Brett Fishbin

Brett Fishbin of KeyBanc Capital Markets inquired about the specific drivers for the upward revision in the company's tariff cost estimate and the rationale for maintaining the AST segment's full-year guidance despite a strong Q1 performance.

Answer

Michael Tokich, Senior VP & CFO, attributed the higher tariff forecast to increased duties on metals like steel, aluminum, and copper, as well as policy changes in the EU. Daniel Carestio, President & CEO, explained that maintaining the AST guidance reflects general conservatism amid some customer manufacturing shifts in the MedTech space, while acknowledging the strong start to the year.

Brett Fishbin asked for more color on the Healthcare capital equipment backdrop and hospital ordering patterns, and also inquired whether AST has sufficient capacity to accommodate a potential return to double-digit service growth.

Answer

President and CEO Daniel Carestio characterized STERIS's capital equipment as a non-discretionary 'utility' necessary for procedural growth, noting the order book remains strong. He also confirmed that AST capacity is not currently a limiting factor and that the company is well-positioned to accommodate higher industry growth.

Brett Fishbin asked about the guidance assumption of no tariffs for the rest of the fiscal year and the potential risk for fiscal 2026 if they are reintroduced. He also questioned the outlook for legal expenses and the accounting rationale for not adjusting them out of reported results.

Answer

SVP and CFO Michael Tokich stated that the tariff situation is too fluid to provide directional guidance but noted that facilities in Canada and Mexico represent just under 10% of cost of goods sold. He quantified the year-over-year increase in legal expenses at just under $6 million for the quarter and projected another $5 million headwind in Q4, which is included in the forecast and recorded in corporate expenses.

Brett Fishbin of KeyBanc Capital Markets Inc. asked for details on the revised Healthcare capital equipment outlook and the drivers of the strong backlog. He also questioned the change in the full-year operating margin forecast and the path back to margin expansion.

Answer

CEO Daniel Carestio attributed the Healthcare capital equipment shipment timing to weather-related delays but highlighted a very strong order backlog. He noted that higher-margin recurring revenues are offsetting this. CFO Michael Tokich confirmed the revised operating margin outlook is due to the underperformance in the AST segment but reiterated confidence in the long-term goal of margin expansion.

Brett Fishbin asked about the margin pressure in Nordion despite strong revenue growth, specifically inquiring about the product mix causing this, and the sustainability of Sterigenics' mid- to high-single-digit growth into 2026.

Answer

Chairman and CEO Michael Petras clarified that Nordion's margin pressure was due to growth in lower-margin equipment sales, but emphasized that overall margins remain very strong. For Sterigenics, he reiterated the long-range guide of mid- to high-single-digit growth and expressed confidence in long-range commitments made at the investor day.

Brett Fishbin from KeyBanc Capital Markets asked for a breakdown of the drivers behind Nelson Labs' significant margin improvement and questioned the impact of the extended ETO regulations timeframe on investment plans and the competitive landscape.

Answer

Chairman and CEO Michael Petras explained that the Nelson Labs margin expansion was a result of ongoing execution on labor productivity, a favorable mix shift to core lab testing, and pricing discipline. Regarding the ETO rule extension, he stated Sotera Health is well-positioned, will continue its planned investments, and views the extension as an opportunity for optimal installation without altering its long-term competitive outlook.

Brett Fishbin inquired about the specific drivers behind the notable margin improvement in the Nelson Labs segment and its expected trajectory. He also asked for more detail on which end markets or modalities are driving the volume recovery in Sterigenics.

Answer

CEO Michael Petras attributed the Nelson Labs margin expansion to a favorable mix from new regulations, increased new product testing, and recovering sterilization volumes, alongside effective pricing and labor stability. For Sterigenics, he highlighted that bioprocessing has shown significant growth and that underlying trends across the core customer base are strong, supporting the outlook for continued volume improvement throughout 2025.

Brett Fishbin from KeyBanc asked about the biggest swing factors that could drive growth to the high or low end of the 2025 guidance range. He also requested a breakdown of the pricing outlook by business segment.

Answer

CEO Michael Petras identified volume as the primary swing factor, stating that stronger-than-expected med device volume would position both Nelson Labs and Sterigenics for outperformance. For pricing, he indicated that within the 3-4% total company range, Sterigenics would be at the high end, while Nelson Labs and Nordion would be at the low end.

Brett Fishbin of KeyBanc Capital Markets asked about the long-term margin potential for Nelson Labs as its business mix shifts back towards core testing. He also requested a preview of the main objectives for the company's upcoming Investor Day.

