Young Li

Young Li from Jefferies questioned whether the entry of a major competitor in the dry eye market would alter Bausch + Lomb's investment strategy and profitability timeline for MIBO. He also requested an update on the health of the contact lens market, noting recent competitor comments about a potential slowdown.

Answer

CEO & Chairman Brent Saunders asserted that the strategy for MIBO remains unchanged, as the dry eye market has significant room for expansion and B+L holds a strong competitive "beachhead" with its comprehensive portfolio. EVP of R&D Yehia Hashad further detailed MIBO's clinical differentiation for evaporative dry eye and its superior symptom relief data. Regarding contact lenses, Saunders described the market as healthy and stated that B+L continues to outpace it, highlighting the 36% growth of the Daily SiHy franchise and even growth in legacy brands like Ultra monthly (8%).

Young Li asked about the performance of consumer-exposed businesses, particularly in the U.S. and China, and whether any slowdown was observed in March or April. He also questioned the speed of implementing tariff mitigation strategies and the ability to pass on price increases.

Answer

Chairman and CEO Brenton L. Saunders noted that despite concerning sentiment surveys, actual consumption remains strong, even in April, attributing this to the essential nature of their healthcare products. He mentioned potential for retailer inventory destocking but confirmed solid demand, including 6% contact lens growth in China. CFO Osama Eldessouky detailed a two-step tariff mitigation plan, with immediate 'no regret' actions like inventory management already deployed, and longer-term strategies like shifting production still under evaluation.

Young Li of Jefferies asked about the possibility of Chinese customers stockpiling inventory to hedge against tariff risks, the tangible impact of government stimulus in China, and whether facility investments signal expectations for larger cargo system orders.

Answer

CEO Sunny Sanyal stated that order intake from China has remained steady without signs of customers stockpiling inventory. He noted no significant demand increase has been tied directly to stimulus programs, though government healthcare expansion continues. Sanyal explained that facility investments are to fulfill the existing $55 million in cargo system orders and prepare for a strong pipeline. CFO Shubham Maheshwari added that individual orders exceeding $25 million are not uncommon in the cargo industry.

Young Li asked about the nature of ongoing orders from China amid high tariffs, what paused customers need to see to resume purchasing, and for an update on potential government stimulus. He also inquired about the large $25 million cargo inspection order, Varex's capacity to deliver on it, and the future trajectory of similar deals.

Answer

CEO Sunny Sanyal explained that while the order mix from China is similar, pauses are affecting high-value tubes from the U.S. as customers use existing inventory. CFO Sam Maheshwari added that non-U.S. shipments continue and Varex is pursuing mitigation strategies like bonded warehouses, which they hope to complete by the end of Q3. Regarding the cargo order, Mr. Maheshwari noted the 12-18 month delivery timeline is driven by customer-site civil works, not Varex's manufacturing capacity, which is not a bottleneck.

Young Li from Jefferies inquired about Varex's market performance in China and the potential impact of government stimulus, the margin profile and investment required for the new direct-to-customer cargo inspection systems business, and the development pathway for photon counting detectors.

Answer

President and CEO Sunny Sanyal confirmed an encouraging sales uptick in China but stated the company is not yet counting on a stimulus impact. For the cargo systems business, he and CFO Shubham Maheshwari explained that margins are initially lower on hardware but will improve with service revenue, with the business expected to be accretive at a run rate over $10-15 million per quarter. Regarding photon counting, Sunny Sanyal noted that adoption is currently being led by the industrial sector, with medical adoption expected to follow over a longer timeline.

Young Li of Jefferies asked for CEO Damien McDonald's early impressions of the business, his near-term priorities, and his views on enabling technologies, including robotics. He also requested more detail on the performance of the shoulder versus foot and ankle businesses within the extremities segment.

Answer

CEO Damien McDonald outlined his priorities as organic growth, operational excellence, and financial discipline. He stated that ARVIS is the key enabling technology platform, and the company is still evaluating the cost-effectiveness of large-format robots. For extremities, McDonald attributed strong shoulder growth to the U.S. launch of ARG and international cross-selling. CFO Ben Berry added that foot and ankle experienced softer market volumes in Q2 but is expected to accelerate in the second half.

Young Li questioned why the full-year guidance for the P&R segment remains at low single-digits despite a strong Q1, and asked for quantification of the revenue impact from SKU rationalization related to tariff mitigation.

Answer

CEO Matthew Trerotola explained the conservative P&R guidance is prudent because it's the segment most affected by tariffs and has diverse end markets, preferring to 'see some more of the movie' before making changes. CFO Phillip Berry stated that while SKU rationalization is part of the mitigation plan, the company would not quantify the impact at this time, noting it is already contemplated in the current guidance.

Young Li asked for an update on the Foot & Ankle business, including its competitive position and margin profile, and also inquired about which new products would be the most meaningful growth drivers for 2025.

Answer

CEO Matthew Trerotola expressed high satisfaction with the Foot & Ankle business, citing its strong product line, aligned channel, and KOL partners as drivers of success. He noted its high gross margins and climbing EBITDA margins. For 2025, he highlighted the ARG in Shoulder as 'extremely important,' along with a new version of Arvis in Knee and key portfolio additions in Hip.

