UBS Global Healthcare Conference - INTEGRA LIFESCIENCES HOLDINGS CORP

Explicit Guidance:

• Free Cash Flow (2026): On track to deliver $130–$140 million, contrasting with $73M (2023), $25M (2024), and a $30M decline in 2025.
• Earnings Per Share (2026): Projected to grow approximately 5%.
• Specialty Surgery Growth: Expected to normalize to 3.5%–4.0% growth once Cincinnati flood impacts and prior favorable comps are excluded.
• Cincinnati Flood Headwinds: Q4 2026 revenue impact forecasted at $15–$20 million, specifically driven by the Mayfield line lacking inventory and secondary supply sources.
• Q4 Growth (Integra Skin): Sequential growth anticipated but below previous forecasts; full portfolio growth expected to strengthen as supply issues resolve.
• Price Increases: Annual pricing capture of approximately 1% expected to continue.
• EBITDA & Margins: Gross margins and EBITDA expected to be flat for 2026 (viewed positively given prior declines).

Business-Segment Outlook:

• Specialty Surgery (Neurosurgery): Projected to grow 6.5% in Q3 (including $7M flood headwind); underlying growth expected to stabilize at 3.5%–4.0%. Demand characterized as stable and non-elective (trauma/acute).
• Tissue Reconstruction: Primatrix product line tracking to recover >50% of pre-recall revenue by Q3 2026. Integra Skin growth anticipated to accelerate as supply availability improves and competitive share is reclaimed.
• Product Relaunches:
  • Surgimen: 510(k) version to be reintroduced in 2027; PMA for implant-based breast reconstruction expected in 2027.
  • Durazorb: Pursuing PMA approval for implant-based breast reconstruction following Surgimen, expected in 2027.
  • Other Products: Two remaining products in the wound reconstruction portfolio expected to return to market in 2027.
• International Specialty: International business grew high single digits in Q3; goal is to return to high single-digit run rates as supply reliability is reestablished.
• Market Position: Maintains #1 or #2 market share in most neurosurgery categories; #3 in ENT.

Market and Competitive Outlook:

• Supply Chain Recovery: Full operational capacity for the Cincinnati Mayfield line expected by mid-2027; supply availability for tissue reconstruction portfolio considered "strong" following the restoration of 50+ products.
• Competitive Dynamics: Wound reconstruction market fragmentation expected to force vendor consolidation or exit due to fixed reimbursement rates ($127/sq cm) and margin compression on smaller players.
• Pricing Power: Competitors facing margin erosion due to price adjustments; Integra expects minimal margin impact due to existing pricing alignment with reimbursement rates and product sizing flexibility reducing wastage.
• Customer Behavior: Surgeons prioritizing clinical evidence, product differentiation, and supplier reliability; demand remains durable for clinically necessary procedures regardless of macroeconomic conditions.
• China Market: Volume potential remains high despite VBP (Volume-Based Procurement) pressures; China manufacturing facility is operational, pending sales approvals to mitigate tariff headwinds.

Macro / Industry Outlook:

• Cost Pressures: Inflation drivers identified as wages, salaries, and material costs (components); oil/freight impacts are secondary.
• Payer/Regulatory Pressure: Anticipated ongoing pressure from private payers and government (CMS) on healthcare spending and reimbursement; monitoring VBP implementation trends in China.
• Technology Impact: AI anticipated to influence competitive positioning, operational workflows, and capital markets.
• Interest Rates/Capital Structure: ~75% of capital structure fixed through 2027; refinancing provides flexibility to manage interest expense dynamics.
• Healthcare System Health: Overall environment viewed as stable; procedures are largely non-elective, providing a floor on demand despite potential Medicaid cuts or ACA reforms.

Strategic Initiatives:

• Commercial Restructuring: Consolidation of commercial and contracting activities under a new Chief Commercial Officer (CCO) role to leverage enterprise scale and standardize contracting across IDNs and GPOs.
• Offense Strategy: Shift from supply recovery to commercial expansion, specifically targeting underpenetrated international markets (e.g., deepening presence in China beyond tier-one hospitals).
• Innovation & R&D: Continued investment in catheters and tissue ablation innovation; pursuit of PMA approvals for Surgimen and Durazorb to access implant-based breast reconstruction.
• Supply Chain Investment: Redoubling effort on supply resiliency; expected to complete remediation plan and product relaunches by 2027, freeing resources for offensive growth.
• Capital Allocation: Refinancing completed to extend debt maturities and access new capital pools; focus on balancing R&D, SG&A, and supply resilience investments.

Risks and Headwinds to Outlook:

• Cincinnati Flood Recovery: Full operational resumption of the Mayfield line delayed until mid-2027 due to specialized equipment lead times; risk of prolonged revenue impact if delays extend.
• Regulatory Timelines: Delays in FDA PMA approvals for Surgimen and Durazorb could postpone entry into the implant-based breast reconstruction market.
• Market Reacquisition: Reclaiming share lost to competitors during Integra Skin supply constraints may take longer than anticipated.
• Macroeconomic Costs: Persistent inflation in labor and material costs may outpace 1% annual price increases, requiring continued operational efficiency to protect margins.
• China Regulatory Risk: VBP implementation and shifting reimbursement dynamics in China could alter margin structures or market access timelines.

Management Tone on the Future:

• Confidence Level: High confidence in the turnaround trajectory; management expresses excitement about "going on offense" commercially following the stabilization of supply chain.
• Narrative Shift: Management emphasizes moving past the "execution discount" by demonstrating progress (stabilized margins, projected FCF recovery) and expects investor confidence to be restored.
• Timeline Perspective: View of 2027 as a major inflection point where the majority of supply chain remediation, product relaunches, and capital structure fixes are completed, opening a "runway" for offensive growth.
• Stability: Repeated emphasis on the durability of demand in neurosurgery and tissue reconstruction, countering fears of economic downturns affecting procedure volumes.

Miscellaneous:

• Capital Structure: Debt maturities extended with a mix of fixed-rate instruments (75% fixed through 2027) and a terminal B to provide flexibility.
• International Expansion: Strategy to utilize both direct sales forces and indirect distributors, with a specific focus on deepening penetration in existing markets like China rather than just new geography.
• Inventory Strategy: Acknowledgment that finished goods inventory is not held at the Cincinnati site (held at DCs), mitigating some immediate flood impact but complicating specific product line recovery.