IART - Earnings call transcript Q2 2024 | Integra LifeSciences Holdings Corporation

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Operator

Good day, and welcome to the Integra LifeSciences Second Quarter 2024 Financial Results. [Operator Instructions]. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Chris Ward, Senior Director, Investor Relations. ahead. go Please

Christopher Ward

Chairman; the morning, at we Officer. Earlier a LifeSciences Good me you press joining Lea ] which for the XXXX Chief President under Thank release Officer; The results. earnings Executive & issued Quarter and XXXX a Integra and release Executive Essig, Stuart presentation, Second are quarter Chief Presentations available Call With De morning, file Quarter Earnings and the will we call, Witte, call Investors, Events and Financial you. Knight, during [ named thank Jan this reference financial Conference on integralife.com XXXX announcing our are Presentation. corresponding and second Earnings Second Call.

Boston from Organic the excluding revenue at acquisitions in currency, divestitures. Boston and performance. the because with many rates Before in considered Boston global we prepared information growth Exchange effects disaggregated to nature useful revenue on filed products the Boston. Organic franchise-level excludes of may this plant reports foreign recall. our and the looking. made forward differ in periods. organic growth believes begin, all cause at release. growth, all be call company's that growth, stated, in of during the materially based will unusual otherwise manufactured I from and statements products the organic current want [indiscernible] revenues manufacturing growth Management that manufactured company's provides are [indiscernible] that an the you excludes growth organic and the organic could Factors we discussed Act both facility Unless Boston reported revenue when remarks, results in revenue of are and stoppage to our remind voluntary excluding evaluating of revenue excluding SEC Also reference revenue

to filed certain which Integra's with is report on measures. non-GAAP an non-GAAP X-K Lastly, will Reconciliations now Form current with I turn And our financial that, of to call exhibit comments will include Stuart. over the today SEC. financial [indiscernible] the

Unknown Executive

Chris. Thank you,

cover Jan to words Lea We the Jan path investor with good today and shortly. Before a few the business of I'd forward. lies further be guidance much and and on in and however, what for Leo presentation of which and We appreciate, quarter, more like second your will the detail begin about will that performance the the rest had and focus Q&A, a say year ahead. our

call So I'll address the that handing before to them. first

over we've very and a gaps. has commercial said, identified with several last armed That series strong Integra of a quarters, differentiated the team operational portfolio. a systems quality

revenue our quality spending The half As own will a plan. manufacturing the state is there as a agencies improving system, audit it our for of result lower holistic master broader in-depth well and quality our to GMP organization. What bolster arisen supply plan systemic processes compliance and evaluations reviews need in compliance these clear manufacturing drive typical our across EPS of of XXXX as system year. to the across and our is and The expectations the increased second quality compliance regulatory by has become of the the and network. approach has that both from our

shipping labeling impacts place many that worth to As morning, into resulting those guidance is and It noting to regulatory reflected resume are holds in impacts year. later put assess this the in quarter, revenue we have this there and are that in our of revenue products while product several updated the we preparing compliance. from third shipping confirm

compliance our to to to product entire potential. processes and Over supply our organization our the next execute will investments match our XX to our will planned elevate the demand and customer months, allow enable operations

will have of operations, lines are our quality to term come that long-term committee it quality will attention a all in [ of ] Additionally, responsible giving expense will we to stakeholders formed the communication the through we want growth have regular assure these Directors regulatory. I growth ELT that for issues the direct and level at of of the and members earnings but execution. recognize that is they necessary We near support the at deserve. sustainable predictable Board this

our improving focus time, continue this hands to our globally capabilities. and our new will of our the During product we business getting on products growing customers development into

are believe operating color had our if product on for provide place current been progress not and assessment, list. and role, in in and our an will on I'm the commercial and the board and of longer-term has CEO announced best & in the We that have of portfolio tremendous very the interviewing driving is new this confident Once CEO long-term highly on go more products, the time the There team our interest time we I Board bring continued ] to from of an in sooner. amount business. The capable place executing Heidrick impressive our qualified LRP and appropriate year, a have new Struggles both selected the we will with a spending to commitments. and exciting strategy candidates believe Board along the we'll financial company's has individual it. a make growth and on make given with strategy prospects and excellent life-saving of management search by CEO working significant strength. The [ end growth

our can delivered haven't we still market exceed to we we growth. recently, While believe or meet potential,

their committed to Acclarent not have tissue products ENT and and Over that are as and a and our patients. I and a thank market, like as customers and more acknowledge in support neurosurgery breadth the as synergies, necessary with remains differentiation result and to valuable we our to the great portfolio thank detail. but now Integra. making We in and the continued leader of with resilience acquisition. turn of largest a we to Lea investments commercial supply portfolio their over built well would technology that, in guidance only for and second regenerative discuss meet meaningful technology in Jan to of updated have quality And to significant time, it a our their has our portfolio demand. Integra that for and to manufacturing provides our also shareholders operations employees customers I'll sustainably enable quarter

Jan De Witte

the good year. Thank second the Lea and our you, Acclarent. to ] during ] our with first updated that reflects just [ and on products. touched [ themes quarter demand our of results our Stuart success Stuart, for second guidance we the many I what morning, market our quarter, reflected early and robust saw on. Similar and update everyone. will integration for you which of quarter

to in you our If turn X Slide presentation.

