All right. Thanks, everybody, for joining our next session. I'm Matt Taylor, the U.S. Medical Supplies and Devices Analyst here at Jefferies, and I'm pleased to be joined by the management team from Integra, including Lee Knight, the CFO, and Chris Ward here as well, who runs the investor relations function. So we have about a half hour for Q&A. I've got to keep this tight because I have a lunch at Applebee's that I've got to get to. And I have a number of questions that we prepare to hopefully go through all the hot topics surrounding Integra. So I guess maybe to start, I want to do a more high-level question. And for those newer to the story, can you talk about a brief introduction of the business and the growth drivers across both the Codman Surgical business and Tissue Recon?

Yeah, certainly. And Matt, thank you for the opportunity to be here. We appreciate it. So certainly, Integra Life Sciences is a global medical technology company with leadership in both neurosurgery and regenerative medicine. We operate in two divisions. Our first division, our largest division is specialty surgery. It has a total addressable market size of about $6 billion, growing at about mid-single-digit levels. Across our portfolio, we show up as foundational across procedural workflows within hospitals with strong recurring demand in neurosurgery and ENT. We command a number one or two share position across our segments in neurosurgery as well as instrumentation and occupy a share position of number three in ENT. Our products are used to treat areas like brain lesions, brain tumors, hydrocephalus. We treat, you know, various areas across surgical and specialty instrumentation, and then also do transnasal procedures as part of our ENT work. When you look across from our competitive kind of positioning with respect to specialty surgery and our products within, our products have strong clinical differentiation. We have strong trusted customer relationships. So many of the surgeons that use our products have been trained on them, which is important. And then we also have scale, right? These are some unique specialty areas, and we have a broad portfolio to be able to show up as foundational across the procedure workflow. So as you step back and look at kind of that part of our business, the combination of the breadth of our portfolio, the scale that we operate, as well as the trust mark that we represent for surgeons is a combination that's tough to replicate or penetrate. Our scale also creates benefits for the other side of our business, the second division, which is tissue reconstruction. The scale that we have in neurosurgery we bring to bear from a contracting perspective, which gives us benefits as we also bring our tissue reconstruction portfolio to the table. Second division is tissue reconstruction. Total addressable market size is about $2.5 billion. Parts of that portfolio grow at mid-single-digit rates, parts of it in the low-single-digit territory. Tissue reconstruction is a differentiated portfolio made up of biologics as well as resorbable synthetics used in complex wound reconstruction as well as soft tissue reconstruction. In that space, we treat burns, we treat traumatic wound injuries, we treat soft tissue and muscle flap repair, hernia repair, as well as breast reconstruction. And from a present standpoint, we have about 90% of our business is in the inpatient setting with strong durable demand based on the procedures we treat as well as strong clinical evidence to support across our portfolio. One of the things I'll mention is that within our wound reconstruction business, about 90% of our, we have a number one share in wound reconstruction, 90% of our portfolio is in wound reconstruction. On the soft tissue side of the business, we have a share position of about number five. That's only 10% of the business. What's exciting is, to your point earlier, around the growth trajectory, right? We are positioned this year to bring back to market Surgman. I'm sure we'll get into that conversation later. And that will be the catalyst to allow us to drive faster, more accelerated growth, and be in a position to take share and drive growth on an accelerated basis as we move forward. So structurally, from a total business perspective, It's an attractive business. We have had some performance challenges that I'm sure we'll get into. But the nature of those challenges have been more around supply execution, less about demand. And our focus in 2026 is absolutely around making sure we're driving improved supply reliability along with the discipline to execute consistently so that we can make sure we are meeting the demand.

Great. That's a great summary. And you laid out a lot of good questions to follow up on there. So let's go step-by-step through that. Maybe I'll start at the top again. And just wanted you to address there was a recent management change, Stu coming back, Stu Essig, one of the founders, came back to fill the CEO role. Maybe talk about just what that means and any changes to the strategy that we could expect from Stu's presence. Yeah.

