Integra LifeSciences Holdings Q2 2026 Earnings Call

Good day, and thank you for standing by. Welcome to the Integra LifeSciences second quarter 2026 financial results. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. I would now like to hand the conference over to your speaker today, Chris Ward, Senior Director of Investor Relations.

Good morning, and thank you for joining the Integra LifeSciences second quarter 2026 earnings conference call. Joining me on the call are Stuart Essig, Chairman, President, and Chief Executive Officer, and Lea Knight, Chief Financial Officer. We issued a press release this morning announcing our second quarter 2026 financial results. The release and earnings presentation we reference during the call are available at integralife.com under Investors, Events and Presentations. Look for the file name Second Quarter 2026 Earnings Call Presentation. Before we begin, I want to remind you that many 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 reports filed with the SEC. These factors are also detailed in the release. Also in our prepared remarks, we'll reference reported and organic revenue growth.

Organic revenue growth excludes the effects of foreign currency, acquisitions, and divestitures. Unless otherwise stated, all disaggregated and franchise-level revenue growth rates are based on organic performance. Lastly, our comments today will include certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included 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 Stuart.

Thank you, Chris, and good morning to everyone on the line. We are encouraged by our second quarter results. We delivered on our commitments, achieved important milestones, and advanced our key priorities across the business. As a result, we are operating with greater consistency and strengthening our foundation for long-term growth. Revenue for the second quarter was $419 million, up $27 million sequentially, and in line with our May guidance. Adjusted earnings per share were above the high end of our guidance range, driven by our improved operating execution and favorable tariff dynamics in the quarter. We are reaffirming our full-year organic revenue growth outlook and adjusted EPS guidance as our underlying operating expectations for the year remain unchanged. We are updating our reported revenue outlook to reflect the impact of foreign exchange. Lea will provide additional color on our guidance.

Turning to our business segments, specialty surgery remains a core strength of the company. We hold the leading position in neurosurgery, supported by a broad portfolio of differentiated products, longstanding customer relationships, and clinical interventions that are deeply embedded in the daily practice of neurosurgeons. Importantly, our leading positions in neurosurgery and instruments provide unique access to hospitals, IDNs, and GPOs, strengthening our enterprise commercial footprint and offering further growth opportunities across our broader portfolio. ENT remains an important emerging growth opportunity for Integra. We continue to invest in the pipeline and are confident in our commercial team's ability to drive meaningful growth contributions as the business and portfolio continue to develop. Turning to tissue reconstruction, we maintain a strong market position anchored by Integra Skin, our flagship product and the market leader in dermal regeneration.

The franchise is built on the broadest product portfolio available, including Integra Skin, PriMatrix, AmnioExcel, MicroMatrix, and DuraSorb. This drives market leadership in complex wound reconstruction, particularly in the hospital setting. Looking more broadly at the market, we believe Integra LifeSciences is uniquely positioned within the evolving reimbursement landscape. The combination of the breadth of our portfolio, deep clinical evidence, a predominantly hospital-based business model, and pricing aligned with both hospital and outpatient reimbursement dynamics is difficult to replicate. As the market continues to adjust to the recent CMS reimbursement changes, we believe these strengths make us one of the best-positioned companies in wound reconstruction. We are also encouraged by the continued adoption of PriMatrix following its relaunch. Strong customer adoption reinforces our confidence in both the value of this product and our ability to successfully bring important products back to the market.

Building on that momentum, we have successfully restarted manufacturing at our Braintree facility, marking an important operational milestone for the company. We are now building inventory to support the commercial relaunch of SurgiMend 510(k) product in the fourth quarter. While the relaunch of SurgiMend represents an important near-term milestone, our broader objective is to expand the opportunity for both SurgiMend and DuraSorb through our dual PMA strategy in implant-based breast reconstruction. We are advancing toward an expanded label for SurgiMend, which we expect in 2027, with DuraSorb expected later that same year. Once approved, SurgiMend and DuraSorb would provide both biologic and synthetic solutions with the first two PMA indications for implant-based breast reconstruction, expanding surgeon choice and further strengthening one of Integra's key competitive advantages, the breadth of our portfolio.

