アニカ (ANIK) 2026年第3四半期決算説明会：売上高10%増、2026年見通しを引き上げ

要点

• 2026年第3四半期の売上高は、コマーシャルチャネルとOEMチャネルの双方が成長したことに支えられ、前年同期比10%増の3,060万ドルとなりました。
• コマーシャルチャネルの売上高は17%増の1,400万ドルと過去最高に達し、OEMチャネルの売上高は5%増の1,660万ドルとなりました。
• 粗利益率は前年同期の56%から62%に改善しました。調整後EBITDAは90万ドルから510万ドルに増加しました。
• アニカは2026年の売上高成長率見通しの下限を6%〜10%に引き上げ、調整後EBITDAマージンのガイダンスを15%〜17%に上方修正しました。
• Integrityの売上高は前年同期比で30%以上増加し、海外の変形性関節症疼痛管理製品の売上高はCINGALおよびMONOVISCの持続的な需要により19%増加しました。
• FDAは、提出された臨床データをおもな理由としてHYALOFASTのPMA（市販前承認申請）を承認不可と判断しました。アニカは今後の規制対応の選択肢および追加の根拠データの要件を検討しています。

主要財務実績

年初9カ月間の営業キャッシュフローは280万ドルとなり、前年同期の660万ドルから減少しました。経営陣はこの減少について、在庫投資、生産量の増加、および設備能力の拡張によるものとしています。

事業および営業実績

海外の変形性関節症疼痛管理製品の売上高は、CINGALおよびMONOVISCの継続的な需要に牽引されて19%増加しました。経営陣は、海外の第一線における営業職の増員をコスト中立で進めていると述べました。

再生ソリューションの売上高は12%増加しました。Integrityの売上高は前年同期比で30%超、年初9カ月間で37%増加し、直近12カ月間で750万ドルを生み出しました。インプラントのサイズ拡大により足部・足関節および膝の手術へと適応が広がったほか、9月に発売された第2世代の手術器具により、新たな挿入・展開の選択肢が提供されています。

経営陣によると、米国の予定手術件数は夏季に軟調でした。第4四半期初頭にはIntegrityの需要動向に改善が見られたものの、第4四半期の成長が第3四半期の軟調さを完全に相殺するとは見込んでいません。

OEM売上高は、J&J向けおよび非整形外科製品の順調な推移が寄与しました。またアニカは当四半期中、新たなOEM販売代理店に対してHyalomatrixの最初の商用ユニットを出荷しました。

同社はベーリンガーインゲルハイムと動物用ヒアルロン酸（HA）に関する新たな10年間の販売代理店契約を締結しました。この契約には、仕切価格の引き上げ、最終市場での売上に対するロイヤルティ、契約上の最低購入数量の引き上げ、ならびに前払い金およびマイルストーン支払い総額800万ドルが含まれます。2027年第1四半期に400万ドルの前払い金が見込まれ、残りの400万ドルは販売数量に連動します。前払い金はGAAP基準に基づき10年間にわたって償却されます。

製造面での取り組みとしては、新たな無菌プロセスのFDA承認や、2基目の架橋充填機のバリデーション完了などが含まれます。架橋ラインのユニット生産量は2022年の水準を50%以上上回っています。経営陣は需要に対応するため生産を増強し、安全在庫を積み増しています。

CINGALについては、生物学的同等性試験の患者登録が従来の年末目標を前倒しして9月に完了しました。試験報告書は2027年第1四半期に完成する予定です。またアニカは、ヒアルロン酸を医薬品として申請するために必要なCMC（化学・製造・品質管理）業務の完了を進めており、2027年末までにCINGALの新薬承認申請（NDA）を提出する見込みです。

経営陣による業績見通し（ガイダンス）

アニカは、2026年通期の総売上高成長率ガイダンスの下限を従来の5%〜10%から6%〜10%に引き上げました。

コマーシャルチャネルのレンジ引き下げは、米国の予定手術件数の軟調さと、Integrityの寄与が当初予想を下回ったことを反映しています。OEMの力強い業績がその下押し圧力を部分的に相殺しています。