So effective May 1, Stuart Essick, our chairman at the time, announced, we announced that he is now taking on both roles of chairman and CEO. He served as chairman for about 14 years prior. And then to your point, even prior to that, for 15 years, he was CEO of Integra Life Sciences. So he comes to this role with a lot of knowledge and understanding in terms of our products, how we're positioned, our markets, our customers, all of which we believe will continue to serve us well. In terms of focus areas, what has been clear as he stepped into this role as CEO is the transformation that's been underway will remain as is. No changes to that, right? The operational initiatives that we've put in place to strengthen our quality management systems, to drive, improve supply reliability, to advance the remediation activities that are currently underway, all of those things remain on track. They were initiatives that when we launched them had the full support and backing of the board, and so they remain undeterred in that respect. What is changing is as we now start to move away from a focus on remediation and move into execution, there is much more of a focus of how do we start positioning ourselves to drive our Horizon 2 accelerating growth activities, how do we take a more aggressive position around commercial readiness, field engagement, customer engagement in ways that leverage our scale and, you know, make us ready. to restore customer confidence and ensure that we can continue to drive growth on this business as expected. So that's where the focus area is going forward. We've received a lot of great feedback, both from inside the company as well as outside the company with Stuart taking this role, which has been great to hear. But I think Stuart, if you were here, would also acknowledge and say that our focus for the next several quarters is absolutely about execution.

I want to get into some of the remediation activities and the relaunches, but maybe first we could just spend a one-minute level setting on what has happened here, where you are with the compliance master plan, and some high-level thoughts on next steps as far as progressing through the new plan and new product launches.

Yeah, yeah. So maybe a little bit of quick history. So we have, I guess, beginning in 2023 and continuing to 2024, we had a number of operational challenges that stemmed from gaps in our quality management system. And so in 2024, we launched our compliance master plan that was a focus at strengthening our quality management system holistically across the entirety of our network. And so while we had quality functioning in each of our sites, we didn't have a central standard way of operating across the breadth of our manufacturing footprint, which is made up of about 17 manufacturing sites. And so the focus became that. Along the way, we also acknowledged that while we had not had a centralized quality capability across all sites, we also weren't leveraging from an end-to-end supply chain standpoint the opportunity that existed across our manufacturing footprint to drive efficiencies, to improve visibility and planning capabilities. So that became the operational effort that was part of our transformation. So we've been advancing both of those things, right, through 24 into 25. And at this point, we are, from a remediation standpoint, most of our remediation activities will be implemented by the end of this year. We will have fully implemented the actions required to address our open warning letters by the end of this year. And we are already starting to see evidence of improved supply chain visibility, which is helping us mitigate challenges before they become real problems. And as a result, we see less supply chain interruptions. So the transformation is very much still underway. Still a lot of work to do, but we're already seeing signs of it being effective.

And I guess as part of that, we've already seen you relaunched some products. And so I wanted to ask you about the relaunch of Primatrix and DuraPair and maybe just give us an update on how those are going.

Yeah, we're really excited about the progress that they've made. To your point, we relaunched Primatrix and DuraPair. There were two of the products that were taken off market when we closed the – when we did a voluntary recall of our Boston facility. We relaunched them in Q4 of 2025, which was about a year ahead of when we planned to. And we were able to do that by securing a dual sourcing strategy that allowed us to bring those products back to the market faster. And just, you know, from that perspective, that is also very much part of the operational transformation I talked about, which is ensuring supply reliability through redundancy. So a key part of our undepending of the initiatives that we had. The initial customer reaction to that relaunch was very positive. We had some strong initial uptake. We've seen demand pull through in Q1, which has been also great to see. On a run rate basis, coming out of Q1, we are at a run rate that would suggest we could get back to 50% of what our annual revenues were for those products when they were last in the market. And as you can imagine, with a launch, you kind of start small and you grow and expand. So while our run rate at the end of Q1 is at 50%, obviously, from a commercial strategy standpoint, we're pursuing a much more aggressive strategy. And here's, you know, what we're learning through this is, you know, customers, we're reengaging with them, tend to fall in one of three groups. We have those customers that know and understand our product differentiation, they've missed our products, they've wanted them back, and they're readily willing to take them. We have a second group of customers where they also understand our product differentiation. They are taking us back, but we're sharing the shelf in ways that we didn't have to share previously. and then we have a third group that's much smaller but still real that are you know at a point where they're not willing to necessarily take us back immediately but with those customers we've been able to work with them and demonstrate in what cases our products show up differently and use that as the avenue to begin getting back our share and so all of that we take with us we think it'll be informative as we launch Sergimen in Q4. And we're excited about the fact that the market dynamics around outpatient wound have changed in a way that's moving into our favor. And that actually represents more growth opportunities for Primatrix, as an example, beyond what was present when we were last in the market. So all those things together are encouraging and give us the basis to drive our share forward even more so.

