IART - NASDAQ

Good day, and thank you for standing by. Welcome to the Integra LifeSciences Second Quarter 2025 Financial Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chris Ward, Senior Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining the Integra LifeSciences Second Quarter 2025 Earnings Conference Call. With me on the call are Mojdeh Poul, President and Chief Executive Officer; and Lea Knight, Chief Financial Officer. Earlier this morning, we issued a press release announcing our second quarter 2025 financial results. The release and corresponding earnings presentations, which we will reference during the call, are available at integralife.com under Investors, Events and Presentations in a file named Second Quarter 2025 Earnings Call Presentations. Before we begin, I want to remind you that many of the statements made during this call may be considered forward-looking. Factors that could cause actual results to differ materially are discussed in the company's Exchange Act Report that are filed with the SEC and in the [ LOOP ]. Also in our prepared remarks, we will reference reported inorganic revenue growth. Organic revenue growth excludes the effects of foreign currency, acquisition and divestment. Unless otherwise stated, all disaggregated and franchise-level revenue growth rates are based on organic performance. Lastly, in our comments today, we will reference certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures can be found in today's press release, which is an exhibit to Integra's current report on Form 8-K filed today with the SEC. With that, I will now turn the call over to Mojdeh.

Thank you, Chris. Good morning, everyone, and thank you for joining us for our second quarter 2025 earnings call. I would like to start by acknowledging the tremendous work done by our teams across the company to deliver a strong second quarter performance while advancing our priorities. Our transformation is underway and I'm encouraged by the progress we're making in establishing the foundation for operational excellence and a culture of continuous improvement that will drive long-term performance, consistency and reliability across our business. Today, I will walk through the progress we're making on our Compliance Master Plan, provide an update on our operational excellence efforts and close with an overview of our financial results and updated guidance. Lea will then take you through the financials and our revised outlook in more detail. Let's begin with our progress on the Compliance Master Plan. We continue to execute our Compliance Master Plan as a cornerstone of our turnaround. I'm pleased to share that we completed assessments at all of our internal manufacturing sites ahead of our original Q3 time line with 0 related [ shipholds ] identified or initiated since our last earnings call. This is a key milestone in our risk reduction and operational readiness efforts. We have taken the learnings from our site assessments and have begun remediation planning and execution. Our quality, engineering and operations teams working closely with the newly formed transformation and program management office have built a detailed risk-based execution road map that prioritizes efforts aligned with the FDA Quality System Regulations and previous observations. This office oversees execution of the risk mitigation plan, including resource allocations, time lines and deliverables. Some of the remediation work will extend into 2026 with continuous improvement becoming a standard element of operating in highly regulated industry. We remain fully committed to transforming our quality management system across our supply chain network and recognize there is still significant work ahead. We are encouraged by the positive outcomes from recent FDA inspections at 2 of our facilities not covered by the warning letters. Related to our warning letters, we continue to provide regular updates on our actions committed to the FDA. The progress we're making in quality compliance supports our advancement towards the operational strength and agility required to execute consistently across our global network. Together, these capabilities are critical to delivering the reliability and performance our stakeholders expect. Moving to operations, we remain focused on strengthening execution across our global network. We have implemented a new supply chain control tower to drive enhanced visibility, accountability and performance management throughout our global supply chain. We are making good progress at our Braintree facility, which will support the relaunch of SurgiMend and PriMatrix. We remain on track to bring the site online in the first half of 2026 and plan to share our relaunch time lines by the end of this year. The facility's quality management system is on schedule for implementation with equipment installation and qualifications underway. In addition, the site's staffing model has transitioned to its long-term operating structure, ensuring readiness to resume manufacturing operations. Turning to our financial performance in the second quarter, we delivered global revenue of $415.6 million, exceeding the high-end of our guidance. Reported and organic revenue growth were both down slightly versus the prior year, which was expected and previously communicated during our Q1 earnings call. This was largely due to the impact of shipholds offsetting healthy mid-single digit growth across the portfolio, which underscores continued demand for our differentiated products. Adjusted EPS came in at $0.45 at the top of our guidance range, reflecting strong revenue execution and OpEx management offset by higher remediation costs. A standout this quarter was Integra Skin. Through our manufacturing resiliency and yield improvement efforts, we achieved the company's highest ever production levels in Q2 and expect to maintain normal revenue run rate through the rest of the year. We are also rebuilding safety stocks to improve supply reliability moving forward. As the reimbursement and access dynamic shift in wound care, we are well-positioned with a clear path to restore our full wound reconstruction portfolio. The timing of our Integra Skin production recovery, along with our preparations to restart PriMatrix next year, align well with the recent proposed changes for wound care reimbursement in the outpatient and physician office settings. The established clinical evidence across our portfolio strongly supports the opportunity for us to deliver care beyond the acute care setting. Our continued investments in further clinical evidence will also provide additional support for broader reimbursement. Looking ahead to our financial expectations for the third quarter, we expect revenue between $410 million and $420 million, representing approximately 8% to 10% reported growth. For the full year, we are updating our revenue guidance to a range of $1.655 billion to $1.68 billion. This reflects increased visibility into our shipholds and remediation outlook, including an expectation that we will not experience any material new holds related to the Compliance Master Plan for the remainder of the year. For Q3, we expect adjusted EPS between $0.40 and $0.45 and we are maintaining our full year EPS guidance range of $2.19 to $2.29. Before turning the call over to Lea, I want to emphasize the long-term focus and an initiative we are taking to drive additional shareholder value. We remain confident in our leadership positions in neurosurgery and tissue technology and the sustained demand in the attractive market we serve. We are laying the foundation for sustainable growth and profitability through strategic investments and disciplined cost management. This includes enhancing supply chain reliability and executing on our Compliance Master Plan. Additionally, as part of our broader transformation, we are optimizing our operating model to accelerate decision-making, strengthen accountability and enable scalable execution while embedding a culture of continuous improvement. These efforts will allow us to move with greater agility, reduce complexity and unlock meaningful value in quarters ahead. Based on our preliminary work in the initial phase of this initiative, we expect to deliver minimum annualized savings of $25 million to $30 million over the next 12 to 18 months by driving out inefficiencies and redundant costs. Optimizing our cost structure is essential to maintaining long-term competitiveness, particularly in light of the evolving tariff and macroeconomic environment. This is a foundational first step in a larger strategic initiative to drive sustained margin expansion. I look forward to keeping you updated on this initiative in the coming quarters. With that, I will now turn the call over to Lea.