2027年について、経営陣は全社売上高成長率を横ばい〜5%とする見通しを再確認しました。コマーシャルチャネルの売上高は5%〜15%の成長が見込まれる一方、OEM売上高は米国の変形性関節症疼痛管理製品の価格下落が見込まれるため、横ばい〜小幅な減少が見込まれています。この見通しには米国におけるHYALOFASTの売上高は含まれていません。

経営陣は、設備投資を継続しつつも2026年第4四半期にプラスの営業キャッシュフローを見込んでいます。同社は現在、再生ソリューションへの投資による通期調整後EBITDAの押し下げ影響を約800万ドルと見込んでおり、従来予想の1,000万ドルから改善しています。

リスク要因および注視事項

• FDAはアニカに対し、提出された臨床データをおもな理由としてHYALOFASTのPMAが承認不可である旨を通知しました。将来の承認取得には追加の臨床的根拠が必要となる可能性があります。
• 米国における変形性関節症疼痛管理製品の価格は2027年に下落する見込みです。経営陣はJ&Jと連携し、価格が安定する時期を見極めようとしています。
• OEM顧客の発注パターンにより、四半期ごとの売上高および調整後EBITDAに変動が生じる可能性があります。
• 関連するロイヤルティ収益が本格化する前のHyalomatrixの再投入など、製品構成（プロダクトミックス）の変化が前四半期比での粗利益率の低下につながりました。
• 需要を満たすには製造能力の拡張を継続する必要があり、在庫投資や設備投資が短期的なキャッシュフローに影響を与える可能性があります。
• CINGALのNDA提出時期は、生物学的同等性試験報告書およびCMC業務の完了状況に引き続き左右されます。

アナリスト質疑応答のハイライト

経営陣は、短期的には60%台前半の粗利益率が妥当であると述べました。今後2〜3年の間に、製造生産性の向上が米国の変形性関節症疼痛管理市場における価格下落圧力を相殺する可能性があります。同社は長期的な正式な粗利益率目標を設定していません。

Integrityについて経営陣は、主要な執刀医による継続使用、インプラントサイズの拡充、および新しい手術器具の導入が普及の牽引要因であると挙げました。肩の手術にとどまらず、足部・足関節および膝への適応拡大が引き続き重要な成長機会となっています。

資本配分については製造設備投資を最優先とし、次いで米国の販売体制への投資を重視します。自社株買いやその他の株主還元、M&Aも選択肢として残されていますが、経営陣は現時点では事業内部への投資が最も確実な短期的リターンの機会を提供していると述べています。

決算説明会トランスクリプト全編

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, ladies and gentlemen, and welcome to Anika's Third Quarter Earnings Conference Call. This call is being recorded on Friday, November 6, 2026.

I will now turn the call over to Matt Hall, Executive Director, Corporate Development and Investor Relations. Please proceed.

Matthew Hall

Good morning, and thank you for joining us for Anika's Third Quarter 2026 Earnings Call. I'm Matt Hall, Anika's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website as are supplementary PowerPoint slides that will be used for the discussion today.

With me on the call are Steve Griffin, President and Chief Executive Officer; and Ian McLeod, Senior Vice President, Chief Accounting Officer and Treasurer. They will present our third quarter 2026 financial results and business highlights. Please take a moment and open the slide presentation and refer to Slide 2.

Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today.

Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA and adjusted net income from continuing operations and adjusted earnings share from continuing operations, which are used in addition to results presented in accordance with GAAP financial measures. We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our third quarter 2026 press release.

With that, I'll turn the call over to Steve to discuss the quarter and our progress. Steve?

Stephen Griffin

Good morning, everyone, and thank you for joining us. Our third quarter performance marked another positive step in building a stronger, more profitable Anika. Revenue grew 10% with growth in both our commercial and OEM channels. We improved gross margin year-over-year, expanded adoption of integrity, completed key manufacturing and pipeline milestones and strengthen the long-term partnership that will contribute to future growth. These results also reinforce the strategic focus we have built around our core hyluronic acid platform and the opportunities it creates across our business.

At the start of this year, we established revenue growth as our most important goal for 2026. Through the first 9 months, commercial channel revenue is up 15% and OEM channel revenue is up 11%. That progress reflects the increased focus on our core HA portfolio and execution against the 3 priorities we laid out in February, accelerating sustainable revenue growth, driving operational excellence across the organization, and advancing our hyaluronic acid-based innovation pipeline.