strong across Our $XXX guidance our was finished portfolio. that at performance entire demand second quarter our May on million continued range revenues above

revenue our of to the was guidance X.X% range. excluding $X.XX organic We up prior Boston, adjusted year, EPS was within Our organic compared growth delivered X.X%.

business saw global but of offset a Specialty our loyalty digits consequence, orders. And ] of the during with following strong relapse first pressure Surgical impacted and of demand growth dural customer our Codman uptake monitoring in There quarter. We're and and the [ this grew single low a demonstrating strong back [ the quarter, supply differentiation Our was neuromonitoring by our growth by intracranial X% solid the CereLink seeing bankers. franchises, from as also portfolio. business our access significant once approximately markets, international was in repair ] again

on acquisition closed products of April productively also into our we and the our integrating business. We X, teams been Acclarent have CSS and

portfolio strategic Delivered integration demand and ENT further of of growth reminder, growth DuraSorb, double-digit and model. our continues market a the ahead in joint at complementary the more and our our confirmed a assessments accretive and the opportunities have immediate the provides resorbable As the to as expectations met expands to early our which see neurosurgery. Within in deal reconstruction Technologies of scale the We're our to The the business, Integra wound for with portfolio. addressable this reconstruction products. positions of leader synthetic in point pleased product, teams healthy track team ENT integration. than we deal and high of Acclarent segment, a strategic our Tissue continue progress benefits our broad

the [ as Gentrix of During we saw family also Cytal, products MicroMatrix ]. as and strong quarter, growth our from AMNIOMATRIX continued well

with July on on ] at of Massachusetts in new of focus facility facility. And first the our an and our one for that Boston state-of-the-art up right minimizing in of Surgements current to the in limitations efforts to starting different time would allows manufacturing the been manufacture at facility restart half the had [ production and plan physical layout to our Braintree, given became us clear in not Boston, announced The PriMatrix execution space forward products risk. XXXX. we Integra. Consolidating we also next step As it back on line the to Braintree we operationalize the which have XX, and materially we the was optimized Braintree move expect have market layout at to decided

In ] strategy surgement addition I'm in force more return to is from The received good and regulation. construction. requirements still we based differentiated FDA PMA an the and remain approvable we our committed We In it. to teammates clinical Braintree confident finds conveniently to market. We notification for and compliance our approvable remain our application to to work for portfolio to implants that opportunity PriMatrix applicable bringing FDA until shift improving Boston located efficiency, is for majority facilities, a will has utility subject the to with offer a the the [ the in breast today manufacturing of [ our brand-new compliance our on in the system determined them have [ uptake inspection and the quality provide controls the meaningfully pleased sales to surgiment our customers submission meantime, a to multiproduct and to in stay announce PMA that with to the offering back DuraSorb, market that PMA of we seen patients. Surgient. ] the ] of for the allowing that FDA methods customers the product close fully

guidance in plan and during the guidance a planned for and year respectively. to range Stuart call. The our quarter ] provide mentioned carry reflects revenue business billion Now and year. back share, turning in as orders holds support and We're more quarter within the supply to impact of $X.XX $X.XX third earlier billion well to third updating as expecting for to to guidance in of $X.XX the the guidance. per the the we color will to for master full updated [ increase the CSS adjusted the are our on our Lea compliance reduction that EPS guidance our that spending $X.XXX

continue deeply Braintree bringing and focused and online over Before while I we turn to to our the assure supply capabilities. on me Lea, issues you strengthening our let processes call be that fixing

applying we're that many learned part our quality master across related have We significant system plan. to lessons compliance our network our as management of

We practice take them learnings new we manufacturing and put will to develop capabilities. continue supply and top-tier into to chain ensure

portfolio strong our customers hands their We to have product ability order need see on customers. our right promise in and our in predictability we and to from demand but to to our the shareholders. our deliver their strengthen employees to put continue our and patients, with

Lea. to over Now

Lea Knight

Thank you, Jan.

a starting take Let's at more second X. financial on our highlights, quarter look Slide detailed

X.X% $XXX million guidance The high an on of were May. representing in second million, back range $X revenues X.X% above quarter approximately on and reported basis. the total a organic basis revenues communicated were Total approximately the end growth

was adjusted to compared Our the EPS down quarter XXXX. XX% $X.XX, for

point change scrap, offset basis P&L, by middle points utilization stronger for remediation higher prior partially and XXX Looking year sales XXX Boston the versus an lower points Skin gross returns gross XX.X% margins mix benefit lower and in were revenue at from approximate margins was The by unfavorable impacted basis from the ] approximately down from Integra [ XXX points and basis of second the versus basis international XXXX. in XXX the costs. quarter, lower

and down compared Our XXX XXXX. to XX% points adjusted EBITDA basis margins were

in margin second reflects the for adjusted gross flow decline Operating Our decrease quarter margins. EBITDA the primarily was cash in million. $XX

up million If reported highlights from DuraGen by dive second revenues a prior in in Mayfield. an for single-digit growth the grew offset on in repair driven on Reported were basis our year. back CFS to franchises, deeper by organic into of revenue basis basis Advanced the Slide quarter. organic turn take saw high X.X% X, XX.X% an with Energy, access CFS single-digit we'll on orders. We a and driven Global X.X% delivered and sales the you by $XXX growth low Neurosurgery strong in Aurora. impact dural growth and We in certain QX