Young Li of Jefferies inquired about the ramp-up speed for newly acquired surgeons compared to previous cohorts. He also asked about the timing and pace of the planned commercial expansion from 85 to approximately 100 territories.

Answer

CEO Laura Francis noted that procedural density is increasing, with surgeons active for over a year performing nearly double the procedures of the average surgeon. CFO Anshul Maheshwari added that the company plans to expand to about 100 territories over the next 12-18 months in preparation for new product launches. He confirmed the hybrid model, utilizing both territory managers and sales agents, will continue to be the strategy for driving productivity.

Young Li of Jefferies inquired about the total addressable market for surgeons, the ease of converting new physicians, and the expected timeline for an update on the reimbursement code reassignment for Granite.

Answer

CEO Laura Francis stated that the company added a record 300 physicians in Q1, with broad-based growth across all call points, and noted a 43% increase in physicians performing multiple procedure types. Regarding Granite, she explained that while CMS proposed an 8% DRG rate increase, it requested more time to analyze the data for a full category reassignment, which SI-BONE views as a normal administrative process, not a final decision.

Young Li inquired about the primary drivers of the strong 29% same-store sales growth, questioning the contribution from reps added in prior years versus the impact of increased instrument set availability.

Answer

Chairman & CEO Pat Miles attributed the growth to the company's operational evolution and compelling clinical offerings. CFO Todd Koning added that sales agents onboarded over the last 12-24 months have been significant contributors, supported by strong surgeon adoption (21% growth) and increased utilization (6% growth). Koning also highlighted that improved operational sophistication in managing field assets has been key to enabling this outsized growth.

Young Li asked about the spine market's historical resiliency during economic downturns, using the 2008 financial crisis as a potential analogue for macro headwinds.

Answer

Executive Patrick Miles asserted that spine surgery is highly resilient because it is not truly elective for patients experiencing neural pain. He stated they are not seeing any changes in demand. Executive J. Koning added that historical analysis of both the 2008 financial crisis and the COVID-19 period showed that the market remained robust and fundamental patient demand persisted.

Young Li, on behalf of Matt Taylor at Jefferies, asked for a better sense of the lingering impact of ship holds into Q4 2025 and 2026, and questioned the company's ability and investment required to win back customers once supply is restored.

Answer

EVP & CFO Lea Daniels Knight confirmed the full-year ship hold impact is now estimated at $100 million, with the recent $30 million increase due to extended remediation timelines, not new issues. She stated they don't project additional unidentified holds. President and CEO Mojdeh Poul added that for products on temporary ship hold, they see business return quickly. For products off the market longer, like PriMatrix, she acknowledged a greater effort is needed but expressed confidence in regaining share due to strong market demand and clinical evidence.

Young Li of Piper Sandler inquired about the drivers behind the Q2 guidance, specifically the newly identified shipping delays, and sought clarity on the assumptions supporting the significant second-half revenue ramp. Li also asked about the extent of mitigation efforts factored into the $22 million tariff impact for 2025 and the outlook for this impact into 2026.

Answer

CFO Lea Knight explained that the Q2 guidance reflects the new ship holds but that the full-year guidance had already contemplated such risks. She detailed the drivers for the second-half ramp, attributing it to improved Integra Skin production, resolution of private label supply issues, strong underlying demand, and seasonality. CEO Mojdeh Poul and CFO Lea Knight addressed the tariff question, stating that mitigation efforts are underway but their financial benefits are not yet included in the guidance. They deemed it premature to provide a 2026 tariff outlook.

Young Li of Jefferies asked for perspective on the AirSeal platform, specifically how the 35-40% attachment rate on Intuitive's Xi robot has trended, and whether the 10-20% utilization on the new da Vinci 5 system is due to clinical preference or a lack of integrated alternatives.

Answer

CFO Todd Garner noted the Xi attachment rate has trended up consistently for a decade. CEO Patrick Beyer clarified that AirSeal use on the da Vinci 5 is driven by clinical choice, as surgeons specifically request it for complex procedures to leverage its low-pressure insufflation benefits, despite the da Vinci 5 having its own integrated system.

Young Li of Jefferies Financial Group Inc. asked CEO Patrick Beyer for an update on the long-term portfolio review mentioned on the previous call. He also inquired about capital equipment trends, particularly for AirSeal, and whether ordering patterns differ for new DV5 robotic surgery accounts.

Answer

CEO Patrick Beyer stated that his initial focus has been on engaging with shareholders, employees, and customers, confirming the durability of the four key growth drivers (BioBrace, Foot & Ankle, AirSeal, Buffalo Filter). He noted it's still early for the broader portfolio review. On AirSeal, Beyer confirmed continued adoption with DV5 systems and highlighted that a specific SKU used only with da Vinci robots grew in the double digits. CFO Todd Garner added that there is no sign of weakening customer appetite for their capital products, attributing a quarterly decline to tough year-over-year comparisons.

