sounds like you have better visibility into supply. There shouldn't be any incremental shift holds. So what's driving the step down for the full year? Thank you.
Got it, that's helpful. Um and then just as a follow up, Chris margin came in softer and you're pointing to a a lower number for the full year as well. Um, so can you talk about the softness in the quarter and what's changing on a full year basis? When tariffs are better than when you launch reported and Supply should hopefully continue to improve? Thanks again.
Great. Thank you.
Thank you Mark for next question.
And our next question comes from the line of Ryan Zimmerman of <unk>. Your line is now open hi.
Hey, good morning, everyone. This is <unk> on for Ryan. Thank you for taking the questions.
Just to start with the E&P business I heard your commentary about how growth in the quarter came in below expectations.
Lea Knight: Thanks, Lily, for the question. So to your point, from a shift hold, our previous range did allow for a range of about $90 to $150 million in shift holds. We're now at $100, which puts us kind of slightly below our previous top end of the range. And so that was the reason to adjust it down. To your point, in addition to that, we also have reflected about a $25 to $30 million market demand decline expectation. And that is a combination of a few things. It's the slowdown that we've seen in private label related specifically to one of our private label partners who is seeing demand headwinds due to competitive pressures, coupled with the Q2 performance we saw on ENT. And while we still believe the back half will drive higher growth than what we saw in Q2, it won't entirely overcome that headwind.
Just curious if you could provide a little bit more color around the headwinds that you called out and the expectations for the back half of the year. Additionally, if we think about a little bit longer term, where do you see a sustainable growth rate for the E&P business.
Absolutely. So for Q2 gross margins. Uh, the decline was driven largely by manufacturing variances. We were down about 450% points of that, driven by manufacturing variances, and that's largely attributable to overhead. Inefficiencies that we saw related to our ship, holds some under absorption due to the private label volume changes that I mentioned, um, coupled with tariffs, from a year-on-year perspective. Um, we also saw higher Eno and scrapped again associated with the remediation work that's underway um and that was
Okay.
Thank you for the question, Yes, we did have a softer Q2 growth, but it was mainly due to a tough comp which was last year, we had strong capital sales in the same period.
We saw strong double digit growth in Aero for eustachian tube balloon dilation installation as well as the <unk> navigated disposables.
Slightly offset by some favorable, mix specifically on Integra skin with a strong. Much stronger performance in Q2 this year versus a year ago. Um so to your point we we expect our second half gross margins to remain largely flat to what we we've seen in the first half. Um as we continue to work through our remediation efforts um on a full year basis, we are now projecting gross margins to be down by about 300 basis points versus 2024.
The loan signing classified even though there has been growth volume wise in the market.
We have seen increased payer pressure over the last year and it happens to be varied by geography, as well and our health economic streams are working with our with our field organization to help them navigate through that.
That said, I think it's also noteworthy that the headwinds we experience in Gross margins for Q2 were offset by much better, um, Opex management. Uh, which allowed us to deliver ebita margins? That were very consistent with our expectations and that also will largely be true for the amount of the year.
Lea Knight: And so that's factored in as part of that. And then the last piece is just a slightly slower ramp on market recapture for our supply recovery. Again, part of our shift hold increase is a reflection of longer remediation timelines on some of the recoveries. And so we've also put in there an assumption that we'll have slightly slower market recapture on that.
Right. Thank you.
Thank you moment for our next question.
That dynamic, but we remain excited about the.
The addition of a client to our to our portfolio, we see huge opportunity for US. We are the only company that has a pediatric indication for the <unk>.
In our next question, comes from the line of Ryan. Zimmerman of btig, your line is now open.
Hi, good morning everyone. This is Izzy on for Ryan. Thank you for taking the questions.
Your station two balloon dilation and we continue to invest in evidence for it much like the announcement that you recently saw on the registry pediatric registry that we have.
Lily: Got it. That's helpful. And then just as a follow-up, gross margin came in softer, and you're pointing to a lower number for the full year as well. So can you talk about the softness in the quarter and what's changing on a full-year basis when tariffs are better than when you last reported and supply should hopefully continue to improve? Thanks again.
Launched and when it comes to the second half of the year, our expectation is missing.
Single digit growth and moving forward.