We Faralink strong also from saw our growth in ] [ neuromonitoring the relaunch franchise.

the double-digit single-digit the effect $XX the we decline growth for following and orders quarter. a midpoint saw reporting $X reflects the our of million, the organic I'd growth synergies a low growth in so, decline X ENT integration to However, the that Even like delivered business, reflect approximately low Acclarent in offset at was quarters in of highlight only CFF will led MicroFrance that ENT [indiscernible] of neuro by the ahead second our for XX% monitoring early segment to a ENT the performance our to back acquisition. On this the guidance which Acclarent the reflecting date. million instruments first close approximately is of reported the acquisition. basis, management. In

were For driven our delivering the by in line ] capital second be results for digits, up high monitors, with [ sales which single quarter, our that expectations launch. Ferlink are

the we international an with X% of our in low due saw decline challenging approximate strong international many growth continued We markets. in demand business. instruments. our versus a to quarter single-digit to comp to XXXX. Shifting saw Turning

in However, in to orders remarks. earlier due back meeting increase quarter the we we fell in short demand discussed the our of

segment our X.X% reported X. Technologies the Tissue on year. prior on an compared basis X.X% to to Moving a Technologies Tissue Slide on organic basis and increased

Excluding Boston, was organic down growth X%.

saw across from focus franchise, DuraSorb, team. growth double-digit the surgical the reconstruction from broad including sales growth sales in wound increased quarter for Second high benefiting reconstruction

double-digit Gentrix challenges We driven also and Cytal we was a reconstruction partially quarter's earnings double-digit last by growth in in decline discussed wound by saw call. mid-double-digit low and production [indiscernible]. Growth Skin the offset Integra during in MicroMatrix, low

fourth at are capacity. of We continued have not over operating expect ramp Skin course we we quarter, production to Skin second normalized While full Integra at still of now sales to Integra the label be the the is the the private from Boston. versus lapping during X.X%, XX% rates sales up approximately recall. quarter. In up run year, due primarily year label, were to excluding last returns Private prior

Tissue the Boston. due sales up to Technologies international from double lapping were high year digits Finally, returns in prior also

our will you sheet, turn If discuss and structure X, cash I balance to flow. Slide capital

$XX.X During and investments ] from in million, cash MDR spending was free million, cash the [ XX-month was flow quarter, continued working increased was on trailing $XX.X EU primarily and CapEx operating cash on flow XX.X% inventory. Free reflecting basis. and conversion flow a capital

flexible plans. liquidity a short- and balance support long-term sheet have our to We ample with

total debt was leverage X.Xx net was to billion, target our XX, June of As of consolidated ratio range just $X.X X.Xx and our X.Xx. above

investments total remainder revolving cash in within liquidity $X.X our are target ratio credit facility. company We $XXX and leverage focused billion, the on available our range. The bringing including our back of million had on and short-term

growth million rates would revolver. through convert rate our flexibility $XXX of to range the X% swap and it with We allow the the investments XXXX. maintain are in liquidity approximately the of due bond Through term take interest the the our our using environment. With flexibility, that low third balance sheet convertible improvement coming confident rate and to operations current our have strength in will our in even portfolio, XXXX, we long-term fund of end us quarter we to rate interest and all-in fixed strategy debt our execute in

to will and a Our the closely structure. environment along with maintain finance flexible Board, highly our the to treasury work and efficient rate capital continue monitor of committee team,

and will turn consolidated you per our and full XXXX. guidance the to earnings provide If Slide third adjusted I for X, year share revenue quarter

year. we shipping in majority cleared before holes end several As remarks, we of which discussed the a of temporary implemented, the updated have earlier guidance our be will our reflects

by revenues the quarter supply million shipping between Third million, are impact and be temporary back forecasted hold to $XXX $XXX to the orders. driven of

in and of down guidance revenue an to X.X% X.X% on range reported a basis. flat decline updated Our approximately of approximately the represents growth organic X.X% to

the billion the temporary the the levels into range $X.XXX billion as abate of we and be hold to $X.XXX are backorder to in fourth year, to revenues For full quarter. expect forecasted

the of we expect tailwind fourth demand the we shipments While the to slight our a can't able clearance, step-up a in period. only third modest the as many will backorder in substantial meet supply cases in quarter be with quarter providing into lost, revenue are

expect organic X.X% X% full to be be range and for We in growth growth to minus to and reported X.X% XXXX. year X.X% plus the of our the

earnings to per adjusted guidance. share Turning

$X.XX. to expect we $X.XX EPS quarter, third adjusted the be For to

Our resulting third product remediation and from holds. investments the quarter operations lower and EPS scrap due holds the costs higher efforts, utilization in quality, product reflects to plant

full spending year to will to [indiscernible] in can like you to range for our full $X.XX second we EPS increase adjusted that reliably hold The anticipate the through as our the revenue support demand. I'd be EPS a level considerations well outlook master as to the We year contemplates of half Slide For as network linked deliver we our increased year, full plan. XXXX that to reduction on $X.XX in share. updating we meets key across of this are supply spending per planned invest the and shipping ensure XX. impact temporary to revenue take at XXXX our

