Integra LifeSciences Holdings Corporation

Good day, and thank you for standing by. Welcome to the Integra Life Sciences First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Chris Ward, Senior Director of Investor Relations. Please go ahead, sir.

Thank you, Norma. Good morning, and thank you for joining Integral Life Sciences' first quarter 2023 earnings conference call. Joining me on the call this morning are Jan DeWitt, President and Chief Executive Officer, Matthew Alsemeyer, Vice President of FP&A, Investor Relations and Treasurer, and Jeff Mosbrook, Principal Accounting Officer. Earlier today, we issued a press release announcing our first quarter 2023 financial results. The release and corresponding earnings presentation, which we will reference during the call, are available at IntegraLife.com under Investors, Events, and Presentations, and a file named First Quarter 2023 Earnings Call Presentation. Before we begin, I would like to remind you that many of the statements made during this call may be considered forward-looking statements. Factors that could cause actual results to differ materially filed with the SEC and in the release. Also, in our prepared remarks, we will reference both organic and reported revenue growth. Organic revenue growth excludes the effects of foreign currency, acquisitions, divestitures, as well as discontinued products. Unless otherwise stated, all disaggregated and franchise-level revenue growth rates are based on organic performance. And lastly, our comments today will include certain non-GAAP financial measures. Reconciliations of any 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 with the SEC. And with that, I will now turn the call over to Jan.

Thank you, Chris, and good morning, everyone. Let me start by reviewing our first quarter business highlights on slide four. Our first quarter revenue performance reflects solid execution by our teams as well as positive trend in market amounts and procedure volumes that we see now nearing pre-COVID levels. First quarter revenues finished at around $381 million above our February guidance range, with organic growth of 4.6% comprised of tissue technologies at 6.8% and government specialty surgical at 3.5%. Tissue technologies enjoyed a strong start to the year, including double-digit growth from a number of our leading products the wound reconstruction franchise, such as Integra Skin, Micromatrix, Gentrix, and Cytel, along with high single-digit growth from Surgiment. We also launched Micromatrix in Europe, where we are seeing positive initial feedbacks from wound and reconstructive surgeons. While we are encouraged by the broad strength in demand for our tissue technology products, we are also experiencing the expected revenue pressure from the normalization private label orders, as we mentioned in our February guides. Beyond the top-line results in tissue technologies, we remain confident in our efforts to obtain a breast reconstruction indication for surgiment, and we're on track to file our PMA update this August, as well as completing related work at our Boston facility to upgrade our quality systems. An FDA inspection in March reinforced the urgency of these quality system upgrades. To maximize focus and efficiency in implementing these changes, we have paused production at the Boston site and accelerated certain project work that was originally planned for later in the year. We plan to resume production in early June after the system upgrades are substantially complete. And in the meantime, we will continue to work with our customers and commercial teams to minimize the supply chain impact as they work through existing finished product stock. Turning to CSS now, here we also saw a good start to the year, with double-digit growth in our KUSA product line and our programmable files, as well as strong performance in instrument sales. We launched the KUSA Clarity bone tip in the US, Canada, Australia, and New Zealand, further expanding the global KUSA portfolio. As expected, we also continued to work through several supply headwinds and backorder levels remain elevated, particularly in our durable access and repair and neuromonitoring franchises. Related to CERLINK, we've made progress on resolving the electrical interference issue in our monitors and now expect to relaunch late third quarter of this year. As we were validating and testing an earlier technical fix, our engineers identify a more robust solution that does not require any change to the monitor. We are currently in verification testing, and in the meantime have contacted the FDA to discuss the regulatory pathway to return to the market. Also working with regulatory agencies outside U.S. to finalize the plan in our international markets. Our current technical solution allows us to ramp up distribution faster once we're back in the market. We are excited about the relapse of Satellink, our customers' commitment and support during the recall, further validates our confidence that Serolink remains an important catalyst to our long-term growth expectations. Turning to our bottom line now. First quarter adjusted earnings per share came in at 74 cents within our original guidance range. Despite some temporary pressures to our adjusted gross margin during the quarter from product and geographical mix and the Boston Quality Project, we were able to meet our profitability targets and continue to make the necessary investments to fuel our long-term growth plans. During the quarter, we also appointed Dr. Stuart Hart as Chief Medical Officer. Dr. Hart has worked at leading medtech organizations and brings a deep and broad experience in global medical affairs and surgical innovation that will enable him to strengthen our clinical operations and innovations capabilities. Our CFO search continues with a strong slate of candidates. We're close to identifying a great leader who has the right skills and fit for the company. In the first quarter, we further solidified our balance sheet and liquidity position by amending and extending our credit facility, providing us ample liquidity as we execute our M&A strategies. We also initiated a $150 million accelerated share repurchase, to return additional value to shareholders. Overall, the strength demonstrated by our portfolio at the beginning of this year provided us confidence that we will deliver our 2023 commitments, and we are reaffirming our original full-year guidance for revenue, organic growth, and adjusted EPS. Consistent with the guidance we provided in February, we expect to see a clear step up from our first half to second half revenues. Additionally, we now also expect a larger step-up in gross margin as a result of the Boston Quality Project cost acceleration from the later part of the year into the first half. So with that, I'd like to turn the call over to Mathieu now to go deeper into our first quarter performance and our guidance.