Good day and welcome to the Integra LifeSciences second quarter 2020 financial results call. At this time, I'd like to turn the conference over to Mike Beaulieu. Please go ahead, sir.

Thank you, Eduardo. Good afternoon and thank you for joining the Integra LifeSciences second quarter 2020 earnings conference call. Joining me on the call are: Peter Arduini, President and Chief Executive Officer; Glenn Coleman, Chief Operating Officer; and Carrie Anderson, Chief Financial Officer. Earlier today we issued a press release announcing our second quarter 2020 financial results. The release and corresponding earnings presentation, which we will reference during the call, are available at integralife.com under Investors, Events & Presentations, and the file named Second Quarter 2020 Earnings Call Presentation. Before we begin, I'd like to remind you that many of the statements made during this call may be considered forward-looking statements. Factors that could cause actual results to differ materially are discussed in the company's Exchange Act reports filed with the SEC and in the release. Also, in light of the ongoing COVID-19 uncertainty, we are disclosing more information today for investors about recent, current, and anticipated future business performance than we would during a typical quarterly earnings call. In particular, we will refer at times to our June 2020 revenue performance. When we do so, in all cases, our June 2020 average daily sales rate is being compared to the average daily sales rate for the entirety of the second quarter of 2019. This comparison provides a meaningful mechanism for understanding our actual business performance toward the end of the second quarter in 2020 versus 2019 by normalizing year-over-year sales activity to account for differences in monthly customer buying patterns and selling days. Lastly, our comments today will include certain non-GAAP financial measures. Reconciliations of any non-GAAP financial measures can be found in today's press release, which is an exhibit to Integra's Current Report on Form 8-K filed today with the SEC. With that, I'll now turn the call over to Pete.

Thank you, Mike, and good afternoon, everyone. Thank you for joining the call, and I hope you and your families are staying safe and healthy during these difficult times. If you turn to slide 4, I'll begin the presentation. The second quarter was one of the most extraordinary periods in our company's history. Beginning in February and continuing through the second quarter, healthcare providers around the world moved quickly to manage the effects of the global pandemic. Surgical procedure volumes across the industry declined materially, as the central resources were reallocated to treat COVID patients. Integra quickly adapted by taking actions to safeguard employees, ensure continuity of our supply chain and manufacturing capabilities, and contain costs to protect liquidity and profitability. These efforts were vital to our performance during the second quarter, and I'm proud of the resiliency of our global colleagues and their commitment to supporting customers and patients. Looking at the second quarter, total sales were down 31% on an organic basis. However, looking at the monthly sequential trends, sales in June improved to a decline of approximately 13% from the prior year's average daily rate for the second quarter. In our global neurosurgery business, sales in each of our major franchises increased on a monthly sequential basis during the second quarter, consistent with the outlook we provided on our last earnings call. Products used to treat underlying conditions that are considered more urgent such as neuromonitoring, CSF management, and dural access and repair led the improvement in the second quarter. Second quarter performance outside the US, while highly variable, was slightly better than the US and was led by our business in Japan, where sales increased double digits over the prior year. While this performance can be attributed in part to effective government policies in Japan that…

Thanks, Pete, and good afternoon. Second quarter revenues for the total company were $259 million, representing a decline of 33% on a reported basis and 31% on an organic basis compared to the second quarter of 2019. Our performance was above the high end of our preliminary range communicated on July 9. Adjusted earnings per share were $0.33 compared to $0.73 last year. And while revenue and EPS declined on a year-over-year basis due to the adverse impact of COVID, both came in at the high end of our internal models. If you turn to slide 5, I'll start with a review our CSS segment. Second quarter CSS revenues were $170 million, a decrease of 30% on an organic basis. We saw steady monthly improvement throughout the quarter, with sales in June down 13%. Global neurosurgery sales performed better than the segment average, with a decline of approximately 26% in the second quarter, with each franchise showing sequential monthly improvement off of the April lows. For the month of June, neurosurgery sales were down mid-single digits, led by a strong recovery in neuromonitoring, CFS management, and dural access and repair, as these products are used in more urgent procedures. Performance in advanced energy was mixed, as capital sales, which are tied to hospital budgets, did not see as strong of a bounce back as compared to our consumables sales, which are largely correlated to CUSA procedures and showed very nice sequential monthly improvement. Sales in our instrument franchise declined 46% on an organic basis. And while we did see monthly improvement throughout the quarter, the month of June was still down approximately 35%. And as we discussed last quarter, the instrument business includes small capital and instruments sold to alternate site settings, which are less correlated to the pace of…