Thank you, Mojdeh. Let's take a more detailed look at our second quarter financial highlights starting on Slide 5. Total revenues for the quarter were $415.6 million, representing a decline of approximately 0.6% on a reported basis and 1.4% on an organic basis compared to the same period last year. Reported revenues included a foreign exchange tailwind of approximately 80 basis points. Organic revenue performance exceeded our expectations despite supply disruptions related to remediation efforts under our Compliance Master Plan. Adjusted earnings per share for the quarter were $0.45, representing a 29% decline compared to the second quarter of 2024. On a GAAP basis, we reported a goodwill impairment charge of approximately $511 million during the quarter. This charge was identified through our goodwill testing and was primarily driven by macroeconomic uncertainties such as tariff and risks around the supply recovery efforts, which were reflected in the decline of our market capitalization over Q2. I want to emphasize that this impairment charge is noncash and reflects accounting requirements under GAAP. It has no impact on our cash position or liquidity and will not affect our ongoing operations or our ability to execute our strategic priorities. Gross margin for the quarter was 60.7%, down 450 basis points year-over-year, primarily due to higher operational costs associated with shipholds remediation. Adjusted EBITDA margin was 17.1%, down 290 basis points, reflecting the decline in gross margin. This was partially offset by disciplined expense management as we continue to prioritize investments in our quality systems in efforts to build operational resilience and execution capability. Operating cash flow for the quarter was $9 million. Turning to Slide 6, let's review the revenue highlights from our Codman Specialty Surgical segment. CSS reported second quarter revenue of $304 million, reflecting growth of 0.7% on a reported basis and a decline of 0.3% on an organic basis. Global neurosurgery revenues increased 0.3% organically, driven by strong performance in our CUSA platform, the Aurora Surgiscope, Mayfield cranial stabilization systems, DuraSeal, BactiSeal and CereLink monitors. This growth was offset by the impact of shipholds, which particularly affected our advanced energy, dural access and repair and neuro-monitoring franchises. Despite these challenges, demand across the neurosurgery portfolio remained strong, with mid-single digit growth in products not experiencing supply constraints. In our ENT business, we remain encouraged by the ongoing integration of Acclarent, which contributed approximately $30 million in revenue this quarter. While we're pleased with the overall integration progress and prospects for this business, growth for the quarter came in below our expectations. This was primarily due to reimbursement-driven market pressure in the Sinuplasty Balloon segment, as well as timing of capital cut [indiscernible]. These headwinds offset double digit growth in AERA Eustachian Tube Balloon Dilation and our TruDi navigated disposables. Second quarter capital sales grew low single digits primarily due to CUSA capital sales. Our global capital funnel remains strong and well-positioned to support future growth. In our Instruments portfolio, revenue declined low single digits driven by a difficult comparison in the alternate site channel following strong performance in the prior year. This was partially offset by growth across our acute care business. International performance within CSS declined by low single digits primarily attributable to the shiphold, which offset strong underlying demand from our international markets, including high single digit growth in China. Moving to our Tissue Technology segment on Slide 7. Tissue Technology revenues were $111.6 million, down approximately 4% on both a reported and organic basis compared to the prior year. Within wound reconstruction, we saw strong underlying growth across the portfolio, including double digit growth from DuraSorb and Integra Skin. Growth in Integra Skin was supported by both continued demand strength and improved production output, while DuraSorb's performance was driven primarily by sustained market demand. We also saw high single digit growth in MicroMatrix and Cytal. However, this growth was offset by the impact of previously announced shipholds specifically