Integra LifeSciences Holdings CorporationIARTNASDAQ
LOADING
|||
Operator: Good day, and welcome to the Integra LifeSciences Third Quarter 2025 Financial Results. [Operator Instructions] As a reminder, this call may be recorded. I would like to turn the call over to Chris Ward, Senior Director, Investor Relations. Please go ahead.
Christopher Ward: Good morning, and thank you for joining the Integra LifeSciences Third Quarter 2025 Earnings Conference Call. With me on the call this morning are Mojdeh Poul, President and Chief Executive Officer; and Lea Knight, Chief Financial Officer. Earlier this morning, we issued a press release announcing our third quarter 2025 financial results. The results 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 Third Quarter 2025. Before we begin, I want to remind you that many of the statements made during this call may be considered forward-looking. Factors that could cause actual results to differ materially are discussed in the company's Exchange Act Reports that were filed with the SEC and in the release. Also in our prepared remarks, we will 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, in our comments today, we will include certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures can be found in today's press release, which is an exhibit to Integra's current report on Form 8-K filed today with the SEC. And with that, I will now turn the call over to Mojdeh.
Mojdeh Poul: Good morning, everyone, and thank you for joining us for our third quarter 2025 earnings call. During today's call, I will begin with an overview of our third quarter results. I will then discuss our progress on our three key priorities, which will position us for sustainable long-term success. Lastly, I will provide updated 2025 guidance, after which Lea will review our financials in more detail. Since our second quarter earnings call, we have made meaningful progress on our Compliance Master Plan, moved ahead with our plans to improve operational and execution excellence and reintroduced PriMatrix and Durepair ahead of schedule. We saw continued healthy demand across our portfolio, offset by two supply interruptions in our CSS business, which led to growth below expectations for the quarter. Disciplined spend control allowed us to deliver strong operating income and improved operating cash flow performance despite the top line results. In the third quarter, we delivered revenue of $402 million, representing organic growth of approximately 5% year-over-year, but below our guidance range. Adjusted EPS for the quarter was $0.54, exceeding the top end of our guidance range. This reflects our ability to offset top line pressure through improved operational efficiency and disciplined cost management. Our third quarter revenue shortfall underscores the work still ahead to achieve greater execution consistency, which remains a critical transformation imperative for us. We have been taking a systemic and foundational approach to strengthening our supply chain to allow us to reliably meet demand and drive predictable growth. We have made progress realizing that building a robust supply chain is going to take time. Looking forward, we remain focused on our three key priorities: executing our Compliance Master Plan to strengthen our quality systems, driving operational and execution excellence and delivering on our financial commitments. Starting with our first priority, which is executing our Compliance Master Plan, we have made good progress and remain fully committed to transforming and improving our quality management system. During the third quarter, we continued to execute our remediation plans under the oversight of our transformation and program management office, ensuring disciplined prioritization, effective resource allocation and consistent progress tracking. We have maintained active constructive engagement with the FDA and have delivered steady progress on our warning letter commitments and routine inspections. As previously stated, while our remediation work will extend beyond 2025, we are establishing a firm foundation for supply chain excellence and resilience. Our second priority is driving operational and execution excellence. Since our appointment in April, Valerie Young, our Corporate Vice President of Global Supply Chain, has been implementing a comprehensive plan to establish a robust end-to-end supply chain for Integra capable of delivering consistently reliable performance. Val is strengthening her leadership team by bringing on new highly experienced talent and is driving a culture of accountability, discipline and continuous improvement. While it will take time for our supply chain capabilities to fully mature, we are already seeing measurable progress and expect continued improvement over the coming quarters. I would like to highlight