Thanks, Carrie. Good afternoon, everyone. If you turn to slide 9, I'd like to provide further color on our international performance, cover some external factors to consider as we look at the second half of 2020. On the left side of this chart, we provide the revenue decline rates for each segment as well as splits for US and OUS performance. We've included both the full second quarter and the month of June, which as Mike indicated, is a comparison to the average daily sales rate from the full second quarter of 2019. Sales outside the US declined 30% in the second quarter compared to the prior year. Our revenue recovery improved each month and in each region during the quarter, with June sales down 14%. By region, Asia-Pacific was down less than the company average in the second quarter and showed the strongest rates of revenue improvement, led by Japan. As expected, revenue in China was down in the second quarter, as distributors worked through deliveries taken in the first quarter. We're confident this decline was largely a matter of timing, as China returned to growth in the month of June. Performance in Europe was down slightly more than the company average and varied significantly by country. Germany, Italy, and Benelux led the recovery, while France, Spain, and the UK lagged. Turning to the rest of the world, we've seen mixed results, with Brazil being one of the hardest hit markets and Canada showing steady improvements in line with the company's monthly sequential recovery for the second quarter. With that, let me now turn on how we're looking at revenue recovery scenarios for the second half of 2020. There are still a number of factors that can vary widely and will determine the pacing of revenue improvement in the…

We'll now take our first question from Matt Miksic at Credit Suisse. Please go ahead. Matt Miksic - Credit Suisse Securities (USA) LLC: Thanks very much for taking the question. One question, if I could, just as I'm sure a lot of folks are wondering about – you've given some color in Q3 and this idea of down 5% to 15% year over year, which suggests there's improvement from the exit growth rate of June. Could you talk a little bit about how the pieces fit into that directionally? I know the last time we spoke, there was a question about ICU availability. And there were lots of questions around the rebound in some of the elective procedure categories that seemed like they're having a favorable impact on the recovery for orthopedics. But maybe if you could, just take us through the businesses and give a sense of, within that down 5% to 15%, where the trajectory should lie across your major businesses. And then I have one follow-up.

Carrie, do you want to lead us off?

Sure. Again, I think generally, the slide that we had provided to you during our Q1 call that looked at the spectrum of our products and what we would think would be laggards and leaders of the recovery is largely intact. I think the things that we thought would lag like capital did lag, and I would expect those to continue to lag into the third quarter. And the things that were more tied to more urgent procedures would lead the recovery. And certainly, a lot of our neuro – in our neurosurgical area did see a faster recovery as we exited June. So I think largely that slide is still intact. I think there were a few surprises. Ortho really came back much stronger than what we expected. So certainly there was some pent-up demand, I would say, that helped us in the second quarter on the ortho side. But generally, we think the ortho side of the business will continue to show some nice recovery there. And I would say the other surprise was maybe instruments kind of lagged a little bit more than what we expected it to do. It behaved more like a capital-like. And, again, we do have some parts of our instrument business that are tied to alternate site settings, and so those would lag instruments that are more in the surgical setting. So largely, I would say that's where we would largely stay in terms of how we would see Q3 kind of unfold. Matt Miksic - Credit Suisse Securities (USA) LLC: Okay, that's helpful. And then as a follow-up, if I could, and maybe this is for Glenn and just generally on the geographies, that seemed to be improving across the global common footprint. I guess what – you mentioned monitoring some of the trends looking for sort of flare-ups across the portfolio. Given what's happened in the US and what seems to be kind of maybe quieting back down in certain parts of the US, how confident are you at this point that we're looking at a series of sequential improvements, or is there some sense that we're likely to see more flare-ups and steps back before we take the final steps forward in some of the other geographies like we've seen in the US?.

