Matthew O'Brien

Matthew O'Brien from Piper Sandler inquired about the strong scoliosis performance in the quarter, competitive pressures, and the future outlook for the franchise.

Answer

President and CEO David Bailey attributed the strength to continued share taking, the impact of the VerteGlide system, EU MDR approval, and a robust product pipeline. He noted that VerteGlide is attracting new accounts. COO and CFO Fred Hite then addressed the strong margin progression, confirming expectations for a 73% gross margin and $25 million adjusted EBITDA in 2026, driven by leverage in sales & marketing and G&A.

Matthew O'Brien asked about the strong performance of the Scoliosis business in the fourth quarter, inquiring about the drivers, competitive landscape, and the outlook for the franchise. He also questioned the sustainability of the strong gross and operating margin progression, asking if OrthoPediatrics is entering a new era of business scaling and profitability.

Answer

David Bailey (President and CEO) attributed Scoliosis growth to continued market share gains, the early success of the VerteGlide system attracting new surgeons, and robust international growth following EU MDR approval for the full product portfolio. Fred Hite (COO and CFO) confirmed strong Q4 margin drop-through, projecting a similar 73% gross margin for 2026, with Adjusted EBITDA growth driven by leverage from sales and marketing (due to OPSB's faster growth and lower S&M percentage) and the cash portion of G&A.

Matthew O'Brien directly asked for confirmation on his calculation of 2027 pro forma EPS, which he estimated to be in the $9.50 to $10 range, considering stranded costs, debt paydown, and share repurchases.

Answer

John Deren, Executive Vice President and Chief Financial Officer, could not confirm specific model numbers but agreed there is significant opportunity for uplift, suggesting an EPS closer to "$10 or more range." Lawrence Keusch, Vice President of Investor Relations and Strategy Development, reiterated the company's commitment to deploying the $1 billion share repurchase authorization and using the remaining $800 million for debt payment, which would lead to significant interest savings.

Matthew O'Brien sought confirmation on his calculation of a pro forma 2026 earnings per share in the range of $9.50 to $10, considering the exclusion of benefits from stranded cost mitigation, debt paydown, and share repurchases from the current guidance.

Answer

John Deren, EVP and CFO, could not confirm the specific model but agreed that with the restructuring benefits, covering TSA/MSA costs, and mid-single-digit growth, significant leverage and interest savings should lead to an EPS closer to or above $10 in 2027. Lawrence Keusch, VP of Investor Relations and Strategy Development, reiterated the commitment to the $1 billion share repurchase and $800 million debt payment.

Matthew O'Brien asked about the unexpected softness in Q4 handpiece sales, specifically inquiring if approximately 4,000 handpieces were flushed from inventory, and sought clarification on the confidence in the back-end loaded 2026 guidance given the modest Q1 outlook and commercial reorg impact.

Answer

Larry Wood, Chief Executive Officer, explained that Q4 handpiece dynamics involved both anticipated destocking to establish par levels and the elimination of bulk purchase discounts, which significantly influenced customer behavior. This resulted in handpiece sales being 80% of procedures but improved average selling price (ASP) to $3,340, up 5% sequentially. He noted that for 2026, they model a 1:1 handpiece to procedure ratio with an ASP of $3,500. Regarding 2026 guidance, Mr. Wood acknowledged Q1's typical slowness and the time needed for the sales force realignment to mature, expecting benefits in the back half. Kevin Waters, Chief Financial Officer, added that tomorrow's Investor Day will provide a full cohort analysis to address concerns about the low end of the range, showing modest utilization growth in the legacy installed base.

Matthew O'Brien asked about the unexpected softness in Q4 handpiece sales, specifically inquiring if approximately 4,000 handpieces were flushed from inventory, and sought clarification on the confidence in the back-half loaded 2026 guidance given modest Q1 expectations and the impact of the commercial reorganization.

