Ryan Zimmerman

Ryan Zimmerman asked for more details on the Health Information Systems (HIS) business, particularly regarding competitive guardrails, contractual obligations, and the impact of AI. He also sought expectations for the Acera acquisition, including its sustained organic growth contribution.

Answer

CEO Bryan Hanson highlighted long, multi-year contracts and significant switching costs in the HIS business, emphasizing the trust factor in reimbursement coding and Solventum's leadership position with proprietary algorithms and data. Regarding Acera, Bryan Hanson noted its entry into a $1 billion market growing 10%, specifically in attractive synthetics, expecting healthy double-digit growth and a force multiplier effect from combining commercial infrastructures, along with good profitability.

Ryan Zimmerman asked about guardrails for Solventum's Health Information Systems (HIS) business, particularly concerning competitive bidding and AI, including contractual obligations. He also sought high-level expectations for the Acera acquisition, its sustained organic growth potential, and its contribution to overall growth.

Answer

CEO Bryan Hanson stated that Solventum has long-term contracts and significant differentiation in HIS, viewing AI as an opportunity rather than a threat due to proprietary algorithms and data sets. Regarding Acera, he highlighted its entry into a $1 billion market growing 10%, with differentiation in synthetics, expecting it to be a healthy double-digit grower and a profitable growth avenue for Advanced Wound Care.

Ryan Zimmerman first asked for clarification on the cadence of the $500 million cost for the 'Transform for the Future' program. He then inquired about the implied lower growth profile for Q4, asking if the dental back-order dynamic was a contributing factor.

Answer

CFO Wayde McMillan clarified that the details on the cadence of the $500 million cost for the 'Transform for the Future' program have not been provided, but it is planned over the next four years, dictated by various projects. Regarding Q4 growth, he explained that the implied 2.5% growth includes absorbing the remaining first-half volume give-back in Infection Prevention and Surgical Solutions (IPSS), and when normalized, the growth rate is in line with the previous two quarters.

Ryan Zimmerman inquired about the cadence of the $500 million cost for the 'Transform for the Future' program over the next four years. He also asked about the implied lower growth profile for Q4 in the updated guidance, specifically if dental back-order dynamics were a contributing factor.

Answer

CFO Wayde McMillan stated that the $500 million cost for the 'Transform for the Future' program is planned over the next four years, with the cadence dictated by individual projects. Regarding Q4 guidance, Wayde McMillan explained that the implied 2.5% growth includes absorbing the remaining first-half volume give-back in Infection Prevention and Surgical Solutions (IPSS), noting that normalized growth would be in line with previous quarters.

Ryan Zimmerman from BTIG asked for clarification on Solventum's revenue exposure to China and the potential impact of tariffs. He also questioned if current IV solution shortages could affect the company's dialysis filtration business.

Answer

CEO Bryan Hanson corrected that China represents just over 5% of revenue, not 11%, and stated that based on the relatively small volume of imports from China, he does not see tariffs as a major business impact. CFO Wayde McMillan addressed the second question, stating the company has not seen any fall-off in demand for its dialysis support products. Hanson added that the business is often under capacity constraints and could add capacity to meet demand.

Ryan Zimmerman asked for clarification on the company's revenue exposure to China and the potential impact of tariffs, given its manufacturing footprint. He also inquired if ongoing IV solution shortages are affecting the Purification and Filtration business, particularly in dialysis.

Answer

CEO Bryan Hanson corrected that China represents just over 5% of revenue, not 11%, and stated that based on the relatively small volume of products imported from China, he does not see tariffs as a major potential impact. Regarding the purification business, CFO Wayde McMillan said the company has not seen any fall-off in demand for its dialysis-related products due to IV shortages. Hanson added that the business is often under capacity constraints, suggesting they could add capacity to meet demand if needed.

Ryan Zimmerman asked about the mix of price versus volume for MACI in 2025 and expectations for 2026, as well as the dynamics of new doctor growth and MACI Arthro adoption among existing versus new customers.

Answer

Joe Mara, Vericel's Chief Financial Officer, stated that pricing remains a key growth driver with over 95% prior authorization approval, and the significant MACI performance improvement in the second half of 2025 was volume-driven. Nick Colangelo, Vericel's President and Chief Executive Officer, explained that approximately two-thirds of MACI Arthro trained surgeons come from existing MACI users, with the remaining third from prior open targets or new arthro-only surgeons. He noted that trained surgeons, especially those performing Arthro cases, show increased biopsy and implant growth rates and higher conversion rates.

Ryan Zimmerman asked about the mix of price versus volume in MACI's growth, particularly reflecting on 2025 price increases and the balance for 2026. He also inquired about new doctor growth, MACI Arthro adoption dynamics, and whether growth is driven by existing or new customers.

Answer

Joe Mara, Vericel's Chief Financial Officer, stated that pricing remains a key growth driver with strong prior authorization approval rates, and that the significant step-up in MACI performance in the second half of 2025 was volume-driven, though both price and volume contribute. Nick Colangelo, Vericel's President and Chief Executive Officer, added that approximately two-thirds of MACI Arthro trained surgeons are existing MACI users, with one-third being new, and that trained surgeons, especially those performing Arthro cases, show increased biopsy and implant growth rates and higher conversion rates.

Ryan Zimmerman asked about the slight miss on MACI's Q2 revenue guidance, the confidence in a second-half acceleration, and the rationale for lowering the burn care forecast despite strong Epicel biopsy growth.

Answer

CFO Joe Mara explained the MACI variance was minor, likely due to implant timing, and reaffirmed full-year guidance based on accelerating July trends. CEO Dominick Colangelo and CFO Joe Mara clarified the burn care guidance change is a conservative approach due to recent unpredictability in biopsy-to-graft conversion, despite strong underlying metrics and a solid start to Q3.

Ryan Zimmerman asked about the market opportunity for MACI Arthro in the femoral condyles and trochlea, its potential to expand the addressable market, and the expected seasonality and pacing for MACI in the second half of the year following the Arthro launch. He also sought clarification on any MACI Arthro revenue contribution in the first quarter.

Answer

CEO Nick Colangelo explained that MACI Arthro is increasing penetration in the trochlea defect segment, an existing but underserved part of the market. CFO Joe Mara stated that while typical seasonality is expected, strong leading indicators for Arthro support a higher full-year MACI forecast in the low $240 million range, implying strong growth in the remaining quarters. Nick Colangelo added that while some incremental impact from Arthro occurred in Q1, a significant inflection in implants is expected in the second half of the year, mirroring the original MACI launch in 2017.

Ryan Zimmerman questioned Vericel's 2025 MACI guidance, asking why it doesn't assume a larger contribution from MACI Arthro given positive early indicators, and inquired about the drivers for NexoBrid adoption and its 2025 outlook.

Answer

CFO Joe Mara explained the MACI guidance framework starts with core drivers, leaving MACI Arthro as a potential upside, and noted Q1 guidance accounts for one fewer selling day. CEO Dominick Colangelo clarified that the discrepancy between NexoBrid's Q4 hospital orders and recognized revenue was due to distributor inventory management, emphasizing strong underlying demand as a key growth indicator for 2025.

In a follow-up question, Ryan Zimmerman asked if the fourth-quarter implied guidance accounts for any potential impact from recent hurricanes or IV solution shortages on MACI procedures.