related to MediHoney. In our private label business, sales declined 5.9% year-over-year primarily due to a component supply delay and softer commercial demand experienced by one of our private label partners. International sales in Tissue Technology has declined low double digits, reflecting strong growth in Integra Skin that was more than offset by the impact of the MediHoney shiphold. Turning to Slide 8, I'll now review our balance sheet, capital structure and cash flow. During the second quarter, operating cash flow was $8.9 million and free cash flow was negative $11.2 million, reflecting our continued capital investments in key infrastructure. As of June 30, net debt stood at $1.59 billion and our consolidated total leverage ratio was 4.5x, which remains within our current maximum allowable leverage ratio of 5x. This ratio extends through the second quarter of 2026 following the amendment to our credit agreement executed during the second quarter. We fully anticipate being well below our maximum allowable leverage ratio when the amendment expires. We ended the quarter with total liquidity of $1.1 billion including $254 million in cash and short-term investments with the remainder available under our revolving credit facility. As a reminder, we plan to use this facility to satisfy the convertible bond maturity in the third quarter. If you turn to Slide 9, that will provide our consolidated revenue and adjusted earnings per share guidance for the third quarter and full year 2025. For the full year, we are updating our revenue guidance to a range of $1.655 billion to $1.68 billion. This updated range reflects a more refined view of the full year impact on shipholds informed by the progress we've made in executing the Compliance Master Plan and the increased visibility that has come with it. When we issued our original guidance, we included a broad range of $90 million to $150 million to account for potential shipping impacts related to the Compliance Master Plan. As we have said previously, that range was intentionally wide given the early stage of our plan and the number of unknowns at the time. Since then, we've completed our site assessments and now have a clear picture of the full year impact. We've refined our assessment of shipholds and related remediation for the year to be approximately $100 million, which is $30 million more than reported last quarter. This increase is solely due to extended remediation time line for a few of our previously communicated shipholds. We have not identified any new Compliance Master Plan related shipholds since our first quarter earnings call. Importantly, based on completion of manufacturing site assessment, we do not anticipate any new material shipholds in the second half of the year. The lower end of our updated guidance range reflects extended time lines required to complete remediation efforts already communicated and in progress, while the top end of our range reflects the potential for stronger demand and a more rapid return to market for select products in our portfolio. Based on this revised outlook, we now expect full year reported revenue growth of approximately 2.8% to 4.3% and organic growth of approximately 0.6% to 2.1%. For the full year 2025, we are maintaining our adjusted EPS guidance in the range of $2.19 to $2.29. This outlook incorporates our updated revenue expectations, remediation costs, ongoing compliance and manufacturing costs and increased interest expense. These pressures are being offset by disciplined cost management and updated tariff-related policy changes and mitigation since our May guidance. For the third quarter, we expect revenues to be in the range of $410 million to $420 million, representing reported growth between 7.7% and 10.3%. We expect organic growth between 7.3% and 9.9%. Our forecast reflects continued strong global demand for our products, normal second half seasonal sequential improvement and the benefit of improved production yields for Integra Skin and others [indiscernible] recovery. For the third quarter, we expect EPS to be in the range of $0.40 to $0.45, reflecting the effects of longer remediation and the impact of [indiscernible]. For additional details, please refer to Slide 10, which outlines the key assumptions supporting both our third quarter and full-year guidance. I will now turn the call over to Mojdeh to conclude our prepared remarks.

