IART - Earnings call transcript Q4 2020 | Integra LifeSciences Holdings Corporation

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Operator

Good day and welcome to the Integra LifeSciences Fourth Quarter and Full Year 2020 Financial Results Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Mike Beaulieu, Director Investor Relations. Please go ahead, sir.

Mike Beaulieu

Thank you, Catherine. you Year the XXXX thank Quarter LifeSciences and Full and Earnings morning for Integra joining Fourth Good Conference call.

the Events the are Glenn Officer; our corresponding will fourth on Chief we issued reference XXXX Financial me call named and release we Arduini, today Peter available integralife.com Joining and financial announcing XXXX press President Officer. Executive which Earlier Officer; Carrie at full Coleman, results. and Operating Full quarter in a earnings Earnings The Chief presentation, and Anderson, Chief are under and Fourth Quarter Call Investors, release file the call Presentations and Year during Presentation. year

remind results Company's Exchange Before are statements. considered SEC of that the forward-looking many made to discussed the that in filed may reports we and like the cause could differ in be begin, release. Factors to materially actual you the with during I'd Act statements this call

comments financial turn financial Lastly, release, an our certain current now of exhibit the today's X-K today over SEC. to I'll can Pete. report which to with found measures any that, With press is filed Integra's call non-GAAP in reconciliations measures, Form be on the today will include non-GAAP

Peter Arduini

Thank you, morning Mike and good everyone.

a The of profitability pandemic, of were first XXXX $X.XX. the to felt hospitals. half slide revenues earnings basis perspective half of to first the performance our spending delays in down declines $X.XX the first Full our were performance billion and year April surgical COVID and capital of we've with were organic included and from impact to adjusted X, in impact These half as the turn XXXX. procedure you'll and and May, organic of a comparison the COVID-related and and XX% If second declined To during XXXX. XX% on in biggest a X.X% down result, was a compared XXXX revenue illustrate begin side-by-side I'll review at to XX% an deferrals of direct revenues and year. result earnings put declined

calls, R&D we've As our discussed key to of chain swiftly supply employees clinical and protocols pandemic our reacted programs. ensure prioritizing we safety and on continuity to of while prior the implementing the

also position down by We financial our protected costs sharply. managing

As projects. recovery take the while begins in at invested benefit We to divestiture methodically our in half, ACell. growth saw portfolio continue In to pandemic We inventory of and times of the our to X the operating million acquisition the $XXX X.X response. allocating we hold, of generated towards productivity improved flow, additional times we related expenses the and end ratio manage the funds balanced orthopedics in cash with June in year. of the from leverage our second reshaped

first year-over-year. to million and per revenues X.X% only the revenues the half, sequentially declined share second second compared year-over-year. increased XX% In Our $XXX $XX half earnings increased million EBITDA half inorganic increased

programmable valves fourth in Our products of which persisted sales to quarter DuraGen as locked all in despite market-leading fourth localized quarter. of Integra driven by as downs our service growth well skin, surges and such the COVID the as recovery portfolio returned

If Slide company. that the XXXX to reinvest can used as opportunity an you you see turn we to X,

year, XXXX and we to in of addition financial the the growth positioned accelerate half in us strong In second action recovery the to took beyond. that

sure while always products supply has on been we patients, critical keeping employees the throughout So, pandemic making our employees safe. could our and our focus

the have debtors. to We the to mindset do things together shore coming a up one-team right

occasion. they they employees time We virtual their re-imagine and tools environment. the we on and challenged to the hit, management a we the how a would the prioritize to acted team our pandemic people. At resources first quickly most jobs asset, provided our do As important in rose to same

recovery strong our made possible. people Our

protocols that with development of we optimization Moving long-term product targets. by posed continuity part implemented XXXX, sites we tissue discussed of employees critical closed supply. did the and the spite investments will earning COVID it the In organization. keeping to surgery We the The within program pandemic. of on not challenged, growth help our scope of investments but Aurora us and consistent pandemic. we as impede X ensure timelines as safety calls global our and reach in in such quickly our their completed adapted we sites progress previous rigorous numerous original also R&D them programs operations; challenges logistical across supply solidifying to to our both track how profitability On our maintained

capabilities, force a stay and commercial adequate rapidly and to to customers patients. digital sales connected our with marketing of the to collaboration mechanisms ensure organizations variety adopted Moving to our virtual support

to will a that strengthening Turning finally, company. accomplishments leadership benefited transform technology parts and highly positions acquisition XXXX, and to tissue our business growth our of many of during achieved the We I portfolio. advance of increasing focused creates of as we across and most digital will our transformation within two greatly prior The infrastructure from our accelerated information sheet while our in the segment optimization, balance financial actions the of be all combination our and were investments the profitability portfolio these systems, two agility. And the and mentioned, orthopedics our these of divestiture accretive ACell. of

the can we of way beyond, our proud you success in we pandemic, the and I'm responded. did position to as XXXX colleagues utilized not sit still the and see, company the time for So, during

We are today stronger, than a focused entered company more we when XXXX.

of for guidance XXXX. over and more call Carrie? the for Carrie turn performance to like review detailed quarter I'd our fourth Now, to

Carrie Anderson

our representing reported basis. like a an total decline basis highlights on quarter start X.X and fourth quarter X. Pete Slide million of on a of to Fourth with I'd on brief everyone. X.X% a and were morning organic decline summary revenues $XXX.X good Thanks, of a

Our performance preliminary of our the at XXth. revenue was January on communicated end high range

sequentially improvement our quarter fourth to in sales of of resulting managed we markets QX. affected or tight in a of ICU capital that Sales basis. many return a the equipment products our XX%, but third capacity, compared year-over-year on quarter. growth COVID surges franchises that Most the we're During the quarter bed growth quarter third X% still by down improved into but our over still in to sustained

calls, capital prior have As to of was on we recovery lag expected earnings portfolio. of discussed the rest the

compared was prior pleased if growth capital US improvement capital, organic compared about flat XXXX. and the was year-over-year So, and exclude as total orthopedics. performance continue flat an in by we to showing flat about performance Adjusted to was also segment in basis increased Fourth with to increased growth organic per QX US organic profitability on organic in the excluding We also our we earnings our share $X.XX. points in CSS basis margins quarter spending. By exclude QX OTT growth XX.X% adjusted to we year. XX% if X% increased manage XXX to QX US quite were EBITDA

