Integra LifeSciences Holdings Corporation

Q4 2021 Earnings Conference Call


spk_0: to the intergraph life sciences fourth quarter twenty twenty one financial results call today of call his record it and i'd now like to turn the conference over to quit for senior director of investor relations please go ahead sir
spk_1: the german
spk_2: good morning beautiful join the his fourth or or four years we've we want earnings conference call during the on the called this morning or beyond with president and chief executive officer when calling chief operating officer and gary anderson see but it was earlier today we issued a press release announcing a fourth quarter and boy you're twenty twenty one but it's results of course money on his presentation which will be referenced or the call is available integra like dot com under investors and events the presentations the forward again i would like to remind you that statements made during this call may be considered forward looking that is that could cause actual results to differ materially are disgusted companies and games at reports filed with the fcc and in the release also in are prepared remarks will make reference to both reported inorganic revenue growth for twenty twenty one organic revenue growth excludes the effects of foreign currency acquisitions including a cell divestitures including the sale of our extremities what appeared it's business as well as just two different products unless otherwise stated all desegregated the franchise level rep revenue growth rates are based on organic performance and lastly or comics today will include certain non gaap financially reconciliation with any non gaap financial measures can be found in today's press release which was an exhibit to and tigers current report for a tape file today with the fcc
spk_3: and with that one out from the over the ah
spk_4: thank you chris and good morning everyone thank you for joining us would like to make a few brief remarks at the start of this call my first earnings call wouldn't either let me start with congratulating i'm thinking or employees since i joined the company or teams that occasional resilience across the globe have been readily apparent to me a look forward to working alongside his team of the months and years ahead as we charge or exciting but forward to my first few months on board i'm quite impressed with and proud of what it's like or has achieved in recent years i'm thrilled to be leading his organization with it's own legacy values and capabilities into the future and tiger has a solid business but form with significant untapped huge potential that will be my focus to bleed or team into reaching it's full potential
spk_2: two thousand twenty one was successful year for the company despite many ongoing challenges from the global pandemic we've run a study ship through the rough currencies
spk_4: but while doing so we've also driven significant changes in the portfolio and strengthens our blood from for the future and throughout this unusual year or team showed tremendous resilience and serving our customers and patience while continuing to move our growth produce forwards during today's presentation glanville go into more detail about two dozen twenty one both forms and are key accomplishments and then carry will provide a deeper look at our financial performance and will share our outlook for twenty two finally i will cookies even my thoughts on our key initiatives for accelerated growth and the company's areas for focus for this year
spk_5: so without limits or rid of the black five shouting morning please turn despite sex a shot mention we made great strides in two thousand twenty one and billy we're at another inflection point for grow let me highlight of you of our he accomplishments or three transformed our portfolio of the the divestiture or a low growth not or what the phoenix possess and the acquisition of a cell a faster growing more profit over of tissue business we'll continue to optimize a manufacturing footprint as one of our key levers to improve our most margins overtime we have a fancy completed the manufacturer interest or common portfolio from change eight it or mansfield massachusetts facility or on fact closer manufacturing site and france and completely necessary product transferred to another exist the location by the end of this year we also make meaningful progress on several new innovative products in each of our segments the at that we launched sterling or advanced monitoring system for measuring intracranial pressure about the us and europe and the third quarter of two thousand and twenty one
spk_2: we will have the for your benefit of serling in his to markets in two thousand twenty two claws were also launching in japan and several other international markets later this year
spk_5: we also to hear a phase clinical launch of are worse or just go proprietary surgical solution from italy of vase of neurosurgery or m i s with integrated visualization designed specifically for use in deep sea the brain lesions we're gathering clinical evidence using the same technology for early surgical intervention for the treatment of interest remote hemorrhages or i ch as well together these two opportunities m i s and i th are expected to expand our just have a market neurosurgery by about one billion dollars and take your technology be followed appear may prefer german and participated in the left the a panel meeting regarding a specific education for breast reconstruction
spk_2: we ought to completed the more that that are study regarding the use of prime matrix and train in treating diabetic but ulcers intended to expand commercial coverage
spk_5: some of our most important accomplishment the two thousand twenty one occurred outside of an r n d or a commercial setting i'm pleased to hear that attackers been recognized by leading publications as a two thousand twenty one best company for diversity and also won the top one hundred healthcare technology companies these honor servant external validation of our diversity and inclusion efforts and market leadership
spk_4: and you kinda last year we executed a smooth leadership transition welcome me as a new ceo
spk_5: let's turn up by seven will provide of two thousand twenty one financial highlights and asked some initial thoughts on two thousand twenty two despite a challenging external environment once again in two thousand twenty one we delivered strong financial results or fill your reviews were just over one point five billion dollars with organic growth exceeding fourteen percent or to two thousand twenty and four point six percent compared to two thousand nine ten we stop stalling cover your class most of our product lines despite covert setbacks benefiting from the critical nature of our products as well as the diversity of our portfolio
spk_2: our products play a crucial all improving the quality of patients lives as rebuilt the majority procedures and which are products are used can only be deferred for short periods of time which bodes well for continuing revenue recovery as we move beyond the lingering and emigrated disruptions in two thousand twenty two
spk_5: or bill just the dps was three hours and eighteen says representing growth of thirty percent versus two thousand and twenty and sixteen percent or to two thousand nine ten even a march is also expanded one hundred sixty basis points and we delivered record operating cash flow at three hundred and twelve million dollars as we look to two thousand twenty two specifically in the first half of the year we the covert impacts will linger staffing challenges at hospitals and production at supply chain disruptions posing the greatest risk