Thank you, Lea. To close, this quarter was all about focus, execution and momentum. We made real measurable progress in building the foundation for what comes next. While there is more work ahead on transformation of our quality management system, the Compliance Master Plan is proceeding as planned and remediation efforts are underway. At the same time, we're focused on restoring supply reliability, strengthening operational discipline and delivering on our financial commitments. We're also driving cost efficiencies to restore the earnings power of the business and generate margin expansion, reinforcing our ability to deliver meaningful return to our shareholders. This marks a significant step in our shift from stabilization to transformation and the opportunity ahead is exciting. We operate in highly attractive markets with strong fundamentals and durable long-term demand for our differentiated portfolio. Our plans for obtaining PMA approval for SurgiMend and DuraSorb are underway, unlocking our potential in implant-based breast reconstruction. In addition, the proposed Medicare payment and [ LTD ] changes will favor evidence-backed cost-effective wound reconstruction products, positioning us well for future growth in multiple types of care. I remain energized by the significant opportunity to position the company for sustainable growth and long-term value creation. The foundational work we're doing today will allow us to fully realize the value of our portfolio, accelerate growth and drive long-term value for our shareholders. Operator, please open the line for questions.

[Operator Instructions] And our first question comes from the line of Vik Chopra of Wells Fargo.

Two for me. First, I would love to get your thoughts around the CMS' proposed 2026 reimbursement changes aimed to control overutilization and spending on skin substitutes. Can you maybe just remind us what impact this has on Integra and what percentage of your products are exposed? And then I had a quick follow-up, please.

Yes. So I just want to make sure that I mention, first of all, a reminder that majority of our business is in the in-hospital setting, in the acute care. And so we don't see an immediate short-term impact of these changes. However, long term, for sure, we are very encouraged by the changes that they're proposing because obviously, it's going to favor the products that are cost-effective as well as having strong evidence behind them. So we are encouraged by that. And long term, there's definitely a lot more opportunity for our wound reconstruction portfolio as we leverage the clinical evidence that we have been putting behind this product line as well as continuing to strategize as we move forward into our long-range plan, what the longer-term opportunity would be for us to be able to leverage the changes that are being proposed. So that's the way we see the opportunity right now. It will be mainly in the future and we're building towards it.