three examples of such progress, Integra Skin production improvements, Braintree facility progress and our strategic approach to dual sourcing. In the case of Integra Skin, we have proven that focused planning and disciplined execution deliver results. Since January, Integra Skin manufacturing yields have improved by more than 50% and inventory levels have increased by 2.5x. These improvements in Integra Skin demonstrate the effectiveness of our approach and the progress we are making towards greater operational reliability across the enterprise. In the case of the Braintree facility, we continue to make good progress and are on track to resume production in June of 2026, in line with our previous issued timeline. This facility will produce SurgiMend, PriMatrix and Durepair, with initial production focused on SurgiMend to build inventory ahead of its planned relaunch in the fourth quarter of 2026. Finally, in the case of strategic dual sourcing, in order to enhance our manufacturing flexibility and resilience, we have entered into a new third-party supply agreement for PriMatrix and Durepair. As a result of this agreement, I'm pleased to share that we recently relaunched both products in the fourth quarter of this year, almost a year ahead of previously expected timelines. Most importantly, this dual sourcing strategy gives us the opportunity to return these critical products to the physicians and patients who rely on them. Before moving to our third priority, I would like to highlight the appointment of Dr. Raymond Turner as our Corporate Vice President and Chief Medical Officer, reporting directly to me. Ray is a Board-certified neurosurgeon, fellowship trained in endovascular neurosurgery. He's also an accomplished executive with extensive experience in the MedTech industry, having held Chief Medical Officer positions for Siemens Endovascular Robotics and Johnson & Johnson Cerenovus businesses. We welcomed Ray to our team last month. He's leading our worldwide medical and clinical affairs organizations, including clinical research, clinical trial operations, evidence generation and medical safety and communications. His extensive medical and clinical experience and expertise are already proving to be significant assets as we strengthen our focus on building robust clinical evidence and delivering innovative solutions to transform patient care. Now turning to our third priority, which is delivering on our financial commitments. Earlier on this call, we reviewed our third quarter financial results. Now I would like to take this opportunity to talk about the steps we are taking to position our company for long-term growth. We recently completed a portfolio prioritization process that will guide our capital and resource allocation decision. Our longer term goal is to shift our product mix towards higher growth, more profitable categories to drive accelerated growth and performance. This disciplined approach is reflected in how we are investing in high-growth segments of our portfolio. As an example, we're progressing the PMAs for SurgiMend and DuraSorb in implant-based breast reconstruction, positioning us to become a key player in this high-growth $800 million market. As the proposed CMS reimbursement changes continue favoring evidence-based cost-effective products, we also see additional investment opportunities in clinical evidence to expand our reach in outpatient wound care settings, driving sustainable profitable growth. Finally, to drive long-term profitability and create room for investment in growth, last quarter, we announced the initial phase of our margin expansion initiative, which is progressing well. We expect the program to yield $25 million to $30 million of cost reduction in 2026 through initiatives focused on COGS improvement, third-party spend reduction and operating model efficiencies. Not only will these initiatives support our longer term margin expansion goals, they will also leave us well-positioned to offset any potential headwinds that may arise from a cost perspective, for example, tariffs. Moving to 2025 guidance; we are revising our full year 2025 revenue and adjusted EPS guidance to a range of $1.62 billion to $1.64 billion and $2.19 to $2.24, respectively. Our new guidance reflects our lower-than-expected revenue in the third quarter, coupled with updated assumptions for the fourth quarter. We remain confident in our plans and ability to deliver the foundational transformation required to improve our performance and delivery of consistently reliable results. Looking ahead, we will continue to balance near-term execution with investments that strengthen our foundation for sustainable growth. Now I would like to turn it over to Lea, who will provide more specifics on our third quarter results and share additional details on our revised guidance. Lea?
