Integra LifeSciences Q3 2025 Earnings Call: Contradictions Emerge on Supply Chain, ENT Growth, and Private Label Performance

Date of Call: None provided

Financials Results

• Revenue: $402.0M, 5.6% reported growth and ~5% organic YOY, below prior guidance
• EPS: Adjusted EPS $0.54, up 32% YOY, exceeded top end of guidance
• Gross Margin: 62.9%, down 10 basis points vs prior year; company also expects ~260 bps FY impact (≈200 bps remediation + ≈60 bps tariffs)
• Operating Margin: Adjusted EBITDA margin 19.5%, up 330 basis points vs prior year

Guidance:

• Q4 revenue expected $420M–$440M (reported decline ~5% to -0.6%; organic decline ~6% to -1.4%).
• Q4 adjusted EPS expected $0.79–$0.84.
• FY2025 revenue narrowed to $1.62B–$1.64B; FY2025 adjusted EPS $2.19–$2.24.
• FY gross margin expected to decline ~260 bps (≈200 bps remediation investment + ≈60 bps tariffs).
• Expect modest revenue growth in 2026 and $25–30M of cost reductions targeted for 2026.

Business Commentary:

* Revenue Performance and Supply Chain Challenges: - Integra LifeSciences reported revenue of $402 million for Q3 2025, with approximately 5% organic growth year-over-year, but below expectations. - The shortfall was mainly due to two supply interruptions in the Codman Specialty Surgical business and insufficient safety stock levels for impacted products.

• Operational and Financial Performance:
• Adjusted EPS for the quarter was $0.54, exceeding the top end of guidance, reflecting improved operational efficiency and cost management.

• The company achieved strong operating income and improved operating cash flow despite the revenue shortfall.

• Quality and Supply Chain Improvement Initiatives:

• Integra is focused on strengthening its quality systems and supply chain capabilities to meet demand and achieve consistent growth.

• The company has taken steps to improve supply chain reliability, such as reappointing key executives and implementing a dual sourcing strategy.

• Product Launches and Portfolio Prioritization:

• Integra successfully relaunched Primatrix and DuraPair ahead of schedule through a dual sourcing strategy.

• The company is prioritizing its product portfolio to shift towards higher growth, more profitable categories, with a focus on breast reconstruction and outpatient wound care.

• International Growth and Demand Recovery:

• The company's international revenue grew by 14.6%, driven by strong demand and renewed availability of certain products.
• This rebound reflects the strength of Integra's global commercial execution and underlying demand for its products, particularly in China.

Sentiment Analysis:

Overall Tone: Neutral

• Revenue $402M and organic ~+5% but below guidance, while adjusted EPS $0.54 beat expectations; management highlighted supply-chain remediation progress, early relaunch of Primatrix/DuraPair, Braintree restart targeted June 2026, and $25–30M margin savings for 2026, offsetting near-term execution shortfalls.

Q&A:

• Question from Vic Chopra (Wells Fargo): Can you provide more color on the Q4 guide, especially supply headwinds? And is there an opportunity to grow the top line in 2026 and how should we think about gross margin stabilization and profitability?
  Response: Q4 guide reflects a ~$26M midpoint pull-down from updated ENT and private-label assumptions, delayed CMP remediation returns, and slower production recovery after a Q3 interruption; management expects modest 2026 revenue growth while prioritizing remediation, operational discipline, and balanced investment/cost management.

• Question from Joanne Wunsch (Citi): Is the private-label headwind driven by the same partner as prior quarter and what visibility do you have? Also, what was going on with MediHoney this quarter?
  Response: Yes, the weakness is primarily the same private-label partner reducing orders; management currently anticipates low single- to mid-single-digit private-label growth and says MediHoney is under remediation, was already off-market and removed from prior guidance.

• Question from Ryan Zimmerman (BTIG): When did the ship holds/supply interruptions occur (including in CSS), were they factored into prior guidance, and what does the portfolio prioritization mean for potential pruning or Acclarent assumptions?
  Response: Two CSS supply interruptions occurred in August (after July guidance), have been resolved and production resumed but couldn't fully close the Q3 gap; portfolio prioritization will reallocate resources to higher-growth areas with SKU rationalization possible but no preset divestitures, and Acclarent's balloon sinuplasty remains payer-challenged while other Acclarent products are growing.

• Question from Richard Neubiter (Truist Securities): How should we think about the sustainability of the Q3 gross margin strength given remediation costs and potentially tight production/safety stock? And what revenue/ramp should we expect from Primatrix and DuraPair returning?
  Response: Q3 margin outperformance reflected better EO/scrap control and favorable mix, but the company still expects FY gross margin pressure (~260 bps) from remediation and tariffs with one-time headwinds receding over time; Primatrix and DuraPair were previously ~$25–30M combined pre-withdrawal and management expects a gradual relaunch to regain share.