Combined with our established presence in complex wound reconstruction and our commercial capabilities, we believe this strategy positions us well for long-term growth in this market. Beyond our portfolio initiatives, we have begun to realize the benefits of the broader changes we have made in how the company operates. By better aligning our commercial organization, operating model, and transformation initiatives around a common set of priorities, we are improving execution and enhancing coordination across the business. Together, these efforts are creating a more efficient organization and have contributed to cost savings in the second quarter. As we continue to improve supply reliability and operational performance, we see a clear path to further margin improvement in the coming years. That same focus on disciplined execution is reflected in our approach to capital allocation. Deleveraging continues to be our top priority.

We exited the second quarter of 2026 at 4.1 times total leverage, down from 4.5 times at year-end. We remain on track to approach the upper end of our target leverage range by the end of 2026. Overall, we are advancing important milestones, improving how we operate, and strengthening the foundation for sustainable growth. We remain focused on creating long-term value for customers, shareholders, and employees. With that, let me turn the call over to Lea for additional detail on our results and outlook.

Thank you, Stuart. Good morning, everyone. I want to begin by thanking our team for their continued strong execution in the second quarter. Turning to slide five, I will cover our second quarter financial results. Our second quarter revenues were $419 million, representing 0.8% growth on a reported basis and 0.7% growth on an organic basis. These results build on the progress we have made over the past year, and they reflect the steadier, more predictable performance we are now delivering quarter to quarter. Adjusted EPS for the quarter was $0.56, an increase of 24% compared to the prior year. Relative to our May guidance, revenue delivery and transformation savings were in line with our expectations, and stronger overall operational execution drove performance to the high end of our guidance range.

In addition, we benefited from $0.05 per share of tariff favorability versus our May guidance, which contributed to our adjusted EPS performance above the high end of our guidance range. Gross margin for the quarter was 61.3%, up approximately 60 basis points from 60.7% in the prior year, reflecting efficiencies achieved across manufacturing operations and lower remediation spending. Adjusted EBITDA margin was 18.7%, up approximately 160 basis points versus 17.1% in Q2 2025, reflecting the benefits of the gross margin drivers I just discussed, together with contributions from our recent margin improvement initiatives. Cash flows from operations totaled $22.8 million in the second quarter, and capital expenditures were $12.3 million. Turning to slide six, we will take a deeper dive into our Specialty Surgery's revenue highlights for the second quarter. Specialty Surgery revenue was $309.3 million, representing 1.7% growth on a reported basis.

On an organic basis, revenue grew 1.6% compared to the prior year. Global Neurosurgery delivered 1.9% organic growth, driven by Certas Plus, CUSA, and Bactiseal, as supply reliability and fulfillment have continued to improve. Sales of capital equipment were down approximately 1%, as double-digit growth in CUSA was offset by a decline in smaller-ticket capital equipment during the period. We remain confident in the hospital capital environment and maintain a positive outlook for capital for the year. Instruments grew low single digits, benefiting from order timing relative to the first quarter. We continue to expect growth for the full year. In ENT, revenue declined low single digits, reflecting continued growth in MicroFrance ENT instruments, offset by ongoing pressures in sinus balloons. Revenue in our international markets grew low single digits as improving supply is strengthening our ability to meet customer demand. Moving to our Tissue Reconstruction segment on slide seven.

Tissue Reconstruction revenues were $109.5 million, down 1.9% on a reported basis and down 2% on an organic basis compared to the prior year. Within wound reconstruction, we continue to see positive growth contributions from DuraSorb and encouraging momentum following the relaunch of PriMatrix. While Integra Skin grew sequentially over the first quarter, it was down year-over-year as the second quarter of 2025 benefited from a significant backorder clearance for the product. MicroMatrix also declined in the quarter versus the prior year. For the first half of the year, Wound Reconstruction was approximately flat versus 2025, and its performance remains within the range of outcomes contemplated in our full-year guidance. During the second quarter, private label sales grew 4.7%. Finally, international sales and Tissue Reconstruction grew low single digits, driven by Integra Skin.

