Brett Fishman

Brett Fishman asked about CMS removing HTNS procedures from the VNS 64568 code, LivaNova's view on this decision, and potential trade-offs between protecting VNS reimbursement and the future HTNS opportunity. He also inquired about early customer feedback from CECs or facilities regarding these changes, specifically anecdotes on budgeting or supporting procedures.

Answer

CIO Ahmet Tezel explained that LivaNova believes the VNS therapy code for epilepsy should be separate from HGNS/OSA and is actively pursuing a Level 6 APC classification for new VNS therapy patients. He stated that LivaNova sees no risk in using prevailing codes for its HGNS technology due to similar features. CFO Alex Shvartsburg noted early progress in reopening closed accounts and renegotiating volume-based discounts, expecting an outsized impact on price relative to volume.

Brett Fishman asked about CMS's decision to remove HTNS procedures from the VNS 64568 code, inquiring about LivaNova's view on this and potential trade-offs between protecting VNS reimbursement and future HTNS opportunities. He also sought early customer feedback from facilities regarding these changes, specifically on budgeting and provider support for procedures.

Answer

Ahmet Tezel, Chief Innovation Officer, explained that LivaNova believes VNS Therapy for epilepsy should have a separate code from HGNS/OSA. He stated they would work with medical societies for an appropriate HGNS code for their launch, expecting to use prevailing codes due to similar technology, and reiterated advocacy for Level 6 APC classification for VNS Therapy. Alex Shvartsburg, CFO, noted early progress in reopening closed accounts and expanding penetration, particularly in renegotiating volume-based discounts, expecting an outsized impact on price relative to volume.

Brett Fishman asked for more information on the 9% year-over-year revenue growth from cross-business unit (XBU) customers in 2025, including the size of this customer group as a percentage of total revenue and the specific drivers for this accelerated growth. He also sought an update on the company's capital allocation strategy, particularly regarding the balance between organic investments, debt reduction, and potential bolt-on acquisitions.

Answer

Chairman and CEO Michael Petras highlighted that several hundred customers engage across both platforms, with strategic pilots showing even greater growth than the 9% reported. He noted the team's success in leveraging Sotera Health's end-to-end value proposition, with XBU customer satisfaction scores exceeding the company average. On capital allocation, Mr. Petras reiterated that funding organic investments remains the top priority, followed by debt reduction, aligning with the committed free cash flow target for 2025-2027. The 2026 CapEx guidance fits within this framework.

Brett Fishman asked for more details on the cross-selling (XBU) customer base, specifically its size as a percentage of total customers and the factors driving its 9% year-over-year revenue growth in 2025. He also inquired about any marginal changes in the company's capital allocation strategy, balancing organic investment and debt reduction against potential bolt-on acquisitions in 2026.

Answer

Chairman and CEO Michael Petras stated that several hundred customers are doing business across both platforms, with strategic pilots showing even greater growth. He highlighted the team's success in leveraging the Sotera Health value proposition, noting high customer satisfaction scores. Mr. Petras reiterated that capital allocation priorities remain consistent: funding organic investments with appropriate returns, and committing to the 2025-2027 free cash flow target, with the 2026 CapEx guidance fitting this framework.

Brett Fishman asked about the preliminary 2026 outlook, specifically the 4% to 7% organic growth for the rest of the portfolio compared to the typical 6%-8% range, and sought elaboration on the nature of expected headwinds in Cardio and Vascular (loss of share vs. end market demand). He also inquired about the visibility into the return to market growth by Q4 2026.

Answer

Payman Khales, President and CEO-elect, explained that the rest of the portfolio grows at the market rate without new product introductions, and the current headwinds are from declining new products. He clarified that there are no lost products, loss of share, insourcing, or products being pulled from the market. The headwinds are related to two electrophysiology products with slower-than-anticipated market adoption, impacting 2026. Khales affirmed good visibility with a steady backlog of around $730 million, noting that new product launches are inherently lumpy, and the current situation of multiple programs experiencing significant changes simultaneously is unusual. He expressed confidence in a Q4 2026 recovery due to anniversarying strong Q1 2025 growth.

Brett Fishman asked about Integer's preliminary 2026 outlook, specifically the 4% to 7% organic growth for the 'rest of the portfolio' compared to the typical 6% to 8% range, and sought clarification on the nature of cardio and vascular headwinds (loss of share vs. end-market demand). He also inquired about the visibility into the projected return to market growth by Q4 2026.

Answer

Payman Khales, President and CEO-elect, explained that the 4% to 7% growth for the rest of the portfolio reflects market rate without new product introductions, as the identified headwinds are declining. He clarified that the impacted products are not lost, but rather experiencing slower-than-anticipated market adoption for two electrophysiology products that had strong ramps in H1 2025. He noted steady backlog and expressed confidence in H2 2026 recovery due to anniversarying strong H1 2025 comps and planned product launches.

Brett Fishman inquired about the underlying patient volume trends in the Dental Solutions business and asked to identify key new products to watch in the second half of the year.

Answer

CEO Bryan Hanson stated that the dental market has been stable, neither accelerating nor decelerating, and that the company's growth plan is not dependent on market improvement. He highlighted that growth will be driven by recently launched products gaining traction, specifically naming ClinPro Clear, Filtek EZ Match, and the Clarity Precision Grip attachments.