As of updated key tax as well rate FX find will count. our you as look the at side average metrics the left share and for page, you

to the and have as to As our and as on ramp drivers guidance OpEx. stepped right third the investments highlights we year we of the side, revenue up well key impact quarter and COGS on fourth quarter look full the

issues, quarter beyond need are lines providing based changes to XXXX meet on we in guidance. we time the to the Based on fourth not some resolve we XXXX. context our our XXXX, appreciate able expected for to XXXX the of Although the guidance should demand identified for be supply

also disruption master expect XXXX, execute which for we mid-single-digit into compliance organic to products, we XXXX, demand our over the strong growth pockets supply but as plan. see takes For account revenue of

flat of all this We make see margins EPS XXXX. growth into investments. on we account, as adjusted to adjusted modest pressure gross our also expect we Taking to in key expect to continue

an master continued strong reflected commercial remain our during committed our providing I'll order to our over our in our improve support quality Acclarent plan. saw our ] teams our like and XX, forward I'd supply manufacturing turn We do can products remarks. the organization-wide to sustainable make commitment through growth line the and quarter, we compliance second required for prepared to that progress customers and Slide that, we have meet needs. our Q&A. network to our up time. In advancing demand with their generate and better in and up that, remain [ to confident our wrap we investment for including are updates across look We portfolio compliance SurgumMPMA you resilience new bring and to Braintree With as updated IBDR. The to back and ] we PriMatrix guidance facility you to [ for SurgiMend open against market If

As Please facilitate present line open question. Jan the Q&A. will is for Stuart not [ the physically call, first the ] for I and the

Operator

Our with CL from Stewart question comes first King. Kristen

Kristen Stewart

expand was going are us that taking what and if if the on these I a you more confidence the the wondering shipping kind you're on XXXX. it's why holds with in revenue could provide also color to of bit into represent? be third just that just products little quarter hold third specific under products provide you total the and quarter not ship And could just

Lea Knight

segment. requirements. to primarily operate. of differ as which themselves, compliance of relate a across And across the the of the temporary so Yes, QX. in for expect instruction they you impact question, holes packaging majority we in of number which These labeling, business by do We SKUs -- IFU, we place the holes have cleared nature Thank the our terms in requirements a all use be those is markets Kristen. you and with to CSS for shipping hold

into just into question clear and will doesn't news the throughout your was to it And XXXX? action other good implement will course finish assess we products started some and And so want time to already other QX question I imagine, we shipping to are it -- I'm continue the as of was confident is and resume part we've of continue your the actions. The QX. take of fully corrective that can to that how of sorry. you part

Kristen Stewart

Yes.

Lea Knight

of clearance So do XXXX. based that now, of get through plan, right our those we majority end, into to on

that down So we this to should had in the magnitude be isolated of issue XXXX. related the call

Kristen Stewart

that [ the only ] And quality it just comfortable and how just on company? of end are you Is in of CSF that? is isolated color this the any the additional issues

Lea Knight

Yes.

back So the Kristen, to of this implemented master the goes I we've spirit plan. why compliance think

like remarks, overall As work standards our GMP have progress like across examples, is the and They'll is manufacturing approach -- and actions supply remit compliance. their is and this controls structured [ and Stuart will our things entirety corrective through and ] the and identify processes network as systemic to plan documentation into improving of of on as plan. holistic on focus mentioned look in quality That compliance. labeling they'll the things our focus itself to that as his they they'll streams implement

body of in be So months. this XX concentrated work next the the will

assess so when actions. during of the and implement course is we'll able be And that fully to

carry that So does us through XXXX.

Operator

Our next question Steve Oppenheimer Lichtman comes & with Company from

Steven Lichtman

a bit bit just that more wanted a how of level visibility anticipated little quarter. a holds ask commercial as potential fourth with result and share talk organization? Can that the you about sustainable for your the addressing the on customers loss more and in step you're about So ship little more to the up

Lea Knight

Yes.

me start let there. Steve, So

a of that CSS portfolio number across So as across mentioned, it's the I have the as SKUs whole, we look requirements. various

we're and so requirements those And we them. corrective implement releasing meet as actions,

part the From the the look of have on line of a for we'll a holes. really it's that some us the confidence extent time So majority think your what the that into process does to also of the risk at as to throughout upside we that's guide. of QX. end how guide the rest release realize to quarter. And right? question can that be guide, called and the as we of risks related absorb as continuous of the in upside little at that the that guidance improve. shifts the We have able a And that as of reflected Is a for sort we lower a QX, to those gives other additional happening bit, year, you ability we've then get perspective, is was timing kind if there I [indiscernible] the do do

Steven Lichtman

Yes. Yes.

in terms customer pushback, Any organization the commercial a Just disruption anything. of the issues result here? obviously, on of,

Lea Knight

Yes.

our working to working been we've proactively them around we'll so as them be impact in begin communication that and with products terms to And become customers is alleviate what with will help these nature the understand when of of we and our available. holes, them,

so the we of through through into through And this temporary that them portfolio, the constant current -- our relationship with of shipping fourth a as kind manage maintain we're and can result of help breadth the we hold the confident quarter.