Lea Knight: Thank you, Mojdeh. Let's take a more detailed look at our third quarter financial highlights, starting on slide 5. Total revenues for the quarter were $402 million, representing 5.6% reported growth and 5% organic growth compared to the same period last year. Reported revenues included a foreign exchange tailwind of approximately 60 basis points. Revenue performance was below our expectations due to two supply interruptions in our CSS business, coupled with insufficient safety stock levels for the impacted products. Adjusted earnings per share for the quarter were $0.54, representing 32% growth compared to the third quarter of 2024. Gross margin for the quarter was 62.9%, down 10 basis points versus the prior year, reflecting increased remediation costs, investments in the Compliance Master Plan and tariffs, mostly offset by favorable product mix from stronger sales in higher-margin products in Neurosurgery and Wound Reconstruction. Adjusted EBITDA margin was 19.5%, an increase of 330 basis points versus the prior year, driven by revenue growth due to improved inventory availability and disciplined cost management. Operating cash flow for the quarter was $41 million, a significant improvement over the first half of this year. Turning to slide 6; let's review the revenue highlights from our Codman Specialty Surgical segment. CSS reported third quarter revenues of $292.6 million, reflecting growth of 8.1% on a reported basis and 7.1% on an organic basis. We are pleased that demand remains strong in the global neurosurgery market. Our revenues in neurosurgery increased 13.3%. This outsized growth was driven by strong performance of Certas Plus, DuraGen, CereLink and Mayfield Capital in addition to a favorable prior year comp. Our ENT business was roughly flat for the quarter. We continue to be impacted by reimbursement pressure in the Sinuplasty Balloon segment and the timing of capital equipment purchases. These dynamics continue to weigh on overall ENT growth despite growth in our newer products. The AERA Eustachian Tube Balloon Dilation and TruDi Navigated disposables both delivered solid growth. We remain focused on continuing new product development, driving commercial execution and engaging with payers to address reimbursement challenges. Of note, in Q3, we initiated enrollment in the Acclarent AERA Pediatric Registry, a prospective multicenter observational registry evaluating the real-world use of the AERA Eustachian Tube Balloon Dilation system in children. The data generated from this study will provide valuable real-world insights and support broader efforts to improve reimbursement pathways and clinical adoption. We continue to invest in our ENT offering and are taking a disciplined approach to managing and growing the business. In our Instruments portfolio, revenue declined 7.6%, driven by a tough comparison in the alternate site channel following strong performance in the prior year. Turning to the results in our International business. Revenue grew 14.6%, driven by strong demand across key markets and the renewed availability of certain products that were not available in the prior year. This rebound reflects the strength of our global commercial execution ability and the resilience of the underlying demand for our products. Our international growth was led by China with an approximate 24% year-over-year increase fueled by stronger supply, further geographic expansion and deeper market penetration. Other strategic markets also delivered low double-digit growth. While part of the growth reflects lapping last year's ship hold, we are encouraged by the sustained demand signals. We remain focused on expanding access, improving supply reliability and driving adoption of our differentiated technologies globally. Moving to our Tissue Technologies segment on slide 7; Tissue Technologies revenues were $109.5 million, down approximately 0.5% on a reported basis and 0.3% on an organic basis compared to the prior year. Within Wound Reconstruction, we saw strong underlying growth across the portfolio, including approximately 50% growth from DuraSorb and approximately 25% growth from Integra Skin. Growth in Integra Skin was supported by both continued demand strength and improved production output and availability, while DuraSorb's performance was again driven by sustained market demand. The positive growth in Wound Reconstruction was offset by the negative impact of MediHoney. In our Private Label business, sales declined 12.6%, primarily due to the softer commercial demand experienced by our private label partners. International sales in Tissue Technologies grew low double digits, reflecting double-digit growth in Integra Skin and our UBM portfolio, partially offset by the impact of MediHoney. Turning to slide 8; I'll now review our balance sheet, capital structure and cash flow. During the third quarter, operating cash flow was $40.9 million and free cash flow was $25.8 million, reflecting our continued capital investments in key infrastructure. As of September 30, net debt was $1.57 billion, and our consolidated total leverage ratio was 4.3x, which remains within our current maximum allowable leverage ratio of 5x. We ended the quarter with total liquidity of $550 million, including $268 million in cash and short-term investments, with the remainder available under our revolving credit facility. During the third quarter, we satisfied the convertible bond maturity using our revolver. During 2026, we plan to increase and extend the proportion of fixed rate debt in our capital structure. If you turn to slide 9, I will provide a consolidated revenue and adjusted earnings per share guidance for the fourth quarter and full year 2025. For the fourth quarter, we expect revenues in the range of $420 million to $440 million, representing a reported decline between approximately 5% and 0.6% and an organic decline between approximately 6% and 1.4%. Our fourth quarter outlook reflects normal seasonality and updated market assumptions for ENT and private label as well as remediation and supply improvement timelines. For the full year 2025, we expect revenues of $1.62 billion to $1.64 billion, representing reported growth of approximately 0.6% to 1.8% and an organic decline of approximately 1.6% to 0.4%. We estimate an approximate 260 basis point decline in gross margin for the year, including approximately 200 basis points due to investments in remediation and the Compliance Master Plan. Our gross margin outlook also reflects an approximate 60 basis point headwind from tariffs. Our tariff assumptions align with the most recent formal tariff rates and reciprocal tariffs on record from the relevant jurisdictions. For the fourth quarter, we expect adjusted EPS of $0.79 to $0.84 and for the full year between $2.19 to $2.24 per share. Our adjusted EPS guidance assumes continued disciplined cost management and investments in operational stability and longer term growth. Finally, on slide 12, we've summarized our key guidance considerations, including assumptions for tariffs, FX rates, tax rates and share count. I will now turn the call over to Mojdeh to conclude our prepared remarks.
Mojdeh Poul: Thank you, Lea. To close, I want to emphasize our focus on strengthening our foundation through improved compliance and quality, operational excellence and continued strong commercial execution. The actions we are taking will drive measurable progress towards improved reliability, consistency and performance. We have successfully relaunched PriMatrix and Durepair ahead of schedule through our dual sourcing strategy and are on track to begin production of SurgiMend in Braintree by June 2026, with the launch expected in the fourth quarter. Our cost saving initiatives are underway with $25 million to $30 million in savings expected in 2026. As we look ahead, we are highly confident about the future of Integra. Our entire organization is fully committed and working every day to deliver on our purpose to restore life. With our differentiated portfolio, holistic transformation strategy and robust plans, we are well-positioned to deliver long-term sustainable growth, improved margins and ultimately, strong returns for the shareholders. Operator, please open the line for questions.
Operator: [Operator Instructions] Our first question comes from Vik Chopra with Wells Fargo.
Vikramjeet Chopra: I have two. The first one, your Q4 guidance is below Street expectations. Would just love to get some more color around some of the puts and takes for the fourth quarter, especially around the supply headwinds? And then I had a follow-up, please.
Lea Knight: Certainly. Thanks, Vik, for the question. So to your point, Q4 guide currently reflects a pull down from a midpoint of about $26 million versus our previous guide. It's made up of three factors. We did update our assumptions for ENT and private label based on kind of the market impacts that we saw in Q3. So we've reflected that in Q4. We've also reflected updated CMP remediation timing, including the delay of some products return to market. And then finally, it reflects updated assumptions regarding our production rates and supply improvement following the Q3 supply interruption. So while we've resolved that interruption, we are expecting performance in Q4 to be lower than what we previously assumed in our Q4 guide.
Vikramjeet Chopra: Great. And then my follow-up question, I'm just curious if there's an opportunity to grow your top line in 2026 and how we should think about gross margin stabilization and profitability.
Mojdeh Poul: Vik, this is Mojdeh. Thank you for your question. Before I let Lea review some of our thoughts about 2026, I wanted to provide some context around the work that we've been engaged in doing this year, which is really foundationally systemically strengthening our quality, reliability and overall execution across our business. And we're in the midst of a significant transformation of our quality and operations across the entire 14-site manufacturing footprint, and it will take time to embed. There's going to be some variability going quarter from quarter-to-quarter as we execute our remediation but we are going to be committed to the three priorities that we've been bringing forward at every earnings call. We're going to carry on those priorities into next year because we believe those are the foundation for us to be able to deliver consistency in performance and driving growth in 2026 and beyond. And with that, I'll let Lia comment.