spk_6: or current backwater levels are about two and a half times higher than normal
spk_5: so even as commercial demand is recovering we are seeing challenges and keeping up with our customers requirements
spk_2: the the impacts will be felt most acutely in the first quarter and expect them to continue beyond the first quarter as will take time for hospitals are all manufacturing plants and supply chain to return to normal staffing and production levels consequently we expect more modest sales growth to continue with the second quarter with faster growth in a second half of the year
spk_5: and closing i want to reiterate our confidence or long term plans and the ability of our teams to deliver our growth targets once covered pressures subside
spk_7: and with that on outrun the color red arrow and climbing the morning every month like start with the summary of our fourth quarter and full year revenue result and flight nine you for total revenues were four hundred and six million dollars representing an increase of four point three percent on a report of basis and eight point three percent and an order interfaces compared to the prior year revenues were negatively impacted by approximately three million dollars of effort and the quarter we're pull your twenty twenty one revenues were just over one point five four billion dollars representing reported growth of twelve point four percent and organic role of fourteen point two percent compared to twenty twenty despite the delta impact impacting two three and overcrowded hospital staff an impact in queue for we achieve second half organic realm of seven and a half compared to twenty twenty and five twenty percent compared to twenty are strong second half top topline girl was driven in part by recovery and or capital business including the benefit of our new selling i c p monitor and a recovery and are in indirect market as well as told our instruments and private label businesses to continue to benefit from double digit growth in china and japan he turned his by ten will take a deeper dive into our css revenue highlights for the fourth quarter you for revenues and see if that were two hundred and seventy million dollars an increase of six point four percent unreported bases and nine percent on an organic basis over the prior year with equal contribution from both neurosurgery an instrument geographically sales in the us grew hi single digits an international sales grew low double digits compared to twenty twenty the recovery and global neurosurgery sales was broad based in sales and instruments continue to benefit from pent up demand we saw continued growth contribution from the launch of sarah link in the us and europe and even excluding sales of sarah link or capital sales grew approximately thirty percent compared to twenty twenty and about four percent compared to twenty nineteen international sales and css increased across all major regions compared to the prior year japan and china continue to deliver strong rooting for with both countries deliberate of double digit growth over twenty nineteen moving to our tissue technology segment of slide eleven you for sale and tissue technologies where one hundred and thirty five million dollars slightly on a reporter basin and six point seven percent an organic bases from the private year sell them one reconstruction increase three point eight percent an organic faces compared to twenty twenty led by inside were skin and surgeon men and are burn trauma and surgical reconstruction markets the so business stabilize during the fourth quarter delivering sixteen point nine million dollars in sales in line with november guidance sheldon and private label increase fifteen percent compared to twenty twenty years and by continued recovery and customer orders during this by twelve or cover the highlights of the piano for the fourth quarter and four years adjusted gross margin into forward sixty six point eight percent this was lower than what we expected and was impacted by multiple pandemic related factors including increase a cost supply chain disruption and unusually high levels of absenteeism and our factories caused by the over on various the disruptions to our factories which causes idol capacity charges and under absorption cloth of continued into the first quarter and staffing and our site is only now beginning to return to normal i'd level since manufacturing under absorption costs are capitalized on the balance sheet and recognized only as an inventory terms are gross margin will continue to be negatively impacted through the first half a twenty twenty two argue for adjusted ebitda margin was twenty six percent compared to twenty six point four percent in the prior year as the benefit from increase revenue was offset by higher operating costs as we discussed and que three operating expenses continue to increase as we use the spending restrictions put into place into to twenty one he in response to the global pandemic nevertheless we remain disciplined and are spending while investing in new product innovation further geographic expansion and clinical studies and although for your operating expenses increased year over year the strong recovery revenue helpless expand even margins by one hundred and sixty base it points for the four year twenty twenty one adjusted earnings per share for the fourth quarter was eighty four cents flat vs twenty twenty last boy your adjusted mps grew thirty percent compared to twenty twenty that returns by thirteen up provide a brief update on or balance sheet capital structure in cash flow operating cash one the porter with sixty nine million dollars and free cash flow was forty two million dollars free casual conversion was fifty eight percent in queue for reflecting higher levels of capital spending on a full year basis for twenty twenty one and both are operating cash flow a three hundred and twelve million dollars and are free cash flow of two hundred and sixty four million dollars or record highs for the company as of december thirty first know that was one point zero five billion dollars and are consolidated total leverage ratio was two point three time the company had total liquidity of one point seventy billion dollars including five hundred and thirteen million in cash and the remainder available under our revolving credit facility as a result the restaurant cashflow look would it be position at the end of the year we commence a one hundred and twenty five million dollar accelerated share repurchase program in january that is expected to be completed in the first half of the year during the five fourteen i'll provide an update to are consolidated revenue and adjusted earnings per share guy and for the full year twenty twenty two and the first quarter our guys for twenty twenty two reflects continuing first half uncertainty around the scope and duration of the pandemic and it's related impact on our business for the full year twenty twenty two while we anticipate a less of a direct impact on underlying procedures than and twenty twenty one we do expect first half variability and uncertainty and sales to continue as a result of the indirect effects of kobe including staffing challenges and ongoing supply chain disruption we expect revenues to be in the range of one point five eight billion to one point six billion dollars representing reported growth of two and a half percent to three and a half percent in organic that