Steven Lichtman

the of the what the hold broader sort of the months? we ship specifically XX detail the but are Got And can it. -- going here? little little next sort are over I investments what obviously, actions to Just investments aspect, being you the secondly, Okay. a then, made? understand the on that What provide provide made guess, just are are be here more a

Lea Knight

Yes.

resources address So the resources, streams we it's internal and I master through and an well in going controls we mean talked as step as that and to increase the standards. with work external know specifically quality compliance as expertise plan about,

we we're our some also lower necessarily the likely of we'll So investments of corrective that, utilization as making. Coupled sites part a cost with actions. at from that be that perspective, implement will see

we'll we're as from this requirements, -- of business. capital or which of on you a will gross then is a perspective, that a that positioned this sure anticipate effort, perspective. And part have be can looking impact to in negative a -- on we that meet making gross interest again, the sustainably growth also the So at capacity our pressure from margin

consistent to so at expect we're in And can years. the remain for what perspective, a that XXXX are you capital several spending capital from levels next with

you kind how that's an investment from So of think it about perspective.

at some most all it, on have position Steve, the supply meet late. on impact and to of a front of the will be important proactively we've these business making as is we're we'll it going investments is of of seen remain and of sure result challenges in that and part we XXXX better the growth as this, expectation the end though, of into the now drive forecasting business, think the I a make in the of

Operator

Our question Taylor with from comes Jefferies. next Matt

Matthew Taylor

I and I about I you a the lot to comp, QX XXXX. wouldn't you clear a second more with understand half guess these easy going you're your to for why issues ask 'XX. little us bit can of assumptions more guess, in of you wanted grow help in up XXXX?

Lea Knight

Yes.

that And level, So stages recognition is compliance thanks master are implementing for some we this that in of question. early the plan. still our at

your business in down that grow. across disruption, seeing to do the call top other our XXXX we of through as point, that, supply step we parts So coming strength of of much are that we continue on And the anticipate back. continued to

should supply compliance providing master early we're working also the XXXX. continued our terms in of and So that back but because that together how supply Acclarent business through drive disruption that's we're plan. of coming We're will be also on of parts our XXXX. And into your the with growth should principally in for growth additional still a full for we're year. And meaningful point, DuraSorb seeing the drive taken growth about to other potential in thinking in thoughts

so better we not. that, we'll or And or as assess be those will do realized disruptions to be able whether potential not supply

Matthew Taylor

margin Okay. the a thinking have similar impact. on question just line Great. And I of then

So to about growth modest you're EPS flat year. talking next adjusted

I back cost multiyear some overhang? is going when costs can be you obviously Or us understand, XXXX? guidance. this in type a the on in will plan of do help with actually mean, ongoing think place contemplating you're this resolved to past? in long-range you be margin So track the in kind goals you all Can that there's put get you've that of that

Lea Knight

Yes.

So terms out bit a little let of assumptions. more me cost in frame

as on compliance about the plan what the XXXX, remember impact negative we're have communicated, last we in that the is points magnitude that versus kind of master The down XX this for margins was basis we 'XX top of it's margins XX, guide investments means in the plan year-on-year would will that. points. And original to order said of -- So of of you and basis incremental moderately support master the our another making basis a XX 'XX, frame impact XX we if implementation points. be and on

on for another into master can we full incremental point and you negative -- move we're operating the now impact compliance basis As anticipate year, XX to XXXX, impact XX a plan under margins.

that's we're that investment, nature that's about magnitude of -- talking so the think the order kind as about. And you the of cost of

that disruption where framed of I all growth so versus you the or 'XX. to supply up EBITDA that to modestly taking get out And flat start of for consideration to into 'XX the margin EPS potential XXXX along that's with overall is

Beyond anticipate from your investments. a being gross some happens in gross margin point, next, do costs better terms supply the and level margins But in a impact these that, as what much of of maintenance result a anticipate of on position. to perspective we we also

XXXX So will would growth positioned. At not from around in this can't though, we're overall be be we're an specifically point, this but perspective and what say providing of should doing reflected guidance that that profitability work I long-range planning. because at kind much be better point, the

Operator

Ryan with from comes Our next BTIG. question Zimmerman

Ryan Zimmerman

answered still, think, moving Okay. A lot dynamics. be on these all questions of to just I based

So of issues. here the about tissue these of thinking I'm sitting start kind

so or year a over back more. Going even

we 'XX? course take I as of the ] through obviously more of think context money? ] just take not is money, why think, that in this that of long going I the within And quality like about will [ issues? So money some kind at And have these SurgiMend, as mean spending for if why issues? view maybe till throw it it this to throw resolve a why because with to to your a while in XXXX could has [indiscernible] is, it the resolve you issues. has [ you're Codman. Why Now supply of still some more I dynamics now ton already get that, not unpack why investors bedeviled the taken

Jan De Witte

questions. for Thank the you, Ryan,

on now -- okay, I there then question. me why questions [indiscernible] see Let why, are X and

to reevaluate us of company. we've we manufacturing system the our first particular, what at learned our postal more the Clearly, quality the processes and standardizing the learned and during ] has offers analytics compliance our our gaps. is need on made activities across So what quality be remediation effective some supply network. In [ across

of quality And to the so need last the years, more couple areas continue improved invested system have for we improvement. over our see while we and of

why our And this decided to markets. ahead compliance in so to compliance our approach capability, step before to this. commercial launch supply GMP get this indicated at and our our Lea activating the essentially the with our like strength master holistic be that's to of to and level and Board plan, opportunity we And of up our quality line systemic system create of

the already decision we that's the So the that Question step we had activities of many accelerate over quarter the to years. few really going up [indiscernible]? past and made up setting past over

Ryan Zimmerman

'XX? get I why it can 'XX? Why not at you're [indiscernible] [indiscernible] going to -- ton it as to if in in you a mean -- already active is money as of is these long why throwing take problems,

Jan De Witte

Yes.