I'll provide updates on each of those priorities, including where we are making progress and where our future work is focused. Our first priority remains accelerating sustainable revenue growth. Commercial channel revenue increased 17% to $14 million in the third quarter, another record. We continue to see demand across our international OA pain management business and our regenerative portfolio with CINGAL, MONOVISC and Integrity contributing to that performance.

International OA pain management revenue grew 19% in the quarter, supported by sustained demand for CINGAL and MONOVISC. These are established products with an important role in our portfolio. Last quarter, I talked about the benefits of bringing greater focus to the international business and aligning our organization and distributors around our core HA products. The third quarter results give us further reason to continue that focus.

We are investing more and where we see opportunities to grow international sales, including adding new frontline commercial team members in a cost-neutral way. Within regenerative solutions, total revenue increased 12%. Integrity revenue grew more than 30% year-over-year and increased sequentially, bringing year-to-date growth to 37%. Integrity has generated $7.5 million in revenue over the trailing 12 months as we enter the fourth quarter, traditionally the strongest seasonal quarter for elective surgery.

The larger implant sizes introduced in the fourth quarter of 2025 and the first quarter of this year have been an important part of that growth. They have expanded use of integrity into other tendon applications, including foot and ankle and knee. That matters because the opportunity for the platform extends beyond a single anatomy. Surgeons need the sizes and the instrumentation to use the implant across a broader range of tendon repair procedures.

In September, we launched second-generation integrity instrumentation that provides an alternative insertion and deployment option to address differences in surgeon preference. This is a practical enhancement to the platform, giving surgeons another way to work with the implant as adoption expands. We remain encouraged by Integrity's sequential and year-over-year revenue growth.

Market-wide seasonality was more pronounced than usual in the summer months. As has been reported by hospital operators and other orthopedic companies, elective surgical procedures in the U.S. were slower during the third quarter. Our updated commercial channel outlook continues to reflect growth in the fourth quarter, but it is not expected to make up for the softness seen over the summer months.

Ian will walk through the updated ranges in his prepared remarks. Turning to the OEM channel. Revenue increased 5% in the quarter and 11% through the first 9 months, supported by continued execution with J&J and our nonorthopedic products. Our U.S. ORTHOVISC and MONOVISC relationship remain an important part of the business.

As we discussed last quarter, customer ordering patterns can create variability from 1 quarter to the next. So we look at performance over a longer period as well as the individual quarter. Last quarter, I also highlighted the opportunity to improve growth and profitability across our broader OEM portfolio. We have several long-standing relationships and long-standing products that can contribute meaningfully to revenue and cash flow. This quarter's update includes tangible progress on that work.

This month, we entered into a new 10-year distribution agreement with our existing high best partner, Boehringer Ingelheim. The agreement provides higher transfer pricing, a royalty on end market sales higher contractual minimum purchases and upfront and milestone payments. In total, we expect to receive $8 million in payments with a $4 million upfront payment expected in the first quarter of 2027 and the remaining $4 million tied to commercial volumes.

Boehringer has been a trusted partner for more than 20 years, and we expect to continue that relationship through the coming decade under our new agreement. Together with our other long-term U.S. agreements, these partnerships solidify important streams and illustrate the growing demand for our products. Hyalomatrix, our Hip wound product is now included within the OEM channel, and we shipped the first commercial units to a new OEM distributor during the third quarter. Reintroducing Hyalomatrix gives us another way to put our existing technology and manufacturing capabilities to work.

Our second priority is strengthening operational discipline and execution. Gross margin was 62% in the third quarter compared with 56% a year ago. That improvement reflects the work underway to make our manufacturing operations more productive and better able to support demand. We have made progress, but we continue to see opportunities to increase output and improve the way that we run the business.

Last quarter, I discussed the capacity expansion on our Monovisc and CINGAL line and upgrades to our ORTHOVISC and nonorthopedic line. Those projects address constraints in our operation. We have continued that work with stronger production planning, process improvements and greater sourcing flexibility. Recent progress includes FDA approval of a new aseptic manufacturing process and validation of a second Crosslink filler. These are specific improvements that expand our capacity to meet growing demand.