three and a half to five percent compared to twenty twenty one a revenue range accounts for an eighty based basis point had one from fx and as a reminder the calculation of organic growth remove the year to year fluctuation in the facts year over year change and just continue products and revenue from a cell prior to january twentieth be the one year anniversary of the opposition a still revenue was included in organic road as of january twenty we expect a staffing and supply chain challenges to be more pronounced in the first quarter and as a result we are expecting first quarter revenue of three hundred and fifty seven to three hundred and sixty five million dollars representing reported road of negative one percent to positive one point five percent and organic growth of zero to two and a half half percent compared to twenty twenty one as we think about for the phasing the on one we anticipate organic road to exceed five percent in the second half of the year turning to adjusted earnings guidance for twenty twenty two weeks fact first quarter a japanese yes to be in the range of sixty seven to seventy one cents and with a four year we expect adjusted mps to be in the range of three dollars and twenty seventh and the three dollars and thirty five cents guidance includes the benefit of the accelerated share repurchase and a slightly higher your of a year adjusted effective tax rate of eighteen and a half percent human some of the had ones discussed earlier as well as our plans to continue to prioritize our best investments to build out our capability to activate or grow catalyst we expect moderate improvements in adjusted gross margin and iba a margin in the second half which y twenty two as compared to twenty twenty one as a pandemic related challenges a bait we fact returned to greater margin expansion toward our long term target once we reach the other side of the macro impacts of the pandemic without i'd like to turn the call back over to yawn
spk_8: and your carry
spk_2: as was indicated earlier the we started thousand twenty two feeling confident about our capabilities
spk_4: we still have very few data points on exactly how hundred and the right wing fair know that we're getting over on april and how are markets and operations will use toward the next level of normality hence the classroom and or open for two thousand twenty two however our new tom caution should not obscure our ambition and opportunities to continue to invest in our future and to accelerate the business to and next level of performance over the coming years if you don't slide sixteen i would like to have one or expected revenue growth trajectory and how we will accelerate his boss
spk_2: the first factor for growth in home and to we have today in our corporate for you then the get back into the results from the past forty years we've delivered historic organic growth between four and five percent
spk_4: expect us to be arranged in two thousand twenty two is kerry mentioned in our guards acknowledging that on new them girl from likely continue to be impacted by called expect to see the pandemic limit the speed at which our customers staffing return to normal and white large supply chains move back to study speech however many past the first half of two thousand twenty two we should see a return to normal procedure volumes and growth at the same time will begin to see more substantial benefits from our and guys and girls initiatives which we have continued to invest in during the past two cold years and will continue to focus on in two thousand twenty two descent the will allow us to expand or time and strengthen positions and existing segments which will get is more solidly above that five percent organic growth more the towards factors about expanding our commercial activities on the international exes as well as browsing over reddit adjacent sees including leveraging digital cable
spk_2: these are midst to him for opportunity airbus we will advance in two thousand twenty two
spk_4: once receive the benefits of our efforts in these obvious expect to be solidly into and you're gonna grow furthermore five to seven percent or organic or long term are going gonna grow thorntons and finally different factors executing on synergistic emily to further strengthen our business portfolio with the creative growth and volume housing opportunities today twenty two i'll give a laser focused on federal building momentum with watch me exited two thousand twenty one while capturing new tom acceleration opportunities as a function of how fast or markets leave covert impacts behind and at the same time ceiling and building the foundation for mitt a long term acceleration western to slide seventeen as we think about near to midterm there are a lot of great catalyst that can drive her performance these include capturing are strong international growth opportunities in japan china european countries and other markets wrapping up commercial success of mps as well as further expanding or a cell territory coffee in barrel to capturing the potential of our capitalist we will drive focused around those initiative that strengthened our mid and long term capabilities and growth potential we are stepping up as we speak or focus on employee engagement talent development and resilience leveraging the lessons learned during the cold period with a very full and diversified portfolio of new products and innovation ideas across both of our business segments will also and product management capabilities and right focus on our md and regulatory execution while in barrel ramping up and optimizing new capacities in our factories
spk_2: we started to define a multiyear path to bring up before of products to additional international markets aiming to leverage and amplify the momentum and lessons learned from our international in this is over the past use
spk_4: and as i'm working with our division lead leaders to evaluate a longer term strategic options we will translate this into emanate game board to support steeper growth curve i finally as i communicated earlier this year we're making your g and ongoing operational alert for the company with a three of years g road map and development to define our future ambitions and an inaugural eg report to be published later this year if you thought just like a team or finding flights i would like to acknowledge the actions mistaken to date that has set us up for long term success we have substantially transformed or before you focusing on more profitable differentiated products cool with has tested us but males more resilient and agile and or operations as well as commercially we're stepping up our focus on important girlfriend is this knowing that our financial rigorous from balance sheet them provides additional optionality to execute a growth strategy as we focus on our porch initiatives and move past the current pandemic headwinds and distractions expect a position integra into a long term organic revenue growth for them in the five to seven percent reach the double digits just a dps rolf adjusted gross margins between seventy seventy two percent adjusted even a margins of twenty eight to thirty percent and free cash from version above ninety in conclusion let me reiterate my excitement about it douglas future and the opportunity to meet or came forward and bring and great outcomes to surgeons their patients as well as to our shareholders and our colleagues with that i would like to open the cold fortunate