Advanced and X.X% turn sales $XXX in strong improvement in improved capital now and and and management basis catheters sales from including which repair were were in CSS down products on the QX, a access neuromonitoring year-over-year. on dural low-single If organic sales neurosurgery Sales organic low-single DuraGen, third service the of Slide an three CSS our mid-single revenues antimicrobial the valves. the million, review and market-leading increased third mid-teens digits quarter increased year. decrease in includes low-double segment. Sales down digits directly prior importantly our digits in performance sequentially CUSA QX Global from of respectively. quarter benefited digits from I'll Sales with increased line our you sequential in from programmable to quarter sales QX. tied a X.X% Energy, were franchises X, Reported the in fourth All expectations, fourth of to of quarter. consumables an equipment CUSA basis

positioning. funnel remain in strong of sales capital Our and is opportunities competitive confident our we

to of until with still digits single but digits. in countries, be International budgets performance. saw the in However, quarter Japan QX to hospitals were QX through decline In a certainty organic sales high have China X% instruments we in in CSS sequentially sales low-double our a year-over-year. constrained European on expect several in do from down franchise basis first both the capital the increased mixed far, growth revenues low-single increased COVID. digits return half XXXX QX, will slight around more in continue we

this by a offset was recovery However, slower in indirect markets. our

we Slide reminder, QX but versus of increased fourth the ortho were million Moving revenues and the X% segment $XXX and digits on slide Orthopedic skin private sales and basis wound digits business Fourth quarter, SurgiMend, this sales in X; in nerve declined sales an double decline sales year. increased a all decline January organic reconstruction of to mid-single of on of X% increased X.X% year, Xth a the quarter X.X% sales in the low-single prior OTT amniotic of representing divestiture a in reported of on label as on line and with a expectations. digits. declined the Integra closed basis.

Slide to X; quarter product was from Gross and gross XXXX. US compared XX.X% to in our fourth P&L show the quarter of performance in will margins mix. you XX.X% margin I Turning cost of the favorable fourth now components. performance Adjusted key benefited management, the stronger

year. an shares by Adjusted compared the management $XX one-time the XX.X% below margin year, in repurchase was this reflecting were driven increase was The to year GAAP in a Our gross and compared largely Fourth Diluted the year. Operating by approximately share cost margins the of EPS XX.X% earlier to by result was $X.XX compared outstanding increase as quarter accelerated the of expenses the improved down million completed benefit EBITDA a to adjusted in $XX prior quarter. restructuring program during were over QX in $X.XX slightly prior quarter of XX%. was levels. XXXX, $X.XX in measures. driven EPS $X.X driven quarter fourth million tax completed prior fourth ongoing

year. XX%, and second reached Turning over approximately flow collection now Operating year and in for million for full Slide fourth driven performance. strong receivable conversion $XXX flow flow capital by cash I'll of million EBITDA half the the cash quarter $XX expenditures. review prioritization Free to cash almost performance, full efforts the just XX; was improved

into a from a pro basically $XXX turn provide of net a the forma Slide in X.X ratio to $XXX of our We on levels balance improvement ended million flat structure. an leverage a XXXX of This was XXXX, you with times brief our year inclusive I'll notes. with million update balance on translated with the XX; our If strong the basis. debt convertible cash pro sheet, position capital forma

targeted to Our ratio leverage times. X.X at range X.X

times, So, within we moved the peak year were quarter at ratio second range the this To XXXX We right flow for our in squarely the second X.X out call the of window. by that half in middle so reached of our cash year-end.

for guidance full Turning to provide first of our I'll overview quarter XXXX. an revenue share and and XX; adjusted per the consolidated Slide earnings year

are improvement mentioned our earlier, equipment half as first procedures uncertain, new XXXX. the remains the gradual guidance with course today, in that but providing pandemic and in of We new COVID in constrained rate we to believe sales first will surges setbacks full a variable. or in of capital In continue the And, result, half be a recognize from as surgical procedures remains guidance, year budgets we assume the no and of variance. the further capital recovery

We environment to updates the assess our will calls. continue quarterly on provide and current

up revenues in -X% to represents to $XXX representing of to normal in the X% million organic quarter over forecasted approximately This are flat seasonality reported of growth our and $XXX be of XXXX. to range This growth flat QX. million

expect $XX we XXXX, included revenues year organic of of and January to million. be late ACell representing billion and the over to of the full $X.XXX reported XXXX. a $XX full and growth million closing. growth Reported to to million the for of ACell billion This of range estimate to based XX% million quarter XX% in XX% revenues on in to first range $XX year XX% is range revenues $XX $X.XXX million in estimate For the estimate $XX of XXXX a

also typical we business. We existing disruptions short-term for impact as business as assume that tissue as sales our the well ACell similar to integrate continuing COVID

expected impact acquired products, orthopedics consistent on the year reported revenues is a excludes reconciliation reported and will decline a products currency a and including foreign will XXXX X.X% impact continue ACell, have in The discontinued reminder, As include including discontinued growth previous practice, approximately divested revenues revenue. fluctuations, to between of organic organic growth. XXXX from we full with impact negative of and to

significant the an any be reminder, been a overall year product important SKU rationalization should As improving of discontinuation. gross XXXX the of last impact portfolio we how and part margins. are has for simplifying

year first quarter the revenue expected to is $X.XX Full to like the I'd year-over-year represents earnings double-digit just provided, over we adjusted Turning $X.XX the on EPS EPS be call to based the guidance to Glenn. of $X.XX XXXX, in that, adjusted $X.XX. growth. and to range ranges the for expect range of XXXX I which With to to be in turn