Answer

CEO Nick Colangelo responded that the company has not seen any impact on implant procedures to date. He explained that an open MACI procedure uses little IV fluid, and while an Arthro case uses more, they are not currently observing any negative effects from supply shortages.

Ryan Zimmerman inquired about the expected average selling prices (ASPs) for 2026, considering potential downward pressure from the cervical launch, and the outlook for General & Administrative (G&A) expenses and overall operating expense growth.

Answer

Leo Greenstein, CFO, clarified that while aprevo Lumbar ASPs have remained stable, the aprevo Cervical product has a different reimbursement profile and adjusted pricing. The procedural mix in 2026, still largely driven by lumbar, will result in a slightly lower overall ASP in the mid-to-high $20,000 range. For G&A, he stated that Carlsmed aims to maintain sufficient infrastructure for a public company while focusing investments on R&D and sales & marketing to drive revenue growth. He expects G&A to decline as a percentage of revenue due to its largely fixed cost nature, contributing to operating leverage.

Ryan Zimmerman asked about the potential downward pressure on average selling prices (ASPs) in 2026 due to the cervical launch mix and sought insights into the company's general and administrative (G&A) expenses, specifically whether the lower-than-expected G&A trend would continue into 2026 and overall operating expense growth.

Answer

CFO Leo Greenstein clarified that lumbar ASPs remain stable, but the overall average revenue per procedure (ARP) in 2026 is expected to be slightly lower, in the mid-to-high $20K range, due to the procedural mix incorporating cervical. He indicated that G&A expenses are anticipated to decline as a percentage of revenue in 2026, as most G&A costs are fixed, allowing for operating leverage while the company prioritizes investment in R&D and sales & marketing for revenue growth.

Ryan Zimmerman questioned the 2026 guidance, specifically the implied 300 bps of innovation at the high end (7% revenue growth), which is higher than the historical 200 bps, asking for a bridge of this 100 bp delta. He also asked about the current refractive strategy following the STAAR saga.

Answer

CEO David Endicott explained the guidance reflects a disciplined view, starting with Q4 rates and adding new product flow, with the upper end accounting for potential overperformance. Regarding refractive, he emphasized WaveLight's superior outcomes for LASIK patients and the commitment to the refractive area, exploring options like ICLs and RLE as white spaces.

Ryan Zimmerman asked about the 2026 guidance, specifically bridging the 100 basis point delta between the historical 200 basis points of innovation on top of market growth and the implied 300 basis points at the high end of the 7% revenue guide. He also inquired about Alcon's strategy in refractive, particularly after the STAAR saga, and commitment to the area.

Answer

David Endicott, CEO, explained that the guidance is disciplined, starting with the Q4 market rate (3-4%) plus the usual 200 basis points from new products, with the extra 100 basis points at the high end accounting for potential variability in new product flow. On refractive, he highlighted excitement for WaveLight and customized LASIK outcomes, stating a commitment to the refractive area (RLE, laser, ICL) as a white space, but not in a hurry for an ICL solution.

Ryan Zimmerman of BTIG asked how the recent slowdown in market growth affects Alcon's long-term target of growing 200 basis points above the market, and how recent M&A and margin pressure impact the company's cash flow and margin expansion trajectory.

Answer

CEO David Endicott stated the long-term growth targets remain intact, viewing the current market softness as a temporary oscillation. CFO Tim Stonesifer noted the business still generates strong underlying operating leverage, which is temporarily masked by tariff pressures, and that the capital allocation strategy is unchanged. David Endicott added that the recent product-focused acquisitions offer significant leverage on Alcon's existing infrastructure.

Ryan Zimmerman asked for a breakdown of the contribution from price versus new products within the innovation-driven growth guidance. He also questioned why SG&A spending would be highest in Q2 when sales are expected to accelerate more significantly in the second half of the year.

Answer

Chief Executive Officer David Endicott stated that Alcon typically aims for a couple of points of price annually, with new products accounting for the remainder of the growth. Chief Financial Officer Tim Stonesifer explained the Q2 SG&A spike is due to three factors: normal seasonality in DTC advertising, some cost phasing from Q1, and the initial wave of investments to support new product launches.

Ryan Zimmerman asked about the contribution of volume versus price to growth, particularly in the contact lens segment, and inquired if higher inventory would continue to be a gross margin headwind in 2025.

Answer

CEO David Endicott explained that price contributed about one-third of growth, a historical norm for the contact lens market, but he anticipates pricing power will moderate. CFO Tim Stonesifer projected that 2025 gross margins would be flattish to slightly improved, as some higher-cost inventory will still flow through and the launch of new equipment like Unity will add initial pressure.

Ryan Zimmerman asked about the economics of the Unity VCS upgrade cycle, including the combo machine and the margin impact from new cassettes. He also inquired about launch expectations for the dry eye drug AR-15512 relative to previous market entries like Xiidra and RESTASIS.

Answer

CEO David Endicott explained that the Unity combo machine will be priced at a premium to the two separate devices combined, and new consumables will also carry a premium due to the clinical efficiencies they provide. Regarding AR-15512, he noted that the market has changed significantly due to payer dynamics, making recent launches a better comparison. He highlighted the drug's potential for faster action and efficacy as key differentiators, stating a clearer launch strategy would be available in 4-6 months.

Ryan Zimmerman asked about the composition of 2026 guidance, specifically why it implies a slowdown in legacy Musculoskeletal growth, and how the company plans to take adjusted EBITDA margins higher given increased R&D investment.

Answer

Keith Pfeil, President and CEO, explained 2026 guidance anticipates short-term lumpiness for Nevro and that aggressive enabling tech placements via operating leases may not yield immediate revenue recognition. He remains optimistic about core spine, international, and trauma. Kyle Kline, Chief Financial Officer, stated the plan is to invest heavier in R&D (ramping to 5%-6% of sales) across all businesses, using strong margins to fund this investment.

Ryan Zimmerman of BTIG questioned the composition of Globus Medical's 2026 guidance, suggesting an implied slowdown in legacy Musculoskeletal growth despite strong Q4 2025 performance. He also asked Kyle Kline about the potential for further increasing Adjusted EBITDA margins given the strong legacy Globus margins and the need for increased R&D investment.

Answer

Keith Pfeil, President and CEO, clarified that the Nevro business might experience short-term lumpiness, and enabling tech revenue could be impacted by a higher mix of operating leases, which don't provide immediate revenue recognition. He expressed optimism for the core spine business, international improvement throughout the year, and continued trauma performance, affirming the achievability of the conservative guidance. Kyle Kline, Chief Financial Officer, explained that the plan is to invest heavier in R&D (ramping from 5% to 5%-6% of sales) across all businesses, leveraging the strong mid-30s EBITDA margins to fund innovation rather than necessarily pushing margins significantly higher in the short term.

Ryan Zimmerman of BTIG asked where Globus is under-indexed within its spine portfolio to drive accelerated growth and inquired about the components of the final 15% of NuVasive merger synergies expected in year three.

Answer

CEO Dan Scavilla identified biologics as a key under-indexed area with significant lift potential. He also pointed to cross-selling opportunities with neuromonitoring, strengthening the pediatric deformity portfolio, and driving enabling tech into legacy NuVasive accounts. CFO Keith Pfeil explained that the year-three synergies will primarily come from gross margin rate expansion as in-sourced manufacturing from 2025 flows through the P&L in 2026.