spk_0: thank you if you'd like to ask a question that you can do so now by pressing star one on your telephone death star one if you'd like to ask a question we will now take our first question from a that litman from oppenheimer and company please go ahead your line is open
spk_9: thank you the morning the first question on the revenue outlook for twenty twenty two have any further or granularity you provide in terms of what your outlook is by segment and and yon what would you see is the new the biggest product growth driver opportunities here in the near term work for and hagler
spk_7: and these are the morning i'll start the question then and then and and hit that back half of your question there in terms of the segment color i think i would i would say that both tt and css will be largely in line for the full year in line with the corporate averages obviously they'll be some pluses and minuses there but generally yeah i would say each model the segments for the full year to be somewhere in the range of the corporate ah mart or the corporate ranges in the second half the year i would say if you'll probably see more of a pick up in gg on as itches benefit from from that a cell acceleration in the back half the year until a brother product launches there
spk_4: and then he on if you want to take that yeah if if if you have think one of the building up momentum know of the core of our business as said we get over coffee that one yet if you take additional products on top of that like several link like a cell where we are the building up or commercial that those are your product specific product that will further accelerates over and above this would say normal
spk_7: come back after coven yeah i would also say if capital is still an area in a heap a young mentioned thoroughly but capital and so i still still thing has the opportunity to recover up further into a twenty two of we saw a nice rebound in are smaller size capital and twenty twenty one but the our our largest capital is the kusa unit and although we saw some nice recovering queue for i think compared to twenty nineteen we still have some opportunity to see some further bounce back as we move through the covert headwinds if you know just give a little a geography color as well if i look at the fastest growing market or slightly and twenty twenty two
spk_2: go to china and the china we should be putting up over twenty percent growth organically our spending into this tier to into three cities got a really good planet place for china so yeah now it's over fifty million dollar market for us but i'm sure you to hear us talk about pretty consistently and twenty twenty two about the growth coming out of china which would be a key market for us over the next five ten years as well but i would highlight that is kind of an exceptional growth market for us into a tornado
spk_9: with thank you i'm reluctant to cool with you he spoke about the your the indirect impact the rope into the direct impact wondering if you could provide a little bit more colored from the what you've seen in recent weeks and months i've been very dynamic and he call you could provide on your december's again or vs february on that
spk_5: yes all star and then you're carrying on you cannot into this i think first and foremost a big thing we're seeing in our business is the absentee rates at our facilities we saw significant spike up an absentee rates which is closed manufacturing disruption
spk_2: day by day that's getting better for the good news is that's coming back to a more normal train but we're still not going to be normal probably for the rest of this quarter of but nevertheless that did have an impact certainly a in january and in early february are still struggling with our supplies are in certain cases where the be electron components packaging materials plastic moldings things that could use that our products and so you are our supplier consistency is not what it was in of three to four months ago i think we're working through that but that was part of my comments around this record high number in terms of our backers and just to put it into corner
spk_5: eight of term to me to and a half times higher than normal means we got ten to twelve man hours of incremental backward is typically wouldn't say as a thing about go with on on procedures the looks like that or training in a positive direction i see you back capacity is improving ups all that looks like it's it's living in the right direction as well but these are all things that that have an impact
spk_7: as we accident two thousand twenty one and the beginning quarter of two thousand twenty two carrying the i would only add on i think that was a pretty comprehensive response that i would say hospital staffing challenges still or lingering as well so you know i think it's a combination as i think about the dynamics that took place last year in the first quarter to the second quarter and compared to what we're seeing now those are the two biggest pieces are his continued hospital staffing issues and then the continued supply chain disruption as a religious to the contagious nature of of owner crimes and just labour being impacted in our facilities but also in the supply chain ugh as well
spk_10: got it thanks everyone been automatically
spk_11: xd of the
spk_0: thank you we will now take our next question from mass mythic from credit suisse please go ahead the line is open
spk_12: great thanks so much for kicking questions one on follow up on this on a transition of and staffing and code related pressures and que en i think that you mention that things are starting to get a little bit better wondering if you could dt provide any color eyes to how this is breaking out us know us and because and think some other like give exposed like to focus you know names in early could surgery for the season or universe are sort of seeing an inflection now and it sounds like you're suggesting that the inflection is beginning that may not be complete until you know and time and cute you just have to understand the nuances and one quick power
spk_5: yeah i think the recovery of procedures is clearly appling that inflection point is happening the challenge we see is the disruption to the supply chain or not gonna be immediately coming back to normal says gothic as a bit more time to get throw in it really is the two things i mentioned earlier the absentee rate or facilities was at very i love those that's now or trending and right direction a day by day getting better but we're probably still
spk_2: you know a way to go on add to the end of the quarter before we get back to normal staffing levels of the other part of the supply chain is gonna take some time to work through so yeah getting components packaging materials and everything else that we need to do i ship by the customers is going to take several more months in my mind at least to get back to him
spk_5: much better rhythm and caden so i'm by geography yobs he these issues affect the globe i would say from a procedure perspective we still have more challenges and certain markets like australia with i have not come back get that's more of a march discussion so market by market you'll see some procedure areas that are still not back to normal but
spk_2: on the whole other items that we've talked about really impact the globe
spk_4: that led maybe add for me on a customer expected what we see is that our customers your hospitals are still struggling when staffing constraints or staffing moose and they're working to dead but that we see a steady improvement of that another step change were suddenly everything is