If you turn to slide eight, I will provide a brief update on our balance sheet, capital structure, and cash flow. Operating cash flow for the second quarter was $22.8 million, compared to $8.9 million in the prior year. Our second quarter operating cash flow also reflects an $11 million final milestone payment related to the Sia acquisition. For the first half of 2026, operating cash flow increased $35 million compared to 2025, and we remain on track to deliver an approximate $150 million improvement in operating cash flow for the year, driven by EBITDA growth, working capital efficiency and an approximate $60 million reduction in cash expenditures related to EU MDR compliance and Braintree startup costs. Free cash flow for the quarter was $10.5 million, with a free cash flow conversion rate of 24%.

As of June 30th, net debt was $1.6 billion and our consolidated total leverage ratio was 4.1 times within our current maximum allowable leverage of 5 times. Reducing our leverage and continued debt repayment remain our top capital allocation priorities for 2026. We will continue to reduce our leverage over the course of the year and expect to approach the upper end of our target leverage range of 2.5-3.5 times by the end of 2026. The company had total liquidity of approximately $496 million, including approximately $274 million in cash and short-term investments, with the remainder available under our revolving credit facility. Turning to slide nine, I will provide our consolidated revenue and adjusted earnings per share guidance for the third quarter and full-year 2026.

Before I begin, I would like to note that two weeks ago there was flooding in the Cincinnati area that has resulted in operational disruption at our manufacturing site. We responded immediately, implementing our business continuity plans. Based on our latest assessment of the inventory available at our distribution centers, our secondary supply sources, and our insurance coverage, we do not expect the event to have a material impact on our revenue or EPS guidance for 2026. For the third quarter, we expect revenues to be in a range of $410 million-$425 million, representing reported growth of 2%-5.7% and organic growth of 1.9%-5.7%. Turning to the full-year 2026, we are reaffirming our organic revenue growth guidance range of 0.8%-3.3%, reflecting our expectation for a second half revenue increase driven by normal seasonality and continued improvement in supply.

We are updating our reported revenue outlook to a range of $1.654 billion-$1.695 billion and reported growth of 1.1%-3.7% to reflect the FX impact of a stronger U.S. dollar relative to our prior guidance assumption. Turning now to adjusted earnings per share guidance for the third quarter and full year. For the third quarter, we expect adjusted earnings per share in a range of $0.53-$0.61. For the full year, we are maintaining our adjusted earnings per share guidance range of $2.40-$2.50. The midpoint of our guidance range continues to reflect gross margin and adjusted EBITDA margin expansion over 2025 of 60 and 100 basis points respectively, as our underlying operating assumptions are unchanged.

Lastly, we continue to evaluate opportunities to optimize our capital structure, and we expect to refinance our outstanding bank debt in the second half of 2026 if market conditions permit. While we now anticipate somewhat higher interest expense in the second half of the year due to both the current rate environment and a potential refinancing, we expect those impacts to be offset by tariff favorability. We continue to expect to deliver earnings within our 2026 adjusted EPS guidance range and do not expect the higher interest expense to alter our broader earnings trajectory. Looking beyond 2026, we expect to offset potential interest expense headwinds through ongoing operational improvements and cost savings initiatives. For your reference, we have included the key assumptions underlying our third quarter and full year guidance, as well as the key modeling inputs on slide 10. With that, I will turn the call back to Stuart.

Thank you, Lea. Before we move to Q&A, let me close with a few thoughts. The second quarter was another step forward for Integra. We delivered on our commitments, advanced important milestones across the business, continued to improve the way we operate. We are seeing the benefits of stronger execution and improved supply reliability. The organization is more aligned, and we continue to make meaningful progress on the opportunities that can drive future growth, including the SurgiMend relaunch and our PMA strategy in implant-based breast reconstruction. As I spend time with our customers, I am increasingly excited about what lies ahead. We still have work to do, I believe we are building real momentum and positioning Integra well for a strong future. What gives me confidence is the talent and dedication of our team at Integra.