Answer

CEO Michael Petras expressed satisfaction with Nelson Labs' performance, noting improvements in core testing volume and strong customer satisfaction scores. For the Investor Day, Petras outlined key goals: introducing division presidents, educating on the company's role in healthcare, and providing a long-range view on CapEx, revenue, free cash flow, and M&A strategy.

Brett Fishbin of KeyBanc Capital Markets asked for more details on the recently won MyDay private label agreements and their potential upside for fiscal 2026. He also inquired about the mixed results from MiSight's short-term promotional pricing and the go-forward strategy for the back-to-school season.

Answer

President and CEO Al White explained that the over 30 new private label agreements are for MyDay products with customers who were previously unable to get supply. He stated this activity is a key reason for his confidence in a revenue ramp-up. For MiSight, he noted the promotional strategy of offering trial lenses was very successful in EMEA but caused some confusion and mixed results in the U.S. as it was rolled out. He affirmed the company is standardizing the approach globally as the strategy itself is proving effective.

Brett Fishbin asked for an explanation for the moderating growth in torics and multifocals, which had previously been in the double digits. He also requested an update on CooperVision's performance in China.

Answer

President & CEO Albert White advised not to read too much into the 7% growth for torics and multifocals, stating the market remains strong and the quarterly figure was affected by the timing of Biofinity shipments. He reported that the China business was essentially flat in Q2, an improvement from being down in the prior quarter.

An analyst from KeyBanc Capital Markets inquired about potential changes to the strategy for PARAGARD given the first new market entrant in a long time and asked about the risks to the product's guidance.

Answer

CEO Al White emphasized that the strategy for PARAGARD is to 'continue to execute,' leveraging the strong team and the recent launch of the new single-hand inserter. He believes the product is well-positioned. Regarding guidance, he acknowledged that PARAGARD revenue can have dramatic quarterly swings but expects the full-year result to be in a tight range around flat, similar to the previous year, as the underlying non-hormonal IUD market is not seeing significant unit growth.

Brett Fishbin from KeyBanc Capital Markets asked for a breakdown of the expected 40% MiSight growth in FY25 between the U.S. and international markets. He also inquired about the relative size of the Energys product lines within the CVI portfolio.

Answer

CEO Al White expects MiSight growth to be driven by markets around the world, highlighting traction with key accounts in the U.K. and Europe and successful strategies in Korea. He expressed optimism for exceeding 40% growth if uptake by large retailers accelerates. For competitive reasons, he declined to specify the size of the Energys lines but confirmed they are becoming "more material," with MyDay Energys being a significant growth driver.

Brett Fishbin commented on the uneven results across the contact lens space and asked what differentiates outperformers like Cooper. He also requested an update on the FDA approval timeline for the SightGlass myopia control spectacles.

Answer

CEO Al White attributed Cooper's consistent outperformance to its broad, innovative product portfolio and its strategic focus on expanding into daily silicone hydrogel lenses, particularly in toric and multifocal categories. Regarding SightGlass, he stated there were no new updates to the timeline, with the company still targeting potential FDA approval in the latter part of next year while working through the clinical process.

Brett Fishbin of KeyBanc Capital Markets sought confirmation of the increased full-year guidance for international ArteGraft sales to $2 million and asked for the key drivers behind the expected significant operating margin ramp in Q4 2025.

Answer

Chairman & CEO George LeMaitre confirmed the $2 million full-year ArteGraft guidance, attributing the increase to strong early results in Europe and South Africa following recent approvals. CFO Dorian LeBlanc explained the Q4 margin ramp is driven by revenue seasonality, lower operating expenses in the second half as major investments are complete, and reduced regulatory expenses post-MDR.

Brett Fishbin of KeyBanc Capital Markets sought clarification on what specific tariff impacts were incorporated into the updated guidance and asked how exiting the $5 million Aleutia distribution agreement could be a tailwind for organic growth.

Answer

Executive Dorian LeBlanc confirmed that the guidance incorporates the annualized cost impact from Chinese tariffs, half of which is expected to be offset by price increases. CEO George LeMaitre and President Dave Roberts explained that the Aleutia agreement becomes an organic growth tailwind because the product's sales were declining; removing the prior year's sales from the organic calculation base mathematically helps the growth rate. It also allows reps to focus on core, higher-growth products.

On behalf of Brett Fishbin of KeyBanc Capital Markets, Will asked for an update on the strategy and status of the RestoreFlow Allograft (RFA) approvals in Ireland and Germany, referencing a previous hiccup.