spk_2: gonna be a back to back to normal and hence and que one part of due to recede steadily come back but not a step change
spk_12: understood and and just home upon a cell you know a lightly computer to keep or stable as you pointed out carrion just realized that to get an understanding of when we should expect their businesses are grown sequentially again or can be stable here in the near term and and what are some of the drivers that sort of get it get it moving upward again
spk_6: yeah now that it first and foremost matt up we love the a cell portfolios or michael matrix our product site all of the she and also change texas in the laparoscopic we love the product portfolio of we've made the necessary improvements and changes that i think are going to have a big benefit for
spk_5: us and twenty one is what are we died i think first and foremost we that it more coverage and territories and at more resources so you could think of that as were net that gonna probably add incrementally fifteen plus resources and que one and and and a double that in cute to so i think getting better coverage adding back more resort
spk_2: says
spk_6: crop is going to be important in terms of this revenue recovery plan we've all done things to change our sales compensation plans which is going to help as well
spk_2: and the combination of those two items gonna put us on a trajectory where we start talking about growth has a mid year timeframe and i think ultimately will be growing as business kind of in in line with you overall tissue tech portfolio of at high single digits herself so we they were on the right path we like the i said i
spk_5: we just say the good news is right in these resources back and still achieving our financial models boeing bought this business so it's very creative to our overall bottom line you can see the error he that in numbers and are over achieving that either and margin expansion so i'm either with adding that the resources are still on track to our right targets and
spk_0: and our financial measures when he bought this business so i would get they look for continued improvement here and app another will return to growth had a major is is how it would set the at expectation they make you me
spk_13: thank you thank you we wanna take our next question
spk_7: from robbie market from jp morgan please go ahead the line is helping hi this is actually lily on robbie and for taking the class and i'm fine a guidance implies something like one to three percent growth in the first half of the aaron five to seven percent in the second half which is that pretty meaningful stuff up so like give you the confidence and that accessories and in the back of the and yeah i'll take that really i think it in terms of of what we see in the first half obviously it is an eel impacted by called it a related disruption in absurd and an attempt down growth in the first half of the year an enhanced at those are those issues debate we can see more clearly a stronger faster growth
spk_4: trade in the second half that as an answer would be greater than five percent think of you think about some of the underlying momentum there that we talked about it went in steve's first question is you had the benefit of the thoroughly lines and the pull your benefit of that you have what lenses mention the a cell recovery ah that will start to pick up in the second half
spk_13: we will be launching are nerve product here at the engine to one i that will start to add some some nice cunt contribution as well as to other areas i'd think capital recovery that still hasn't i would say it gotten fully back on the large capital and then the international growth that that glenn talked about his wound up with double digit growth
spk_7: as expected die in china as well as continue recovery of have some the other markets i think it's a combination of all of those things that really than lead us to other momentum in the second half and and don't forget but your were sitting at this point on significant back orders and we expect in the second half to get back to normal situation so our supply chain will be catching up with some of the months that that this point we can't assume okay that have more on and then the follow up on color on panel thing had landed on the inflationary side and how much pressure from the he had faith in eat yeah thanks for the i think yeah i would say and you know that the the thing that has changed over the last couple months is some the new things we talked about which is that the would i would come more temporary impacts as it relates to this high level of absenteeism in or plan that creates this under absorption on a part that have to kind of moved to our our our piano over the over the period of time their inventory turned to think that with incrementally new i'd say the inflation has it that that hasn't necessarily change is i would say i was hoping that maybe some of the frequent bait a bit more faster and and was a costs are still with us and gently were there in the fourth quarter or and will likely continue to be with us into first quarter into second quarter as we get with the backorder issue that we talked about and trying to get product where it needs to be a we have incorporated an inflationary pressures of working with our global sourcing a group on and we have also incorporated commensurate price increases as well so we have the opportunity and ten to look at price or opposite an annual profits for us we were pretty aggressive in the in the second half years looking at that and factoring that into our budget thoughts for twenty twenty two as i think about price not only do they have the opportunity to do
spk_13: list price adjustments a see looking at your discount levels but we also have the opportunity as we introduce new products that we can add incremental price when we bring a new customers we can add incremental price and then even in their enterprise a contract those tend to be a little bit longer term in nature on but
spk_0: lot of those contracts do have volume commitment as part of those and we had the opportunity to audit those contracts to ensure that those buying commitments are being made and if they're not that leads us to an an opportunity to open negotiations with those so i think that the in a we've we've largely tried to offset that inflationary pressures and i think with incrementally know
spk_14: new information is some of the the of the bathwater issues because the some the levels of high absenteeism that are impacting on are gross margin that's helpful thing thank you leave a now take and next question some ryan zimmerman from and beatty i d please go ahead
spk_2: good morning ah thanks for taking the questions so i want to ask a yawn
spk_14: you know i appreciate the cadence of a business i appreciate some the growth drivers here other other area
spk_2: on the same and tegra other other areas of slower growth products
spk_15: our area the thing makes sense for potentially
spk_2: divestiture or discontinuation just given that they're kind of dragging down the corporate
spk_4: it did it the short answer is that i do not seem obvious it slow growth area where
spk_2: and we should take immediate action
spk_7: we are of course the first my focus is on looking how can we accelerate across the board and as leveraging the international it's so focused on them and p ice and and make sure they get into full attention
spk_2: there's one area where have we are discussing it's a classic your area