Ryan Zimmerman of BTIG asked for thoughts on the durability of the strong spine market, potential margin impact from in-house manufacturing, and whether R&D spending would need to increase to support new market entries.

Answer

President & CEO Dan Scavilla opined that while the spine market is currently strong, he expects it to normalize to a 3-4% long-term growth rate. He also clarified that current R&D spending already encompasses all planned projects and a step-up is not needed. COO & CFO Keith Pfeil added that in-sourcing benefits will lower cost per unit and drive fixed cost leverage, with cash flow benefits appearing before P&L improvements in 2025.

Ryan Zimmerman asked about the potential interplay and cannibalistic effects between iDose TR re-administration and the next-generation iDose TREX. He also sought clarification on Epioxa's 50% coverage, confirming if it refers to covered lives in dialogue with payers rather than established coverage. Additionally, he questioned CFO Alex Thurman on the operating expense spend for 2026, particularly concerning the Epioxa launch and its impact on profitability.

Answer

Joe Gilliam, President and COO, Glaukos, clarified that Epioxa's 50% coverage refers to clinical conversations with payers representing over half of covered lives, with some early positive policy wins. He stated that the goal for iDose TR re-administration and TREX is to provide multiple options for patients, not cannibalization, with long-term contribution. Alex Thurman, CFO, Glaukos, affirmed the company's philosophy of balancing investments for cash flow break-even/generation in 2026, guiding to mid-teen year-over-year OpEx growth (around $555M-$560M) while maintaining operating leverage. Mr. Gilliam added that significant investments in Epioxa patient access are planned within this framework.

Ryan Zimmerman asked about the interplay between re-administration of iDose TR and the future T-Rex therapy, including potential cannibalistic effects. He also sought clarification on Epioxa's coverage, specifically if '50% coverage' referred to actual covered lives or ongoing dialogues with payers. Additionally, he asked Alex Thurman about the operating expense spend for the Epioxa launch in 2026 and its impact on margins.

Answer

Joe Gilliam, President and COO, stated that the goal is to provide multiple options for patients, with re-administration and T-Rex offering sustained therapy over 20+ years. He clarified that Epioxa discussions are with payers representing over 50% of covered lives, leading to early positive policy wins. Alex Thurman, CFO, indicated a mid-teen year-over-year OpEx growth for 2026 (around $555M-$560M), aiming for cash flow break-even and operating leverage despite significant investments in Epioxa's patient access.

Ryan Zimmerman of BTIG asked for a comparison of iDose TR utilization in MAC jurisdictions with established professional fees versus those without, and for timelines on reimbursement expansion. He also asked about the long-term impact of declining professional fees on the legacy MIGS business.

Answer

President & COO Joe Gilliam noted that over 80% of iDose TR volume comes from the 50% of MAC regions with established pro-fees, indicating faster adoption where reimbursement is clear. He and CEO Tom Burns stated that declining cataract and MIGS fees will further drive the shift to standalone interventional glaucoma procedures like iDose TR, which are currently unaffected.

Ryan Zimmerman inquired about the updated components of the full-year guidance following the Q1 beat and asked about the assumptions underpinning the implied steep revenue ramp for iDose for the remainder of the year.

Answer

President and COO Joseph Gilliam detailed the revised guidance components, noting a mid-single-digit decline for non-iDose U.S. revenues, which implies a modest increase in iDose expectations for 2025. Chairman and CEO Thomas Burns added that the iDose ramp is supported by strong month-over-month progress and the expansion of streamlined reimbursement in key MACs like Novitas and First Coast.

Izzy, on behalf of Ryan Zimmerman, questioned whether iDose's growth was driven by taking market share from DURYSTA or by expanding the overall market. She also requested an update on the status of securing an FDA label for iDose readministration.

Answer

President and COO Joe Gilliam clarified that iDose's growth is primarily from overall market expansion, positioning it as part of a broader industry effort to take share from legacy eye drops rather than competing directly with DURYSTA. Chairman and CEO Tom Burns addressed the readministration question, stating they plan to submit a supplement to the FDA in the first half of 2025, with a potential decision by year-end. He also highlighted iDose TREX as a 'belt and suspenders' backup plan.

Ryan Zimmerman inquired about the growth rate of the core stent business and whether recent Medicare reimbursement changes could shift procedural volume towards stents in 2025. He also asked about the strategic rationale for the Ripple Therapeutics licensing agreement.

Answer

President and COO Joseph Gilliam confirmed low double-digit growth for the stent franchise in Q3 and stated the company's focus is on growing the entire interventional glaucoma market, not just on share shifts. Chairman and CEO Thomas Burns clarified the Ripple deal is for developing back-of-the-eye therapies, distinct from their competitor's focus, and affirmed that the iDose TREX Phase III trial remains on track to start by year-end.

Ryan Zimmerman asked about the pace of growth for 2026 guidance, specifically how the $15.4 million Q1 revenue covenant should be interpreted regarding the company's expected performance.

Answer

CFO David O'Toole clarified that the $15.4 million covenant is a low threshold designed to remove covenant risk, not a Q1 guidance, indicating significant headroom. Interim CEO Cary Vance added that Q4 serves as a strong jump-off point, and the company expects progressive, gradual acceleration in growth from Q1 through the rest of 2026.

Ryan Zimmerman of BTIG inquired about the projected pace of revenue growth for 2026, specifically asking if the Q1 revenue covenant of $15.4 million should be considered a baseline or if the company anticipates significantly higher performance. He also sought clarification on the resolution of 2025 reimbursement challenges, particularly the reestablishment of payment rates by six of seven Medicare Administrative Contractors (MACs), and any concerns regarding the outstanding seventh MAC.

Answer

CFO David O'Toole clarified that the $15.4 million covenant is a low threshold, not guidance, indicating substantial headroom. Interim CEO Cary Vance added that Q4 2025 serves as the baseline, with expectations for progressive, gradual acceleration in revenue growth throughout 2026. Regarding reimbursement, Interim CEO Cary Vance confirmed active engagement with all MACs, noting that the six published rates are restoring clinician confidence. He assured there are no concerns about the seventh MAC, describing its delay as an administrative process.

Ryan Zimmerman of BTIG questioned the amount of international sales included in the 2025 guidance, the expected timing for European clearance, the product mix of the Q4 inventory situation, and the nature of the 'lease revenue' line item.

Answer

CEO Jim Corbett stated that the international sales contribution in guidance is modest due to unpredictable EU approval timing for RECELL GO, now expected mid-year. He clarified the Q4 inventory issue was primarily RECELL and that no Q1 work-down is expected to impede revenue. Both Corbett and CFO David O'Toole explained that 'lease revenue' is an accounting allocation for the provided processing device, not a change in business model.

Ryan Zimmerman asked for details on the revised annual guidance, questioning the drivers for the expected Q4 revenue step-up and the contribution from full-thickness skin defects. He also inquired about the path to cash flow breakeven by Q3 2025, given rising expenses, and whether it relies solely on top-line growth.

Answer

CEO James Corbett stated that the primary growth drivers are the RECELL GO conversion, which increases utilization, a strong new account pipeline of 89 facilities, and the accelerating launch of PermeaDerm. CFO David O'Toole confirmed that the path to profitability is predominantly driven by top-line growth, combined with a high gross margin of over 86%, which will allow revenue to cover operating expenses within three to four quarters.