Glenn Coleman

Thanks morning. Carrie, and good

turn you provide XXth January to implementation If the following onboarded on plans began I'll colleagues. update the an the Mainly ACell of our Slide XX. integration closing integration. ACell and we conveying

The initial largely with to We've commercial Integra assign transition to an established organization. been integration the plans. to and has first cross expanded in-depth training product Tissue and training training. beginning taken three Technologies national ACell sell team rollout of the portfolio. held product on completed the steps Last weeks compensation are of sales sales reps also sales quotas meeting annual our their territories, formalized and the already reps focused week

we the our characteristics early, products addition positive in feedback. portfolio powder gaps Matrix The is of platform still MicroMatrix technology Surgical generating ACell the help expansion of like portfolio porcine fill and to tissue the confident investment and offer and our Gentrix a clinicians unique of ACell, the closed it's additional customer to While tool since will few come but impact in the remain acquisition. on we financial from been only challenging that the returns most weeks interventions. positive reconstructive the this to It's treat

completed be conversion second it critical to by integration all activities our to distribution. invoicing end and expect the a of We quarter, handle with quick including ERP the

integration to colleagues on quarterly excited and next ACell are Integra providing to We call. an look new welcome our to forward update

like I'd of new starting summary XX; introductions. with XXXX a to our provide Slide drivers to growth Turning product

we was all negatively CSS which several of during two take products about by Over expected launched XXXX. are these reach impacted to the X years, sales. past new in to COVID years Performance products peak

CSS and contribute of launches XXXX. valves service should As to like in in Japan programmable hold portfolio for these takes the recovery of our many DuraGen growth

which half during invasive our of launching in our be next addition, generation of neuromonitoring part brain we'll benefit In monitor, the tumors, of important minimally Surgiscope we're for CereLink, Later planning our tissue actively supply Aurora an the franchise. ICP of year, XXXX second plans. of necessary These product and us will that global several regenerative relaunch immediately enable customers, to should growth our long-term the to In plants capacity investments increase in segment only completed existing new technologies were investments our business. our our expand XXXX. our but pursue we at support treatment not

now growth dural growth our XXXX largest country the to during revenue we in is sales COVID. nearly has selling our by the Turning of business consecutive a converted care DuraGen launched Japan the where example a markets. model have our standard height in been we've impact in our the liver of wave surgery. In quarters our market This successfully position neurosurgery US and rapidly we Japan, distributed a first of transition, grafting With model. an X surgical to took outside international also driven the new business leadership achieved a team despite of direct as has leading CUSA direct by COVID, from this general double-digit and of of becoming in revenue surgery portfolio, the procedures. all

leveraging reusable During clinical to specialists XXXX generator, the including and Japan launching that of back a be hydro seal. irrigator, studies market, also number new and will are We're a adding forceps. we to specific bipolar for programmable products valves

product will Taken neurosurgery in introductions in penetration channel XXXX. our Japan together, in of the leading new portfolio these further into drive investments, products market broad

and locked Turning March, out neurosurgery recovered. steadily initial in have COVID to China; after procedures February the

investments in in helped us products with as while can On licensing a commercial the on ACell further partnership strong momentum a organic fourth and and portfolio selling we're commercial a organization regenerative presence China is OTT broader drive distribution portfolio our specialists our education our new We're and our we and to XXXX. medicine. an recently existing gap large in regenerative global a finally in result We've virtual we we capabilities focused commercial into the base. in inside driving Chinese customer this access local growth. hydrocephalus commercial growth deal The with points. double-digit how basis, expanding complementary accelerated fill launch our and with And ACell areas. fit broad low sales year. R&D exclusive deep giving example will XXXX In channel. team This we added bringing that enable product a teams products sales professional a for partner, organizations which XXXX in later the X great represents two of During with together quarter, created leveraging of segment, we key reach and will call our begin which entered our in market and invested infrastructure is neuromonitoring, digital experience in first within knowledge which

to advance you re-imagine and a Despite make towards jobs, position challenges took the Slide optimized company's turn to as of XXXX we of we the outlined the the call, we and goals. result to environment we forced some and If our of advantage beginning many the functions our long-term us current of strengthen operations to that COVID XX, company. the the like within at do I'd closing remarks. how

also a orthopedics with addition And investments the of more future portfolio. drive in we growth. and critical to divestiture We have accelerated focused of the programs product ACell,

double-digit as full have confident of growth. company, emerge year stronger adjusted margins, One to X% from XX%, following gross XX% greater earnings to XX% and remain We objectives growth, we organic and fourth results than long-term succeeded. a X% and believe key share our was EBITDA we goals of the our our last per pandemic quarter margins, year in to

an planned. line Before close event exciting to I'd we to like Q&A, have opening by announcing the

as May event and thorough Investor We'll the generating Thank you'll hosting prepared strategies Half concludes growth. our and on please you Specialty listening. call another open We'll update our in for to to feature Tissue path both to to and virtual April. earnings provide be for first remarks. quarter with organic on a So will our day X% to X% you please Codman to be segments for we Operator, That hope XXth. questions. Surgical review of closer XX. would turn we the look able more date, Slide us. our join line get information forward the We you Technologies a the percent providing

Operator

the Credit Suisse. Instructions] from [Operator ahead. go first from Please now Matt you. Thank We'll Miksic question take

Matt Miksic

Good okay? morning. Can you hear me

Peter Arduini

We can.

Matt Miksic

Thanks so much our taking for question.