Answer

CEO George LeMaitre clarified the two parallel approval paths. The German process is back on track after a delayed auditor visit, with a 2025 approval anticipated. For Ireland, the government now requires a physical brick-and-mortar office, which LeMaitre is committed to establishing. He stated the company expects to receive at least one of the two approvals in 2025, which would then facilitate market access in other European countries.

Brett Fishbin of KeyBanc Capital Markets asked about the reason for lower R&D spending in the quarter and which specific products were responsible for the 6% unit volume growth.

Answer

CFO Joseph Pellegrino attributed the lower R&D expense to a lighter quarter for regulatory spending related to MDR. CEO George LeMaitre identified the allograft (RFA) product, with 26% unit growth, and the XenoSure product line, with 10% unit growth, as the primary drivers of the overall unit volume increase.

Brett Fishbin of KeyBanc Capital Markets inquired about the broader robotic surgery market opportunity, the development pipeline with new customers, and the impact of new products. He also asked about the sequential decline in inorganic revenue, the role of the AJR facility's labor issues, and the timeline for the AJR product transfer to the Dominican Republic.

Answer

Chairman & CEO R. Jeffrey Bailly explained that the robotic surgery market is an excellent fit for UFP, with seven customers in manufacturing and over a dozen in development, expecting meaningful revenue from major players in the next 1-2 years. He confirmed the inorganic revenue underperformance was due to labor inefficiencies at the AJR facility, which delayed shipments, but noted other acquisitions are performing at or above expectations. Bailly stated the AJR product transfer to the Dominican Republic will begin in earnest in Q4, with meaningful revenue starting at year-end and phasing into the next year.

Brett Fishbin of KeyBanc Capital Markets inquired about the broader opportunity in robotic surgery beyond its largest customer, the performance of recent acquisitions like AJR, and the timeline for product transfers to the Dominican Republic facility.

Answer

Chairman & CEO R. Jeffrey Bailly confirmed that the robotic surgery market is a strong fit, with seven customers in production and over a dozen in development, expecting meaningful revenue from top players within two years. He attributed the inorganic revenue shortfall to temporary labor inefficiencies at the AJR facility, which delayed shipments, but noted other acquisitions are performing well. Bailly also stated the AJR product transfer to the Dominican Republic will begin in Q4 2025.

Brett Fishbin of KeyBanc Capital Markets inquired about the drivers behind the strong growth in non-robotics medical segments, the outlook for this business for the rest of 2025, the reasons for the sequential revenue increase from acquisitions like AJR, and the expected contribution from new robotic surgery products.

Answer

CEO Jeff Bailly attributed the growth in segments like infection prevention to new products and the end of customer destocking. He explained that acquisitions, particularly AJR, are growing faster now that they are part of UFP, with AJR securing more contracts. Executive Ronald Lataille quantified this, noting AJR's Q1 revenue was $29.2 million versus a ~$19 million quarterly run-rate at acquisition. Bailly added that the new robotic surgery programs will begin contributing modest revenue in late 2025, with a more meaningful impact expected in 2026.

Brett Fishbin from KeyBanc Capital Markets inquired about the growth drivers in non-robotics medical segments, the reasons for the strong performance of acquired businesses like AJR, and the expected contribution from new robotic surgery products.

Answer

CEO Jeff Bailly attributed the 25%+ growth in segments like infection prevention and orthopedics to new product launches and the end of customer destocking. He explained that acquisitions, particularly AJR, are growing faster now as part of UFP, securing larger, exclusive contracts. CFO Ronald Lataille quantified this, noting AJR's Q1 revenue was $29.2 million versus a $19 million quarterly run-rate at acquisition. Bailly added that new robotic surgery programs will launch in H2 2025, with modest revenue this year and a more meaningful contribution in 2026.

Brett Fishbin of KeyBanc Capital Markets asked for more specific color on what portion of the planned marketing and footprint expansion spending is incremental compared to the company's previous budget.

Answer

CFO Rick Buchholz clarified that the primary driver of incremental spending is the ramp-up of direct-to-consumer (DTC) advertising in the second half of the year. He explained that this spend was intentionally held back in the first half to focus on the Inspire V launch, and now the company is increasing its investment to amplify the launch message and build patient awareness, alongside continued investment in adding new sales territories.

Brett Fishbin from KeyBanc Capital Markets inquired about the marketing strategy for Inspire V. He asked how the external messaging to potential patients will be adapted for the new product and whether it will specifically highlight the improvements to the surgical procedure.

Answer

CEO Tim Herbert outlined a multi-faceted marketing program. He explained that the company will continue its strong outreach to drive patients to its website, which will be updated with detailed information about Inspire V. Additionally, they will conduct a direct outreach campaign to the significant number of patients who have previously registered on their site, informing them that the new technology is now available.