Great. And then my follow-up question, your Q3 EPS guide, I think, came in below the Street, but you maintained your guide for the full year. That implies a pretty significant step-up in the fourth quarter. Maybe just walk us through what's going on there and how we should think about modeling the back half of the year, specifically Q4.

Yes. So a couple of things. So let me talk about -- a little bit about the revenue step-up in the back half and then address specifically the EPS question. So as you look at our Q3 guide from a revenue perspective, we're guiding to revenue that is consistent with what we delivered in Q2. And that's actually very consistent with what we've seen in the past in years where we haven't had significant supply disruption. As we get into Q4, we are calling a revenue step-up of about $38 million going from Q3 to Q4. That's driven by 2 factors. 60% of that is going to be driven by the normal seasonal lift that we see on our business, combined with the very strong momentum that we've been seeing on Integra Skin. The other 40% is going to be driven by the supply recovery. So we've talked about shipholds. Earlier in the year, we do anticipate seeing recovery on some of those items and that will help contribute to the lift that we're expecting for Q4. And seeing that sort of step-up behind the supply recovery is not unusual. We did also see that in Q4 a year ago. So it's going to be the revenue lift that drives kind of that, also the EPS lift that we're seeing in the back half. We'll also get beyond some of the headwinds that we saw from a gross margin perspective. That will contribute to overall EPS. And in total, EPS for Q4 will be order of magnitude, not too different than where we were a year ago.

[Operator Instructions] And our next question comes from the line of Matt Taylor of Jefferies.

Great. This is Young Li in for Matt. I guess to begin, just on the shipholds and the related compliance programs, I mean, it seems like the manufacturing review came in a little bit earlier and better than expected. I wanted to just get a better sense about related to the shipholds, how much lingers and impacts can happen in 4Q '25 and exiting the year? And how much potential risk is there to 2026?

So to your point, and as Mojdeh shared in her prepared remarks, we've seen great progress from a site assessment perspective. We are kind of a little more than halfway through the year at this point. We've completed those site assessments and that has given us greater confidence in the estimate that we provided. Again, our current estimate is about $100 million of an impact in this year. That confidence is also supported by the strong execution of our teams. We prioritize the highest work stream areas first. That's how we said we would execute. That's how we did and that also is contributing to our confidence, coupled with the fact that we didn't find any new CMP-related holds in Q2. So all of those things are allowing us to identify what we believe the impact for 2025 will be, which is $100 million. And at this point, aren't projecting any additional unidentified holds as part of that number. The increase that we are reflecting this quarter of about $30 million from what we communicated last quarter is purely due to remediation time lines for the holds that were already identified as of Q1. So that speaks to basically for the balance of the year, we'll see a delay in some of the supply recovery. But again, as I mentioned, in our second half lift, we do expect Q4 to see a step-up in part due to some of those shipholds being released. As we -- from a remediation standpoint, as you talk about 2026, we do see -- there will be some carryover remediation work into 2026. But at this point, we're not providing any additional -- we're not providing guidance today on 2026. We'll do that as part of our Q4 call in February. But from a shiphold perspective, given the greater visibility and clarity that we now have around the CMP, we don't plan to continue to talk about shiphold separately. This will be kind of baked in as part of how we guide going forward now that we have a better view of what's in front of us.

If I can add a couple of points to Lea's answer. We have spent and come a long way in -- so far this year in terms of focusing our efforts on mitigating risks and also work on improving the predictability that we have on our performance. And I think we are at a stage right now, as Lea explained, that we feel comfortable about our line of sight for the rest of the year. Come 2026, my expectation of our entire team is to continue the momentum that we built in Q2 in order to deliver, first of all, our commitments on the second half and then bring in 2026 even a more ramped-up accelerated momentum in order for us to be able to reliably predict the results that -- and the expectations that the Street should have of us. So just wanted to make sure that I mention that.