Lea Knight: Yeah. So to that end, as we look ahead, there will be both headwinds and tailwinds that we'll need to factor into the 2026 guide. And we look forward to doing that and sharing those details as part of our fourth quarter call in February. That said, we do currently anticipate modest revenue growth in 2026. And we're going to approach next year with the discipline that Mojdeh referenced. We're going to be balancing investment as well as cost management, while at the same time, staying focused on operational execution as well as earnings performance.
Operator: Our next question comes from Joanne Wuensch with Citi.
Unknown Analyst: This is actually [ Anthony ] on for Joanne. On the private label headwinds, I know it was a headwind last quarter as well. Is it the same private label partner that's experiencing these issues? And then if you could just maybe talk about your visibility into the private label business right now.
Mojdeh Poul: Thank you for the question. Yes, we expect growth to continue being impacted in Q4 for private label. It's primarily the same private label partner and the same challenge that they have in the market in terms of their share position. And as their share position is challenged, they reduced the order rates that they have to us. So it's the same exact one.
Lea Knight: And in terms of our visibility going forward, again, as part of our 2026 guide, we'll update our thinking with respect to that. Right now, we would anticipate private label growth in the kind of low single to mid-single-digit trajectory.
Unknown Analyst: Okay. And then can you talk about this quarter what was going on with MediHoney? I know it was pressured.
Mojdeh Poul: Yes. MediHoney, we are currently undergoing remediation for that product under the Compliance Master Plan. And we realize it's been a key part of the Tissue Technologies business and the strength that we have in other parts of the Tissue Technologies, as Lea mentioned in the prepared remarks, we have strong growth in Integra Skin, DuraSorb. We have strong growth in Integra Skin. So we are able to balance some of the shortfall because of the MediHoney being off the market, but we are diligently working on the remediation efforts.
Operator: Our next question comes from Ryan Zimmerman with BTIG.
Ryan Zimmerman: Just real quick, just to go back, I mean, you had said in 2Q that there was no additional material ship hold expected. And so I just want to understand like the timeline of when this kind of popped up either with MediHoney, but you also called out, I think, some ship hold in CSS too. So if you could specify what those products were in CSS and whether that was factored into the prior guidance before?
Lea Knight: Yeah. Certainly, Ryan. So a couple of things. So as you remember, coming out of Q2, we had strong performance. And we saw that performance continue through July, which is when we provided our Q3 guidance and performance at that level is performing consistent with that expectation. The two supply interruptions that I referenced that impacted the CSS business occurred in August in a timeframe which we still had an ability to be able to close that gap. And so we did see a rebound in September, but we just weren't able to close all of the gap by the end of the quarter. Important to note, and I mentioned it previously, but important to note that we have since addressed the interruption and resumed production in the impacted areas. So while it does affect kind of our go-forward ramp, those issues have been resolved. In terms of MediHoney, because you did mention that specifically, that wasn't a factor with respect to our performance versus guide in Q3. MediHoney was recalled earlier in the year. So we had already removed that from our guide as of the July conversation.
Ryan Zimmerman: Okay. That's helpful, Lea. And then the second question, kind of a two-part question. But Mojdeh, you talked about kind of product review, portfolio review. And so I'm curious what that means for existing products. I mean you talked about moving into higher growth areas. But when you look at the portfolio in total, I mean, do you see opportunities to prune, to divest? And I ask that in the context of like Acclarent and the performance you've seen with Acclarent maybe not meeting the expectations that you previously had in your deal model? And what are your updated assumptions, if I may, for Acclarent now based on the updated guidance?