Answer

President and CEO Larry Wood explained that Q4 softness was due to two dynamics: destocking to establish appropriate par levels (as signaled in Q3) and the elimination of bulk purchase discounts, which previously influenced customer behavior. He noted that handpiece sales were about 77% of procedure volume, leading to a significant inventory reduction, but resulted in a 5% sequential increase in average selling price (ASP) to $3,340. For 2026, they model a 1:1 handpiece to procedure ratio and an ASP of $3,500. Regarding the 2026 guidance, Mr. Wood attributed Q1's modest outlook to post-holiday slowness and the time needed for the sales force to mature into the new alignment and rebuild customer relationships, expecting benefits to show in the back half. EVP and CFO Kevin Waters added that tomorrow's Investor Day will provide a full cohort analysis to demonstrate comfort with the low end of the range, expecting only modest utilization growth in the legacy installed base.

Matthew O'Brien asked about the expected acceleration in new pump shipments for 2026, seeking to understand the confidence in achieving this growth without assuming benefit from Mobi Tubeless, and requested a deconstruction of the factors contributing to this acceleration.

Answer

President and CEO John Sheridan attributed the confidence to several factors: the expanding functionality of Mobi (multiple sensor integrations, Android/iOS control, and future tubeless implementation), the expansion of Mobi and FreeStyle Libre 3 into OUS markets, improvements in the sales force's productivity through new systems, and the anticipated positive impact of the pharmacy channel. He noted that while Mobi Tubeless is not in the revenue plan due to conservative forecasting, its expected approval and launch in the second half of the year will be a significant driver.

Matthew O'Brien asked about the confidence in accelerating new pump shipments in 2026, particularly achieving double-digit growth without assuming any benefit from Mobi Tubeless, and requested a breakdown of the factors contributing to this acceleration.

Answer

CEO John Sheridan expressed high confidence in Mobi Tubeless approval and launch in the second half of 2026, noting its exclusion from revenue guidance is a conservative approach. He attributed the expected acceleration to three main factors: 1) new technology, including Mobi with multiple sensor integrations (FreeStyle Libre 3 Plus, Dexcom 15-day sensor), Android/iOS control, and international expansion; 2) improved sales force productivity, supported by a new system launching soon; and 3) the positive impact of the pharmacy channel on market uptake.

Matthew O'Brien followed up on the reduction to the high end of the organic sales guidance, asking if it was driven by specific customer revenue changes. He also inquired about the meaningful increase in Days Sales Outstanding (DSOs) at the end of Q4 and the outlook for this metric.

Answer

Payman Khales, President and Chief Executive Officer, reiterated that there were no specific changes to customer forecasts, and the guidance adjustment was more about rounding. Diron Smith, Executive Vice President and Chief Financial Officer, explained that the higher DSOs in Q4 resulted from a strategic decision to limit accounts receivable factoring to maintain financial flexibility, rather than further prepaying the term loan A.

Matthew O'Brien followed up on the reduction to the high end of the organic sales guidance, seeking confirmation that it wasn't due to unexpected revenue changes from specific customers. He also asked about the significant increase in Days Sales Outstanding (DSOs) at the end of Q4 and its expected progression.

Answer

Payman Khales, President and CEO, reiterated that there were no specific changes to customer forecasts, and the guidance tightening was in alignment with prior communications. Daron Smith, EVP and CFO, explained that the increase in DSOs was a deliberate decision to limit accounts receivable factoring in Q4, aiming to maintain financial flexibility rather than further prepay on the term loan A.

Matthew O'Brien sought to confirm the estimated $70 million reduction to the CMD outlook for 2026 across three products. He also asked for clarification on whether 'emerging customers' are those outside Integer's top three largest clients and if the neuromodulation impact involves a sizable customer experiencing less adoption.

Answer

Payman Khales, President and CEO-elect, confirmed the estimated reduction was 'in the ballpark' for three products (two EP, one neuromodulation). He clarified that 'emerging customers' are newer clients with new products and therapies, not necessarily the largest OEMs. He also confirmed that the neuromodulation customer had significant growth in 2025 but expects a sizable decline in 2026 due to slower market adoption.

Matthew O'Brien asked about the approximate $70 million reduction in the CMD outlook for next year, questioning if it was evenly split between the two EP products and if these were emerging customers outside the top three. He further clarified if the EP and neuromodulation impacts were from emerging customers and if the neuromodulation impact was from an existing, sizable customer seeing less adoption.