So just businesses, one the med bigger together outlook. of guidance and add about a the to question your the it's regenerative business on other some on coming picture right now. talked on trends you bigger and and in And

there that the more some able you advantages regenerative see sell, or of and talk And have opportunities mentioned. you of med sort competitive follow-up, sort enjoy you perspective, bit of the you see how in platform about of just bigger that can more now, across So picture be as you if in maybe that I have the little they platform. a things, the as may to synergies then some running one things I putting what

Peter Arduini

our I regenerative piece Yes, is you in want believe if itself. Glenn, we right, know and multiple deal, say, a having clinicians Matt. a medicine the it's mean little that primarily you think first tell a lot technologies in bit would jump of after. comment and different that it's is, art or I is a I tools science, science, not toolkit then precise of because is and I'll big to

related by surgical have caused from pressure wound or one approaches. may all caused that's by or is those that's or from of vascular trauma, caused a caused So intervention very issue different a one ulcer that

and of We from in together particularly there platforms reconstructive that surgeons, bigger such offices we And, health I as point And have that company plastics use all but think system, positions different these all and contracting more this share becoming so of States these the today, hasn't well systems, technologies we ANC's exists. differentiate. may today but really the not with will the the different most that's most a care with the them, have United that's believe had been companies, comprehensive already I of of portfolio. at with people largest part in think opportunity world-class consolidating time,

other this as insight the that this particularly into what fit, positioned with so, the acute no there go so version be evolve actually products thought on in and great we portfolio And years we the to and I foreseeing it play structure and was potentially And growing are other we particularly also from of is then combined further its the some with we'll had help technology, well also we has University that think new a matrices epidermis, Head have that ACell that was we original very space, large Pittsburgh. of to of R&D. Previously, accelerants we're for upstream, to think into add did able got granulated the I to healing, ACell product that thereof. but back good of think area outside with because work of the that portfolio actually we've within fit

So, talk evolve investment want even new retained little that current as and to well to portfolio. we've capabilities those trends but you more a knowledge stuff a bit got may just have we Glenn, very some into good about not to the products, see. and

Glenn Coleman

think and I it's regenerative first that broader than right. Yes, just our when foremost, about platform, say wound care would we

add the capability the in ACell So did it's well reconstructive also one product. plastic about is parts in as body and other with additional addition hitting it Gentrix but wound and our of the nice care, thing business

of a to the in before and I heavy you we'll around of we've in I after in to impact plans, broader customers I what first in maybe one, I relative additional further now we so, probably business terms new bring year, lifting see think are and has business remarks half think regenerative about moving other struggled And medicines think portfolio ACell, COVID wise, our COVID has adjacent accounts, all once safety built our impacted get really that. really been good team said, that the think things. trending patients. and we lot by been stock I capitalize really quarter, We'll got of care, a that's a the wound we'll thinking body. be think year, we good that us, feel, to hit, we're to obviously, trained news year about I behind The to first combined we're on outside commercial more looks into shape good and in look and the as to done but the ultimately quite have to together excited position talk and we front, how toolkit remember now feel has the like we prepared existing our So, that I we've are we Number the broader here that and in synergies. expecting provide just supply forward. I we we're as bag we're see last with this as forward, the areas we more but doing of customers, mentioned support on with good our the in few been about going and product

Matt Miksic

if partial QX includes correctly. like on the some during Carrie's expect sales some comments Great, thanks heard we'd as a the much. have, it integration. I guidance obviously it's you've follow-up ACell, disruption that I sounded given And and so expectation question just for

wants net we we the XXXX year Just, those sold an kinds about moment, as that at for talk I of exiting outlook the as into the say but into nobody year, the following business about to get growth back to effect of ACell portfolio. the underlying half underlying think we should into how hate business, of this year and just

Peter Arduini

Carrie, frame since a to up want in you it want remarks, commented little you do you prepared bit? the to

Carrie Anderson

out. at growth think be would to business we the it tissue level growing to think same for our rest that growing we of expectations ACell, in I the expect Yes, expect terms would of be I

the X% the is out digits, that expectation high-single sure. into Glenn has coming ability confident X% So, as Tissue to I the I what should back as Technologies well think supply, and definitely we get we low that that ortho ACell with entire to get have the our for double mentioned all think more as to digits, segment high-single on digits that with

that's what same ACell. be would that so, And my for expectation

Matt Miksic

Thanks.

Peter Arduini

much. so Thanks

Operator

As on today's follow-up from JMP a Securities. taking one ahead. and question Dave question next now call. the Please take question Turkaly we reminder, We'll are one from go

Dave Turkaly

Thanks. I like was got here quarter beginning forget full to and was the with and guidance, a year. we

your I'd So for things for with thank mentioned you are world, that. changing one you but future. I to some fluid the mean, Maybe obviously maybe of what's confidence. virus looking was sort happening level, to your as on love get your internationally there of domestically compared want or to whether talk what the confidence out you well with and it in XXXX thoughts forward.

Peter Arduini

Yes.

up it off, start it Glenn maybe can you globally. Let frame me

got lot we add some I comments how good add and a COVID see right other and think really it I you've will now.

Glenn Coleman

Yes. would from first say I I us. and mean,

versus of say in impact last been deferrals If saw down There an the Central probably Our in impacted impact are was an in the the biggest COVID, May states that Southern be and first of and month in were at of actually we to area February. quarter hot has right January the Texas some look moment. is you at is the of impact, California now early going Arizona, of spots those and some even procedure April the year. biggest Outside the to than procedures been levels has US. in the really January of significant decline terms the greater a that US, UK. the

it's market, but one us, that a got not hard big impacted. pretty has So UK for been

Europe where part, from spots of of the concern rest of impact, the I some most perspective. think nothing for has there our been

out the remarks, as We like going from that outside that pandemic, third us is me of a even the headwinds indirect are Russia I so is for the of South keeping We're the we've prepared watch the my being virus, impact greatest would lot the and double-digit that things Asia too the we're and heard a impact and now consistent of face markets those would probably but include we in you right impacted have are markets growth going areas good the biggest seen in US. that's and just Pacific, then our Africa seeing through most Portugal, UK some Japan and but really there. wave an say where watch many the the out in on Spain, generating