Mojdeh Poul: Thank you, Ryan. I hope I can remember all the questions. Somebody may have to prompt me. But on the portfolio prioritization, the key purpose behind it is to manage our portfolio for optimal performance. And the outcome of that portfolio prioritization process is going to guide our capital and resource allocation decisions, and it has started to do that actually where we're going to be spending most of our resources towards the most important portfolios and programs for the company. Now the ultimate goal is to shift our portfolio toward higher-growth segments where we are in attractive markets, we are leaders. We have the right to win. And it also -- this disciplined approach would allow us to make sure that we will have continuous and consistent growth long-term into the future. As we have done this work, there is no predetermined areas for us that I would say we would want to divest at this point. But there are opportunities that we're seeing in terms of the SKU rationalization and in terms of streamlining the portfolio, simplifying some parts of our portfolio. But that's the work to be done, and we continue to drive that portfolio prioritization to guide our capital allocation decisions. Now when you're talking about Acclarent, we have one part of the business, which is balloon sinuplasty has been challenged because of the payer challenges. And that has been consistent over the last couple of quarters. And it's the issue that our teams are working very closely with the health economics team that we have, helping the customers as well as conversations with the payers to try to address that. But we knew that actually, at the time of the acquisition, it was known that that's the slower -- growth part of the portfolio. The other parts of the portfolio are progressing very well. We had very healthy growth, low single -- low double-digit growth for both AERA as well as TruDi products. And we have quite a good pipeline of clinical evidence as well as new products that are going to augment and drive the growth of this portfolio forward. So we still believe it's an attractive market. The balloon sinuplasty part of it is challenged, but the other parts of the business are growing very strongly. I think I got all of the questions.
Lea Knight: I think you did.
Mojdeh Poul: All right. In terms of expectations, you said.
Ryan Zimmerman: Yeah, what are your new market or assumptions for Acclarent?
Mojdeh Poul: Yes. The assumptions for the Q4, we continue to project flat. And for the next year, we will come to you when we have the guidance that we bring forward in 2026.
Operator: Our next question comes from Richard Newitter with Truist Securities.
Ravi Misra: This is Ravi here for Rich. I guess I kind of want to prod on gross margin a little bit, pretty strong in third quarter, at least given the revenue shortfall. So can you help us kind of think about -- is this a function of some of the changes that you've been making in terms of the remediation efforts or restructuring or should we be thinking about it more so that with some of the way you're running production so tightly, you might have some issues around safety stock if demand picks up, but longer term, as production gets to normal, maybe this gross margin benefit ebbs a little bit. So any color on that would be appreciated. And I have a follow-up.
Lea Knight: Certainly. And thank you for the question. So from a gross margin perspective, on a full year basis, we're continuing to pace in terms of gross margin performance similar to what we communicated in the last call. So we said we'd be roughly around down 250 basis points year-on-year. We're pacing in kind of that similar path. For Q3, we did see slightly better performance than we had anticipated and does have a lot to do with our ability to manage more efficiently. Some of the cost headwinds that we have been experiencing related to the remediation work that's underway. So where we're able to manage more efficiently from an E&O or a scrap perspective, we're seeing the benefit of that reflected in Q3. And as we continue to move through kind of these remediation phases, we would expect a lot of those onetime headwind costs to come out of gross margins as we move forward. And then from a year-on-year perspective, we were about 10 basis points down. We did see the impact again of the remediation and Compliance Master Plan costs, coupled with tariffs as a headwind. That was largely offset by what I mentioned earlier, which is kind of improvement in E&O and scrap and then also better product mix with Tissue Tech brands performing stronger from a mix perspective and helping to drive improvement in overall gross margins.
Ravi Misra: Great. And I guess my follow-up kind of goes down that Tissue Tech pathway. Talking about PriMatrix and Durepair coming back ahead of schedule. Can you maybe help put some figures around that? Like what kind of revenue do you expect that you didn't ahead of schedule? And then kind of where do you see the growth ramp for those products or kind of how do you look at the growth for those products?
Lea Knight: So PriMatrix and Durepair, prior to pulling from the market in 2023, we're performing around the kind of $25 million to $30 million. And so the work we're doing now as we bring those products back to market is to get back our share. And given that we've been out of the market for a number of years, we know that there's -- it's going to take time to do that. But we're excited about the reception that we're getting from our customers based on this kind of advanced relaunch of those products. And we'll continue to leverage that as we move forward in terms of determining kind of the full path forward. Mojdeh, did you want to?