spk_14: yet where i'm at was relatively relatively small i would say that we continuously ryan look at the portfolio so am i think that that is one thing and terror has done well and even before i joined attacker was this continue review of the portfolio on i think to yawns point we've gotten the portfolio largely to
spk_7: where we wanted to be but i would say that that review is continuous and we will continue to look at opportunities to refine the portfolio bending that to more faster growth type of a lot of opportunities here mind that the heavy live was odyssey are the best to orthopedics of as are done is done last year or those as well last big piece of the port boy there's always going to be supporting but i think he of edit edit relates to the go forward portfolio a business be like the portfolio we have and then just on the guide and carry i appreciate your comments about some of the new product contributions like say the nerd and three the product what's assumed in guidance for absurd to scope for a surge a man and some of these other kind of your bigger profile growth initiatives for twenty twenty two you and common a kind of each to those and their contributions to the appreciate that against one is where the question i think for a week we've certainly a teacher just go buy or scope and surgeon and as part of our near to mid term growth drivers forests and i would say that as it relates to the arrest or just got we'd started with a limited clinic all paved launch in the third quarter a twenty twenty one and in it's really being a pleased with a k well they can help us on a it'll inform ourselves of a of of in in our hope to do a randomized controlled trial of the trial or initiation later in the year and so and you'll start to see some sales from the law mercer just spoke as it relates to others limited a clinical launch on in it's really concentrated in the mentally a basin on a part of the opportunities at the same time we've also launched a mere registry is looking to capture our information and data regarding our and other opportunity
spk_5: for the worse or scope which is the i h opportunity so not a lot of of of revenue that's gonna come from the worse or skip it sort of scope in twenty twenty two some revenue yes but it's a the bigger opportunity is beyond twenty twenty two and then relating to surgeon man remember that product we are selling it to day oh if we cannot specifically an advertiser promote for breast reconstruction but we are you know that that product is is been on the market for over fifteen years and and gaining some nice traction in both the complex hernia as well as the breast reconstruction market which is can't promote for or it so our opportunity and
spk_2: like glenn maybe talk about on the at the the opportunity for a pm a here but i would say it doesn't impact our growth for twenty twenty two as we think about our guidance right now just yoyo that the carries comments and is as we've talked about new product introductions contributing about twenty five percent of organic or
spk_16: road so you can think about is about appoint a half of organic growth i think this you'll be consistent with that when you look at the new product launches with surly or were of a nerve product that we're launching so that that way i think about it when i a break up the revenues for each individual peace but we surely you're quite good that mp guys gonna contribute be a point
spk_0: half ago given that the products that were launching this year it on surge men were not counting have any agreement the revenue from the best indication that two thousand twenty two i think once we get later into the year will give you more color on how we see this rolling out and twenty twenty three as we advances with the f t a but i think for now nothing's been included relative to incremental
spk_17: growth and twenty twenty two for swordsman thank you thanks thanks
spk_18: we will now take our next question from the samuel podolski from tourists people go ahead your line is open
spk_5: i thinks her thanks for taking the question
spk_19: a few on the new products years starting with never again three days be curious to hear a little bit more detail not gonna morgan try genome
spk_5: specifically with the most new potential competitive battery down space and yet have do you think about positioning the problem that is that data protection comes back positive
spk_2: yes i think first and foremost keep in mind we already have a nerve product on the market urgent spent in order for many many years is relatively small at one percent of arkansas that a revenue three big bet on er business only addressing short gap there repair and though what dirge in three d does for us it takes
spk_20: this from short captain big gap gives us more adjustable market opportunity and basically it's the college in hello conduit that included in that kind of it is can conjoined salty joints exorbitant south is it helps to accelerate a group of the nerve for these yeah
spk_17: make abner repair issues and so we're very excited about it we got a dedicated team though we saw in the products with got a team that's already hired and ready to go they'll be selling on or portfolio in a longer term we've got some additional things in the pipeline that will hopefully further expand our nerve portfolio so that's the way we think about it is one of a number of grow drivers or as but again and a key thing to keep in mind as we've always had a nerve portfolio of a really addressing short gap i think we're we're moving to now is how do we get the bit and longer nervy air which is a bigger party overall market opportunity the top and the during a tiny is actually the brunt of in and direction
spk_5: that are so since switching to a cell just as you think about the girl this year and that second half inflection me how much of that is is relying on that adding reps to that product nair and then can you can out with the labour shown here we're seeing person all over the all over the place now these days can you characterize what you're seeing in terms of ability to an address to that franchise and how that may have an integral
spk_21: yeah no i think a key part of the growth rate is getting more coverage and we've made really good progress here in the first quarter mention the net meaning you in your to be as in a by that laugh or plus five fifteen for the first quarter you're just gives you an idea that we are ramping or even though we've had some attrition and that should continue into this
spk_0: second quarter so like to see as be yeah that thirty people up as we get into later stages of cute to and that's going to really help the growth of your our portfolio all with other parts of our own reconstruction business i'd like to sell me a sell products so
spk_22: it's important that we continue to wrap this point of our business i get really good about it and in a we've been no very fortunate to be able to bring in a lot of talent i think a lot that goes to allow these external recognition of me getting as a company top diversity company top one hundred med tech companies all positive things that people look at integra what they want to come to work here and so we are making good progress it's and where we continue that i expect that the during the year more positive stories around a cell what we're doing in particular is that the major get these jobs filled his territory spelled