Peter Arduini

customers Look, very And this caveats as having vaccines say are are a vaccines guidance. effect these back clearly as of the mentioned African reserves well, to Carrie kind positive South Dave, additions have that but a a to UK our like relative some the and effect. holding arise. we're to and something others I We little believe skittish variance would are to optimistic in and and going big in obviously may the other J&J added that

is to And this linear so half. a step in up, we be big going to think think not be that's why first going it's we the

don't a some the that but beds those and tend of has correlation seeing we're on more pickup. As up. optimistic. back either in combination need invasive technology to to to up We I've of are a start we burdened, direct people not of have reminded opening opening at mean, them neurosurgery cases and to bed just amount see cautiously ICUs business holding significant side or many immunity herd reserve with and and in be heavily a business seeing our others procedures We begin don't up, we tissue before. I fully our the that's need

probably you or probably only under on capital But I that business. to when our of on can instruments capital budgets caveat of again few X% think business, up. be our free is which the is, Carrie the a points still so business, would add

but that's flow cash the institutions. think kind that's just, also like still question the with of I different beyond it's a looking for

Dave Turkaly

Great, know you I Maybe are and a thank I'm bps are. for a XXX obviously performance time. sustainable impressive targets your an gross tough those side, of the higher, still how in just the just that's bump great margin EBITDA curious that. on some increases for follow-up improvement. Carrie, but quick long-term

we're environment be your the ahead level So, sort what some that great. you. today, back, and would thoughts come we in and on just there should Thank might moving expect of the of spending given but

Carrie Anderson

certainly, as that in my They are about fourth as were XXXX I were And to going say $XX about million, our would still operating lower trend obviously I very we expenses think prepared our to they as remarks, in low year. operating responded expenses quarter were you last Yes, mentioned XXXX, than up. COVID.

move So run XXXX, we in I to you OpEx expect get us rate back more do as for to levels. to, just

use XXXX that run would but a fourth good rate you I level. net-net, So, say if as the quarter

it, XXXX spend, but So rebounded still spend. as fourth annualize and obviously fourth had Arkis of doing that essentially OpEx it that in OpEx annual worth $XXX and it's well quarter had million about

that business I spend level think I think we'll of you'll beat XXXX. the see in that, don't in

back. I think we've spending, as smart been we're prioritizing obviously spending playing more

So in say than will think that. I lower XXXX between some would that see be improvement I that XXXX. gross we'll also margin

to down produce as addressed is think tissue XX% those that that and supply TMA the of about continue continued though move there discontinued supply as like J&J. now benefiting still revenue you we'll products help to mode, and the gross going into And of benefit don't XXXX, in margin end move margin. ACell was agreement levers with is our with the forget year into are some tissue we things leaning and nice comes gross but our I year back will will gross a off some this out the that the saw XXXX help growth of even in us margins,

gross expect that. offset higher, with modest coming gross bit of I but to helping still kind the with back well OpEx the improvement EBITDA as little margin line So, some improvement margin a would as year-over-year

Dave Turkaly

you. Thank

Operator

ahead. take Krum, We Truist the Kaila Securities, next from please go question will now

Kaila Krum

Hi taking for our guys, thanks questions.

will be guidance up basically basis, business revenue XXXX swapping So or are equal about dollar are guys but just size they ortho levels flat for assumes ACell, obviously extremity you and the in a XXXX businesses. on

this it year, half, you any things us COVID the impact additional for guys to you and seems which the like So, I first that in continue guess detail can assumptions will provide rest be helpful. help could considering the more just is would business are what you are understand of your

Carrie Anderson

as right, comparison to that think it's that would that you Kaila. take XXXX, I will one. Thanks, about flat. I say Sure, you're about Yes.

remove the to if when stronger second I half. the I is of add first organic X% the back our compared when go about remove which described to it's that ACell, And said first going X%. that XXXX remarks XXXX than we So, impact half implies in X% is talked be to recovery to about ortho expectations about year, divestiture the for a half growth the the X% that organic growth as you and to of you gradual

the at call, half be giving able get on the I thinking first half than around And, half stronger the earnings should segment I a terms second largely a be would assuming be would recovery segments some would in second us a line impacts the first So, our just versus COVID second guidance April, of more on with any would that in first will in QX we around to perform to comments QX basis. half you same behind half. half we'll when then that gradual about in time. that color expect an you bit to organic of color give largely which be expect

basis. lot on the performance an segment a not in the midpoint So, at difference organic of

Kaila Krum

makes that makes you how coming terms Okay, CereLink Thanks, new are those can the Carrie. then, year this be and Thank second and thinking half. sense. how products in of of mean launches you. And in that meaningful lot those contributing with just I product a new about Aurora.

Peter Arduini

this, you Do want Glenn? take to

Glenn Coleman

Sure.

going quarter That impact around It's some market then launch. the reflect to really global revenue XXXX, the XXXX most think biggest going the probably more in is years. on Having product a the important that, quarter, last revenues from new contribute XXXX. will be it's the be and controlled and point NPIs be to of new relates other a as third that's driver CereLink. contributor but said fourth Aurora to to be a lot XXXX areas XXXX that meaningful release to few for the us. clearly, in So to we'll the I launch of for launched in growth launching tumor, won't products is we've view, it

out, valve of never we we So, the that saw in about ramp, that put rolled new that head new the XXXX. products products programmable that is ramp I additional lot the bigger for see service surgical tips were contribution enhancements, October and on launched a from before CUSA, toolkit to you and the sizes, a demand we our coming think you're going think there those

product, market be definitely specific a in then, launching a actually to launching a So is some with lot that's the other Japan new along it's contributor not product, to new it's there. year to growth. more going And XXXX, are products we're we a this very shunt

a have again for other coupled in years nice a and will new fact story cadence products headwinds. growth of COVID pass year do the couple this that products XXXX we we launching of when be So have with to launched in part going the ramp our the XXXX, that's big of we last for

Peter Arduini

XXXX have that issue to think wouldn't addressed Tissue on supply customers reach in customers. of had that about just if I because we lot we to bring XXXX, Glenn's Technologies would I'm add new going we we've the didn't struggled that COVID clearly we enough, but supply, obviously you And XXXX, because comments

now So, nice us is and couple and to interesting the such something be to that's of as that portfolio the here and larger that driver argue over I XXXX the product would for opportunities, the going of XXXX a years. new one growth also next ACell ability just base line expand of let's with products, and

Kaila Krum

Great. Thank guys. you,

Peter Arduini

Thanks.