Ryan Zimmerman inquired about the Paragon 28 acquisition, noting its Q4 contribution and 2026 outlook were lower than expected. He asked about the company's observations regarding the health of the foot and ankle market in 2025, specifically identifying areas of weakness versus offsetting strengths.

Answer

Ivan Tornos, Chairman, President, and CEO of Zimmer Biomet, stated that Paragon 28 delivered upper single-digit growth for two quarters as a consolidated company, slightly behind the 2025 revenue accretion target by 20 basis points. He confirmed that EPS dilution is on track (better than 3% in year one, around 1% in year two), and integration costs are better than expected. Tornos reported no dramatic changes in market growth, with the shift to ASCs continuing positively. He expressed excitement for the business, anticipating double-digit growth in 2026 driven by 8 new products and the existing legacy Paragon 28 team.

Ryan Zimmerman asked about the lower-than-expected contribution from Paragon 28 in Q4 and the 2026 outlook, inquiring about the health of the foot and ankle market and specific areas of weakness or offsetting strength.

Answer

Ivan Tornos, Chairman, President, and CEO, noted Paragon 28's Q3 and Q4 performance was in the upper single-digit range, slightly behind the 270 basis points revenue accretion anticipated for full-year 2025. EPS dilution was better than expected. He saw no dramatic changes in market growth, with a positive shift to ASCs, and expects double-digit growth in 2026 with 8 new products.

Ryan Zimmerman of BTIG asked about the specific drivers behind the sequential acceleration in the U.S. Knee business and what factors would sustain this improved competitive performance.

Answer

Chairman, President & CEO Ivan Tornos acknowledged the encouraging 150 basis point sequential acceleration but stated he is not yet satisfied. He attributed the improvement to commercial investments like DTP campaigns, leadership changes, and new product introductions. He expressed high confidence in further second-half acceleration.

Ryan Zimmerman from BTIG asked about the drivers behind the strong 22% growth in the Sports business, its durability, and expectations for the broader S.E.T. segment in 2025.

Answer

President and CEO Ivan Tornos clarified that Sports grew 22% while the overall S.E.T. segment grew 8.4%. He attributed this durable mid-to-upper single-digit growth to a refreshed product portfolio, investments in a specialized sales force, and dedicated resources for the ASC channel. He noted that post-Paragon 28 acquisition, the S.E.T. business will be larger than the Hip franchise and is expected to continue growing at a faster rate.

Ryan Zimmerman asked for a bridge between the 2026 guidance and GE HealthCare's medium-term targets, specifically regarding mid-single-digit revenue growth and high teens to 20% EBITDA margin. He also inquired about the growth in service RPO, the composition of service revenue, and how increased predictability, especially with Intelerad, might shift the broader revenue mix away from lumpier capital sales.

Answer

Jay Saccaro (VP and CFO) and Peter Arduini (President and CEO) expressed confidence in achieving midterm targets, expecting new products and Flyrcado to drive 1-2 points of additional sales growth. They anticipate margin expansion (50-80 bps in 2026) to accelerate through Heartbeat, higher-margin NPIs, productivity, and SG&A optimization, aiming for high teens-20%+ margins. For service revenue, they noted 6% growth in 2025, driven by enterprise agreements, improved capture rates on complex products, and increased equipment utilization. New, sophisticated products are expected to further boost service contract capture rates and margins.

Ryan Zimmerman asked GE HealthCare to bridge its 2026 guidance to its medium-term targets of mid-single-digit revenue growth and high teens to 20%+ EBITDA margin. He also inquired about the composition and predictability of service revenue, its flow through to guidance, and how it contributes to moving away from lumpier capital sales, especially with Intelerad.

Answer

Jay Saccaro (VP and CFO) and Peter Arduini (President and CEO) expressed confidence in midterm targets, expecting new products to drive 1-2 points of additional sales growth. Margin expansion (50-80 bps in 2026) will be supported by Heartbeat, higher-margin NPIs, and productivity. They noted service revenue grew 6% in 2025, driven by enterprise agreements, a growing installed base, and improved capture rates due to product complexity and AI advancements, with new sophisticated products leading to higher-margin service contracts.

Ryan Zimmerman of BTIG, LLC inquired about the pricing strategy for the newly approved drug Flyrcado, particularly its premium relative to existing agents like Rubidium-82. He also asked about the durability of the company's overall pricing power assumption heading into 2025.

Answer

CEO Peter Arduini stated that while specific pricing for Flyrcado is not yet public, the company believes it deserves a premium due to its superior diagnostic accuracy and operational benefits. He noted positive tailwinds from potential reimbursement changes. CFO Jay Saccaro added that the company feels very good about future pricing, linking it to the value delivered by a pipeline of innovative new products resulting from significant R&D investment.

Ryan Zimmerman inquired about a local coverage determination regarding total joint arthroplasty and robotics, specifically with CGS, and whether it creates any risk from payers or an opportunity for incremental reimbursement for robotic usage. He also asked about the trajectory of operating margins, specifically the 150 basis points target through 2028, and the confidence in achieving it given recent performance.

Answer

Chair and CEO Kevin Lobo was unfamiliar with the specific case but noted that other parts of the world offer extra reimbursement for robotic procedures, and data supports Mako's performance, making him confident against reimbursement reductions. VP of Finance and Head of Investor Relations Jason Beach affirmed that confidence in achieving the 150 basis points margin expansion target remains high, driven by internal operational excellence and the healthy margin planned for 2026.

Ryan Zimmerman asked about a recent local coverage determination regarding total joint arthroplasty and robotics, exploring potential risks from payers or opportunities for incremental reimbursement for robotic usage. He also sought an update on Stryker's confidence and trajectory towards achieving its 150 basis points operating margin expansion target through 2028, given recent performance.

Answer

Kevin Lobo, Chair and CEO, Stryker, was unfamiliar with the specific determination but noted that other global markets offer extra reimbursement for robotic procedures, and Mako's data supports its performance. He did not foresee any reduction in reimbursement. Preston Wells, CFO, Stryker, reiterated strong confidence in achieving the 150 basis points margin expansion target, citing internal operational excellence initiatives and confirming that 2026 plans align with this trajectory.

Ryan Zimmerman asked about the U.S. knee business's strong performance relative to competitors, the overall health of the orthopaedics market, strategies to capitalize on potential market disruption, and the observed price pressure. He also questioned the international expansion plans for Inari.

Answer

Kevin Lobo, Chair and Chief Executive Officer, attributed the knee business's success to leadership in cementless, MEKO adoption, and new innovations, noting consistent above-market growth. Preston Wells, CFO, explained that positive pricing trends continue, with MedSurg showing improvement and Orthopaedics performing above historical levels. Kevin Lobo added that Inari's international expansion is expected to gain significant traction in the second half of next year, following a U.S.-focused integration.

Ryan Zimmerman asked about the health of the orthopaedics market, particularly Stryker's knee business performance relative to competitors, and how Stryker plans to capitalize on potential market disruptions. He also sought clarification on the observed price pressure during the quarter. Additionally, he inquired about the international expansion strategy for the Inari business.