Hey, Matt. Thanks for the question. I don't want to kind of predict where the flare-ups are going to happen and when they're going to happen. I would say, though, that from what we've seen so far, we've been very delighted with the results in Asia-Pacific broadly speaking. So Japan had a really strong growth quarter, even despite COVID. China, while we had some challenges early in the quarter, which we knew we were going to have because of how we ship into China, June was a strong month, and we're expecting the third quarter to show growth in China. And even greater Asia has held up quite nicely when we look at the rest of Asia. And so right now, we don't expect to have any setbacks in that part of the world. Australia didn't get as hard-hit as many other places around the globe. Australia continues to be pretty steady for us. Canada was hard-hit in the second quarter. I'm expecting it to show a nice improvement sequentially in the third quarter. Latin America is still a bit of a wildcard for us. We're still seeing some laggards, as we use the term, relative to the Latin American market, and that's probably one market that we're keeping a closer eye on. I would just say generally speaking, Europe has done kind of a mixed review. So we mentioned some of the strength in Germany and in France and in Italy, but at the same time, we haven't seen the same level of recovery yet from the UK and Spain, to name two. So a bit of a mixed bag there, but we are seeing improvement in Europe. In general though, I would say we feel very good about the direction of our direct markets. Indirect, where we sell through distributors, I think is going to be a bit lagging in terms of some of the recovery, and again, that would be part of Latin America. But all in all, I think that's how I would phrase it up. And then obviously, I know your question was very focused on international. The US, we're seeing positive trends sequentially here in July both for OTT and for CSS. And, Carrie, you know a lot of the points about what was going on there.

The other thing I would add is, certainly, as we think about the guidance for Q3, we do have the summer holiday season to think about broadly across the US, but particularly in Europe. And so I'm not sure that we'll see the same sequential month-to-month improvement definitely from Q2 to Q3. We expect sequential improvement, but it may have a different way it unfolds over the months just because of the normal European holidays. Matt Miksic - Credit Suisse Securities (USA) LLC: That's great. Thanks so much. I'll get back in queue.

Thanks, Matt.

All right, we'll now take our next question from Kaila Krum at Truist Securities. Please go ahead.

Hi, guys. Thanks for taking our questions and for all the detail this quarter. So you mentioned that you're optimistic about the ability to return to pre-COVID revenue levels by the fourth quarter. So I guess if fourth quarter revenue was flat this year versus last, is it fair to assume that earnings would also be flat relative to the fourth quarter of 2019, or is there anything in particular we should consider that would weigh or benefit earnings this year as compared with last?

I'll take that. Let me make a comment, Carrie, and then maybe you can frame up on the profitability side of it. I do think – just to be clear, I don't say we think we're overly optimistic on getting to 2019 levels. We clearly are modeling scenarios that get us there, and I would say we lean more towards that scenario that makes sense. That being said, how the flu season plays out, complementing that with COVID and the confidence really within our institutions, I would say our capital funnels are actually quite strong. But we need to have hospitals feel like they can see what a predictable multiple set of months looks like that they could actually pull the trigger and make the acquisitions, and that would clearly give us room to get to the next level. Again, the sequential improvement comes down to the fact that everybody is getting smarter. I think all of the providers from where we were in April, you've heard this from other companies as well. How people are dealing with this has actually made a lot of differences. And so I remain confident that we're going to see, even if things get more challenging, just improved management of patients, which means more procedures. But for us to get to a level of exiting at 2019, we need some capital and we need instruments to be improving versus where we are, which we see that scenario. But in that scenario, it also doesn't have us in October-November getting much worse with COVID and flu combined, meaning people kind of buckle down, and hence why we're not giving guidance at this point in time. On the profit side, I'll let Carrie comment, but we clearly are keeping an eye on our overall expenses for the same reason and making sure that we funnel them to the most important longer-term projects because we do have some big enablers in our hopper that could benefit us on the backside of 2021 and clearly in 2022. And keeping our thesis intact for the company, we want to make sure those are funded. So, Carrie, I'll turn it over to you, any comments that you'd like to add?