Um, just to start with the ENT business, I heard your commentary about how growth in the quarter came in below expectations. So I was just curious if you could provide a little bit more color around the headwinds that you called out, um, and the expectations for the back half of the Year. Additionally, if we think about a little bit longer term, where do you see a sustainable growth rate for the ENT business?
Again, we don't see any reason to be changing our outlook for this product for this business as we have had before.
Lea Knight: Absolutely. So for Q2 gross margins, the decline was driven largely by manufacturing variances. We were down about 450 basis points year on year, about 400 basis points of that driven by manufacturing variances. And that's largely attributable to overhead inefficiencies that we saw related to our shift holds, some underabsorption due to the private label volume changes that I mentioned, coupled with tariffs from a year-on-year perspective. We also saw higher E&O and scrap, again, associated with the remediation work that's underway. And that was slightly offset by some favorable mix, specifically on Integra Skin, with a much stronger performance in Q2 this year versus a year ago. So to your point, we expect our second half gross margins to remain largely flat to what we've seen in the first half as we continue to work through our remediation efforts.
We're making investments in new products, we were making investments in clinical evidence.
And it's an important part of our portfolio.
Yeah.
Thank you that's helpful. And then just one point of clarification, we saw a couple of recalls come in from the FDA. During the quarter I was just curious if these have been contemplated in guidance and if not if theres any impact you could call out that'd be great. Thank you.
Thank you.
Yes happy to do so so I think what you're referencing is a recall notice on.
Micro mist and perforated and those were.
Products that we were aware of and had contemplated.
Our guide even as of May So, yes that is not new news from a guidance perspective.
Great. Thank you for clarifying.
Thank you for our next question again as a reminder to ask a question you will need to press star one on your telephone.
Lea Knight: On a full-year basis, we are now projecting gross margins to be down by about 300 basis points versus 2024. That said, I think it's also noteworthy that the headwinds we experienced in gross margins for Q2 were offset by much better OPEX management, which allowed us to deliver EBITDA margins that were very consistent with our expectations. And that also will largely be true for the balance of the year.
And our next question comes from the line of Richard New winner of <unk>. Your line is now open.
Hi, This is Ravi here for rich I guess, a couple of questions for me here first can you.
Be navigated disposables on the, um, the loan signup, plastic side. Even though there has been growth, a volume wise in the market. Um, we have seen increased payer pressure over the last year, and it happens to be, um, varied by by geography as well. And our health economic teams are working with our, with our field organization, to help them navigate, uh, through that, um, that Dynamic. But we remain excited about, um, the, the addition of acclarent or to our portfolio, uh, we see huge opportunity for us. We're the only company that has a pediatric indication for the um, us station to to balloon dilation and we continue to invest in in evidence for it much like the the announcement that you recently saw on the registry, pediatric registry that we have um launched and uh when it comes to the second half of the Year, our expectation is missing mid mid uh single.
Kind of remind us as prime matrix and surgeon.
We're going to look at them coming back in 2026 can you just remind us what the revenue contribution from these products was or the growth contribution or the end market kind of contribution was before they went off market.
Lily: Great. Thank you.
Operator: Thank you. One moment for our next question. And our next question comes from the line of Ryan Zimmerman of BTIG. Your line is now open.
Certainly so in 2022, what is the last full year before they went off market and they were about $64 million on an annual basis.
Digit growth and moving forward. Um, again, we don't see any reason to be changing our outlook for this product that or for this business, as we have had before. Uh, we're making investments in new products, we're making investments, in clinical evidence, and it's an important part of our portfolio.
Izzy: Hi, good morning, everyone. This is Izzy on for Ryan. Thank you for taking the question. Just to start with the ENT business, I heard your commentary about how growth in the quarter came in below expectations. So I was just curious if you could provide a little bit more color around the headwinds that you called out and the expectations for the back half of the year. Additionally, if we think about a little bit longer term, where do you see a sustainable growth rate for the ENT business?
Great and then as they went off market I mean was that entire kind of $54 million lost or were there products that you had in the portfolio, replacing that just trying to get a sense in terms of the incrementally of what could potentially come back then I guess the second question is just on a clear and is that something youre still having.
Thank you, that's helpful. And then just 1 point of clarification. Uh, we saw a couple uh, recalls come in from the FDA during the quarter. I was just curious if these have been contemplated in guidance and if not, um, if there's any impact you could call out, that'd be great. Thank you, great, thank you.
High single digit growth expectations for this year.