Answer

Kevin Lobo (Chair and CEO, Stryker) highlighted the strong performance of the knee business, driven by cementless technology, Mako adoption, and new product innovations, positioning Stryker to grow above market. Preston Wells (CFO, Stryker) explained that positive pricing trends continue, with current performance above historical levels, and the company aims to sustain this pricing muscle. Kevin Lobo added that the focus for Inari has been on U.S. integration and recovery, with international expansion expected to gain significant traction in the second half of next year, leveraging Stryker's existing infrastructure.

Ryan Zimmerman of BTIG questioned why Stryker's estimated tariff impact only decreased by $25 million, less than peers, and asked about the greenfield opportunity for Mako installations versus adding second or third robots at existing sites.

Answer

VP & CFO Preston Wells explained the tariff impact reflects Stryker's specific manufacturing footprint, with benefits from the US-China agreement partially offset by increases from the new EU framework. Chair & CEO Kevin Lobo stated the Mako opportunity remains vast, viewing every hip and knee OR as potential, and noted international markets are in early innings of adoption, similar to the US five years ago.

Ryan Zimmerman inquired about the durability of the strong OUS hip growth and asked for more detail on the drivers behind the standout performance in Trauma and Extremities.

Answer

CEO Kevin Lobo clarified that OUS hip growth benefited from the non-organic SERF acquisition but noted underlying organic growth is also strong. He attributed the Trauma and Extremities momentum to the "wild success" of the Pangea plating system launch and continued strong double-digit growth in the upper extremities business.

Ryan Zimmerman inquired about Stryker's strategic direction regarding software and recurring revenue, citing the Vocera and care.ai acquisitions, and asked for the outlook on procedure volumes into early 2025.

Answer

CEO Kevin Lobo described the move into software and services as a natural evolution to solve customer problems, viewing it as a high-growth platform opportunity rather than a fundamental shift away from core medtech. VP of Finance and IR Jason Beach stated that the company has no indication of a procedural slowdown heading into 2025 and expects healthy demand to continue.

Ryan Zimmerman of BTIG inquired about Spectral AI's preparations for the U.S. commercial launch of the DeepView system, the expected timeline for FDA clearance, and the potential for expanded applications beyond burn care.

Answer

Dr. Michael DiMaio, Chairman of the Board, confirmed the company is targeting FDA clearance in the first half of 2026 and is developing a thorough commercialization plan with its BARDA partners. He noted that the device's ability to differentiate non-healing tissue creates broad applicability for other wound types, such as traumatic, elective, or ischemic wounds, and could be valuable for companies developing skin substitutes or related drugs.

Ryan Zimmerman asked for a reconciliation of the 2025 revenue guidance of $21.5 million compared to prior expectations and questioned the potential commercial revenue contribution. He also asked what tasks remain for the FDA submission.

Answer

CFO Vincent Capone clarified that 2025 is viewed as a 'step back' year to focus on the FDA submission, with a revenue ramp expected in 2026 post-clearance. He noted that any U.K. or Australia revenue would not be significant. Executive Chairman Dr. Michael DiMaio added that the FDA submission requires completing the statistical plan, hardware/software validation, and clinical trial results, all of which will be pre-reviewed by BARDA.

Ryan Zimmerman asked for an update on Spectral AI's preparations for its FDA submission, including data collection timelines and key milestones over the next 6-9 months. He also inquired about progress in the U.K., including system placements, user feedback, and the potential timing for commercial revenue. Additionally, he asked about regulatory hurdles in Australia and sought clarity on the timing and specific metrics for the upcoming top-line data from the burn study.

Answer

Dr. Michael DiMaio, Chairman of the Board, confirmed that enrollment for the burn study is complete and the company is actively 'truthing' images to train the algorithm. He noted frequent, interactive discussions with the FDA are ongoing to align on submission requirements, targeting the first half of 2025. In the U.K., he described feedback as 'resoundingly yes' on workflow integration, with the primary goal being NICE designation before significant revenue. He also confirmed that top-line data, including metrics like Dice coefficient, sensitivity, and specificity, is expected in December.

Asked about the rationale for delaying clinical trials, the financial impact of this decision in terms of costs saved or lost, and how it affects the company's cash burn and runway.

Answer

The new CEO, Stephen From, explained that it's his fourth day and he is prioritizing the completion of a 'production equivalent' system before starting a First Clinical Use (FCU) trial, viewing it as a better use of limited resources. He stated that minimal, immaterial cash had been spent on trial prep so far. The CFO, Sarah Romano, added that the delay would not materially impact the 2025 budget as clinical trial costs were not a major component.

Ryan Zimmerman inquired about the specific supplier dynamics causing delays, the impact on manufacturing for clinical trials, and the revised timeline for the trial's commencement.

Answer

President Randolph A. Clark explained that material procurement challenges with a few key suppliers, including a sub-tier supplier's financial issues, created a cascading disruption. He confirmed these issues are now resolved with no currently gated items. CEO Adam Sachs added that the first clinical patients are now expected toward year-end 2024, which will be outside the pivotal trial. He also noted that feedback from potential international clinical sites has been very positive.

Ryan Zimmerman from BTIG asked about the rationale for delaying clinical trials to focus on a production-ready system and questioned the financial impact, including costs already incurred for trial prep and the effect on the company's cash runway.

Answer

CEO Stephen From, in his first week, explained the strategic shift ensures resources are focused on finalizing a commercial-grade system, avoiding wasted effort on a non-production prototype. He stated that cash spent on trial preparation to date was immaterial. CFO Sarah Romano confirmed that the delay would not materially change the 2025 budget or cash burn guidance of approximately $50 million for the year.

Ryan Zimmerman of BTIG inquired about the commercial dynamics of CIMVEST, specifically the drivers behind the sales uptick in July and the company's go-forward pricing strategy.

Answer

CEO Laura Niklason explained that the sales increase was due to the natural time lag of the Value Analysis Committee (VAC) approval process and a strategic price reduction. She announced the price of CIMVEST was lowered from $29,500 to $24,250 effective July 1, 2025, to ease the approval process, and confirmed this will be the new standard price point for the next year.

Ryan Zimmerman inquired about the initial commercial experience with Symvess, asking about progress at the first three purchasing sites, the status of the 45 hospitals in the Value Analysis Committee (VAC) process, the procurement process for military hospitals via ECAT, and whether the current sales force is sufficient to cover all targets.

Answer

CEO Dr. Laura Niklason and CCO BJ Scheessele responded. Dr. Niklason confirmed the first commercial implant occurred and noted that the company's published health economic model is helping gain traction with VACs. Mr. Scheessele added that the sales funnel is strong, the VAC process typically takes 3-6 months, and getting listed on ECAT is a key milestone for military sales. He confirmed the current sales force is adequately sized for initial demand.

Ryan Zimmerman from BTIG asked for details on the V012 trial's upcoming interim analysis, the definition of success for that trial, and the potential for the same FDA team to review the supplemental BLA. He also requested commentary on R&D expense trends for 2025.

Answer

Executive Laura Niklason detailed that the V012 trial's primary endpoint is 'catheter-free days' for female dialysis patients, with a supplemental BLA filing planned for H2 2026 pending positive interim results. She expects some FDA review team overlap but with more nephrologist involvement. Executive Dale Sander projected a ramp-down in R&D expenses in 2025, driven by the wind-down of major clinical trials and the capitalization of manufacturing costs into inventory as sales commence.