Unit volumes on our CrossLink line are now more than 50% higher than 2022 levels as we meet demand above our forecast. We see further opportunity to expand output. As demand continues to grow, we are increasing production and building safety stock to support the business. The objective is to meet customer needs while improving productivity and gross margin over time.

Our lean transformation is about improving how we do the work every day. Simplifying processes, reducing waste and addressing constraints where they occur. As I said last quarter, the team's closest to the work have an important role in identifying and solving those problems. This approach remains central to how we improve manufacturing execution and continue building a more efficient organization.

The quarter also illustrates why margin improvement will not necessarily be a straight line. Gross margin was lower than the 65% we reported in the second quarter, primarily because of the mix impact of products, including the reintroduction of Hyalomatrix, which does not yet include future royalty revenue from product sales. We expect the products margin contribution to improve as those benefits develop.

Turning to our third priority, advancing our HA-based innovation pipeline, our approach remains focused on applications where our experience with hyaluronic acid and HIF can address unmet needs in OA pain management and regenerative solutions. We're investing in the clinical, manufacturing and quality work needed to move these programs forward.

Starting with CINGAL, there are 2 important deliverables to be completed before we file the NDA. The first is the bioequivalent study. We completed enrollment in September, which was earlier than our previously communicated year-end target and are now awaiting completion of the study report expected in the first quarter of 2027. The second priority is the ongoing CMC work required to support filing HA as a drug. Based on the progress we've made, we expect to submit the CINGAL NDA before year-end 2027.

Turning to HYALOFAST. I want to address the U.S. regulatory status separately from our commercial performance and outlook. In October, we received formal notification from the FDA that our HYALOFAST PMA is not approvable based primarily on the clinical data included in the submission. We continue to believe strongly in HYALOFAST potential in the U.S. market and are assessing the available regulatory pathways and next steps including discussions with the FDA regarding the additional clinical evidence that may be required to support a future approval. Our revenue guidance continues to exclude U.S. HYALOFAST sales under the approach we adopted last quarter, to include only products with regulatory approval or clearance in the relevant market. That keeps our revenue outlook separate from an assumed U.S. regulatory outcome.

Beyond the later-stage programs, we continue to advance preclinical studies of Hyaff fiber for regenerative suture and tape. We remain encouraged by the data we have seen, which we believe will support future approval and launch in a large established market. This is 1 example of the broader opportunity to apply our biomaterials expertise where it can offer additional regenerative solutions for soft tissue repair.

We will continue to share updates on our R&D pipeline as milestones are achieved and offer further perspective on potential launch timing as visibility improves.

With that, I'll turn it over to Ian for the financial results and outlook.

Ian McLeod

Thanks, Steve. Please refer to Slide 5 of the presentation. Unless otherwise noted, my comments relate to continuing operations and comparisons are with the same period last year. I'll start with the quarter, then discuss our cash position and the updated outlook. During the quarter, total revenue was $30.6 million, up 10% from $27.8 million. Commercial channel revenue increased 17% to $14 million, which represents the highest commercial channel revenue in history.

That growth reflects continued demand across international OA pain management and regenerative solutions rather than a contribution from a single product or market. International OA pain management revenue grew 19%, led by single haul MONOVISC and total regenerative solutions revenue increased 12%. Integrity grew more than 30% year-over-year and an increase sequentially. OEM channel revenue increased 5% to $16.6 million, supported by continued execution with J&J and our nonorthopedic products.

We also reintroduced hi Matrix a high app wound product in the U.S. with first units shipped to a new OEM distributor partner during the third quarter. We are increasing our full year OEM outlook to reflect the greater contribution from this channel while continuing to recognize the quarterly variability associated with customer ordering patterns. Gross margin was 62% compared with 56% last year and 65% in the second quarter. The year-over-year improvement reflects continued progress in manufacturing execution. The sequential decline primarily reflected the mix of products, including Hyalomatrix.

We continue to see opportunities for our productivity gains from stronger planning, process improvements and higher output. Total operating expenses were $19.5 million, up 4%. Research and development expense was $7.9 million compared with $6.9 million while selling, general and administrative expense declined to $11.7 million. Total G&A, excluding the impact of stock-based compensation is down 19% compared to the last year.