Great. That's very helpful. And then I guess a follow-up, wanted to get your view on basically your ability to win back customers and accounts and the amount of investment you might have to potentially do to do that. How is the feedback so far from some of your reps as well as customers and sort of their confidence that after supply shows up, they will be able to win back some of these lost customers?

Yes. Great question. When -- if you're considering the products that we put on shipholds, we have seen consistently quarter after quarter that once the products come off shipholds, we see the product move unless there have been products that get used immediately on a particular case where you may have lost that case. But for the most part, as we have production and supply available, we have not encountered any problems being able to get that business back. Now when you talk about products like PriMatrix and SurgiMend that have been off the market, of course, there's other substitutes that are being used instead of them. And we have more work to do there. Once we bring those products into the market, reintroduce them, we are not underestimating the lift that's going to be required for us to gain some of that business back -- all of that business back. But we're very confident. It's a very strong market, $800 million market. It's growing at high single, low double digit. We have a great position with the products that have that clinical support behind them and we are confident in our ability to be able to do it. It may take us some time, but we are very confident in our ability to be able to take the share back.

Our next question comes from the line of Robert Marcus of JPMorgan.

This is Lily on for Robbie. Maybe just starting on revenue growth. The reported range is moving up, but on an organic basis, the midpoint is moving a meaningful step lower. So can you talk through that a bit? It sounds like you have better visibility into supply. There shouldn't be any incremental shipholds. So what's driving the step-down for the full year?

So to your point, from a shiphold -- our previous range did allow for a range of about $90 million to $150 million in shipholds. We're now at $100 million, which puts us kind of slightly below our previous top end of the range. And so that was the reason to adjust it down. To your point, in addition to that, we also have reflected about a $25 million to $30 million market demand decline expectation and that is a combination of a few things. It's the slowdown that we've seen in private label related specifically to one of our private label partners who is seeing demand headwinds due to competitive pressures, coupled with the Q2 performance we saw on ENT and while we still believe the back half will drive higher growth than what we saw in Q2, it won't entirely overcome that headwind. And so that's factored in as part of that. And then the last piece is just a slightly slower ramp on market recapture for our supply recovery. Again, part of our shiphold increase is a reflection of longer remediation time lines on some of the recoveries. And so we've also put in there an assumption that we'll have slightly slower market recapture on that piece.

Got it. That's helpful. And then just as a follow-up, gross margin came in softer and you're pointing to a lower number for the full year as well. So can you talk about the softness in the quarter and what's changing on a full year basis when tariffs are better than when you last reported and supply should hopefully continue to improve?

Absolutely. So for Q2 gross margins, the decline was driven largely by manufacturing variances. We were down about 450 basis points year-on-year, about 400 basis points of that driven by manufacturing variances. And that's largely attributable to overhead inefficiencies that we saw related to our shipholds, some under-absorption due to the private label volume changes that I mentioned, coupled with tariffs from a year-on-year perspective. We also saw higher E&O and scrap, again, associated with the remediation work that's underway and that was slightly offset by some favorable mix, specifically on Integra Skin with a much stronger performance in Q2 this year versus a year ago. So to your point, we expect our second half gross margins to remain largely flat to what we've seen in the first half as we continue to work through our remediation efforts. On a full year basis, we are now projecting gross margins to be down by about 300 basis points versus 2024. That said, I think it's also noteworthy that the headwinds we experienced in gross margins for Q2 were offset by much better OpEx management, which allowed us to deliver EBITDA margins that were very consistent with our expectations. And that also will largely be true for the balance of the year.

And our next question comes from the line of Ryan

This is [ Izzy ] on for Ryan. Just to start with the ENT business, I heard your commentary about how the growth in the quarter came in below expectations. So I was just curious if you could provide a little bit more color around the headwinds that you called out and the expectations for the back half of the year. Additionally, if we think about a little bit longer term, where do you see a sustainable growth rate for the ENT business?