spk_7: thanks thanks thank you we gonna take that next question from laurie the and some wells fargo peace go ahead now can we had to take them requested a more caring a bad one for you on the piano and maybe a figure it would be helpful to deprive provide a little bit more color on the gross margin operating margin fit for the year that that's implied i thought i heard your comments were on the gross margin were more specific to the second half of the year and and you know any color on to dps catered for that one follow up yes sure larry ann a n n g i think you heard those remarks are correct in that maya specifics at was a modest level of improvement in margins and gross margin any but of margin in the second half of the year so i i i i i you should interpret that as flat margins in the first half and gross margins and our bags are you better margins and and modest growth in the second half the year i think it's important that i'm at and then just wanna again go back to the fact that you're it's gonna take us a little bit of time to work through as some of the had wings on are these high levels of absenteeism in the impact that it has in the factories and it it
spk_22: will take some time until that inventory turns and guess that fall under absorption out of the pier now i'm in in addition i would say that i'm you know we are really wanting to make sure that we are prioritizing aerobics investment that something that we get and twenty twenty one where we gradually brought our backs investment back in
spk_7: and on and i think is you you think about next year later i would i would look at our cue for of twenty twenty of one number of our bags an annualised that that's probably a good number to think about a how are thinking about our pets for the gear and that will gradually increase over the year there but it is something that we're not going a sacrifice and and prioritizing on long term investment plans and at the expense of and of a really kind of optimizing gross margin right now we want to make sure three this temporary code the disruption that we're still prioritizing those objects investments because we have a lot to be excited about in terms of the the long term growth of momentum of the business
spk_23: and then i would say it dutch poetry dps as well on very similarly
spk_0: sorry about that he thinks it's super helpful and just one one one quick follow up carry are you suggesting candidate they second quarter and the first quarter organic growth should be pretty similar is at kind of the the message here or to expect an improvement in queue to over ricky one like for taking the question
spk_24: yeah i mean i would expect to see sequential revenue growth from he wanted you to write i do hope that some of the things that are impacting more acutely and que one will start to a but it was still be with us to of what i think our comments or if you compare last year and you look at what happened between the first quarter and second call twenty twenty one it was a substantial have spring back a bounce back in queue to i don't think we're we're expecting that here this year and i think it's because of some of these lingering impacts of back orders staff and challenges at hospitals that i think you should expect a gradual sequential recovery and not may be the same level of bounce back that we saw last year
spk_7: thanks for taking the questions we will now take our next question from craig as they do from an uncle america please go ahead oh the glory think smooth and shooting questions just couldn't come quick volunteer korean on your comments on the capital markets to make sure that i'm clear and the or the smaller capital markets or are they can or are they back to normal level and then i know you mention the larger ones are probably not quite back what do you think needs to happen before to those get back to normal level and your when we when do you can foresee that within twenty two yeah i cried so let me start with first a reference a capital as a percent of our total sales it's it's only about six percent of our total sales including unnecessarily so i look at where we came in for twenty twenty one capital of about six percent of revenues to not have a driver but certainly as i think about opportunities to see a broader recovery i'm in twenty twenty two the larger capital which is really that the cruise that for answer obstacles it is the unit price a couple hundred thousand dollars and then everything else falls into that smaller capital which is your you're trying to forty thousand or last hour in in that neighborhood of what small capitalise and as we look at
spk_2: at at how capital trended and twenty twenty one we saw a nice bounce back in a smaller capital show think of that is our lighting systems as ours are cranial stabilization and systems as our generators as are like had units and obviously we we did see some nice of sarah length of launch momentum here in this second hatch an end and even with that i would say fourth quarter still proved to be a nice quarter for us so we expected to see a rebounds with three court judge third quarter to the fourth quarter as most hospitals fiscal years and in the in the fourth quarter we just see that are capital sales were up a topic that five million dollars
spk_24: from que three to queue for to so was part of that recovery in the fourth quarter as well but i do think that is i look at to sell relative to twenty nine teen i think their thirst for their opportunities to see some recovery and bounce back and twenty twenty two am i think it's gonna take a little bit of time i eat a q one is started out flow on and i'm and i think we owe that the omer crime very into the contagious nature of that and impacting staffing shortages and back committees and so forth so i'm it is one of these things where where and a had to get past some of those items before we start to see the final at the funnel is still very very strongly rate visibility to that to that use of final we do not believe that anything is fundamentally changed in the in competitive landscape on it's just an extension of the selling cycle a great of keep in mind you know i know we're talking capital bug with these capital c or she gets a recurring revenue stream for disposable so as procedures recover will see faster disposable robot cursor on cyrillic up because every hour procedure it's time you get a recurring revenue so just dump that the notice wow factor as procedures get back to normalcy an uptick in revenue in our disposal in our disposal as business that's very much attached capital gonna votes helpful the next one just on unser german
spk_5: just wanted you follow appear when you know if you guys had a more color earning additional discussions can with the of the area and maybe remind us of smooth
spk_2: the approval pining for the
spk_24: rest recon
spk_25: indication know if if you still can lose if you're still planning and expecting that i believe who is
spk_0: the second half of this year but please correct me if i'm correct yeah so up first of of are continuing to work with the ft a were doing additional analysis around the data that you know be submitted the pm a we've had the panel discussion is over continuing to work through of the necessary things to get the approval by that you can take some time to get there of i think we've we need to get further into toy
spk_24: twenty two before talking about when we would expect an approval for other via may but it's not a twenty twenty to improve like and say that it will be a toy twenty three approval for shooting for i'm will give you a better idea of timing once we get later into this year
spk_7: great thanks for taking the questions
spk_26: thanks
spk_24: thank you
spk_7: as a reminder if you would like to ask a question today please do so now by pressing star one on your telephone