Ryan Zimmerman inquired about the nature of discussions with the FDA following the PDUFA date delay for the ATEV in vascular trauma and asked about the company's strategic prioritization between the trauma and AV access programs for 2025.

Answer

Executive Laura Niklason clarified that most substantive FDA interactions occurred before the original PDUFA date. Since then, communication has been limited to occasional outreach and responding to minor documentation requests, without a new timeline provided. Regarding prioritization, she stated the commercial team for trauma is conservatively sized at 10 representatives, and the financial spend on the AV access program is not substantial as its main clinical trial is nearing completion.

Ryan Zimmerman asked about the impact of the proposed 2026 CMS payment reform on Organogenesis's portfolio, market dynamics through 2025, the sufficiency of the updated 2025 guidance reduction, and the specific timing for the reintroduction of Dermagraft.

Answer

CEO Gary Gillheeney described the CMS proposal as a "transformational event" that Organogenesis has long advocated for, noting it will level the playing field and significantly benefit PMA products like Apligraf. He anticipates aggressive competitor pricing for the remainder of 2025 but highlighted strong momentum for Organogenesis. He also stated that Dermagraft is expected to launch by 2027. CFO David Francisco affirmed that the updated guidance sufficiently accounts for market challenges, citing momentum from recently launched products.

Ryan Zimmerman of BTIG asked why Q1 buying patterns differed from the strong Q4, questioned the expected slowdown in Q2 before a back-half recovery, and sought insight into CMS's rationale for delaying the LCD to 2026.

Answer

CEO Gary Gillheeney explained that market confusion and customer audits led to a market contraction in Q1, unlike in Q4. He noted the nine-month LCD delay provides time to get products like PuraPly back onto customer formularies, a process that impacts Q2 but should stabilize by the second half. Regarding the CMS delay, Gillheeney believes CMS is now more deeply involved, reviewing coverage policies and allowing time for more clinical data submission. He is optimistic this will result in more products, including PuraPly AM, being approved, and suggested the LCD serves as a cost-control backstop if a new payment policy isn't implemented.

Ryan Zimmerman of BTIG sought confirmation on the company's assumption that the LCDs will be implemented as written and asked for a breakdown of the assumptions driving the high and low ends of the 2025 guidance, particularly regarding product conversion and at-risk revenue.

Answer

CEO Gary Gillheeney affirmed the operating assumption that the LCDs will be implemented in April as written, suggesting a delay is unlikely due to market confusion. CFO David Francisco explained the guidance range reflects uncertainty in the timing of customer conversion to covered products, with the back half of the year expected to be stronger due to significant market share opportunities. Gary Gillheeney added that a large portion of PuraPly revenue comes from non-DFU/VLU indications, which are not impacted by the LCDs.

Ryan Zimmerman of BTIG asked for clarification on the Q4 guidance, questioning the assumptions for the high and low ends given potential LCD impacts, and inquired about the key milestones required to meet the Q4 2025 BLA submission timeline for ReNu.

Answer

Chief Financial Officer David Francisco stated that Q3 saw limited disruption from LCD uncertainty. He explained the Q4 guidance range reflects this uncertainty: the low end assumes customers pull back spending ahead of a potential January 1st LCD effective date, while the high end assumes business as usual, continuing the strong momentum from the first three quarters. For ReNu, Francisco confirmed the last patient visit was completed in June and an interim analysis of the second trial is expected in Q4 2024, keeping the company on track for a full BLA submission by the end of Q4 2025.

Ryan Zimmerman of BTIG questioned why gross margin guidance wasn't raised further given the reduced tariff impact and challenged the Q3 handpiece guidance, suggesting it implied a utilization slowdown.

Answer

EVP & CFO Kevin Waters clarified that the gross margin guidance was effectively raised by narrowing the previous range to the high end of 64.5%. Regarding utilization, he explained that Q3's projected growth is comparable to H1 and that Q4's strong growth is against an artificially low 2024 base caused by a saline shortage, making the underlying growth rate consistent throughout the year.

Ryan Zimmerman asked for clarification on the capital sales guidance, specifically how replacement revenue fits into the total system revenue number. He also sought to confirm if the 2,000 deferred procedures from Q4 were fully recouped in Q1.

Answer

Executive Kevin Waters clarified that the full-year U.S. system revenue guidance of approximately $95 million includes revenue from both the 210 new greenfield systems and the smaller number of legacy system replacements. He also reiterated that the deferred procedures were not assumed to be fully recouped in Q1, as any benefit was offset by the lingering saline shortage, making the net impact negligible.

Ryan Zimmerman asked management to address field commentary regarding Medicare (RAC) audits, potential clawbacks, and reimbursement pushback from private payers like Cigna and Humana. He also questioned the Q4 guidance philosophy, given that it didn't seem to follow typical seasonal step-ups.

Answer

Executive Reza Zadno and CFO Kevin Waters addressed reimbursement, explaining that RAC audits are common and have not been an obstacle, though they are working to remove a Medicare size restriction that impacts a small subset of patients. Zadno clarified that Cigna 'retiring' its policy is a positive development. Regarding Q4 guidance, Waters defended the forecast of 56 systems as a record high, explaining that the methodical launch of nearly 100 systems in the second half of the year necessitates a more measured utilization ramp to ensure long-term success.

Ryan Zimmerman of BTIG asked about the performance and contribution timeline for new and existing OPSB clinics, and for color on the expected growth composition between the Scoliosis and Trauma & Deformity segments in the second half of 2025.

Answer

CEO Dave Bailey stated that existing OPSB clinics are showing 'same store sales' growth and new clinics are contributing, though none are at maximum volume yet. CFO & COO Fred Hite added that while they don't guide by segment, Scoliosis growth is expected to remain strong and likely outpace overall company growth in the next two quarters, though perhaps not at the 35% rate seen in Q2.

Ryan Zimmerman inquired about the impact of 7D system placements on the adoption of Scoliosis products, asking if these accounts serve as leading indicators for growth. He also asked for clarification on the breadth of the Scoliosis portfolio and the interplay between devices like VerteGlide and RESPONSE.

Answer

CEO David Bailey confirmed that 7D placements, especially in accounts with previously low or zero pedicle screw sales, are driving significant growth for the RESPONSE Fusion system. He explained that the comprehensive Early Onset Scoliosis (EOS) portfolio, including VerteGlide and the upcoming eLLi, enhances credibility with top surgeons and institutions, which helps pull through the entire Scoliosis product line, including Fusion and ApiFix systems.

Ryan Zimmerman of BTIG inquired about the key contributors to the 2025 revenue guidance, particularly the expected impact of EU MDR clearance on the international business, and also asked for color on expected seasonality and pacing throughout the year.

Answer

Executive David Bailey explained that typical seasonality, with Q2 and Q3 being strongest, should continue, though the growing OPSB business might level it out over time. He confirmed that EU MDR approval will be a positive catalyst in 2025, with a more significant impact in 2026 and beyond, especially for the European scoliosis franchise. Bailey also noted that the smaller scoliosis business is expected to continue growing at a faster rate than the larger Trauma & Deformity (T&D) business in 2025.