Braintree let maybe context on a So and me the bit give rationalization. of

you facility have that plan site some think the building Braintree with commissioned communicated of the remember that I XXXX to ready in that we of XXXX. in we that will

to step to strategy specifically with of to long-term All deliver factory. was of Surgimen is output [ our And productive of modern the our and is our and a up colleagues. Braintree to to knew growth attractive our facility opportunities, significantly part work that's this to breast was still that big this capacity for PriMatrix. Intention and secondly, we factory and be factory, was place build never of strategy [indiscernible]. Boston manufacturing more enough ] In the building for going

in started have site. phase facility XXXX. And of the that we're building, that this Braintree the we still So year, construction in currently, building

half Braintree ramp path communicated, that to be facility update specific days XXXX. we and once closer the point, for too of expect operational the in to first to get still As operationalizing. the We'll the on commercial be we there. more we closer specific this understand sure, early At the as

Ryan Zimmerman

a instituted supply? question that? broader there is of other back there one when in the Okay. you in some stability preserving I'm you've as retention when result in proposing Are wondering hop queue. these instituting sales In disruptions force. had Are issues I and just the contemplated costs shipping you're I'll retention sales any that? the for of business, you you've what in incentives 'XX, you past, force the -- of about of and to you ask think concern terms actually holds your have or want to

Lea Knight

with that. I'll start Thank you, Ryan.

So for have the XXXX, holds again, nature shipping -- they're by nature. of the that talked we do temporary about

their result, in do committed absolutely of force yes, business very of get of our an sales hands them driving understand our because as been asset And strength expect long value helping only and but to we we QX. to one, we So terms forward. going QX customers, for course during for in not be growth products are we and able there's to a a terms us to beginning in into our back the of the time, huge retaining a recognize, this alleviate

XXXX. into carries sentiment same that So

strengthen quality through force we As sales on to to support key continue us business making plan growth the to and move and work this our because we master plan necessary to as overall our helping they're this to we understand, the also forward. unlock investments environment, we again, client continue

Operator

next with JPMorgan. Marcus question Robbie comes from Our

Robert Marcus

for Great. X me.

and 'XX years, a First, guidance X there's a at think view downgrades time you mostly do give into how back changes, many an how confident been to so look guess, is to past responsible I the If to comfortable uncertain X how giving I get just when to wanted degree? to ask, long-term over you company? the clearly guidance. I and it's it forward here 'XX do

Lea Knight

the question. Thank Robbie. for Yes, you

point a clarification. just of So

early talked holds on providing about, what we up you're is the shipping the allows on XXXX. considerations guidance was What we of talking it you provided out, laid of And through our in step Robbie. that how kind not shaping XXXX. for exactly for about as thinking We light are we XXXX that

supply do already it. think in starting our of we're baseline. experienced questions sorry, we early continue And earlier, made reduced digit counting in the to we're a to not the has about the million disruption be we could or million to of it embedded the that master disruption business XXXX we plan. yes, XXXX for we're with we because expect -- XXXX but some supply this potential -- there that back is grow of get $XX our as understand execute compliance we XXXX off be direction fundamentally, disruption were that as on against for able additional to shipping points That baseline baseline. about $XX So to as To mid-single XXXX going thoughts on

still So and taken adjusting in we've then past we from the XXXX. And in what's are XXXX, compliance not as we absolutely assessed of Robbie, that of at the of clearly, be short, light kind requirements are for master our around point. the part this and approach to come in the providing in guidance considerations plan, for guidance

work We the the have long-range are be and and appropriate plan, that that come done we'll back our conversation. including at to time to on

Jan De Witte

differentiated positioning. heard third, Ryan that our One, have demand markets, strong of [indiscernible]. me commercial outcomes, the products, our sorry, portfolio. growth. me that we great maybe in mean we're force. A [ strong question, certainties then times. are we -- you ] competitive -- uncertain and and a our mentioned that clinical Rob, And have add let couple are about broad strong we in add Let market sure I making Stuart within We're asked them we focus Yes. okay. know you thing, No, one We strong because about confident commercial talk force, products are on retaining

So not today, see CSS. back. We it product will with it destroy see in we in one DuraSorb other their products

have, commercial impacts we of and temporary and serve we'll force those the products there's those right? are ship the we to Those commercial while certainties building our and breadth continue build So are And deal with of that holds, relationship. right, on customers back. to continue the bring productive keep engaged, opportunities our to on that strengths, we

Robert Marcus

just me. follow-up Great. Helpful. for Maybe one

You'll imagine the How other up over a for have ability running to do contracts. regain have market they get will and there? to X to other products, well even on about had other doctors multiple time the share year, the products feel companies, out I potentially back you have of years. moved by

of off I given with to back, comes guidance it how be shorter Is about back? lines to prior to come the original do months. recapture the now How dollar share in rate think So long market? you half you're that when was it time we when get know run XXX% XX going