Sure. As I think about the fourth quarter of last year, our EPS number, adjusted EPS number was around $0.68. I don't think that's a bad place to think about a scenario that if we could get back to fourth quarter 2019 levels in the fourth quarter of 2020 that we could – I think that's a general area that we could shoot for. The geography of the P&L may be slightly different. I would expect gross margins to be a little better this year compared to last year just because, again, of our favorable mix as we continue to move on discontinued products and continue to look at new product introductions and the contributions of those to generate favorable mix changes. But I would say a higher tax rate year over year this year compared to last year, we just don't have the stock comp expense deductibility that we had last year, so maybe unfavorable in the tax rate year over year. But generally, I think operating expenses are going to be lower this year than last year. So we're going to continue to control discretionary spending, and I would definitely expect that operating expenses will be lighter than last year. So the combination of maybe a little bit better gross margin, a little bit less operating expenses offset with a higher tax rate largely would get us directionally in line with where we ended Q4 of 2019 for 2020.

That's great context and color. And then I know you guys mentioned on the call that you're investing in a pipeline of R&D programs, which is typical of you (33:40). What would – I'd like – if you guys could just remind us of any upcoming product launches you're particularly excited about, any updates on Rebound or Arkis product launches from those two acquisitions. And then I'm assuming you guys are still consistently evaluating M&A and inorganic opportunities at this time. Can you just comment on what you're seeing on the M&A landscape and how you're thinking about supplementing some of those organic projects? Thank you.

That's a good question. That's a big one. I would say I'll frame a couple points up and then hand it over to Glenn. But we clearly are active looking at opportunities in the M&A world. We think any type of disruption or change is obviously a good opportunity to take a look at scenarios and how they may play out for us. And so we will keep very active in keeping our eyes on things. At a high level, and I'll let Glenn comment further about some of the other products in the near term, I think four big areas that we're focused on that have impact out into late 2021 and beyond, Rebound clearly is a big opportunity. To remind everyone, it brings two products for us. It brings a minimally invasive tool for neurosurgery to be able to do keyhole access for tumor resections and others. It also brings us into the stroke market for intracerebral hemorrhage. And so both of those areas have different timelines to those, but in late 2021 is when we start testing the water with some commercial capabilities with MIS and then ICH a little bit later. We have some ongoing dialogue with the FDA relative to building out our nerve portfolio, and we've been making good progress working and building our portfolio. We've been making sure that we've been able to fund that adequately during this time period. And also in our plastic and reconstructive area, even though some of those businesses have taken probably a stronger hit during the COVID window, we still see opportunities with our technologies in regenerative medicine to play a bigger, significant role. And we're working with the agency as well as product development strategies to expand our indication portfolio there. Glenn, you may want to add some other comments as well.

Sure. I think the first point to emphasize is during the cutbacks that we made from a cost reduction point of view, we did not really impact any of the long-term R&D programs. We wanted to make sure those were funded for the long-term viability of the company. So all the things that Pete mentioned obviously we are funding. The other thing I'd add is we're still investing heavily in clinical studies as well to support reimbursement, to support differentiation of our product, and a lot of that is in the regenerative portfolio area. So PriMatrix, amniotics, as in other areas of heavy investment that we've been making.

Great. Thank you, guys.

All right, we'll now take our next question from Shagun Singh at Wells Fargo. Please go ahead.

Thank you so much for taking the question. Pete, I was wondering if you're willing to share what the exit growth rate was in July versus the 13% that you called out in June, and if there were any differences by segment. It seems like it was pretty similar exiting June. And then I'm curious to get your thoughts on 2021. It looks like consensus is looking for about flattish growth in 2021 over 2019 levels. And I'm just curious to know what your reaction is. I know it's a long way between now and then. But do you think that's a reasonable place to be, or could it be conservative if, in fact, you are able to approach normalized levels in Q4? Thank you for taking the questions.