Young Li of Jefferies requested an update on the Buffalo Filter business, including the status of smoke evacuation legislation in the U.S. and globally. He also asked about the feasibility of using price increases to offset potential tariff impacts.

Answer

CEO Patrick Beyer reported that 18 U.S. states now have smoke evacuation laws, with three more becoming effective in 2025, and he remains bullish on the product line. He expressed skepticism about passing tariff costs to hospitals due to existing contracts. CFO Todd Garner added that while pricing has been neutral to slightly positive, the window for increases is likely closing.

Young Li asked about the growth of the private label business versus branded products and whether there was a consumer shift from higher-priced to lower-priced lenses. He also inquired about Cooper's interest in the weekly contact lens market.

Answer

President & CEO Albert White stated that CooperVision's private label business is growing slightly faster than its branded portfolio. He noted that while demand for high-priced products like MyDay remains strong, there have been shifts in purchasing behavior, but not a significant trade-down to lower-priced lenses. He confirmed Cooper has no plans to enter the weekly/two-week lens market.

Young Li of Jefferies asked for updated views on M&A for CooperSurgical and inquired about the drivers behind the expected rebound in spherical lens growth for the remainder of the year.

Answer

CEO Al White stated that the focus for CooperSurgical is on internal execution, including increased R&D to develop new products and continued investment in geographic expansion. Regarding spherical lens growth, he explained that the key driver is increased production of MyDay. As the company accelerates manufacturing, particularly after focusing on building out the expanded toric range, more MyDay sphere lenses will become available to meet market demand.

Young Li from Jefferies asked about the health of the consumer, inquiring about any shifts in price sensitivity, trade-up/down behavior, or private label trends. He also asked about the industry-wide supply/demand balance for manufacturing capacity.

Answer

CEO Al White reported no significant changes in consumer behavior, noting consistent growth in both branded and store-brand products, with continued strength in both value-oriented monthlies and premium dailies. On capacity, he stated that the entire industry is investing heavily to keep up with the long-term shift to dailies, which requires significantly more lenses. He does not see a risk of overcapacity due to the long lead times for new manufacturing lines.

Young Li asked about the current extent of competitive trialing in the U.S. AT-IOL market and whether Alcon would also be trialing PanOptix Pro. He also inquired about the pathway for the Voyager system to become the standard of care for glaucoma.

Answer

Chief Executive Officer David Endicott stated that competitive sampling continues in waves with new product launches but sees it as a diminishing factor. For Voyager, he noted a growing consensus for SLT as a first-line therapy, and believes Voyager's efficiency will help drive that standard of care. He also mentioned that manufacturing is scaling and being dual-sourced in Israel and the U.S.

Young Li from Jefferies asked for more details on the business trends observed in April and requested additional color on the expected quarterly cadence for the remainder of the year within the annual guidance.

Answer

President and CEO Dr. Ron Kurtz confirmed that business trends stabilized and improved later in April but offered no further specifics. CFO Shelley Thunen reiterated that the company does not provide quarterly guidance but expects LDD sales to exceed 2024 levels. She cautioned that Q2 may not show typical seasonal strength due to macro and competitive pressures, with a stronger LAL volume recovery expected in the second half of the year.

Young Li from Jefferies asked for more details on RxSight's global expansion strategy, including potential timelines for ex-U.S. regulatory approvals and key international markets. He also questioned if there were performance differences between private equity-owned practices and independent clinics.

Answer

CEO Dr. Ron Kurtz stated that the premium IOL market is about 80% outside the U.S., concentrated in ~20 major countries in Europe and Asia. He confirmed regulatory processes are underway in both regions and expects to provide updates on approvals in the 'next several months.' Regarding practice types, Dr. Kurtz explained that while the sales process can differ, clinical decisions in PE-owned practices are often still made at the local site level. He noted that PE groups with existing LDDs recognize the system's ability to drive high-margin revenue, making it an attractive way to expand margins across their network.

Young Li, on behalf of Jefferies, asked about Globus's planned presence at the upcoming AAOS conference, the value proposition for spine robotics in Ambulatory Surgery Centers (ASCs), and the benefits and economic model for the new navigation headset.

Answer

CEO Dan Scavilla confirmed Globus will have a larger presence at AAOS to showcase its expanded portfolio. He noted that while the ASC setting is growing, Globus is positioned to support it without disrupting the hospital channel. For the navigation headset, he highlighted benefits like direct line-of-sight on the patient and its utility as a teaching tool. CFO Keith Pfeil added that the economic model is flexible, complementing existing capital sales with various acquisition options.

Young Li questioned the rationale for the modest guidance increase given the Q1 beat and asked about the impact of China's economic stimulus and anti-corruption campaigns on Accuray's business.

Answer

President and CEO Suzanne Winter and CFO Ali Pervaiz responded that the modest guidance increase reflects cautious optimism, as Q1 is typically the smallest quarter and they expect about 55% of revenue in the second half of the fiscal year. Regarding China, Suzanne Winter acknowledged that the anti-corruption campaign has caused process slowdowns, but stated that Accuray is still gaining market share due to strong pent-up demand for its domestically produced Tomo C product and its unique JV partnership.