Jan De Witte

I'll this one, Yes. take Robbie.

reconstruction projects are for the for those about we're months hernia market. X we're into And here complex breast confident I market probably one, long I talking remains refer growth, that of markets PriMatrix, for think before, you to [indiscernible] are strong. which the Like the the complex repair. and mentioned implant-based the market wound

customers. They Now to competitive today, back. to a clear fill that back over that going and And we need [ relationship SurgiMend filling. And the presence see in specifics other and take products, with it's are significant recognize the the get work there's really fill products our But PriMatrix [indiscernible] to no [indiscernible] the products years, differentiated. that are our need, that and we come competitive and ] not next then do fill market. our

successfully are the more reconstruction synthetic keep DuraSorb, once our sales selling get active a there which at force, to teams building It's look engaged today, of It's impactful customers breadth keeps surgical even the us very than the customers products active sales back relationship portfolio resorbable that year the market. that you ago. use and that our an that our and we'll if relaunch acquired foundation of If market. of front not very drive products with and in the -- in these we we that

Lea Knight

you out products to on mentioned years. for because just that guide multiple And

PriMatrix, we're but to true point, portion of portfolio, with I is think to and respect [indiscernible] that's talking CSS the Jan's been that the dynamic. yes, about a across holds that XXXX the

months, will matter to So up weeks XXXX. it's to but been it maybe isolated of add a it's

Operator

Jayson Bedford comes James. Raymond with from question Our next

Jayson Bedford

morning. Good

X hold products It on quickies the when sounds me. decision Just ship for get your released. it's like

need will do for third-party regulatory any of additional Just these need anticipate products you Do clarity, that you approval? opinion? any

Jan De Witte

Jayson, let me take one. this

a to these observation our work, yes, is management The observations. at have place, correction defined been voluntarily on It's quality system our management an path from ship okay? put in driving system. quality actions corrective So holes by essentially

basis. us essentially it's we're a that correction done when on So who with product define specific

Jayson Bedford

there just part [indiscernible]? Is all a the based products this they Why CSS. in sounds label? products it of a plan, related like curious how And you there Or is on on -- facility? as just of or Is Okay. master same the ship the common selected? thread question these products. these were I'm these is are age on it on the manufacture decided

Lea Knight

Yes.

our not business, shipping compliance itself entirety business. that about plan that all we've Within is system the plan This CSS the hold systems So emphasis across this management right? per the compliance. quality a that's uniquely cuts master management is of affecting temporary plan is of se. within and So master is gap talked a and divisions so the gap a the why the exactly compliance though, manufacturing GMP of facility that on quality is the

that's quality and scope against of incorporated our the more we've robustness issue so own And from authority strengthening executing along that the that make also to our with sure systems of investments observations we're compliance we've the gotten remediate and shaping master this we're regulatory internal and broadly. plan what

Operator

Bijou Securities. Bank with of Craig from comes America question next Our

Craig Bijou

I belabor point, ask but what a guess, on, on you to said on I clarification want the a maybe the just follow-up to just Sorry to did manufacturing.

And plan at the products? you And processes CSS maybe looking are that the So about you broader ship broader look those all the looking at products hold? think are beyond a facilities? as management you quality the are are the going even your for processes manufacturing for manufacturing you just on forward, taking at

Lea Knight

Yes.

again, relates So to management hold, quality the the temporary ship and just control. of yes, systems clarify, nature to

temporary of use of the of that issue requirements is talking again, hold the packaging it's about. nature So the kind it's instruction most for labeling the we're -- and themselves,

also to included in that supply to does resilience ensure make right, that's at plan only for capacity. making we so we're move itself the the sure master front business capacity of control -- compliance sure as in providing scope to and broadly look forward, things adequately more like the systems, And we're go but we're that needs not our strengthening growth the quality getting of

at looking needs. that yes, be capacity growth to we'll and lens, through future sites So support our

Craig Bijou

it. Got

look implied at step-up is And just seems I then a on most like taken I getting But guide basis, follow-up I guess revenue is of guess out revenue QX -- question QX. of what's it as this Okay. the lower revenue, when well. a in the I

come there guidance portion discounting a that at you it in percentage of expecting that timing So come I the back your planned. But Are revenue there. account of there I that does ship out going that say mean timing from heard disruption all may to you expect that or is back? a you I -- I end QX anywhere about 'XX? the revenue and for you're thinking is think assumed maybe not is a what some the lower for of or and mean holds that the just guidance -- QX? And is as to that pushed

Lea Knight

Yes.

ramp. So the through me yes, step let

from of look be the you as QX, addressing shipping under that driven hold. to X/X just So by million. is will the $XX QX ramp about

about supply again, of because address most by that. across that QX, will that we be polled, currently -- the the end should in ship of start them So are X/X and position we're better hold of on addressed products

X/X little primarily now rates other with skin a seasonality. The towards along QX in It back things. is just run is a X being normalized

keep end holds, low some the like for well end the to kind being does and last UBM And it DuraSorb date. as we the growth for in allows makes timing drive the continue contemplated Acclarent, other as It strength high but with shift also X/X. that business, our parts So we've strong the up seen on that the the earlier, franchise to we've of guide. then shipping of to for as your allow to example, point some -- around that of the been