So making good progress, you're kind of halfway back with those. Can you just remind folks what the revenue base was before for Primatrix and Durapair?

Yeah, Primatrix and Durapair annually are about $25 to $30 million.

Now, you alluded to one of the other big launches, Surge Aband, a couple times. So I wanted to step through a couple questions there. One is maybe you could just remind folks on the Boston side of things now with this Braintree plant, which is outside Boston, you know, opening the progress there seems to be on track for a June reopening of that plant. And then that would lead to the Surgamand launch. So maybe just talk about how that plant progress is going, the next steps there, and when we'll actually see Surgamand back in the market.

Yeah, absolutely. So one thing to note, right, as we do this, we view the Braintree production capability and the relaunch of is a very significant operational milestone for 2026. And I'm intentional in saying operational milestone because from a revenue guidance perspective, we're not counting on significant material contribution and revenue from Surgemen in 2026, but this is more about, it speaks to the progress that we're making with respect to our transformation, right? To get this site up and running, to reestablish supply capability, to demonstrate our execution capability and being able to do what we say we're going to do when we say we're going to do it. All those things matter in terms of establishing our capabilities moving forward. So to your point, yes, Braintree, we expect to have established production capability in a few short weeks. Following that, we will bring Surgman back to the market in Q4 of this year. What's important to understand as we consider how we're bringing that product back is what's changed in a positive way in terms of our portfolio since we were last in the market. Implant-based breast reconstruction is currently an $800 million market growing at double digits, which represents opportunity for us. We're seeing changes already in the market where customers are moving away from human ADM towards options like xenografts and resorbable synthetics, which plays really well to our portfolio. We're seeing changes in how procedures are being done such that they now require or there's increased demand for larger sizes. That also plays really well to our portfolio. And finally, DORZOR, which is our resorbable synthetic in this space, has been an opportunity for us to stay in front of customers even while Surgeman has been off-market. So as we're ready to enter, what does that mean? It means in Q4 when we relaunch, we'll relaunch with our 510K product. We'll go back into our key accounts and customers. You know, Surgeman does have certain unique product characteristics like sizing, like consistency. It also, from a price point standpoint, is more advantageous than some of the other options out there. Um, we'll, you know, as part of that, we'll have the conversation around the dual brands in our portfolio, again, Sergiment and DuraZor. And then when we are able to follow through and get PMA approval, that will give us an ability to promote an implant-based brush reconstruction and drive accelerated growth in that fast-growing segment of the business.

Yes, you've got Sergiment Part 1 and Sergiment Part 2. Maybe we could take each one of those in turn. and can you first just remind folks what the old surge amend revenue base was yeah and then i want to talk about the pma certainly it's almost uh annual basis sergeant was about mid-40s okay okay and then this pma program has been uh in flight for for a while here we're now you know kind of getting to the last innings of it um so maybe you could talk about the plan submissions for both sergman and durazort timing of those and then the opportunity that you see for both going forward happy to do so so sergman um we have received already an approvable on our clinical submission

for sergman what we now need to do to complete that approval is to get approval on our manufacturing gmp manufacturing capability so when we're when brain tree becomes operational in a few weeks That'll be the catalyst to be able to complete the other PMA requirements and will be positioned to get FDA pre-approval inspection for the PMA by the end of this year. We obviously do not control the schedule of when the FDA will actually come in, but we will be ready by the end of this year, and therefore we expect PMA approval for surge men in 2027. Doors Orb is on a similar timeline trajectory. We also expect to be able to complete all of the PMA requirements and get approval in 2027, and that's the catalyst that will unlock an ability for us to be first and second to the market with respect to a PMA, and it is interesting because in this context, the PMA acts like a regulatory mode, right, that separates us from other competitors in the space. No competitor has a PMA currently. When we come to market in 2027 with both, we will have number one and two PMAs in the space. It gives us an ability to promote directly an implant-based breast reconstruction. It gives us ability to start training clinicians on the usage of our product and encourage adoption. And so we believe that will be the catalyst to help us drive accelerated growth across our platform.