We continue to fund the development and manufacturing work required for our priority programs while managing the broader expense base. For CINGAL, that includes the bioequivalence study report and CMC activities needed to support the NDA submission. Our GAAP operating loss narrowed to $0.7 million from $3.2 million. GAAP loss from continuing operations was $0.3 million or $0.02 per share compared with a loss of $3.2 million or $0.22 per diluted share.

Adjusted net income from continuing operations was $3.9 million or $0.29 per diluted share. The reconciliations in our earnings materials explain the adjustments from the GAAP results. Adjusted EBITDA was $5.1 million compared with $0.9 million last year and $7.1 million in the second quarter. The year-over-year improvement reflects the progress in revenue and gross margin and the sequential change and primarily related to the timing of OEM shipments as discussed on our prior earnings call.

Our full year 2026 profitability includes the impact of our investment in our Regenerative Solutions business. Previously, we expected a $10 million impact to adjusted EBITDA. We we now expect it to be closer to $8 million as a result of disciplined expense management and aligning our talent in the regions driving the highest growth. These incremental benefits are incorporated in our adjusted EBITDA forecast for 2026.

We generated $8.4 million of operating cash in the quarter and invested $1.7 million in capital expenditures. We expect to continue investing in CapEx through the fourth quarter and next year. We ended September with $45 million in cash and cash equivalents compared with $38.4 million at the end of June. That cash position provides flexibility as we invest in manufacturing and our development priorities.

For the first 9 months, operating cash flow was $2.8 million compared with $6.6 million last year as a result of investments in inventory to support our growing demand, increased unit output and capacity expansion. We follow a disciplined capital allocation framework, which determines where to invest next. First, we are investing in CapEx to expand our manufacturing capacity to meet increased demand and improve our operational efficiency. Second, we are investing in our regenerative solutions team supporting our recent growth and regularly evaluate to ensure we're tracking towards returns commensurate with the years of product development in our regenerative portfolio.

We also continue to work with J&J on pricing stability in the U.S., OA pain management market, while that stability is achieved, we will provide an update on our capital allocation framework. Turning to our outlook. We are raising the lower end of the full year 2026 total company revenue growth guidance to 6% to 10% from 5% to 10% previously, while updating the expected contribution from each channel. We now expect OEM channel revenue growth of 5% to 9% compared with 0% to 5% previously.

Commercial channel growth is now expected to be 9% to 13% compared with 12% to 18% previously. The change reflects a greater OEM contribution and updated commercial channel growth, including the recent market dynamics related to U.S. elective surgery. We are also raising our adjusted EBITDA margin outlook to 15% to 17% from 13% to 17%.

For 2027, we are reaffirming total company revenue growth of flat to 5%. We expect commercial channel revenue growth of 5% to 10% with OEM revenue flat to modestly lower. As we previously shared, our forward guidance does not include any U.S. [indiscernible].

With that, I'll turn the call back over to Steve.

Stephen Griffin

Thanks, Ian. Through the first 9 months, we've made meaningful progress against our priorities for the year. We delivered double-digit revenue growth in both channels, strengthened a long-term partnership increased manufacturing output, expanded integrity adoption and completed enrollment in the CINGAL bioequivalent study. Our goal is clear. Translate commercial growth, manufacturing efficiency and better economics into profitability and cash generation.

As I've outlined, we will do that by continuing to invest in both our commercial and OEM channels and by advancing our existing and future portfolio. To deliver these improvements, our lean transformation puts the people closest to the work at the center of identifying problems, improving processes and embracing a culture of condos improvement. To the many employees listening in on our call today, thank you for your commitment and dedication to our continuous improvement initiatives.

I also want to thank our distributor and commercial partners who help bring our products to patients around the world, and the patients who place their trust in our therapies.

With that, operator, let's now open the line for questions.

Operator

[Operator Instructions] the first question comes from Michael Petusky with Barrington Research.

質疑応答

Michael Petusky

Lots of really good and interesting disclosure to discuss, hey, so Steve, I guess the first question I have, in terms of gross margin, it looks like maybe mix could be possibly slightly moving against you, but you continue to sort of work on your manufacturing processes and trying to get more efficient. I'm just curious, as you sort of look out over the next 1, 2, 3 years? I mean, do you expect gross margin to sort of stabilize sort of be in the low 60s?