Shagun, unfortunately, I can't give you a whole lot right now. This is the reason that we're not actually giving guidance here even this year until we kind of see how the smoke clears. In probably late October, early November, we'll have a better view. Our plans for 2021 guidance right now are kind of what we traditionally do, which would be out in early Q1, so I'm not going to comment about that. And I think when it comes to our June exit rates and our July, we've kind of given about what we want to give at this point in time. I would say, obviously, each of our product families and franchises has different levels of exit that bring that composite for the whole company. I think we've given some views here where orthopedics had the greatest recovery, but it also had the biggest impact, and more things like wound reconstruction tended to be more steady throughout the quarter. But I think that's really all the info on those two areas that we want to provide at this point in time.

Thank you.

All right, we'll now take our take our next question from Robbie Marcus at JPMorgan. Please go ahead.

Thanks, I appreciate the question. How do we think about – you touched on this before, but how do we think about the impact on forward growth from capital equipment? CUSA had been a pretty big driver of growth. I know it's a capital, but then a disposable component afterwards. How should we think about this environment, where maybe capital units aren't getting placed as much having an impact on forward growth?

Robbie, I'll take a shot. And then, Carrie, if you want to or Glenn, add to it. I think again, about half of our portfolio when you think of something like CUSA, again, which is typically used in tumor resections or broadly in liver surgery around the world, is in consuming of the actual tips, the tubing, the whole cassettes that are used, and we're seeing that surge quite a bit. And some of this, as you know, as an incumbent in an area where there isn't a lot of new equipment being brought in, an incumbent in a given area, which we tend to be a significant one in neurosurgery, you tend to benefit from added cases. So we're seeing that come through. I think again, capital has to be framed up in the look of CUSA about what – because we're not talking that this is a linear accelerator or an MRI that may cost multiple million dollars. These are $200,000 devices. And so I think we believe as the uncertainty settles, they are products that clearly enable procedures to be done that are still very profitable for institutions around the United States and obviously very necessary in markets outside the US. And we are seeing reasonable transactions take place outside the United States in markets that start improving. So as we see a market get better, this level of capital purchase, which some companies may describe as smaller capital or midsized capital expenditures, we think are going to be some of the first ones coming back. So I think, Robbie, the long and the short of the question is I think our funnel hasn't decreased. Our funnel has actually been growing, and I don't see people saying in six months if it's even challenging, I don't need this product anymore. I think they're going to buy it when they can afford to buy it. And we're going to be able to see that have an impact at that point in time. I don't know, Glenn, if you want to comment or, Carrie, if you have some other things.

Yes, maybe I'll add just a couple things. Again, capital is only about 10% of our total revenue. And I would say, as Pete mentioned, the funnel is still quite healthy. And I would say we're obviously working with our customers as they have the financial wherewithal on different options, whether it's an outright purchase, whether it's different financing models, rent to own, leasing models as well to facilitate that capital purchase and how it makes sense to them. And generally, I haven't seen any change in the competitive landscape either. So I think it largely has stayed the same, which is good. Glenn, anything else?

Yes, I was just going to say, don't forget, Robbie. We also just got a neuro indication for CUSA, which we think is a differentiator. And there are significant savings to hospitals in using our CUSA device, with a significant reduction in the OR theater and the fact that we are precision cutting and only cutting out the tissue that's the bad tissue, the hard-to-remove tissue. And so we believe there's differentiation in the product. We've just got a new indication for CUSA. And again, the funnel is strong. We think it will come back once the actual hospitals get some dollars freed up.

That's really great color. And maybe just to follow up, Carrie, this was one of your better free cash flow conversion quarters. Obviously, it was a little unusual. But did you undertake anything in the quarter that can increase free cash flow conversion going forward? And how do we think about that maybe as the top line and some of the expenses come back in? Thanks.

I would expect second half cash flow to improve sequentially from the first half as revenue continues to increase. One of the levers, we did see some inventory build in the second quarter. So I would expect as revenue continues to recover, we'll be able to work through some of that inventory, which will incrementally help cash flow. And in addition, from a free cash flow perspective, capital expenditures will still be an area that we will manage tightly. So if you think about our first quarter CapEx, it was around $16 million – $17 million. We obviously controlled that very tightly in the second quarter. CapEx in Q2 was only about $7 million. And largely, I think if you think about the second half, I would say incrementally we'll be higher than where we ended in Q2 on CapEx in each of the quarters in the second half, but certainly probably not at the levels we were at Q1. So I think CapEx will continue to be a source of free cash flow conversion to us, along with just generally working some inventory levels down and improved EBITDA associated with higher sequential revenue.