Operator

Richard Newitter from And with our next question comes Securities. Truth

Richard Newitter

what's curious Acclarent Maybe a have follow-up. year? organic that embedded first just expectation that to or growth with growth next I one business for contribution the just And for year. next then the mid-single-digit turning outlook the I'm

Lea Knight

Yes.

on I terms about did step that excited The fact Acclarent our million. of for that that the our as performance $X of was just business drive portfolio So shape is QX, excited. about strong for business. see about really general, it future well. We're will again, the QX that the We're in in -- XXXX, by integration proceeding -- thinking talk in a growth QX of we back part exceed having and business and

will million, that to Acclarent And $XX I $XX we have and reflected in so it were think XXXX, now provided about in be we and originally for that's our guide, at we the guide contemplated closer calling earlier. million

$X that So performance upside we in saw being out it's QX. million that really

balance be it continue drive will we the of to full of XXXX business are single-digit XXXX, to into XXXX. by we of the throughout as kind move end we high year the of a -- be believe we As able QX growth will for operating

Richard Newitter

helpful of the or Or need then Will update to And with of you your you to longer? the just -- That's be maybe some plan on plan, to keep a this or And have Okay. above need off ratio leverage sequent where these we us little you it a your when periodic maybe then are that need end that something just addition be if that in just what's is covenants aware there color. of know any by update that, the there? And third to will quarter? you'll everything could each know of? you ships market quarter? products

Lea Knight

Yes.

have the against question first. update second terms take of part on of me ship a our We current call that meaningful we'd to based holds be do that expectation. as the able -- So in again, we're provide how the release of plan let we'd to timing progressing anticipate,

would that. So I anticipate

and result of knew In of kind terms We're a which are. about at deal of leverage X.Xx the asked leverage range we you our as acquisition. of be would Acclarent about rate, above kind the we we where

happen. our current we'd will our expect year of not that did also drive the ideal the just at call, high the in leverage that of by earnings that communicated this last we down our time above within communicate end to down So likely call range our range. I with we be that end back

to no, question in the we'll your our don't determined agreement. problem the have at our on projected that concern point allowable along EBITDA, at bank as guide, but look perspective continue to this But will a leverage you have elevated. with debt Our from remain we debt a a adjustments covenants covenant as

Operator

Joanne comes from Our Citi. next Wuensch question with

Joanne Wuensch

implementation to where I'm Perfect. the things that thing, little the ship program. I the the stick this, sort global those to compliance I'm is FDA chose hold you which don't a and on on asked to hold of do? were but to want that understand one of from? confused came trying things Or And the Were you do? ship those

Lea Knight

So made, voluntarily the we shipping were I SKUs initiated that underscore that yes, across just the the remarks Integra holds impacted. to

Now of authorities of that it observations internally or came the result that network assessment across received, internal of that nature result as about as as how was our we've a do a both externally. we regulatory well

shipping holes. current of is compliance broader the but what's plan, informed temporary combination a So X those also the master

Joanne Wuensch

have given gross maybe the what a these there that like from rate, talk of margin relief new year about you stage is margin go-forward this going in pressures to when going to roll sort of that year? is At to And oversight place sound Or a some the into for they're be while? gross expenses? next

Lea Knight

Yes, certainly.

on structure, will will overall top a There meet positive XXXX and result wish seeing said, a the year. full to of an under XX that likely going characterize there an as shouldn't be another that as that, level, cost to be in better magnitude see now better a should this actually not of higher cost and points in 'XX of supply to sustain it XX order offset basis on increase being have that from the a magnitude XX maintenance then we of So demand I we're basis incremental points forward. That are we right? was operating perspective be positioned being We in but the from business. at that

be to why kind able need cost the explicitly to for out speak business. And or that of be kind we frame ongoing to or we'll the of so what impact that's of the XXXX, LRP in maintenance to context as will our into push

Operator

Our Chopra comes from Wells with question Fargo. next Vik

Vikramjeet Chopra

also to ENT QX? hold, shipping does in this that apply on your So business

Lea Knight

No.

level. along as now, have business ENT impacted the Acclarent, we So were in business. across we They with the not our microfrance [ bar is shipping by look Acclarent. Right ]

Vikramjeet Chopra

And helpful. Okay. question on Integra Skin then Got was my That's follow-up it. please.

in where and you just update why expect was you normalize out? time think said to line as are the sales Can QX now. I that you you to an pushed provide the

Lea Knight

Yes. Vik. you, Thank

our anticipated started had resuming to and in would being continue call We So of at We at the that if half -- produce, full XXXX. back capacity operate at you in to while anticipated recall to weren't capacity we've able May, meet production. not levels. those operating we capacity. Since allow operate we're demand got then, still us we for

yields to delays run we've characterize, thinking that that our operate get And I to Our to have where to we'll getting QX, now the think rates at talked does pacing fair what the timing just about. order shift normalized us interim, is be there. and able drives we I in with -- it's by associated that needed schedule for think And those be had improving at business. In be run rates. current normalized current to some production to the I

Operator

concludes Thank This Thank for you the you. participation. question-and-answer your session.

have may now disconnect. great You Everyone, day. a

Integra LifeSciences (IART) 29 Jul 242024 Q2 Earnings call transcript