Brett Fishbin asked for more color on the Inspire V inventory build, which is the primary gating factor for a full launch, and whether there is a specific inventory target.

Answer

Chairman and CEO Tim Herbert confirmed they have a new, active production line for Inspire V and are currently scaling it up. He described it as a normal process. While not providing a specific inventory target, he stated the goal is to build enough supply to ensure a smooth transition and avoid a 'start-stop' scenario once the full launch begins.

Brett Fishbin of KeyBanc Capital Markets asked if the impact from the hurricane and IV shortage was fully de-risked in the Q4 guidance. He also inquired about the utilization ramp of new centers added in the first half of the year compared to historical trends.

Answer

CEO Tim Herbert stated that they believe the Q4 guidance has been de-risked for these factors, with the main challenge being rescheduling patients amid existing capacity constraints. Regarding new centers, he explained that their process involves screening and preparing sites to be productive from the start, with the intention that they ramp up utilization quickly, regardless of when they are activated within the year.

Brett Fishbin of KeyBanc Capital Markets requested further detail on the fiscal year 2026 gross margin guidance of 61-63%, asking about the primary drivers and any expected seasonality or phasing.

Answer

CFO Brett Sandercock outlined a multi-faceted approach, citing a continued pipeline of cost optimizations in procurement and manufacturing, scale benefits, logistics efficiencies, and the ongoing AS10-to-AS11 platform transition. He anticipates starting the fiscal year at the lower end of the 61-63% range and exiting at a higher rate.

Brett Fishbin of KeyBanc Capital Markets requested more detail on the drivers for the FY26 gross margin guidance of 61-63% and the expected phasing throughout the year.

Answer

CFO Brett Sandercock confirmed the improvement will stem from a pipeline of cost optimizations in procurement, manufacturing, and logistics, plus tailwinds from product mix and the AS11 transition. He expects margins to start at the low end of the range and progressively improve through the fiscal year.

Brett Fishbin of KeyBanc Capital Markets asked for more specific details on the key initiatives driving the manufacturing and logistics efficiencies that boosted gross margin.

Answer

CFO Brett Sandercock elaborated that a primary driver was a strong improvement in the sea-to-air freight ratio, which is now close to pre-COVID levels. Other key factors include benefits from manufacturing scale, continuous process improvements, and efficiencies gained from the maturity of the AirSense 10 and AirSense 11 device platforms.

Brett Fishbin from KeyBanc Capital Markets asked for clarity on the second-half gross margin guidance of 59-60%, questioning if a sequential increase is still expected and what the biggest swing factors are to reach the high end of the range.

Answer

Executive Brett Sandercock confirmed the 59% to 60% guidance range for the second half of FY25. While the company aims to continue improving margins, he identified key swing factors that could influence performance within that range. These include manufacturing and procurement initiatives, product mix, freight costs, and the pace of new product rollouts. He emphasized a focus on consistent delivery of a healthy pipeline of initiatives to support margins over the medium term.

Brett Fishbin asked for details on the strategies ResMed will use to capture the anticipated increase in patient demand driven by consumer wearable technology.

Answer

CEO Michael Farrell described a strategy focused on "demand capture and demand conversion" through a "digital sleep health concierge" model. This involves leveraging digital tools like the Dawn GenAI chatbot, Somnoware physician software, and the MyAir patient app to create a seamless pathway for new patients entering the funnel.

Brett Fishbin questioned why the full-year organic growth guidance was not raised after a strong Q2 and asked for a bridge to the second-half forecast. He also inquired about the drivers behind the improved full-year outlook for the CRM & Neuromodulation segment, despite its modest 2% growth in the quarter.

Answer

COO Peyman Khales explained the Q2 strength was partly due to a demand pull-forward from Q3, strong new product launches, and accelerated execution at the New Ross facility. He noted the second half faces tougher comps, justifying maintaining the 8.5% midpoint for full-year growth. President & CEO Joseph Dziedzic added that the CRM & Neuromodulation segment's second-half growth is expected to accelerate to high-single-digits, driven by improving neuromodulation customer demand and the easing of a planned program decline that impacted the first half.

Brett Fishbin of KeyBanc Capital Markets Inc. asked for details on the $1 million to $5 million tariff impact estimate and inquired about the deceleration in the Cardiac Rhythm Management & Neuromodulation (CRM&N) segment.