• Question from Robbie Marcus (JPMorgan): Q4 EPS implies a sizable step-up—what bridges that and what gives confidence in margin improvement exiting the year?
  Response: The Q4 EPS step-up is largely driven by an expected ~$33M revenue increase (normal seasonality plus recovered supply and reintroduced products); management resumed production on interruptions and expects additional supply-driven revenue and margin improvement in Q4.

• Question from Matthew Taylor (Jefferies): As Primatrix and DuraPair re-enter the market, how much price concession might you accept to regain share?
  Response: Management declined to discuss pricing strategy, stating they assumed no significant material pricing impact in 2025 from the relaunch and are positioning the relaunch to support stronger 2026 performance.

Contradiction Point 1

Supply Chain Interruptions and Recovery

It highlights differing expectations regarding the timeline and impact of supply chain interruptions, which could influence revenue projections and investor confidence.

When did the MediHoney issue and CSS supply chain disruptions occur? Were they considered in prior guidance? - Ryan Zimmerman (BTIG)

2025Q3: The supply interruptions happened in August. We resolved them by the end of the quarter. - Moshe Paul(CEO)

Given that Q3 EPS guidance was below expectations, how should we model the remainder of the year, particularly Q4? - Vikramjeet Singh Chopra (Wells Fargo)

2025Q2: We are guiding to revenue consistent with Q2 for Q3. For Q4, we anticipate a revenue step-up driven by normal seasonal lift and strong Integra Skin momentum, along with supply recovery. - Lea Daniels Knight(CFO)

Contradiction Point 2

Growth Expectations for ENT Business

It involves differing expectations for the growth of the ENT business, which is a key segment for the company.

What are the updated assumptions for Acclarent following the guidance changes? - Ryan Zimmerman (BTIG)

2025Q3: We project flat for Q4 and will update full-year expectations in 2026. Acclarent is facing payer challenges in balloon sinuplasty but is strong in other areas like ERA and TruDi. - Moshe Paul(CEO)

For the ENT business, what are the expectations for the back half of the year and the sustainable growth rate? - Unidentified Analyst (BTIG)

2025Q2: ENT business had a soft Q2 due to tough comparisons and competitive pressures. Expect mid-single digit growth in the second half, supported by investments in new products and clinical evidence. Long-term expectations remain positive with continued investments in Acclarent. - Mojdeh Poul(CEO)

Contradiction Point 3

Private Label Business Impact

It highlights differing assessments of the impact and recovery of the private label business, which could affect revenue and market share.

What is the current status of the private label business? Is the same private label partner having issues? - Anthony (Citi)

2025Q3: Yes, growth continues to be impacted in Q4 by private label again. It is primarily the same private label partner facing market share challenges, leading to reduced order rates. - Moshe Paul(CEO)

What is driving the significant decline in the midpoint of organic revenue growth? - Lilia-Celine Breton Lozada (JPMorgan)

2025Q2: The adjustment is due to more precise visibility on shipholds and an expectation for slightly softer market demand, including impacts from one private label partner and slower ramp-up in market recapture. - Lea Daniels Knight(CFO)

Contradiction Point 4

Supply Chain and Production Capacity

It highlights changes in the company's ability to manage supply chain interruptions and production capacity, which significantly impacts revenue and operational performance.

Your Q4 guidance is below expectations. Can you explain the key factors influencing Q4 results, particularly supply chain challenges? - Vic Chopra(Wells Fargo)

2025Q3: The Q4 guide reflects a pull down of $26 million, composed of three factors: updated assumptions for ENT and private label, delayed return of some products due to updated CMP remediation timing, and lower supply improvement expectations post-Q3 interruption. - Moshe Paul(CEO)

What factors are influencing the 2Q guidance and the low-end assumptions? Additionally, what mitigation is included in the $22M tariff impact for 2025 and how should we assess this for 2026? - Young Li(Jefferies)

2025Q1: While it is too soon to provide a complete update on the bottom line due to the short holding period, we still expect to deliver on our 2025 guidance and we are evaluating our 2026 outlook as we proceed through the year. - Mojdeh Poul(CEO)

Contradiction Point 5

Private Label Business Performance

It reflects differing expectations regarding the performance of the private label business, which is a key revenue driver for the company.

Can you provide visibility into the private label business? Is the same private label partner experiencing issues? - Anthony(Citi)

2025Q3: Yes, growth continues to be impacted in Q4 by private label again. It is primarily the same private label partner facing market share challenges, leading to reduced order rates. - Moshe Paul(CEO)

What is your visibility on private label demand for 2H and is there any tariff-related pull-forward demand in instruments? - Iseult McMahon(BTIG)

2025Q1: A second half step-up is anticipated, with a low-single-digit decline expected for the full year. Private label performance should return to mid-single-digit growth in 2026. - Mojdeh Poul(CEO)