Operator

go We'll now with Marcus JPMorgan. next from take Please the question Robbie ahead.

Robbie Marcus

Great, thanks the for taking questions.

in have, CapEx over was year. coming probably give really didn't flow, us you I hear a had on for bit so free guidance thoughts than here, that guys cash you fourth lower would flow cash just how around a I and quarter wondering if noticed Carrie XXXX good trend will for conversion I So that was you could normally the

Carrie Anderson

Sure, Robbie.

with start free my will then We work cash flow. I'll to way operating flow cash and

just robust flow flow, our cash over cash that operating For in operating XXXX. XXXX COVID-impacted we so will again expect even increase despite, a did cash would year. into $XXX a I million flow nice

flow cash flow. be So, CapEx than cash because to the little I operating do XXXX going just a in Free that going improvement is of to lower normalize. expect is you mentioned, bit modest a as fact though

COVID. of cash as was much XXXX prioritized and So in us $XX as million and view trying CapEx as in preserve CapEx result the really was weathered really we taking of that to could XXXX we

CapEx will where for neighborhood be the the our expenditures expect would XXXX I around spend. up $XX of of XXXX was, in that million was capital So XXXX float probably of

maybe peg demand. a little think or I it some there just you pent-up higher because So, that around bit can is

cash flow flow cash the differential just So spend. free year-over-year in operating bit a say, little I the would of because lower higher, CapEx

Robbie Marcus

that over we I'd short now? and just say couple, thinking about, for cash how thinking May are you impactful quick acquisitions the follow-up free get Day, business than flow. conversion. where are in Great. the will at have And the How right about sits but you flow staying more maybe the a free on cash was Analyst term. old long-term XX% the a just The guidance greater course an guessing Thanks. update I'm of

Carrie Anderson

when take as I that do Robbie, some bit mean, Yes. a and integration little do for to faster additional cash you're our acquisitions correct that we drive ultimately benefit we topline will work in us. of that's

So, in we investments integrate think the making it's off of terms right to those a good trade businesses.

the cash those environment flow perspective, I do of cash So CapEx. see of in I to normal because think we're state for free the but and XXXX, an a XXXX where steady type to steady do and conversion the cash can be possible. I like see of including year But numbers us I where the to in XXs types the conversions think, is you're from where conversion acquisition, and don't maybe we're certainly normalization XX% our be mode, going in but into a going again different a years range, I of think got in XX% obviously XX%-XX% to think there, expect state, in of I a flow that flow we're go some in

Robbie Marcus

appreciate thoughts. Great. I the

Operator

go Matthew ahead. the Piper from Please at O'Brien We'll Sandler. next question now take

Matthew O'Brien

for one and for Gary. guess I questions. Glenn the taking for one Carrie thanks morning, Good

Glenn. Sorry, Pete.

number it that from opportunity behind this ACell that perspective pro in? you when guess really and some is lifting you pro year. something did we even know of And kind now, Is looking really far you, later million year? And impact, a and contracting year $XXX XXXX full more big full be a the synergistic integration and forma this this is year As that goes, basis think for do last heavy wouldn't why given disruption impact, forma then, I real COVID or conservative, there like XXXX XX as XX-XX you some year year. just like but is kicks on all a the not or cross-selling from

Glenn Coleman

force. place as COVID we think about to versus that this, with considered Carrie you have some of business the Yes, had impact to similar takes full guidance, the tissue that as as like got of respect time ACell a no, I year XX our Obviously, any just outlined. guidance our and part we've months disruption for you through rest go the typical sales integration we've

all XX that's factored for this of guidance year. to so, XX into And our

can take your some It that point of And get we year, to us when will late cross-sell the to we bag. quarters a start entire of see think how products our fully early to probably number. the that's around we've guidance, looked these continuing opportunities to rolled out, materialize, it's outperform so, couple at I XXXX. selling, cross And this hopefully

us take get couple I think to to going through So it's a of quarters that.

looking upside moving into So this seeing then at some probably year late we're XXXX and

Matthew O'Brien

as like your a and floor grows is far business XX as Okay. really mean Glenn, view. kind I until in XX of that

Glenn Coleman

Yes.

COVID to of the get through the uncertainty got to and how last rest we've respect integration. to have with going We is

outlined is we've it it. would hopefully how just of kind I and conservative, say So that's

Matthew O'Brien

by the QX time being three in quarters but of and you've for three I done course a fair talking let And XX% Okay, things. year. with understandQX, XX% the throughout are earnings the a we around, looking lot ramp quarters earnings historically into think then, Carrie, last impacted I'll last of enough. your of the your this the of XX% I come in big - about

us the Can gives what just you pull case power can earnings three some of up? So to pop the or of in you level levers whatnot get related that Thanks. quarters guys on of these some in year. have you issues COVID you that the confidence that give other last

Carrie Anderson

with replacing it going margin a coming little of because mix That's QX bit out of which But out, time of quarter. have comes portfolio of we're the ACell certainly have then the But heavy going average burden in. the COVID ortho lower not synergies of other a create is spend ortho little Sure. to you again, in than realize is that QX to our but revenue would that which ACell, you is fourth OpEx factors out yet the thing line ACell where two we the by in lower XXXX. and there in in get of some I OpEx that that into QX of and an that bit Well, QX expect bit ranges, kind be until just take that for the the compared corporate was whole quarter. going all QX down little guide realize that about to in to think going year-over-year months, a QX, for that the for gross margins they're comes there the you'll to see I QX I fact do because EPS will change in margins, timing the impact XXXX full part given the so higher the sure, three as for gross just thirds that, say only margins of

So, timing is portfolio that over cost will part be ACell also of the reflecting year. change synergies course this the realized QX of the and gradually fact

be we I will us as should be the the expect as at second well COVID behind build of that of point. as, half, most that So part that mentioned certainly is that impact

would see first revenue half a we in contribution half. our versus the of second heavier So