Answer

Payman Khales, President and CEO-elect, clarified that the approximate $70 million reduction is for three products (two EP, one neuromodulation), not just two EP products. He confirmed these are emerging customers, part of a group of 10 customers with products in the market or launch phases. Khales stated that Integer's EP business is broad, serving both large OEMs and others, and could not be more specific. For neuromodulation, he confirmed that one customer, which had sizable growth in 2025, is now seeing less market adoption, leading to a significant decline in 2026.

Matthew O'Brien asked for clarification on Beta Bionics' 2026 revenue guidance, noting that the midpoint was lower than 2025's absolute sales, and if factors like the Warning Letter, competition, or higher attrition were contemplated. Matthew O'Brien also commented on the strong Q4 gross margin and questioned the implied step-down in H1 2026, asking if future Mint sales were contemplated and if Beta Bionics still expects to be second to market for patch pumps.

Answer

CFO Stephen Feider stated that no unusual competitive landscape characteristics, Warning Letter impacts, or changes in pharmacy attrition rates were factored into the guidance, which is set with confidence. CEO Sean Saint reiterated the timeline for Mint's unconstrained launch by the end of 2027 but did not comment on its market position relative to competitors. CFO Stephen Feider explained that the gross margin guidance accounts for potential outperformance in pharmacy new patient starts, which can create a short-term drag on gross margin, rather than competitive issues or warranty rates.

Matthew O'Brien questioned the 2026 revenue guidance, noting that the absolute dollar number at the midpoint is lower than 2025 despite the benefit of recurring pharmacy patients, asking if factors like the warning letter, competition, or higher attrition were contemplated. He also inquired about the gross margin guidance, which implies a significant step down in the first half, and sought an update on Mint's market positioning and timeline.

Answer

Stephen Feider, CFO, stated that no odd competitive characteristics, warning letter impact, or increased attrition are contemplated in the 2026 guidance, which is set with confidence. He explained that the gross margin guidance accounts for potential outperformance in pharmacy new patient starts, which can create a short-term headwind. Sean Saint, CEO, reiterated the timeline for Mint's unconstrained commercial launch by the end of 2027 but did not comment on its specific market positioning relative to competitors.

Matthew O'Brien pressed on the international market opportunity, specifically how Dexcom plans to close the $2 billion revenue gap with the U.S. business, compete with a large rival, the expected timeframe (5 vs. 15 years), and any potential margin impacts from scaling this business.

Answer

Jake Leach, President and CEO of Dexcom, outlined plans to expand within existing markets (Europe, Asia Pacific), unlock coverage (Type 2 basal, NIT globally), generate evidence, and leverage a tailored product portfolio (Dexcom ONE+, Stelo, new system in 2026). He acknowledged past competitive advantages but stated Dexcom is now ready to take share as access opens. Jereme Sylvain, Chief Financial Officer, confirmed it's a longer-term vision, exceeding five years, given the U.S. market's continued runway and the need to enter new countries.

Matthew O'Brien from Piper Sandler asked about Dexcom's international opportunity, specifically how the company plans to close the approximately $2 billion revenue gap with its U.S. business, the expected timeframe (5 vs. 15 years), and any potential margin impacts from scaling this international expansion.

Answer

Jereme Sylvain, CFO of Dexcom, clarified that the international vision is a longer-term one, beyond five years, due to continued bullish expectations for U.S. growth. Jake Leach, President and CEO of Dexcom, highlighted two main international opportunities: expanding deeper into existing markets (Europe, Asia Pacific) and unlocking coverage for Type 2 basal and non-insulin users, which currently trails the U.S. He emphasized generating evidence, driving awareness, and leveraging a substantial product portfolio tailored to diverse market needs and pricing structures.

Matthew O'Brien questioned the implied deceleration in Q4 guidance on a two-year stack basis, particularly domestically, and how this aligns with confidence in low double-digit growth for 2026.

Answer

Jereme Sylvain, CFO, explained that the Q4 guidance reflects a normalization of business seasonality, with Q4's contribution to the full year declining and Q1's increasing. He stated that underlying user growth remains solid, and the delta between unit volume growth and revenue is narrowing. He believes these factors support comfort with low double-digit growth in 2026.

Matthew O'Brien asked about the Q4 2025 guidance implying deceleration on a two-year stack basis, especially domestically, and why the company is comfortable with low double-digit growth in 2026 despite this.