Great, thanks a lot.

All right, we'll take our next question from Raj Denhoy at Jefferies. Please go ahead.

Hi. Good afternoon. I wondered if I could ask a couple on the expense lines. I think you noted that the gross margin was quite good in the quarter, quite better than I think most people were modeling. It sounds like you're comfortable with that continuing for the balance of the year, so one, if that's in fact correct. And then the second question was really around the other operating expenses. So I think you mentioned you expect operating expenses to only be down about 5% in the third quarter. The second question, is that correct, and what's the outlook really for spending on those lines? And kind of the roll-up of all that is when one thinks about your EBITDA, your leverage ratio here, and where it ultimately peaks out in a sense, because your EBITDA is probably going to be a little lower for the next several quarters. So how much capacity do you truly have when you think about doing deals over the next few quarters here?

So let me take that question in different parts. Let's start with the gross margin question. So I'd expect Q3 likely to be in a gross margin neighborhood that's somewhere in between Q1 and Q2. Obviously, Q3 revenue will likely be in the range we provided. It will be higher than Q2 but lower than Q1. So I'd expect gross margins to be somewhere in between Q1 and Q2 actuals for Q3. So that bodes well. And in terms of the operating expenses, we gave guidance in my prepared remarks that Q3 operating expenses will be down about 5% from last year. I think it's more interesting to compare it to our Q4 2019 run rate. So we didn't have Arkis and Rebound really in our run rate numbers until Q4 of 2019. We did those two acquisitions very late in the third quarter. So when you compare it to more of a Q4 2019 operating expense run rate, our Q3 2020 operating expenses are probably more down like 10% as a rough magnitude. And I would say sequentially, we'll likely continue to increase that in Q4 as long as revenue continues to recover, but we'll obviously manage that quite a bit. And then what was your last question, Raj? I missed that one.

Sorry, just when one thinks about your debt ratio right now, given how expenses are going to trend, where do you think that peaks out before it starts to improve?

Remember, the way that the net – the total consolidated leverage works, it's based on a trailing 12-month EBITDA number. And it's a bank EBITDA number, it's slightly different than the adjusted EBITDA number that we report, but it's trailing. So the second quarter we'll see more of a peak because you're losing the last two quarters of 2019 as the other quarters kind of roll on into that formula. So certainly, I would expect that ratio to peak a little bit more in the third quarter and fourth quarter. However, we still have lots of capacity as you think about this amendment we did on July 14 without a temporary amendment to bring us up to 5.5 times. In Q2, we were only at 3.4 times. So we have ample opportunity there to be confident of putting spending back in as our revenue recovers and making sure that we're thinking about long-term growth and investments there. And so we still have lots of ample room on our debt revolver as well. So I'll maybe let Pete comment on thinking through M&A opportunities. Pete, do you want to shed a little bit of light on that?

Yes, just the fact that, Raj, again, as I mentioned earlier, in these times there are all types of opportunities that come up. I would say we're keeping an eye on opportunities within the tissue portfolio. We've clearly got opportunities that could start to build out further some of the missing puzzle pieces within our broader neuro portfolio. And those could be small plug-ins that are profitable, singles and doubles. I don't think of any large kind of transactional work that we're thinking of, but there are lots of interesting opportunities to plug in to keep building out the portfolio. And we've been – again, a big part of what we've been focused on during this time period is just thinking about our portfolio and how we continually optimize it. Obviously, SKU rationalization has been a big part of it. But thinking about other things that we can plug into it and keeping the dialogue moving forward. Most of the deals we do, we probably have entertained or engaged in some dialogue with a partner or an opportunity years in advance. And so we're using this time period as well to make sure that we advance those relationships. So when the time is right, we'll be in a good position to add key assets.

That's very helpful, thank you.

Thanks.

We'll now take our next question from Steven Lichtman at Oppenheimer. Please go ahead.

Hey, thanks for taking the question. This is actually David (00:50:33) on for Steve. So I know it's probably difficult to parse out, but could you provide any color on the recovery during 2Q, actually how much of it was from previously deferred procedures versus new patient growth? Thanks and I have one follow-up.