Yes, we did have a softer Q2 growth, but it was mainly due to a tough comp, which was last year, we had strong capital sales in the same period. We saw strong double digit growth in AERA for Eustachian Tube Balloon Dilation as well as the TruDi navigated disposables. On the Balloon Sinuplasty side, even though there has been growth volume-wise in the market, we have seen increased payer pressure over the last year and it happens to be varied by geography as well. And our health economics teams are working with our field organization to help them navigate through that dynamic. But we remain excited about the addition of Acclarent to our portfolio. We see huge opportunity for us. We're the only company that has a pediatric indication for the Eustachian Tube Balloon Dilation and we continue to invest in evidence for it, much like the announcement that you recently saw on the registry -- Pediatric Registry that we have launched. And when it comes to the second half of the year, our expectation is mid-single digit growth. And moving forward, again, we don't see any reason to be changing our outlook for this product -- for this business as we have had before. We're making investments in new products. We're making investments in clinical evidence and it's an important part of our portfolio.

That's helpful. And then just one point of clarification. We saw a couple of recalls come in from the FDA during the quarter. I was just curious if these have been contemplated in guidance? And if not, if there's any impact you could call out, that would be great.

Yes, happy to do so. So I think what you're referencing is a recall notice on MicroMyst and perforators. And those were products that we were aware of and had contemplated in our guide even as of May. So yes, that is not new news from a guidance perspective.

[Operator Instructions] And our next question comes from the line of Richard Newitter of Truist.

This is Ravi here for Rich. I guess a couple of questions for me here. First, can you kind of remind us as PriMatrix and SurgiMend, we're starting to look at them coming back in 2026. Can you just remind us what the revenue contribution from these products was or the growth contribution or the end market kind of contribution was before they went off market?

Certainly. So 2022 was the last full year before they went off market and they were about $64 million on an annual basis.

Great. And then as they went off market, I mean, was that entire kind of $54 million lost? Or were there products that you had in the portfolio replacing that? Just trying to get a sense in terms of the incrementality of what could potentially come back. Then I guess the second question is just on Acclarent. Is that something you're still having high single digit growth expectations for this year?

So with respect to PriMatrix and SurgiMend, when they -- we initially initiated the recall, there was a substitution strategy that allowed for potential growth on Integra Skin for PriMatrix and then Gentrix for SurgiMend. Given the -- some of the production issues that we had with Integra Skin, while you did say some initial uptake in terms of substitution, it wasn't significant. And then as it relates to Gentrix, similarly, the nature of the areas in which we could substitute was relatively narrow, so also not a significant amount of substitution or necessarily different either. As it relates to Acclarent, our expectations for full year 2025 is that that business will deliver or our ENT segment will deliver mid-single digit growth.

Okay. Great. And then just my last one, just on the tariffs. I think last quarter it was about $0.22 for the year. Kind of the way to think about it now with the kind of delta between last quarter and this quarter, just take that gross margin impact and that's going to be the new run rate or [indiscernible]?

No. Let me step through that a bit because there are a couple of factors to consider. So to your point, in May, we had announced that the tariff assumption reflected in our guidance at that time was about $22 million or $0.22. Our current EPS outlook incorporates an anticipated headwind from tariffs totaling about $13 million or $0.13 with most of that impact expected to materialize in Q4. Beyond this year, though, we're not providing an estimate as obviously, we, like others, are watching an ever-changing tariff landscape. And so as that stops moving and we start understanding a little bit more the impact to our business, we'll come back and share expectations for any 2026 impact. That said, we are not standing still. As we mentioned in our remarks, we understand that optimizing our cost structure is essential to maintaining long-term competitiveness and the broader margin initiatives that Mojdeh talked about in her remarks will help us do just that.