And that is a fairly large market. Maybe you could talk about the market size and the differentiation of your products and your label and having a portfolio. What kind of share do you think you could gain in that market?

Yeah, so we have our market size is $800 million. It's growing double digits, again, from a characteristics and what our products offer or provide. We have, broadly speaking, size advantage, consistency in terms of the product experience, and then price. price would be another competitive advantage um that we have in terms of overall sizing um you know that'll be part of the long-range plan that we come up um that we develop or which we haven't released yet um but again we're excited about the opportunity because we'll be able to promote in ways that no other competitor can do great and then is there still some some kind of plan in the second half of the year to do the long-range plan or have you not yeah so as a result of the leadership change one of the things that did change is our intent to do an investor day so

we had originally announced it as a second half activity under our prior ceo um with stewart now assuming the position um he has elected to move that out so no sooner than 2027 okay um and you talked about pricing a couple times yeah advantage and it's related to this uh outpatient uh reimbursement change also so just to remind folks most of your business is inpatient outpatient is sort of a greenfield opportunity, maybe you could talk about how the reimbursement changes play to your favor, basically, or sort of punish others more than you, which receives no punishment there. And could that actually be a material driver? Could we actually see it in the numbers as you move more into the outpatient setting?

Yeah. Yeah. And I appreciate your frame. I think you're exactly right. While there's been a lot of noise in the outpatient wound space and it has caused challenges for a number of players in that space. For our business and our portfolio, we do see it as a net opportunity. And just for the benefit of the audience, let me step through kind of those dynamics. To your point, 90% of our business is based inside the hospital, so inpatient setting, where reimbursement lives under a DRG And there haven't been any changes to that reimbursement structure or profile. It's also a space where we've been able to demonstrate strong performance in Q1. We saw across that part of the business alone double-digit growth. And so it is an area that we continue to see as an overall strength in our portfolio. On the other 10% of our business that is in the outpatient setting, what's unique about our portfolio are the products, the price, the size, and the science, right? All of which give us an advantage despite some of the changes that have happened as of late. So what do I mean by that? From a product standpoint, we have a broad portfolio, provides a lot of treatment options for physicians to drive the outcomes that they desire. From a price standpoint, one of the most significant changes recently was a reimbursement cap of $127 per square centimeter for skin substitutes our pricing was already within in line with that level which means we didn't have to change our price we didn't have to change our margin from a size standpoint the other issue that others are experiencing challenging challenges with is wastage we don't have that problem because we have a broad portfolio with lots of different size options and then from a science perspective our products are backed by strong clinical evidence which also supports delivering the desired outcomes from a physician perspective so all of those things we see as advantageous to us to either mitigate headwinds and also potentially create future opportunities and in terms of where we see those opportunities because I think that was part of your question as well there's a lot still to unfold. A lot of these changes just happened in the January timeframe. So we're still watching and seeing where the market moves, but we believe it will move in one of two ways. The volume of procedures in this space will either stay in the outpatient physician office setting, but you'll have a lot less competitors that can be viable as a result of the changes, but we remain, right, one of the viable competitors in the space. Or you'll see a shift to procedures moving, physicians opting to move procedures from the physician office to ambulatory surgery centers or outpatient wound clinics, which are kind of inpatient adjacent, right, which our channel access through inpatient we can tap into.