Ryan Zimmerman of BTIG asked for clarification on Tactile Medical's lymphedema market share within the 145,000 treated patients and how the company plans to align its growth with the market's 10% CAGR. He also asked when the company expects to lap the launch of its Nimble device, which would help revenue growth better reflect unit growth.

Answer

CEO Sheri Dodd affirmed the company's goal to return to double-digit growth, driven by market expansion and share gains. She noted that the Nimble basic pump is currently growing faster than the overall market, but its lower price point has a muted effect on total revenue growth compared to unit growth. CFO Elaine Birkemeyer added that this has been a multi-year strategy to penetrate the basic pump market and that as the product mix stabilizes, revenue growth will more closely align with the market. They indicated more specific timing would be provided in early 2026.

Ryan Zimmerman asked to reconcile the comment that Nimbl is outperforming the market with the reduced lymphedema guidance, questioning end-market dynamics. He also asked when the company expects to see operating leverage return to the P&L given the increased 2025 spending.

Answer

CFO Elaine Birkemeyer clarified that reps focused on vascular practices for the Nimbl launch, which has more Medicare patients, while sales vacancies impacted the commercial-heavy oncology and VA channels, affecting the product mix. She stated that operating leverage should return as the expanded sales force reaches full productivity and one-time technology implementation costs from 2025 roll off.

Ryan Zimmerman of BTIG asked about the possibility of Thunderbolt clearance occurring before its data presentation, the necessity of a distal aspiration trial, and what would constitute a successful outcome for the THUNDERBOLT trial.

Answer

CEO Adam Elsesser reiterated he could not comment on the timing of the FDA process for Thunderbolt. He noted that while there is discussion about distal occlusions, there is no consensus on needing a new trial. For the THUNDERBOLT trial, he stated success would be measured by a reduction in clot removal time, a key metric for physicians.

Ryan Zimmerman asked if current tariff dynamics have altered plans for the Costa Rica manufacturing expansion and inquired about the potential impact of a newly approved thrombolytic drug on thrombectomy demand.

Answer

CEO Adam Elsesser explained that the Costa Rica facility, set to come online in 2027, provides strategic flexibility regardless of the tariff situation. He stated that the new thrombolytic drug likely targets different patients, such as those with very distal strokes where catheters cannot reach, and is not expected to negatively impact thrombectomy demand.

Ryan Zimmerman of BTIG questioned the drivers behind the significant gross margin step-up required to meet the >70% target by the end of 2026. He also asked for an update on the sales force expansion and market access initiatives, and when their impact would be fully felt.

Answer

CFO Maggie Yuen and CEO Adam Elsesser confirmed the path to over 70% gross margin is driven by favorable thrombectomy product mix and manufacturing efficiencies, not price increases. Adam Elsesser stated the impact of the commercial team expansion was already felt in Q4's strong results, describing it as a non-linear, multi-year effort driven by superior technology and new economic data for hospitals.

Asked about the outlook for operating expenses (specifically sales & marketing), whether the gross margin target of 62-63% still holds, and where further margin upside could come from with full vertical integration.

Answer

Sales & marketing expenses will increase from Q1 levels for the rest of the year, while G&A will remain steady. The company is on track for ~63% gross margin by year-end. Margin improvement will be driven by replacing purchased inventory with in-house products (growth factor, Fibrex), shifting sales mix to higher-priced new products like Trivium, and bringing legacy product distribution in-house later in the year.

Ryan Zimmerman asked for the outlook on sales and marketing expenses, broader operating expense trends, and confirmation of the full-year gross margin target. He also questioned where the company sees potential for margin upside now that it is fully vertically integrated.

Answer

CFO Scott Neils confirmed the company is on track for gross margins of around 63% by year-end. He projected sales and marketing expenses would increase to levels comparable to Q4 2024, while G&A would remain steady. CEO Sean Browne detailed that margin improvement will come from replacing purchased inventory with higher-margin in-house products like Fibrex and shifting the product mix toward the new, higher-priced Trivium DBM offering. Neils added that bringing distribution in-house in Q3/Q4 will provide further margin benefits.

Ryan Zimmerman of BTIG sought to reconcile the company's decision to withdraw guidance while still providing commentary on performance expectations. He also asked for clarification on the 'V5' lens for China, its relation to EVO+, and its pricing. Lastly, he questioned how inventory levels would be managed if China's market recovery slows.

Answer

CEO Stephen Farrell clarified the commentary was intended to provide transparent color, not formal guidance, and highlighted risks to hitting the high end of the ex-China growth range and the gross margin target. President and COO Warren Foust explained that 'V5' is the internal name for EVO+ and it will be priced at a premium. Farrell addressed inventory by stating distributor levels will be at contractual norms by the end of Q2, as the consigned inventory is owned by STAAR.

Ryan Zimmerman of BTIG sought clarification on the withdrawal of guidance while still providing performance commentary. He also asked about the 'V5' lens for China, its relation to EVO+, and its pricing strategy, and questioned how inventory levels would be managed if China's market recovery slows.

Answer

CEO Steve Farrell clarified that the commentary was intended to provide transparent color on business trends, not formal guidance, highlighting potential risks to hitting the higher end of previous ranges. President and COO Warren Foust explained that 'V5' is the internal name for the EVO+ lens, which is on track for approval in China. He noted it will be priced at a premium, though final details are pending. Farrell addressed inventory, stating the consignment stock is company-owned and that distributor inventory is on track to reach contractual levels by the end of Q2 2025 due to strong sell-through.

Ryan Zimmerman of BTIG questioned the steady U.S. market penetration rate despite strong sales growth and asked if management was reaffirming the long-range plan from their Capital Markets Day, particularly concerning assumptions about stimulus in China.

Answer

Tom Frinzi, Chair, President and CEO, highlighted STAAR's significant outperformance in the U.S., with 16% growth against an 18% market decline, driven by the Highway 93 initiative. He described questions about the long-range plan as premature but expressed confidence in China's ability to recover quickly, citing a positive uptick during Golden Week as evidence that stimulus is beginning to work.

Ryan Zimmerman from BTIG asked about STAAR Surgical's confidence in its mid-teens growth forecast for China in the second half of 2024, given the mixed messages from peers and concerns about the health of the Chinese consumer.

Answer

Executive Thomas G. Frinzi responded that while the company is aware of economic headwinds, key concerns like competition, anti-corruption, and PPP have minimal impact on their business. He expressed confidence, stating that STAAR continues to grow and take market share in a declining Chinese refractive market and feels good about the business's trajectory.

Ryan Zimmerman asked about Intuitive Surgical's payer mix, specifically its exposure to the Medicaid population and the potential impact on the business if the government were to implement cuts to Medicaid funding.

Answer

Executive Jamie Samath described the payer mix as a 'healthy mix between private and Medicare' and stated that it was too early to comment on the potential impact of any speculative Medicaid cuts. Executive Gary Guthart reinforced this, noting that while Medicaid is part of their procedure mix, it is not a dominant component, and it is too soon to speculate on what any changes might mean for the business.

Ryan Zimmerman from BTIG asked about the expected revenue cadence for 2025, noting the difficult first-quarter comparison, and inquired about the new product pipeline's impact on average selling prices (ASPs), unit volumes, and potential cannibalization of the Lapiplasty system.