spk_26: we will now take our next question from adjacent that suffer from raymond raymond james please go ahead
spk_27: ah good good morning and and thanks for the questions are just a couple quick ones getting back to your gross margin commentary a carrier think he said flat from the first half of the curious that relative the first half twenty one are flat relative to the to the fourth quarter number
spk_7: no i it's it's first quarter of a twenty twenty one
spk_26: okay and then
spk_2: what is the gross margin imply in near dps guide for twenty two yeah i would i would say again roughly think about it as i can but gross margins are roughly flat compared to for south twenty twenty one flight margin improvement compared to second half twenty twenty one gross margins
spk_7: the guy that that's helpful or images in terms of you mention price what is the net impact of price in in twenty two on the top one
spk_0: yeah we don't we don't necessarily provide that for that level of breakdown down but i would say that that is something that we have been working very actively with our commercial james and and we have reflected that into our into our numbers so he did is deafening part of our our guidance
spk_24: and the in which areas of the business or the biggest backorder meaning her months ago the ten to twelve the glenn mentioned his see it says vs t t and and can we assume by the third quarter you you kind of exhausted that backorder
spk_28: yeah it's mostly css i'm and the css products so obviously a backs bother us and our international business because we're heavily concentrated in css in the international business up yet we don't expect the back ordered to be normalized we execute do it certainly should be better than where we are in que one ah but we're going back to normal state until later in the year
spk_4: and with and city in in the issue an area tissue technology will will see some black lab backorder issue in inner inner private label business as well i'll i'll be so we we worked to prioritize i'd add different i am parts of the this is there and private label will be one of the area that could be affected by that orders on the tissue technology side incur thank you thank you we will now take a next question from matt taylor from the of yes please go ahead i you for taking the class and mom the morning young that you a ton of a higher level two questions he had some time under your belt male new law and i was wondering if you could give us an assessment and play billion what would you like about the tigers strategy or the things that you might keep the change was emphasized
spk_15: currently and in what are some of the kiessling swim you experience the did you can bring
spk_4: you know
spk_29: yeah thank you for up for the question i meet the first
spk_4: a very much like the dd portfolio like glenn said earlier i'm into heavy lifting in terms of and shifting the portfolio to watch he hired role for i prefer built before real has been done so my first barges make sure yet to built out get the portfolio that we have yeah there's clearly the international dimension where does it despite having some great successes and and great cases from the past this is way more yeah we can do and we we started
spk_15: few weeks back a project to really out that that road map yet which countries which products and and what on investment needed to really sell more of what we have here in the in more countries
spk_28: i'm a second discussion have with the divisional leaders is about your what do we we present within care pathways and it with the portfolio we have how can we brought him into a cheat cease to be more of a solutions play a more of a partner
spk_0: yet to the dia the healthcare professionals that we source of today so that will guide
spk_30: it organic as well as inorganic investments to broaden your our portfolio
spk_28: including digital capabilities and me and he a
spk_30: technology any process of business has opportunities to enhance its value proposition yet by building more tech a digital capabilities
spk_5: for those outdoors or two and that's what i try to
spk_2: reflected in those different factors and then of course yet this is a i'm acquisitive a business that would great potential to do acquisitions and so we're continuing to look into near and further jason sees as opportunities to up for to build out
spk_5: to the portfolio of businesses that makes sense that would in the integra family
spk_2: thanks for the tata only with within
spk_5: thanks here we are now take a question that found that matthew are fine sandpaper sandler please go ahead thanks for taking a question of the stick with one given that were didn't tell here year am
spk_2: on the in a commentary about the back half increase in are kind of back half loading of and fear you know your commentary about your commentary about que wine is a little bit worse than we've heard from other companies some just you know you got a it just puts more pressure on the back half of the year it's i'm just wondering what really need to go right
spk_4: the gonna hit these number than that and a talked about the new products but how much you have to get there all the backlog of the a salad new rhapsody to be very productive
spk_2: he added the absenteeism the me to come down meaningfully up to hit the back half numbers or have you built and enough conservativism that that you feel comfortable in that big spike in the back of your bags
spk_4: yeah i think we've got the the right level of conservatism built and to our forecasts of same time when we look at the back half of the our carpet confident rather get there when you look at the backwaters that are going to be so that's going to help us as a starting point supply is gonna get better as gonna be a nice tailwind for us getting procedures more back to normal from an overall covert perspective is going to be a positive for us and then elite new product launches are going to get it around so you know we're just watching on earth product here at the end of the first quarter that's going to be a contributor i was see more so in the back half of year serling i was having a for your benefit and the us and europe
spk_31: will continue to ramp he washed now canada australia
spk_32: we're gonna be launching in japan meteor which is
spk_0: a good opportunity for us along with a number of interact markets are so these np i launch you should be a nice talent for us or so in the back half of europe and then a bell years we add these resources should show sequential and you have your improvement as well it's of those are the key vote drivers for as we feel quite good about it
spk_2: understand it looks like it's got a risk to eight and you have a back half loaded year of a week of a good about it quite likely that that they've yet to think one i think we're probably be cautious
spk_33: that one underlying assumption is that we see gradually a steady improvement yet we're not counting your own any step change snap back yeah both on and would say into staffing a situation sir on our customer said
spk_34: on our own internal we do see steady improvement a question was asked on on the a cell
spk_35: and yes staffing up on following that since since december yeah we've drawn the line yeah from december to and the first second quarter and where be one of the were at work nicely tracking
spk_0: that to deadline yeah despite yeah the challenges that there are in the in the market so

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