Operator

you. Thank

Taylor, UBS. take now next will Please from ahead. We question go Matt the

Matt Taylor

taking Hi, Yes. thank question. you for the

to a different the a integration negatively. positively on longer-term outlook have [ph] of the one for comments first and in follow-up just your was in way for the on just know, And thought these some or ask I house synergies. here, to number wanted products wanted So opportunities I ACell, you've of material about given made we now

Glenn Coleman

surprises. just really would say I Yes. seen haven't any we

the well got I good the we've is commercial think integration underway. news

we've we And would number are the it's so, products. perspective, that impressed Sitel that added of portfolio was. reconstruction space over, from wound powder in the specialists MicroMatrix with a product be thought my the been that the came ACell it what We've around and focused

team And thought what was. think team we bringing specialization is product I portfolio the they high-caliber that is the bring, it that over, we the really so

We're and ready. really So customers feedback surprises. are great we're no I would really happy. from say, getting

really about we good So feel it.

Peter Arduini

lot other derivative years did they so opportunities their the I that's what would scientific wasn't significant the to we products side, of contracting have might for And clearly do aren't with we few market. the and some to with the be leadership bring a that I new clinical, is products on it be I think on part some significant we side, lot addition I going there last think team focus in a a to think reasons. to there with R&D do the And in the derivative out with of do we're would before fact add mentioned nice a of products. comments as on that our second the be, in

So stay tuned on that well. as

Matt Taylor

starting now predict the I follow-up the that terms of in not could capital tunnel, progress up talking how more know any and and the pressure. on over the hospital then, to in capital. our characterize the at of ongoing you couple have Okay, of light open wallets seen next going end if precisely too you've of great. was And that kind that overtime to the wondering how one I there, the about you a It's been that's I that surprising. trends you've quarters. would

Peter Arduini

can a any and color Carrie do at add take I want comment. shot to after you Glenn it and you

Carrie Anderson

about they I improvement really I to and was still but about sales still our that QX, nice, mean, capital capital that think XX% in we've capital sequential capital that again as was down a sequential we've year-over-year in and quarter. QX about seen XX% gone so Yes, the would is, say fourth improvement

So in down a lag it's in the QX was down still XX%, It's of the piece. portfolio quite certainly and obviously still recovery only all X.X% capital is lag. it's

we time. think it's so some And to going take

encouraged the remains are by we're We pipeline having, discussions the strong. really

have options, I stronger table couple the mean, mean get can up a things hundred fourth thousand. Mayfield down responding the we our or then capital the have pieces units Those bit And are business about coming was even only little lighting smaller a be are quarter. our capital the talking of dual that and smaller better, of in you're headset. like options a back like X% capital I to those would rent-to-own of of of largest start those discussions I think our to conversations, type and models We price large say brought financing back to us going. capital. is like very I that capital, capital different in smaller don't instruments

kind good the the competitive the but It's is what smaller pieces a back. just to some lag, So budget, when they of larger coming capital continue more of of will not that up. expect It's news ones free that are the issue. it's

some lighter at that we're discussions of encouraged the be portfolio we're think this a little continue than will the rest the to capital to we point. having So by that still of sales continue see just bit

Matt Taylor

Thanks. great. Okay,

Glenn Coleman

I just revenues. it's add about X% only X% think the is, talked would we've past, of I in our to

really be bright turn it is of business our this come we our corner back, of lining, big we'll not like the quickly, part the it's a the going does capital actually when it's half and So strong silver is with to second here year. funnel pretty business, the in but probably feel and

Matt Taylor

so Thanks much.

Operator

from the Please Singh, question Wells ahead. go next Shagun We'll Fargo. now take

Shagun Singh

the guidance? for range much you assuming guidance, $XX in have assumed of supply it you could questions. for be regen of about Thank back, coming X% million normalizing then for our you estimate, your are By so also sales. you the taking A of [ph]. in And backlog what on XXXX are couple what

or sales, then are to are what of XXX you growth I XXXX in your have of basis expecting contribution? and is you guidance. Arcus that you Rebound in think points that XXX also your And for delegated guidance dial assuming in, all

Peter Arduini

Carrie?

Carrie Anderson

say would backlog. we whether overall that not I Yes, or have

going highly think on I course just to of it's be the dependent COVID here.

the first gradual a assuming are in recovery half. We

an don't coming be improvement of So see demand, big and is bubble I us through, first half the half. steady behind a in a think second we it's gradual that largely pent-up a the would the with expectation impact COVID say slow of bolus I big going course over to that

backlog for backlog So to help provide says of what point. we've I at steady I a calculation the of the Rebound little this XXXX, at and hope bit first that assumed kind is half Certainly. don't and in but breakdowns there seeing you have our in the don't of over this specific again improvement a point, numbers. of we're Arcus the have this I and slow course is

to think of Rebound XXXX some certainly of have going for a I two do Rebound numbers. be larger opportunity Arcus beyond. impact the and we the our still is Rebound, think contribution for I XXXX us and in in larger

Shagun Singh

in of I what supply? about included got guidance. expect demand during And do your the all you a it.