And I've already mentioned the strength that we've demonstrated in that space so that represents an opportunity to us for us so again we'll wait and see how this unfolds but we're excited about the opportunity um in terms of the middle medium term great maybe shifting gears um we talked a lot about the the wound portfolio i wanted to move to the other side of the business and talk about codman and specifically ent sure so ent is an area where you've made some acquisitions you're a leader in that that sub-segment but there's been a little bit of volatility and challenges in the results so maybe you could talk a little bit about what's been behind the disruption and what you can do to improve performance in ENT certainly so

the the challenges that we saw in performance in ENT particularly in Q1 was a function of reimbursement challenges on our balloon cyanoplasty part of the business and that was a headwind we faced in 2025 it was a head when we knew we would continue to face in 2026 and it was contemplated in our guide I should back up to mention though at the time that we did the acquisition of a clarant we know we never expected the balloon sinoplasty part of the business to be the growth driver right that was not the focus the reason for that acquisition was investment and opportunity to grow through some of the more innovative segments of the business around eustachian tubes as well as navigated systems and that continues to be our focus as we move forward to your point we are taking steps to address the current challenges on balloon sign-up policy we have a health economics team dedicated towards helping us mitigate some of that those activities or those those issues we've done some operating model restructuring to streamline, drive better accountability, better execution to also help. On a full year basis, we expect our ENT business to be flat to low single digit decline in 2026. But again, with the longer term growth opportunities being driven by the more innovative segments where we continue to make investments.

Gotcha.

With the few minutes we have left I wanted to spend a little bit of time talking about the P&L and capital allocation so maybe we could start with some of the short-term assumptions and the guidance and specifically wanted to address tariffs because there's some uncertainty there could you talk a little bit about what's embedded into the guide this year for tariffs and where there are some points of uncertainty yeah so in q1 we saw about a 10 cent benefit in tariffs and that was relative to our February guidance right and at time it was a function of the refund that we had filed as a result of IEPA being ruled unlawful in combination with not experiencing kind of the tariff costs or impact that we had anticipated when the guy was first set on a full year basis we are assuming that the administration continues to pursue a tariff policy such that they are able to get back to what IEPA the IEPA law affected which was about a 15% tariff assumption so we've put that assumption embedded in our guide for the balance of the year if it plays out like that right if that's exactly what experience for the amounts of the year we have the potential to see about 12 cents of upside to our existing guide we have not reflected that upside in our guide at this point. It's early in the year. There's still a lot to unfold with respect to the tariff landscape. We want to see more before making that sort of change. But as we move forward if and when an update is warranted, we will make it at that time.

Gotcha. And I know you can't front run the LRP, but you just talk about at a high level, assuming you're starting to see recovery in the business, obviously you're talking about driving towards accelerating growth. And one would think that would come with a lot of margin expansion potential. Could you just talk about the sources of margin expansion potential this year, next year, and over the next few years?

No, you're exactly right. And so this year we're already seeing so on a full-year basis what we've called out is an expectation that gross margins will be slightly above where they were a year ago, which is an improvement versus what we've seen over the past several years. And that is a function of the operating model changes that we've made, manufacturing efficiencies that we've made in the Institute, but it's also a function of not seeing or experiencing the same level of supply interruption that we've experienced in recent years, right? And the true catalyst to get us back to where we were not so long ago, which were gross margins in the mid-60s, EBITDA margins in the mid-20s, what will drive that is, again, better supply reliability, less interruptions. We don't have inventory write-offs, inefficiencies at our plants. We have better mix because our higher margin products were able to supply consistently to meet demand. those will be the biggest um levers and then beyond that we the operational improvements we're making to drive better production yields um better overall um efficiencies incorporating like lean six sigma uh capabilities to improve all overall process flows those are going to be what ultimately gets us back to kind of those that mid-60 territory and gross margins great and we're almost out of time maybe just a word or two on um capital allocation sorry so yeah capital allocation.

Paying down debt, and I know that's the focus now, but is there some ability to do tuck-in deals or how you prioritize them?

Yeah, so we're very clear internally in terms of the priorities. Before we would consider any tuck-in strategic M&A, we have to have a couple things in place. First, from a free cash flow standpoint, we have to be back to generating free cash flow consistently north of 200 million we've got to be able to drive operational supply reliability consistently to make sure we don't continue to see those supply interruptions so that has to be stable and then overall leverage we got to get our leverage back down to our targeted level which is between two and a half and three and a half times when those three things are true that's when we'll talk about tuck-ins and other mna great all right well thanks so much Thanks, everybody, for your interest, and thanks for your time. Thanks for being here.