I want to thank our employees for their resilience, commitment to the business, the way they continue to support our purpose every day. Their focus and perseverance are central to the progress we are making and to the future we are building. Thank you for your continued interest in Integra. Operator, please open the line for questions.

Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Vik Chopra with BMO Capital Markets. You may proceed. Morning, Stuart.

Hi, Lea. This is Anton on for Vik. Thanks for taking our questions. Lea, maybe I'll start with you. Second quarter EPS going to beat consensus by $0.08, but the guide was held intact. Can you talk a little bit more about what's driving the reaffirmed full year EPS outlook despite the $0.03 organic outperformance? Is it just conservatism? Was there some spend anticipated in the second quarter that shifted to later this year? Is there some kind of incremental expense headwind you're expecting in the second half?

Yeah, certainly. Thanks, Anton, for the question. Yes, to your point, our adjusted EPS was $0.56. We were $0.04 above our entire guidance range, $0.08 above the midpoint, to your point. Notably, we were also 24% above our prior year EPS. Relative to our May guidance, what you saw is revenue delivery and transformation savings were absolutely in line with our expectations. We did see stronger performance from an operational execution perspective, which contributed to EPS being at the high end of the guide. In addition, though, we saw tariff favorability of about $0.05 per share. That's what drove us above the high end of our guide for the quarter.

To your point, in the second half, what we are now doing is the upside that we saw from tariff favorability, which we had communicated in May, we have right-sized our tariff estimates or assumptions. We continue to believe our tariff exposure for the year will be about $0.10. What we had as protection for any additional tariff changes, we are now using to mitigate an expectation of higher interest expense in the second half as a result of a planned refinancing transaction. To your point, we do not expect any operational headwinds to offset some of the upside that we saw, but we do expect to see interest expense headwinds.

All right, great. I appreciate that, Laura. Stuart, you've appointed a new chief commercial officer and are going on commercial offense. Just looking at the business, where is the organization under index today, call points, GPO penetration, geographic coverage? What are the areas that you're kind of targeting to reinvigorate the commercial engine over the next 12 to 18 months?

Thanks. Let me start with very positive news, which is our supply situation is improving and has improved dramatically, and that is allowing our organization to be more proactive to go on the offense. The new divisional and commercial structures have been implemented, including our new chief commercial officer and also new division leaders reporting into that role. The focus is on accountability, faster decision making, stronger ownership, broader enterprise contracting, and deeper customer and hospital engagement. I want to reiterate enterprise. We have a really good set of relationships with GPO and IDN, which have really been built around our neuro business and specialty surgery. That leaves a lot of opportunity to expand those relationships into tissue reconstruction and ENT, and it's just a natural thing to add those products to our national account contracts.

Our focus is on better deployment, coordination, using the current organization more effectively. The only real increase we expect in sales force is going to be towards SurgiMend as it ramps, and that will be consistent with the original plan for SurgiMend as it begins to grow. What we don't see is a broader strategy reset. There's not a sales force restructuring. It's really just a way of reinforcing our positioning with customers.

Thank you. Our next question comes from Ryan Zimmerman with BTIG. You may proceed. Good morning, Stuart, Lea.

This is Izzy on for Ryan. Thanks for taking the question. Stuart, I just want to start with you. It's been a couple of months since you have stepped back into the CEO role here at Integra, I was curious what you have seen in that time that has kind of been in line with your expectations, and if there has been anything that maybe you didn't expect.

First of all, I'm very happy with what I've found. I would say all of our focus as a leadership team is on improving execution. I want to underscore, I don't think the company needs a strategic reset. We've got strong market positions. We participate in really attractive end markets, specialty surgery end markets like neuro and ENT and plastic and reconstructive surgery. Our products are clinically important. They're used in critical situations for patients' life and well-being. Our leadership team and the continuity in our leadership team is supporting execution, accountability, and consistent progress. I really haven't seen a need for a reset. What I do see is an opportunity to continue to invest in our organization and drive simplification and accountability.

Got it. Thank you. I think to the question prior to me, Stuart, you mentioned that SurgiMend is expected to come back prior or in line with prior expectations. I was hoping you could maybe quantify that a little bit more ahead of that fourth quarter launch and maybe some of the expectations into 2027. Thanks for taking the questions.