I would say, we haven't – honestly, I don't have it all broken out nor do we have a perfect handle on it ourselves. But clearly, there was a recovery component that was built into it. If you think about orthopedics, as an example, that would probably be the clearest example where we know shoulder procedures were delayed, and we saw that come back much more strongly. So across the board, we clearly had some recovery that was built in there. But I would say, I don't think we're in a position to really characterize exactly how much that was worth within the second half of May or within June.

Okay, that's fair. And I just had one question on your 3Q estimate of down 5% to 15% year over year. Is that an organic basis or a reported number? And what should we be factoring in for FX and discontinued products for 3Q and the full year? Thank you.

Carrie, you want to take that?

That's more on a reported basis. And so I don't have the breakout between FX and discontinued products, but that's more on a reported basis.

Okay, thanks.

Thank you.

And we'll now take our next question from Matthew O'Brien of Piper Sandler. Please go ahead. Matthew O’Brien - Piper Sandler & Co.: Good afternoon. Thanks for taking my questions. And, Pete, sorry to push a little bit here, but everybody is trying to get their head around backlog versus new patient growth. So was July better than June as far as the overall growth rate goes for the company?

Maybe, Pete, let me – I'll take a stab at that. Again, in Pete's prepared remarks, we talked about July being sequentially stronger than June. And I do think, and Shagun kind of asked a little bit about this as well, that certainly I still think there is some pent-up demand, some backlog we're working through as we go through the recovery. But remember also, there are parts of our business related to traumatic injury that are really not tied to pent-up demand. You either have the injury or you don't. You don't have a backlog of those. And so as restrictions – shelter-in-place restrictions ease and people are out and about a bit more than they were in Q2, you will start to see some more recovery in those areas. And I would say we've started generally to see some – as I think about our wound reconstruction, our area that performed the best for us was our chronic wound. But as we move into the third quarter, I do think with some of the restrictions – shelter-in-place restrictions down, we'll see the continued recovery of our acute burn and wound area, as again, those are tied to maybe more traumatic things happening. The same thing with our neurosurgery, TBI type of brain injuries that will benefit from shelter-in-place restrictions being eased.

Yeah. I think, Matt, Carrie covered it. Again, the only piece that I would add to it is the fact that when we take a look here coming into the fall or as we're exiting right now, there's only so much you can delay certain procedures in everything that we do outside of the items that Carrie commented on. And so we're seeing a continual ticking along of those, and there's offset by, as you know, many hospitals still reserving some ICU bed capacity. And that's one of the things that's clearly tempering some of our recovery in neurosurgery because they're being cautious. And so I do think as states get through and continually see a window when they're going to have cases below 5%, as an example, that's been used in the media, we do see correlations with procedures growing. So if we were to look at New Jersey and New York now, our procedures growth versus Florida or Arizona, you would see a big difference just based on what the hotspots are. And so part of our crystal ball discussion we have internally is what's going to happen in September, October, November with masks, with better protocols that are taking place, and honestly, how well the seasonal flu is managed, not because it has a specific effect, but because it causes so-called false positives or loads on the institution, which may actually have folks being continually cautious. So we are optimistic that there's opportunity to actually see more upside. But again, much of it we have to see, I think, with a consistent result state by state rather for the United States, that COVID is being managed consistently. Matthew O’Brien - Piper Sandler & Co.: Okay, that's very helpful and I appreciate that color. As a follow-up, I'm curious about what's under the hood that we can't see, investors can't see at the moment that you could kind of benefit coming out of this dynamic. What's kind of being masked? It sounds like the OpEx side of things is somewhat durable. Are your competitors less focused right now? Are they going to be unable to invest in their inventory channels, their sales forces, are you doing more virtual training? Are there a couple things, Peter, that you can point to that are just kind of under the hood, you can't see that could be some meaningful tailwinds for the business as we head in 2021?