Carrie Anderson

I you're supply? and am sorry what there can't of seeing I hear what kind

Shagun Singh

of regen the the points think that So given basis supply, the impact to normalized XXX I about XXX was

Carrie Anderson

Yes, mean unconstrained our the can point is we supply recovers. at at meet that Yes, I certainly - regenerative Shagun. business demand where been and of expectations would as this have I a we issues yes, tissue any say the point, that it's addressed, the are

segment contributing mentioned the So at Technologies difference CSS performance as one I expect in point that for I questions opportunities at I in that year. Tissue this as think be I of as asked. very the a I to be expect don't to in similar look the assume will somebody big would XXXX. before the we through what

in XXXX equal technology be certainly gross think and XXXX year-over-year think and to Technologies benefit I between goes margin year-over-year restoration our supply Tissue our tissue of growth, that tissue XXXX my certainly margins as will well. back help So as to contributor I of and story an will in gross regenerative about the

Shagun Singh

will I this. with much. so you Thank leave

Operator

the go Raj have question will Dahi from Jefferies. of We Please ahead. next

Unidentified Analyst

adjusted margin this I Anthony progression. my specifically for question is doing progression, is Raj. on everyone hope is Hi, well, [ph] margin

XX% out And XQ sort the of there have it year ends has so XXXX, into not ACell, range. like blended ortho of look and that but last then it does at number the EBITDA it and company in some margin settles fiscal looks sort in the adjusted

about when from now bridge So mix that margin to thinking progression. to do meaning there sure correctly. in how with that of has we about ACell XX% want that we're higher get ortho. can And we range, the than XX you make actually seems about It so then that the think think that a % XX% faster the to terms

XX% So margin to progression about where range. And we do follow. we from XX% quick today I how think will the have are to one

Carrie Anderson

well. I in as Yes, think about thinking you're really that I line with what say would

of coming type improvement we shown In to that this think slides XXXX-XXXX improvement pegged that that be of moving in XXXX. but deliver XXXX EBITDA we in we'll just to margin in you is, deck year by we've Glenn think it our gradually slide margin had little margin of of but a be the think finished you think range, to net-net, couple EBITDA back year-over-year and factors moderated from pretty improvement draw nice his still you And up, want little remember and, expenditures and what right that. the coming XXXX expectation look ACell my I and of some where one bit the in would neutral. XX% at and I operating backed that's acquisition announced able as bit took up gross about if before, you you margins see ortho and back the we'll out still year year-over-year, a be in a pro did we going impact took to forma we'll to deliver low I first a XXXX be back ACell, able I where added obviously, XXXX, EBITDA we when said a about

we will ortho XXXX XXXX. and the you've the into realize and benefit But margin going a ACell, in between real sell-in. improvement tweak got full to still XXXX synergies out I with think nice path in show be out of swap so, can And you is the next to XXXX really year there a when and that's

really we'll EBITDA I So, XX% in some think to our path inroads make XXXX nice along to get margin.

Unidentified Analyst

The fault there mentioned would be, I synergies. guess you

about. I about to complementary so there efforts. the you guess if are to specifically, synergies, on quarter, the be be spoke selling nerve think we just mean to should I'm and last is dedicated a it two cost going cross-selling. then wondering And thinking ACell repair still when those all and is in again. we out about quantify number synergies I separate there side, channel the Thanks And

Carrie Anderson

ask ACell they Glenn synergies their the was million that you million talk about maybe of go business, question about talk a and public little had ACell your about of back second on can of synergies revenue. in there. expenditures I'll $XX $XXX bit to operating Yes, to statements The and their XXXX

business at the breakeven. was essentially So,

we and and So is of to think into the revenue points nice infrastructure we that is bring some lot of synergize to our really have same because that on think there. synergies certainly call there the side opportunity and Integra a we opportunity

I the to of are is that think our end of OpEx by that year. out goal I about as the think get XX% So, about

nice synergies there so, And is there. some

those And I Glenn, about of realization XXXX. neuro synergies then tackle run the I full As you rate think into mentioned, question? is want to going

Glenn Coleman

Yes.

If you think impacts - if the the channels. those you look really the reconstruction and business portfolio, reconstruction and at business surgical it ACell wound

mind reconstruction have it. specialist in that keep by a today, group Now wound sold being on focuses we team nerve we but have the

relates nerve it lot don't I So see per se, a business. the synergies to as of

Unidentified Analyst

Thanks. helpful. That's

Operator

next the Raymond question Bedford Jayson go We'll James, now at from take please ahead.

Jayson Bedford

Hi, good morning.

from the then moving move In tissue to modeling was in of Just here. distributor the contribution increase a keep the questions couple from and what discussion to direct XXXX revenue incremental revenue supply

Glenn Coleman

general surgical the not tissue was the was was moved business the business that So it business.

So I and think that as excel of other instruments. CUSA

the driving that's Japan specifically in is market growth. in keep of context haven't $XX annual Japan to And is, above quantified one million a contributors to put much my today of that We it's double-digit how but revenue. the

Jayson Bedford

side sorry, that XXXX. was one items dynamics, you're what in two your you guess, the wondering was I just XXXX. field in but in supply was the on Japan with And and it incremental other just I'm helping QX had the strain

Carrie Anderson

in impacted know, was was down of XXXX it our COVID. because business because It's hard year. COVID a to Overall,

at where XXXX would a safety be. below put into to stock supply is chain we a and I recalibrated how So was look we that that year really back wanted

a XXXX, have was COVID demand while going top line, it to then to overall our up took opportunities, that go we critical continue on some XXXX missed was and was inventory that that impacting demand. chase approach take the the In when build couple of can didn't we such bring recovery So just that of and we're it. SKUs have happens to there, so in levels these advantage supply factories, the of we the our

the our So the COVID. impact still because it's quantify no board overall in as now across could of the is there I way down XXXX we're businesses

Jayson Bedford

Okay. way the just too or to any XXXX in Is back? delta quantify far is there and between demand supply that

Carrie Anderson

talked Shagun meet we not growth about Well getting two had her having to after of to point us probably think was question, demand. points supply the in a in that, that cost what by XXXX I was what, that's the it

the supply. missed OTT So, opportunity to grow have an that revenue certainly of didn't the fact we because in we

talked about points it us. we to cost So a growth X% being XXXX about that our X% it of in

Operator

questions like at this conference Mr., time. to you, to It I'd appears there turn are back Beaulieu. the sir. no further

Mike Beaulieu

and that Thanks Thank XXth. today everyone. next and you please note on coming Investor of our for updating make in you, look our up in Day we calls sure May listening forward take up you everyone to

Peter Arduini

you. Thank

Operator

call. today's concludes your This Thank you participation. for

disconnect. may You now

Integra LifeSciences (IART) 18 Feb 212020 Q4 Earnings call transcript