Answer

Jereme Sylvain, CFO, explained that Q4 seasonality has normalized over years, with Q1 now having a seasonality benefit. He emphasized that underlying user growth remains solid, and the delta between unit volume growth and revenue is narrowing. He stated that the 2026 base case assumes record new patient years with existing coverage, not necessarily new coverage.

Matthew O'Brien followed up on the organic full-year expectation, seeking clarification on whether there was a slowdown in the core organic number. He also questioned the confidence in AirSeal's high single-digit to low double-digit growth rate, considering its scale, traditional laparoscopic penetration, and the cost implications in ASC settings.

Answer

Todd Garner, EVP and CFO, reiterated that the organic revenue numbers were simply more precise with the final 2025 data, with no change in the core expectation. Patrick Beyer, President and CEO, expressed strong confidence in AirSeal's growth based on clinical performance, global acceptance, and opportunities in both laparoscopic robotic and non-robotic procedures, without commenting on its specific scale.

Matthew O'Brien followed up on the organic constant currency full-year revenue guidance, questioning if it was lower than previously stated, and asked about the confidence in AirSeal's high single-digit to low double-digit growth rate given market dynamics.

Answer

Todd Garner, Executive Vice President and Chief Financial Officer, explained the slight adjustment in organic growth guidance was due to the finalization of 2025 numbers and the impact of the GI business exit. Patrick Beyer, President and Chief Executive Officer, expressed strong confidence in AirSeal's growth, citing clinical performance, customer demand, and opportunities in both global laparoscopic robotic and non-robotic procedures.

Matthew O'Brien asked about Kestra's updated fiscal year 2026 guidance, specifically inquiring about the revenue cadence, potential Q3 seasonality, and other factors influencing the full-year outlook. He also followed up on the strategic use of proceeds from the recent capital raise to accelerate growth initiatives.

Answer

CFO Vaseem Mahboob explained that revenue growth is driven by prescription volume, in-network mix, and revenue cycle management initiatives, emphasizing a guidance philosophy focused on consistent quarterly results. President and CEO Brian Webster stated the additional capital de-risks future needs, fortifies the balance sheet, and will be allocated to key growth drivers, with specific plans to be outlined during the upcoming annual planning process.

Matthew O'Brien asked about the fiscal year guidance, specifically the cadence and Q3 seasonality, and the factors considered for the full year. He also inquired about the use of proceeds from the recent capital raise and how it might accelerate growth initiatives.

Answer

Vaseem Mahboob, Chief Financial Officer, explained that Kestra is a run-rate business driven by prescription volume, in-network mix, and revenue cycle management initiatives, with a guidance philosophy focused on consistent quarterly results. Brian Webster, President and Chief Executive Officer, added that the capital raise de-risks future needs and fortifies the balance sheet, with planning underway to determine the impact on growth strategies for the next couple of years.

Matthew O'Brien asked about the drivers behind the strong sequential prescription growth, Kestra Medical Technologies' current annualization of cases, and the expected percentage of all WCD prescriptions for ASSURE by year-end. He also questioned whether new sales reps focus on converting existing accounts or expanding the market, and the impact of the competitor's recent clinical trial.

Answer

Brian Webster (President and CEO) attributed prescription growth to improving metrics for fully productive reps and successful onboarding of new reps. He noted that new reps initially target high prescribers, while existing reps focus on deeper penetration and opening new accounts to expand the market. He also viewed the competitor's large German WCD study as beneficial for overall market expansion, shining a light on the ongoing need for WCDs.

Matthew O'Brien inquired about the drivers behind the strong sequential and year-over-year prescription growth in the quarter, asking about the current market share and the company's target for market share by the end of the fiscal year. He also asked whether new sales representatives primarily focus on converting existing accounts from competitors or on expanding the overall market.

Answer

President and CEO Brian Webster attributed prescription growth to improving metrics for fully onboarded reps and new reps successfully ramping up productivity. He estimated current market share at around 12%. Webster explained that new reps are directed to high-prescribing accounts first, leveraging pre-existing relationships where applicable, while established reps focus on further penetrating existing accounts and opening new ones to expand the market. He also noted that the competitor's recent study on sudden cardiac death risk would help expand the overall WCD market.