Answer

CFO Mark Hair confirmed that Q1 2025 will be a tough comparison with a higher growth rate anticipated in the second half of the year, driven by new product adoption, but not necessarily in a linear progression. CEO John Treace added that he does not expect a significant shift in blended ASPs, viewing the new products as a driver for procedure volume. He highlighted that natural guardrails exist to limit cannibalization, as the new MIS osteotomy products target the mild-to-moderate bunion segment where Lapiplasty is less penetrated.

An associate for Ryan Zimmerman inquired about the competitive implications of the finalized 2025 CMS reimbursement rates, asking if it would be a 'rising tide' for the market or a share-gain opportunity for Treace. She also asked if the favorable rates could drive a procedure mix shift towards Lapiplasty.

Answer

CEO John Treace acknowledged the significance of the rate changes, especially since Treace is the largest Lapidus procedure player, and noted it could broaden patient access. However, he stated it was too early to determine the precise competitive impact or predict a definitive shift in procedure mix, indicating they will monitor trends in 2025.

Asked about the 2025 outlook, specifically the mix of system sales versus recurring revenue, the expected ramp-up of OUS sales, the long-term OUS sales model (direct vs. distributor), and the SG&A expense run rate.

Answer

The company expects an aggregate sales/lease mix of about 60% sales. OUS sales are expected to grow steadily in 2025 with a larger inflection in 2026, and they will continue with the distributor model for now but may consider a direct presence later. SG&A is expected to increase as they invest in commercial infrastructure.

Representing Ryan Zimmerman of BTIG, an associate asked about the expected 2025 revenue composition between system sales and recurring revenue. She also inquired about the timing of an inflection in OUS sales, the long-term OUS go-to-market strategy, and the future trajectory of SG&A expenses.

Answer

Executive Thomas Staab projected the aggregate sales/placement mix would remain around 60% sales, similar to 2024, even with more aggressive U.S. placements and OUS distributor sales. Executive Nicholas Curtis anticipates steady OUS growth in 2025, with a more significant inflection in 2026. He also confirmed that while LENSAR is comfortable with its current distributor model in the EU and Asia, it may consider a direct presence in other markets in the future. Regarding expenses, Thomas Staab indicated that SG&A will likely increase as the company continues to invest in its commercial infrastructure without the previous offsets from administrative cost-cutting.

Asked about the company's international commercial strategy, the timing of expected revenue from new OUS markets, the health of the overall cataract procedure market, and the long-term gross margin outlook.

Answer

The OUS strategy is a multi-pronged approach targeting private equity groups and KOLs, supported by direct company resources. International revenue is expected in H2, with system sales recognized in Q3 and procedure revenue ramping up in Q4. The cataract market is viewed as healthy, with demand driven by efficiency needs and astigmatism management. Long-term gross margins are projected to improve to the 53%-55% range as high-margin recurring revenue grows.

Ryan Zimmerman asked about LENSAR's commercial strategy for its OUS launch, expectations for international revenue in the back half of 2024, the overall health of the cataract procedure market, and the long-term gross margin outlook.

Answer

CEO Nicholas Curtis detailed a focused OUS strategy targeting key private equity channels and KOLs to highlight ALLY's efficiency advantages, supported by distributors and LENSAR personnel. He confirmed OUS revenue is expected in Q3 from system sales, which have faster revenue recognition. CFO Thomas Staab added that significant OUS procedure revenue would likely begin in Q4. Curtis described the cataract market as having pent-up demand and a strong need for efficiency, which benefits ALLY despite macroeconomic pressures. Staab projected long-term gross margins could reach 53% to 55%, up from the current ~50%, as high-margin recurring revenues grow.

Inquired about the market opportunity from the aging installed base of competitive lasers, confirmed the geography of the 18 new orders, asked about the health of the procedure market, and sought confirmation on the company's growth outlook.

Answer

There are approximately 1,700-1,800 competitive systems in the field, many of which are 12-14 years old, presenting a significant replacement opportunity. The 18 new orders are confirmed to be all in the U.S. The company is optimistic about procedure growth, driven by the large, undertreated astigmatism market and ALLY's appeal to surgeons who previously avoided femto lasers. They reaffirmed their comfort with sustaining over 20% top-line growth.

Ryan Zimmerman inquired about the market opportunity from the aging installed base of competitor systems, confirmed the 18 new Q2 orders are all U.S.-based, and asked about the health of the procedure market and the company's ability to sustain its growth trajectory.

Answer

CEO Nick Curtis detailed the significant opportunity to replace the nearly 1,800 competitive systems in the field, many of which are over a decade old. He confirmed the 18 new orders are all for the U.S. market. Curtis expressed optimism about the procedure market, driven by ALLY's ability to treat astigmatism and appeal to surgeons who previously avoided femtosecond lasers. He also affirmed the company is comfortable with its expectation to sustain over 20% top-line growth.

Ryan Zimmerman asked for details on the newly announced aspheric functionality for the LDD, including the target patient population, and also questioned how the profile of new LDD buyers has evolved and the expected pace of adoption.

Answer

CEO Dr. Ron Kurtz clarified that existing LALs are already aspheric, but the new LDD functionality allows doctors to actively modify the asphericity post-operatively for specific clinical situations. Regarding new buyers, Dr. Kurtz stated the profile remains a broad spectrum of practices and that new technological advancements, like this aspheric feature, serve as a key driver for the next wave of adoption.

On behalf of Ryan Zimmerman, an associate asked about the potential margin impact from exiting the M6 product lines, whether this would create gaps in the U.S. spine portfolio, and which of the upcoming 2025 product launches management is most excited about.

Answer

CFO Julie Andrews stated that the financial impact of the M6 exit is already incorporated into the 2025 EBITDA guidance, with more detailed accounting treatment to be discussed in Q1. CEO Massimo Calafiore added that the move will not create a portfolio gap but will free up resources for strategic priorities. He expressed excitement for several 2025 launches, highlighting the new interbody products for spine, the TrueLok Elevate system for orthopedics, and AccelStim 2.0 for Bone Growth Therapy as key growth drivers.

Ryan Zimmerman asked for an update on the Acclarent integration and its expected revenue contribution and growth profile for 2025, particularly after it becomes an organic part of the business post-Q1.

Answer

CFO Lea Knight confirmed the integration is progressing well and that Acclarent is expected to deliver high single-digit growth in 2025, in line with the original deal model. She also highlighted anticipated synergies with Integra's existing ENT instruments business.

Ryan Zimmerman questioned the margin recovery trajectory into 2025, asking if Q3 represented a trough, and also sought a qualitative strategic outlook for 2025, questioning if it's purely a transition year.

Answer

CFO Lea Knight indicated that Q3's 16.2% EBITDA margin was not representative and expects improvement in Q4, but guided for full-year 2025 EBITDA margins to be similar to 2024. Executive Chairman Stuart Essig added that the new CEO will focus on quality, resilience, and manufacturing before providing an updated long-range plan.

Ryan Zimmerman asked if the expected 2026 gantry growth would be driven by price increases at the expense of unit volume and sought clarification on the revenue contribution from the Gynesonics acquisition.

Answer

CEO Stephen MacMillan stated that the 2026 rebound in the gantry business will be driven by a combination of both increased unit sales and favorable price/mix from the new product launch. CFO Karleen Oberton clarified that the guidance includes approximately $25 million in revenue from Gynesonics for the remaining three quarters of the fiscal year.