Sure. First, let me talk a little bit about how we've been doing in the market pre-SurgiMend. We sell DuraSorb into the market with, again, a separate smaller sales force. We've been driving DuraSorb share and growth consistently in the double digits. We continue with that sales organization to be asked, when are we going to get SurgiMend relaunched and how quickly we can bring it to market. We have real confidence in the demand for that product from legacy customers as well as new customers. The market mix in terms of demand for tissue, has been moving from human tissue to xenograft and to resorbable synthetics, and that really plays to our SurgiMend portfolio and our DuraSorb portfolio. We expect share recapture to build over multiple quarters with SurgiMend. I would remind you that our 2026 guidance does not assume any meaningful SurgiMend contribution.

We do expect to launch it in the fourth quarter. We expect a modest recovery. I think I would say something to the effect of 50% of its historical performance of $40 million, in line with our PriMatrix launch, which has been going very well and where we seem to be driving relatively quickly about 50% of the legacy revenues.

Thank you. Our next question comes from Ravi Misra with Truist Securities. You may proceed. Hi. Good morning.

Thank you for taking the question. Just on the revenue guide. Can you maybe talk about what gets you to the high end or the low end of the 3Q guide? While we're at it, 2027 kind of consensus has growth acceleration on the top line. Just curious, with all these products coming to market, potential indication expansion for your tissue and SurgiMend, are you comfortable with where the street sits? Thanks, and I have one follow-up.

Certainly. Thanks for the question, Ravi. To your first part of your question regarding our 2026 guide, high and low. As you heard, we are reaffirming our full year organic revenue growth guidance of 0.8% to 3.3%. We did update our reported revenue range, just to reflect FX. We get to the high end of that guide through stronger supply reliability, stronger seasonal demand, as well as faster realization of our cost savings. The low end reflects a more measured pace of supply recovery as well as second half execution. That's the high and the low. To your question on 2027, as you know, we do not provide 2027 guidance during this call. We'll do that officially in February. I can give you a way to think about a performance in 2027.

On the top line, through revenue, we do expect to see growth in 2027 versus 2026. Like the approach we took in 2026, we're going to continue to be very prudent with respect to our assumptions on the pace of supply as well as share recovery throughout the year. From an EPS perspective, we do expect to be able to offset the incremental interest expense headwind that I talked about earlier as a result of a second half 2026 refinancing through additional cost savings. When we talked about our 2026 initiatives earlier, we indicated that not only were they going to deliver the $25 million-$30 million in cost savings that we projected for 2026, but on an annualized basis, they would deliver an incremental $10 million-$15 million in 2027.

Additionally, we expect to see remediation and transformation costs come down as we continue to strengthen our quality as well as stabilize our supply. All of these things together should allow us to see EPS growth faster than the rate of sales growth. Finally, on cash flow, we expect to see continued improvement in terms of cash flow generation as we work to improve our overall quality of earnings.

Great. Thank you very much. Super helpful color. Just one last follow-up from me. Just in ENT, I think your performance was a little bit better than we expected. Still a year-over-year decline, I think, but can you talk about the outlook here? It seems instruments are doing well. Curious, around the reimbursement headwinds in Acclarent and then maybe how elective procedures are shaping up in this space. Thanks a lot. Yeah, certainly.

From an ENT perspective, to your point, Q2 did decline low single digits. We did continue to see growth on the MicroFrance instruments part of the business, but that was more than offset by the continued reimbursement pressures that you mentioned on the sinus balloons part of the business. We did indicate as part of our Q1 results that we did expect ENT to be down on a full year basis. That continues to hold true and is what is reflected in our guide at this point in time. Our focus going forward will be to focus on innovation in order to drive growth in ENT in the long term. Where we see those kind of more innovative segments are in navigated systems as well as Eustachian tubes.