I'll comment and have Glenn then add to it. Look, we were behind in inventory. Glenn and his broader team have done a great job using this window of less demand to get our inventory status on all of our products where they need to be. So that's a big deal and Integra-specific item, particularly in regenerative medicine. The second item is, like everybody, we found how to do things differently that otherwise were thought maybe you couldn't do them that way. Many of those things have the potential to give us greater flexibility or agility, but they also have the opportunity to do it in a more cost-effective way. And so we're thinking about those things longer term about what they mean from the impact to the company. And I would say the third one is that from day one, one of the reasons that we actually pulled back on hours and reduced wages and cut expenses are we wanted to preserve the critical programs really around our growth thesis for the next multiple years. I mentioned some of them earlier around Rebound, some of the broader indications. And I think we've done a very good job being able to focus on those, having R&D people coming into environments, advancing those programs, while we've been in the midst of COVID. And so again, as we come out of this towards the end of the year into next year, I think we'll be able to talk more about those specific programs and how we did, again, to feed our future growth. Glenn, what else would you add?

I would just say, obviously, we're being much more efficient with our expenses, virtual selling a big thing for us now. Virtual marketing, we've set up a number of micro sites across all of our key products, doing virtual professional education. Our sales meetings and our sales trainings are all going to be done virtual. And these are all big cost savings for us. Obviously, we want to reinvest some of that in other parts of the business. But you look at those things coupled with even in the R&D area how you can do clinical studies virtually to a certain extent, and these are all things we think will help benefit our cost structure over the long term. Matthew O’Brien - Piper Sandler & Co.: Got it, thank you.

Thanks.

We'll now take our next question from Matt Taylor at UBS. Please go ahead.

Hey, thanks. I'll follow up that with a conceptual question. I was hoping you could help us understand. If you do get to, let's say, the exact same number of dollars in 2021 versus 2019, are these changes that you're talking about on discretionary spending and the virtual training, are those enough to make a material difference in the margins that you would see on the same sales in 2021 versus 2019, or is it more incremental?

So I'll comment and, Carrie, you could jump in because I think you've been giving some really good thoughts to how we think about it. So I would say we'll see. We've laid out our longer-term goals a few years back around 5% to 7% longer-term growth. We don't think that that's changing. We've talked about EBITDA margins of 28% to 30%. We still see that as a very viable goal. The question is how long has COVID impacted our ability to get there. And so that will be part of our focus area around that. And so we've looked at programs and areas that we're talking about that could be incremental adds, obviously, but there are some things that could have bigger impact. And I mentioned some of them are on the R&D front, which could help accelerate growth at a faster level. But many of those are thinking about our cost structure differently and how we might be able to leverage those things in ways that we weren't in the past, whether it be how we have customers be able to service and help themselves more because of the investments we've made in their customer portals and tools, as an example, to actually having the capabilities to share resources around the globe more effectively between countries, which today we're rather binary, and Glenn and the team are looking at those examples as well. But, Carrie, you may want to frame up your thoughts on how you think about incremental versus some things that could make a bigger difference for sure.

Sure, I still believe that our opportunity, our biggest lever is on the gross margin line. And it has to do with our continued portfolio shift on growing our higher-margin, faster-growing products that are really led by our new product introductions and then continuing our discontinued product SKU rationalization. So that still will have a large majority of what drives our margin expansion. And then don't forget, we still have the TMA agreement with J&J that will come off of at the end of 2021, which will drive margin expansion as well. And then I think on the operating model question, the opportunity for COVID to accelerate different thinking about how we drive expenses and manage expenses, I think that does become incremental. And to Glenn's point, it gives us maybe the opportunity to reinvest in other areas of the business that maybe we didn't have enough room for. So we'll utilize the opportunity to maybe trim in some of these more traditional expense areas like travel and entertainment and conferences and things to think about potentially what else do we want to add in R&D and clinical to drive long-term growth. So I look at that piece as more incremental and really where some of the big movement will continue to be in the gross margin line.

Okay, great. Thanks very much for the color.

There appear to be no further questions as of right now. I'll turn it back to the speakers for any additional or closing remarks. Please go ahead.

Thank you for joining the call today, and we look forward to updating you here on our future updates. Thanks again for joining. Have a nice evening.

This concludes today's call. Thank you for your participation. You may now disconnect.