Answer

CEO Joseph Dziedzic explained that the tariff impact is limited because customers manage logistics for products Integer sells, and the company sources minimally from China. For the CRM&N segment, he attributed the 2% growth to fewer selling days and normalized CRM demand, while noting strong growth from emerging PMA customers. He projected the segment would trend toward mid-single-digit growth long-term as neuromodulation's mix increases.

Brett Fishbin inquired about the 2025 growth outlook for the Cardio & Vascular segment, the strategic rationale and timing behind the Precision Coating acquisition, and the company's exposure to potential tariffs, particularly concerning its Mexico operations.

Answer

President and CEO Joseph Dziedzic confirmed that the Cardio & Vascular segment is expected to grow in the low double-digits in 2025. He explained that the coating acquisitions were a long-term strategic goal to vertically integrate a high-value capability, and the timing was dependent on the sellers being ready. Regarding tariffs, Dziedzic stated that while the impact is difficult to quantify due to uncertainty, the company is actively implementing mitigation plans as if tariffs will be enacted.

Brett Fishbin asked about the drivers behind the Q3 organic growth deceleration and the strategic rationale for the recent executive leadership changes.

Answer

Joseph Dziedzic, President and CEO, explained the Q3 organic growth of 4% was largely expected due to a normalization in CRM demand, which was visible in their order book early in the year. He noted growth would have been closer to 5% without a minor impact from Hurricane Helene. Regarding the leadership changes, Dziedzic stated the promotions of Payman Khales and Andrew Senn are about accelerating strategy execution and giving successful leaders broader responsibilities to continue driving growth.

Brett Fishbin asked for clarification on the 80 basis point guidance headwind, noting it was attributed to both business development and licensing, and inquired if there was another element besides the Aurion deal.

Answer

Chief Executive Officer David Endicott confirmed that the vast majority of the impact was from the Aurion acquisition. However, he added that the acquisition of another asset called Cylite during the quarter, along with some minor licensing activities, also contributed to the headwind.

Brett Fishbin asked for details on the optometrist perception and expected ramp of the newly launched PRECISION7 contact lens.

Answer

CEO David Endicott reported that the reception for PRECISION7 has been 'terrific,' with over half of its uptake coming from the intended two-week and reusable lens market. He noted that optometrists appreciate the intuitive and healthier one-week replacement schedule. He believes the product will be a nice incremental contributor in a meaningful market segment where Alcon was previously underindexed.

Brett Fishbin asked about the performance of the consumables business, which was slightly lower than in recent quarters, and inquired about competitive dynamics in specialty daily contact lenses.

Answer

CEO David Endicott explained that consumables growth is highly correlated to procedural volumes, which were softer globally in the quarter. He noted that the 5% growth was still ahead of the market. Regarding specialty lenses, he stated that while competition is increasing, Alcon is in a strong position due to its unique toric lens designs, which are performing very well and driving growth for the entire brand family.

Brett Fishbin sought a follow-up on the tariff impact, asking for an update on the Mexico/USMCA situation and clarifying if the company still expects to achieve the low end of its full-year guidance ranges despite these new cost pressures.

Answer

Executive Brian Bonnell confirmed that the USMCA exemption has significantly mitigated tariff exposure from Mexico, making it the third-largest concern behind Costa Rica and China. Both Bonnell and Executive Vivek Jain stated that while the tariff impact makes the original guidance more challenging, the goal remains to hold the low end of the ranges for metrics like adjusted EBITDA and EPS by using offsets from favorable foreign exchange, cost controls, and lower incentive compensation.

Brett Fishbin asked for more detail on the capital equipment demand environment for products like Plum Duo and questioned if there was potential upside to the mid-single-digit growth forecast for Consumables, given recent strength and pricing benefits.

Answer

Executive Vivek Jain characterized the capital environment as stable, where necessary investments are proceeding, and emphasized that the company is focused on securing net competitive wins with Plum Duo. Regarding the Consumables forecast, he acknowledged the segment's strong performance but stated a preference for setting rational expectations, highlighting that growth is driven by numerous niche markets and not solely by GPO pricing.

Brett Fishbin of KeyBanc Capital Markets asked about the strategic rationale for the Otsuka joint venture versus an outright sale, the operational impact of the recent ERP system cutover, and the mechanics of the JV's put-call option.

Answer

Executive Vivek Jain explained that a sale was never considered as IV Solutions is a core product. The JV with Otsuka was chosen to bring necessary innovation, scale, and supply redundancy that ICU could not achieve alone. He clarified the put-call option is based on a revenue multiple and is exercisable after five years, providing long-term flexibility. Regarding the ERP, Executive Brian Bonnell confirmed the Q3 cutover was successful with no material impact on quarterly results, despite some internal disruption.