To your point on procedures, I'll talk broadly because as we look across the business, overall procedural demand has remained generally consistent with our expectations during the quarter. The majority of our business, if you remember, is in trauma and acute care versus truly elective procedures. While there may be varying impacts across procedures as well as end markets, right now we can't see any specific evidence that we're seeing any unusual impacts from whether it be ACA subsidies or any other sort of insurance enrollment trends. We believe the procedures and care settings that we operate in provide some protection for us and haven't seen any real impacts.

Thank you. Our next question comes from Larry Biegelsen with Wells Fargo. You may proceed. Hi, good morning.

This is Ross Osborne for Larry. Starting off, I realize Integra Skin had a tough comp. Ignoring the prior year, how would you rate the level of demand you're seeing today, and how should we think about contribution to next year?

Yeah. For Q2, we did see a decline in wound reconstruction. There were two parts to that. It was driven by Integra Skin as well as MicroMatrix. To your question specifically on Integra Skin, revenue was actually up sequentially as you look Q2 versus Q1. The performance versus a year ago was really due to that tough year-ago comp driven by backorder clearance that we saw in Q2 2025. From an Integra Skin perspective, we expect to build on the momentum that we've seen in terms of sequential revenue lift through the balance of the year. As it relates to MicroMatrix, the decline there reflects increased competition based on new entrants in the powder form. In total, wound reconstruction through the first half was about flat, and that is consistent with what's currently contemplated in our guidance.

Okay, great. What's the latest on MediHoney, and how should we think about that as a growth contributor in 2027?

Yeah. Why don't I grab MediHoney? First of all, we continue to advance the work to bring MediHoney back to market in 2027. We are including nothing in our 2026 guidance for MediHoney, and we'll continue to move forward with an expectation of bringing the product back to market in 2027. It's in significant demand, and so we're confident in our ability to regain share over time as we bring the product back.

Thanks for taking our questions.

Thank you. Our next question comes from Travis Steed with Bank of America. You may proceed. This is Rayan for Travis.

Thanks for taking our question. Just to build on the previous question on wound reconstruction, how should we be thinking about performance in the second half now with the return of PriMatrix and DuraSorb strength building? With SurgiMend, I appreciate that the contribution in 2026 is not as material but maybe more into 2027. When can we expect the wound reconstruction business as a whole to return to more sustainable strength?

Let me take a crack. First, our relaunch of PriMatrix is going, I would say, exceptionally well. Our numbers are in line with our expectation, and we're seeing significant early signs of customer re-engagement. Approximately nine months into the relaunch, the revenues recovered to slightly more than 50% of the pre-recall levels. PriMatrix continues to increase sequentially quarter-over-quarter. I would say one of the upsides of our recovery is that not only are we winning back prior customers, but our commercial team has been identifying additional opportunities based on many of the learnings that we had while the products were off the market. Let me take a second on SurgiMend. Braintree is actively manufacturing SurgiMend, and we consider that a key operational milestone for Integra. Our near-term focus is building inventory to support a phased and disciplined Q4 relaunch with sufficient inventory expected for the launch.

We will have a controlled market relaunch, applying what we've learned from PriMatrix to the way we relaunch the product, and we'll start by engaging the historical highest volume users and the KOLs first. Braintree was built with a quality system designed to meet the highest regulatory standards. Again, we are not assuming any meaningful SurgiMend contribution in 2026.

Got it. Thank you. On SurgiMend, maybe just to build and looking into 2027, I appreciate that the FDA has cleared the PMA contingent on a successful inspection. Is there a window frame in which we can expect the FDA inspection to occur? Have you maybe submitted a request for them to come visit? How should we be thinking about the timeline for breast reconstruction?

Let me open the question a little bit more broadly to SurgiMend and DuraSorb, both of which are working their way toward a PMA label. First, let me talk about SurgiMend. As you acknowledge, the clinical safety and efficacy review is complete, and we have an approvable decision from FDA already in place. The PMA is now pending a successful pre-approval inspection at Braintree, which we will be ready for this year. For DuraSorb, enrollment and follow-up are complete, and data analysis is underway. That's moving on a slower timeframe than SurgiMend. Like SurgiMend, the PMA will also require a manufacturing facility pre-approval inspection. Obviously, always timing for any approval is up to the FDA, but we're expecting approval for SurgiMend earlier in the year 2027, and later in the year for DuraSorb.