Mojdeh Poul: Yes. I just wanted to call this out because this is part of the intentional strategy that we have to strengthen the resiliency of our manufacturing and supply chain. So this dual sourcing strategy that the team pulled through during this year is quite exciting for us because we've been hearing from physicians and patients and customers that they're missing these products in the market, and we're happy to be bringing them ahead of time to the customers and to the patients who need them. But we're quite excited about the opportunity to launch it almost a year earlier.
Operator: Our next question comes from Robbie Marcus with JPMorgan.
Lilia-Celine Lozada: This is Lilia on for Robbie. Maybe just to dig into the fourth quarter guidance a little bit more. EPS guidance still points to a pretty sizable step-up in the fourth quarter. So can you just help us bridge that? I appreciate that supply should continue to get better, but what's giving you the confidence and visibility in that sort of improvement in margins exiting the year, especially off of now a lower revenue base for the fourth quarter? And just generally, what gives you the confidence that this is the appropriate base for revenues and EPS that you can be and raise off of?
Lea Knight: Certainly, thanks for the question, Lilia. So to the first part of your question regarding the EPS step-up in Q4. So right now, at the midpoint, we are expecting about a $0.26 step-up, but it's largely explained by the $33 million step-up in revenue that we're also forecasting as reflected in the guide. So that will drive sort of that performance. From a revenue perspective, as we look at the step-up and how we get from the low to the high, at the low end going from Q3 to Q4, that step-up requires the normal seasonality that we see on the business. It's about $18 million higher than what we delivered in Q3. And it's consistent with what we've seen kind of historically in Q4 versus Q3. From -- at the midpoint, it requires the seasonality plus some lift from the supply -- the Q3 supply interruption that we talked about. And again, as a reminder, we have addressed those issues. We've resumed production. So we do anticipate additional or higher revenue performance from those products in Q4 versus Q3. And then at the high end, it reflects kind of everything I talked about at the mid-end, plus allows for additional improvements in terms of performance against demand for products that we just reintroduced like PriMatrix and Durepair, along with other products that we have in the portfolio based on improved supply. So I think I got most of your questions. Let me know if I didn't hit one.
Lilia-Celine Lozada: Yeah, that covers all of them. And just as a follow-up, it was nice to see a return to positive free cash flow in the quarter. So can you talk a bit about how sustainable you think that is? What level should we be thinking about for the full year? And is just the right level of conversion to be working off of?
Lea Knight: Yeah. So we were excited as well to your point, operating cash flow for the quarter was $41.9 million. Free cash flow was $25.7 million and free cash flow conversion was 61.9%. And we do continue to expect to see strong free cash flow conversion numbers as we move through the end of this year as well as throughout 2026. In general, we also, with that performance, expect to see our leverage position stay fairly flat through the end of this year, but then we'll see more meaningful improvement on a leverage -- overall leverage outlook as we move throughout each quarter in 2026. Our focus right now remains on decreasing leverage as well as debt and the strongest contributor to that are our expectations on performance for EBITDA contribution as we move forward.
Operator: Our next question comes from Matthew Taylor with Jefferies.
Unknown Analyst: This is [ Matt ] on for Matt Taylor. I wanted to follow up quickly on another question related to PriMatrix and Durepair. And as you look to get back into the market and try and regain share, I know you mentioned that there is a lot of interest in having your product out in the market. But when it comes to executing, can you talk about how much or the magnitude of price concessions that you're willing to take in order to regain that share?
Lea Knight: So for competitive reasons, we wouldn't discuss certain pricing strategy. I think right now, again, as we mentioned, for PriMatrix and Durepair, as we reenter, right, we're being thoughtful and approach. We're working with our customers. We haven't assumed any significant material impact in 2025 as a result of relaunch, but we're using that as an opportunity to position ourselves for stronger performance in 2026. So we look forward to sharing expectations with respect to that as part of our 2026 guide conversation in February.
Operator: There are no further questions at this time. This does conclude the program. You may now disconnect. Everyone, have a great day.