Do you think there's still some room there. Can you just talk about your longer-term outlook? Not looking for like a particular quarter, but just as you sort of think about the puts and takes around gross margin.

Stephen Griffin

Yes, I appreciate the question, Mike. From a gross margin perspective, I think in the near term, that low 60s makes sense. As I noted in the prepared remarks, the mix does shift a little bit with the reintroduction of some products that as they ramp, they could contribute more profitably. As the royalties are received, I think that lower 60s market is an appropriate one. As you look out over the longer term, as you noted, sort of, let's say, 2 or 3 years, what we're balancing is the desire to want to drive improvement in productivity from a manufacturing perspective, which should improve the gross margin slightly up against sort of the pricing dynamic here in the United States OA pain market.

And I think as those 2 things play out, you could see them offset each other. At a minimum, what I'd like to see is trying to drive productivity such that we offset any detrimental pricing impact that is normal in this market. If we're able to really achieve breakthroughs from a manufacturing perspective, you could see gross margin improve. But that's not something we've communicated in as a longer-term goal quite yet. But internally, those are the types of projects we put in place.

Michael Petusky

Yes. So I guess pivoting off of that comment in your earlier comments around pricing stability or lack thereof in always paying in the U.S. I mean, can you just sort of give any insight to sort of on a go forward, what you guys think you're looking at in '27 headwinds around pricing in the U.S.

Stephen Griffin

Sure. I would say -- let me start with '26 and then I'll move to '27. So I'd say '26 has gone according to plan in terms of the pricing in the OA pain market here in the U.S. we haven't really changed our guidance at all. If anything, we've raised our guidance over the course of this year on revenue, but that's primarily as a result of increases in volume. I'd say price was within our expectations. We do expect to see pricing declines next year, and that's embedded in our guidance. You'll note that our OEM guidance is flat to modestly lower next year as a result.

And I really think that we're working closely with J&J to understand sort of where pricing stability win will occur. It's a dynamic market. As you know, in the last 2 years, it's been more dynamic than usual, but it's something we track closely, and I think it's embedded in our guide for next year.

Ian McLeod

One of the things, Mike, on the 2027, I misspoke on our 2027. I said 5% to 10%, it should be 5% to 15% formal -- on the commercial aim next year. Okay. Just for your and aligns with what we had in the earnings release.

Michael Petusky

Okay. Great. A couple more, and then I'll let other folks get on here. Steve, I guess, could you talk about the CMC piece of CINGAL. It sounds like that may be a little bit more extensive than I understood. Can you just talk about what needs to be done there and particularly any of the heavy lifting that needs to be done as you sort of prepare for the NDA by the end of next year.

Stephen Griffin

Sure. So for starters, the CMC work is really to prepare filing HA as a drug. And as you know, we manufacture this product that's really MONOVISC that we manufacture that's going to be filed alongside as part of the CINGAL but we manufacture today as a medical device. And what we really need to make improvements around is in the in-process controls associated with how we manufacture, which is the expectation for a drug type product. Those initiatives are underway with our teams working internally around what those in-process controls may need to look like.

And when they're completed, we'll be in a position where we're able to file A couple of notes on the CINGAL NDA submission. This is the first time we're giving a public sort of comment around when we expect to file, which we said would be before the end of the year next year. And we're pleased to say that we completed the enrollment on the bioequivalence study earlier than initially expected. So earlier in our comments over the course of this year, you probably remember that we said that we would expect enrollment to be completed before December '26, and that was completed in September. And I kind of noted that we'd expect the CMC to kind of lag behind that work. So I expect the clinical study report on equivalence to be done in the first quarter, and then we'll wrap up our CMC activities to then get to the submission on the...

Michael Petusky

Okay. All right. Great. And then just last 1 for me, and I'll get back in the queue possibly. The 10-year agreement on High Vis because that's sort of interesting. And I guess I'm just curious, the $4 million upfront payment, is that in Q1, is that a part of sort of the flat guidance on OEM for next year? Or is that excluded from that guide.