Mojdeh Poul: Thank you for the question. Yes, we did have a softer Q2 growth, but it was mainly due to a tough comp, which was last year. We had strong capital sales in the same period. We saw strong double-digit growth in era for Eustachian tube balloon dilation, as well as the 2D navigated disposables. On the balloon sinuplasty side, even though there has been growth volume-wise in the market, we have seen increased payer pressure over the last year, and it happens to be buried by geography as well. And our health economics teams are working with our field organization to help them navigate through that dynamic. But we remain excited about the addition of Acclarent to our portfolio. We see huge opportunity for us.
So with respect to pre matrix and surge amend when they initially.
Perforators. And those were um uh products that we were aware of and had contemplated ease in our guide, even as of May. So yes, that is not new news from a guy's perspective.
<unk> initiated the recall there was a substitution strategy that allowed for potential growth on integra skin.
Great, thank you for clarifying.
If four prime matrix, and then Jen tricks for surgery.
Thank you, 1 moment for our next question. Again, as a reminder to ask a question, you'll need to press star 1 1, 1 on your telephone.
<unk>.
Given the some of the production issues that we had with Integra skin model you didn't say some initial uptake in terms of substitution it wasn't significant.
And our next question comes from the line of Richard. New winner of Truth. Your line is now open.
And then as it relates to Gen. <unk>. Similarly, the nature of the areas in which we could substitute with relatively narrow. So also not a significant about of substitution on that Peter.
Peter.
As it relates to a clarity of our expectations for full year 2025 is that that business will deliver our A&P A&P segment will deliver mid single digit growth.
Hi. This is Robbie uh here for Rich. Uh I guess a couple of questions for me here first. Can you uh kind of remind us as Prime Matrix and surgeon man you know we're starting to look at them coming back in 2026 can you just remind us what the revenue contribution from these products was or the growth contribution or the End Market kind of contribution was before they went off Market.
Mojdeh Poul: We're the only company that has a pediatric indication for the Eustachian tube balloon dilation, and we continue to invest in evidence for it, much like the announcement that you recently saw on the registry, pediatric registry that we have launched. And when it comes to the second half of the year, our expectation is mid-single-digit growth. And moving forward, again, we don't see any reason to be changing our outlook for this product or for this business as we have had before. We're making investments in new products. We're making investments in clinical evidence, and it's an important part of our portfolio.
Yeah.
Certainly so, um, in 2022 was the last full year before the day, went off market and they were about 64 million on an annual basis.
Okay, Great and then just my last one just on the tariffs I think last quarter. It was about 22.
For the year kind of the way to think about it now with the kind of delta between last quarter and this quarter, just take that gross margin impact and.
Great. And then as they, they went off Market, I mean, was that entire kind of 54 million lost or were their products that you had in the portfolio. Replacing that just trying to get a sense in terms of the incrementality of what could potentially come back.
That's going to be the new.
Our run rate.
Yeah.
Now Jeff.
Let me step through that because there are a couple of factors to consider so to your point in May we had announced that the tariffs assumption.
Then I guess, uh, the second question is just on a clarent. Is that something you're still having, uh, High single digit growth expectations for this year?
Assumptions reflected in our guidance at that time was about $22 million or 22.
um so with respect to Prime Matrix and surgeon when they we initially um uh initiate the recall there was a substitute
for um,
Our current EPS outlook incorporates an anticipated headwind from tariffs totaling about $13 million or 13%.
Izzy: Thank you. That's helpful. And then just one point of clarification. We saw a couple of recalls come in from the FDA during the quarter. I was just curious if these have been contemplated in guidance, and if not, if there's any impact you could call out, that would be great. Thank you.
Most of that impact expected to materialize in Q4.
Beyond this year, though we're not providing an estimate and obviously, we like others are watching and ever changing tariff landscape and so as that stops moving and we start understanding a little bit more of an impact to our business will come back and share expectations for any 2026 impact.
Growth on Integra skin um in uh for primary Matrix and then gentri for um surgeon. Um given the sum of the production issues that we had with Integra scan. While we do say some initial uptake in terms of substitution, it wasn't significant.
Lea Knight: Yes, happy to do so. So I think what you're referencing is the recall notice on MicroMist and perforators. And those were products that we were aware of and had contemplated in our guide even as of May. So yes, that is not new news from a guide's perspective.