I'll remind you, all of our warning letter action items are expected to be implemented by the end of 2026, any inspection and approval timing ultimately remains subject to the FDA.

Got it. Thank you very much.

Thank you. Our next question comes from Robbie Marcus with J.P. Morgan. You may proceed. Hi.

Thanks for the question. This is Allen on for Robbie. I joined a little bit late, so sorry if this has been asked already. When I look at your performance down the P&L this quarter, I definitely saw much better SG&A control. I think we've been seeing that on a good trajectory recently. When we think about the trajectory for the balance of the year, how should we think about balancing continued SG&A controls with your efforts to get some of these new products back online?

Yeah. Let me take that, Allen. Thank you for the question. In terms of cadence of the year of how we deliver against our guide, what you'll see is, we talked about from a revenue lens. Q1, we saw a step up from Q1 to Q2 of about $27 million. That's exactly kind of what we laid out as part of our May guidance. Our Q3 guide keeps Q2 and Q3 about flat. Then we'll see another step-up in Q4, of about $25 million. That's the cadence we described in May. It's how we've been executing through Q2 and how we continue to expect to execute through the balance of the year.

On the cost side of the equation, if you recall, when we institute or implemented the initiatives that were going to drive $25 million-$30 million of savings this year, what we said is the actions and activities have been implemented as of Q1, we would realize an acceleration of those savings as we move throughout the year. That's going to be the driver to be able to drive additional leverage from an SG&A perspective for each quarter as we move forward from Q3 on for the balance of the year. Because it's tied to those initiatives, a very strategic part of our transformation in terms of operating model, how we're building new ways of working. We can do that while also making sure that we execute flawlessly against the planned launches for SurgiMend, as well as executing against the remainder of our remediation commitment.

Got it. Thanks. I heard your answer on the impact of ACA subsidies, how you're kind of insulated from that. Just curious on the CapEx side of the equation. Again, sorry if you've already answered the question, just generally the health of the broader CapEx market.

Our capital business, we saw strong growth in CUSA for the quarter. That performance was offset by some of our smaller ticket kind of capital equipment. Overall, we still believe our funnel remains healthy and the broader market remains healthy for capital.

Thank you. Our next question comes from Jayson Bedford with Raymond James & Associates. You may proceed. Hi, this is Elena for Jayson.

Thanks for taking my question. I have one on guidance. You expect 3Q organic growth to be an acceleration from the first half levels. What gives you confidence in this guide, especially given the tough prior year comp? Can you talk about the moving pieces that contribute to growth?

Let me level set because a year ago in Q3, we actually had experienced two supply interruptions that actually drove performance down for that quarter. As we now lap that period, we actually have an easier comp, if you will, Q3 2026 versus 2025. That describes part of the performance that we expect to deliver and what's currently reflected in the guide. In addition to that, as we move through the year, what was also communicated is we continue to have supply improvements. We continue to see momentum across parts of our business, particularly in neurosurgery, and expect to see more momentum in Integra Skin, and as we already discussed, with the return of SurgiMend in Q4.

While that in and of itself for the quarter will not be a material contribution, it still marks a very significant milestone in terms of getting that product back into the market.

Okay, thank you. I also had a question on the leadership changes, and could you please share more on why is now the right time for this change, and what are the priorities for these businesses going forward?

Sure. Leadership change is really reflected only in the commercial organization, and it really reflects a succession process. Our neuro leader, our specialty surgery leader, was promoted to Chief Commercial Officer. In each of the divisions, we promoted new division presidents. In each case, they came from inside our business and come with significant knowledge and following within our organization. We bring together the leadership of the two divisions, which then allows us to coordinate our enterprise activity, where we see a lot of opportunity to leverage our GPO and IDN presence that is really on the surgical side and drive it into the tissue recon and ENT side. I wouldn't think of this as a significant change in leadership as opposed to an evolution of leadership, where we're getting even more opportunity to leverage our internal leaders throughout the commercial part of the business.

Okay. Thank you. Thank you.

This concludes the conference. Thank you for your participation.