Stephen Griffin

That's implied in the guidance for right now. And if you really think about it, that's going to be amortized from a GAAP perspective, that will be amortized over 10 years. So it becomes less impactful when you really think about it that way. I want to just take a moment though and speak about the high disk agreement. So Boehringer has been an excellent partner for us for the last 20 years in distributing 1 of our HA products in the veterinary space. And we're pleased to be in a position where we're going to extend that agreement for another 10 years. And more so pleased that around the board, it really is an increase in economics that I think represents the value of our portfolio today, even on our legacy assets.

And the $4 million upfront is an important contribution to what we use to make -- continue to make investments in capital expenditures. And on top of that, we'll see increases in transfer pricing, royalties and higher contractual minimums. So we're excited about that agreement, and we think it's a good demonstration of the work that we put in to trying to optimize the HA portfolio that we have in front of us. Lastly Mike, to your comment. When we get further into the beginning of 2027, we'll prepare further guidance around what we expect to see throughout the course of the year. And this is just our preliminary outlook, and it remains the same as to what we shared previously.

Operator

Your next question comes from Madison Wynne El-Saadi with B. Riley.

Unknown Analyst

This is Lee on for Madison. So I think a lot of good color from prepared remarks and also the previous Q&A. Would you follow a on the revenue guidance side. So the impact for Q3 seems like a wide range. Maybe more color on what we are looking at. And also 2027, I know you just mentioned it, but maybe like what are the trend or assumptions we are looking at now here.

Stephen Griffin

Sure. So let's start with the revenue guidance question as it relates to the fourth quarter. We have updated our revenue guidance expectations, both on the OEM and on the commercial side to reflect where we expect to see the fourth quarter play out. Overall, the OEM channel is stronger than we initially expected and the change to the commercial guidance is really just an update associated with integrity, which we expect to be a little bit lighter than what we had initially expected.

When we look at sort of the seasonality, I expect that the fourth quarter, we've got a very strong start to the year. So let me start that. And I think the timing of our order shipments to our distributors has played a factor in that. such that the second and the third quarter were quite strong, whereas historically, we've seen the fourth quarter be the strongest quarter for us. So when we look at the comps on the fourth quarter, I expect to see more moderated growth as we look at what this fourth quarter will be versus what was a very strong fourth quarter last year.

And I'd expect to see probably more moderation on the OEM channel and continued growth on the commercial channel. So that's how things play out for us in '26.

And then to your question around 27, what's implied in our guidance, really what's implied there is continued execution, which we've seen for now over 7 or 8 years of our international 08 pain sales I noted in our prepared remarks that, that team continues to execute really well, and we've made investments on our frontline commercial team in a cost-neutral way to help accelerate that growth. I think the real element for us is making sure that we can catch up from a manufacturing perspective with the increased demand that they placed on the business.

It's a great problem to have, and it's 1 that we're chasing after. That's the foremost element of our total revenue increases as we think about next year as well as continued growth in the Integrity business.

Operator

Your follow-up question comes from Michael, please go ahead.

Michael Petusky

Okay. Great. So just a couple more quick ones. On integrity, Steve, in terms of sort of what you're seeing on utilization reorders and then sort of expanding the doc user footprint. I mean what can you say you're happy with, not happy with in terms of the momentum, both around sort of utilization reorders and getting new guys familiar with the product.

Stephen Griffin

Yes. It's a good question. I'd say across the board, we're pleased with the performance. So 30% growth year-over-year. We're continuing to grow that business at 37% on a year-to-date basis. And when we look at surgeons, we're seeing a lot of good reuse in terms of key surgeons that have been strong in performance and represent, I think, a real demonstration of their belief in the integrity system.

In terms of the incremental work that we're doing to try and drive new adoption, I noted in my prepared remarks that we launched a new set of integrity instrumentation, which offers a different set of deployment tools and that's really because I say surgeons have different deployment preferences and we want to be able to meet them with where they're at. So that's the first element around how we're driving incremental surgeon adoption. And then the other element of where we've been able to drive further adoption has been in regards to different shapes and sizes of integrity.