Um, and then, as it relates to generally, the nature of the areas in which we could substitute with relatively narrow. So, also not a significant amount of, um, substitution, um, on this part of the different theater.
That said, we are not standing still we you know as we mentioned in our remarks, we understand that optimizing our cost structure is essential to maintaining long term competitiveness and the broader margin improvement initiatives that Moshe talked about in her remarks will help us do just that.
Izzy: Great. Thank you for clarifying.
As it relates to a clarent, um, our expectations for a full year. 2025 is that uh that business will deliver or ENT or ENT segment will deliver missing or digit growth
Operator: Thank you. One moment for our next question. Again, as a reminder to ask a question, you'll need to press star one one on your telephone. And our next question comes from the line of Richard Neuwetter of TROOSE. Your line is now open.
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Vik Chopra: Hi, this is Ravi here for Rich. I guess a couple of questions for me here. First, can you kind of remind us, as Pymatrix and Surgiment, we're starting to look at them coming back in 2026, can you just remind us what the revenue contribution from these products was, or the growth contribution, or the end market kind of contribution was before they went off market?
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Okay, great. And then, just my last 1 just on the tariffs. Uh, I think last quarter was about 22 cents for cents for the year kind of the way to think about it. Now with the kind of Delta between last quarter and this quarter just take that gross margin impact and uh that's going to be the new uh run rate.
Or no? Uh, no. Yeah.
let me step through that a bit because there are a couple of
Lea Knight: Certainly. So in 2022, it was the last full year before they went off market, and they were about $64 million on an annual basis.
Vik Chopra: Great. And then as they went off market, I mean, was that entire kind of $54 million lost, or were there products that you had in the portfolio replacing that? Just trying to get a sense in terms of the incrementality of what could potentially come back. Then I guess the second question is just on Acclarent, is that something you're still having high single-digit growth expectations for this year?
Lea Knight: So with respect to Pymatrix and Surgiment, when they initially initiated the recall, there was a substitution strategy that allowed for potential growth on Integra Skin for Pymatrix and then GenTrix for Surgiment. Given some of the production issues that we had with Integra Skin, while we did say some initial uptake in terms of substitution, it wasn't significant. And then as it relates to GenTrix, similarly, the nature of the areas in which we could substitute was relatively narrow, so also not a significant amount of substitution on this one either. As it relates to Acclarent, our expectations for full year 2025 is that that business will deliver, or our ENT segment will deliver mid-single-digit growth.
EPS Outlook incorporates an anticipated headwind from tariffs, totaling about 13 million with 13 cents, with most of that impact expected to materialize in Q4. Um, Beyond this year, though, we're not providing an estimate as, as obviously, we like, others are watching a, an ever-changing tariff landscape. And so, as that stops moving, and we start, um, understanding a little bit more, the impact to our business. We'll come back and share expectations for any 2026 impact. Um, that said we, we are not standing still we, you know, as we mentioned in our remarks, we understand that optimizing our cost structure is essential to maintaining long-term competitiveness. Um, and the broader margin um, Improvement initiative. That Moshe talked about in her remarks will help us do just that
Thank you. I'm showing off further questions at this time. Thank you for your participation in today's.
this does conclude the program, you may now disconnect
Vik Chopra: Okay, great. And then just my last one, just on the tariffs, I think last quarter was about 22 cents for the year. Kind of the way to think about it now with the kind of delta between last quarter and this quarter, just take that gross margin impact, and that's going to be the new run rate?
Lea Knight: Yeah, no, yeah. Yeah let me step through that because there are a couple of factors to consider. So to your point, in May, we had announced that the tariff assumption reflected in our guidance at that time was about $22 million or 22 cents. Our current EPS outlook incorporates an anticipated headwind from tariffs totaling about $13 million with 13 cents, with most of that impact expected to materialize in Q4. Beyond this year, though, we're not providing an estimate. And as obviously we, like others, are watching an ever-changing tariff landscape. And so as that stops moving and we start understanding a little bit more in the impact to our business, we'll come back and share expectations for any 2026 impact. That said, we are not standing still.
Lea Knight: We, you know, as we mentioned in our remarks, we understand that optimizing our cost structure is essential to maintaining long-term competitiveness. And the broader margin initiative that Mojde talked about in her remarks will help us do just that.
Operator: Thank you. I'm showing no further questions at this time. Thank you for your participation in today. This does conclude the program. You may now discuss the next.