So earlier this year and late last year, we launched new shapes and sizes. And that expansion has really opened it up to the foot and ankle and knee space, which is a really good growth market for us, in addition to the shoulder space. So it continues to track really well. I noted in the remarks, though, that there was a little bit of a slower seasonal summer time, which I know some other folks have commented on as well. That certainly had an effect on us because we're not large enough to be able to overcome but we've seen a good rebound through the beginning of the fourth quarter.

Michael Petusky

Okay. Great. And then last question. Obviously, a really good quarter in terms of cash generation. I guess as you sort of think about Q4 and then sort of into next year, I mean, how Obviously, you've got a very comfortable balance sheet, no leverage, obviously, a meaningful amount of cash.

But in terms of free cash, I mean how much of a priority is generating cash relative to maybe different internal investments you guys want to make? And can you just, I guess, any guidance around Q4 because the first 3 quarters have certainly been meaningfully different in terms of free cash generation. And then just sort of, I guess, philosophical comments around and going forward, would really be appreciated.

Stephen Griffin

Absolutely. Let me start with expectations for the fourth quarter. I'd expect to see positive operating cash flow, and then we expect to make investments from a CapEx perspective. And that is probably also how I would frame the start of like what we'd expect to see over the course '27. So we are very focused on driving the incremental profitability and letting it flow through from an operating cash flow perspective. And we were very intentional about our remarks today that Ian made in regards to our capital allocation framework.

Our first use of cash goes into capital expenditures to improve our manufacturing operations. I noted in the comments that we're 50% higher in terms of unit shipments than where we were just 4 years ago. That is a great achievement. But at some point, we have to be able to make investments to allow for continued expansion of our manufacturing operations as evidenced by the new agreements and the extensions and everything else. We want to make sure that we're able to get to an appropriate level of manufacturing capacity. So our use of capital will go towards CapEx first.

I think as it relates to longer-term guidance in terms of free cash flow conversion or operating cash flow, I wouldn't say we're quite there yet in terms of giving a metric. But in terms of philosophically, I look to drive operating cash flow improvement and then stronger overall capacity expansion through the CapEx investments that we make. It drives quarter-by-quarter variability. As you saw, first quarter for us always tends to be a little bit higher of cash usage and then improvement towards the latter half of the year. And I think that's, to some extent, what we saw throughout the course of this year.

Michael Petusky

So actually, let me ask a part B to that question. So in terms, Steve, obviously, of the healthy cash and equivalents you have on the balance sheet, I mean thoughts on M&A. Obviously, the stock has acted terrifically since you gotten the CEO chair, but possible share repurchase, like can you just talk about in terms of your balance sheet strength other than internal investment, I don't suspect you have of internal investment to make. But can you just talk about how you might consider using some of the balance sheet strength over the next couple of years.

Stephen Griffin

Yes. I think it's an appropriate question, and we tried to get ahead of it a little bit in terms of the capital allocation framework. So I'll just restate it. So first and foremost is CapEx. The second is the investment we're making in our U.S. sales force, which we are very cognizant of that level of investment we're making. Further down the capital allocation framework as any company would evaluate, we do evaluate what those options could look like. We have done share repurchases in the past, as you've noted.

And then I look at other ways of returning capital to shareholders, that's obviously something we consider. And then M&A is a potential for the business, but I would obviously caution that with the level of improvement that we're looking to drive with our core operations and where we think we can drive the nearest return on invested capital, I think it's going to come from internal investment, just given what we know about our products and our opportunities to improve our margin rates today.

That's not to say that over time, those things would be ruled out. Certainly, we remain open to it. And to some extent, it is going to be garnered by sort of the U.S. OA pain market. So that pricing stability is a very important element of our capital allocation framework. And as we get better visibility into that level of stabilization, it will help inform that capital allocation framework.

Lastly, Mike, you probably know this, but I've done a fair amount of M&A in my past and it can be accretive from a business perspective and it can create a lot of growth opportunities but it also has to be balanced against where the business is at. And obviously, we went through 2 divestitures recently and really focused our attention on improving operations. I couldn't be more pleased with the way that our teams have responded through the first 9 months of this year. And I think the performance through the start of the year has been really outstanding, and I think it demonstrates what can happen when we make those types of organic investments in the near term, that's where our focus remains.

Operator

There are no further questions at this time. I will turn it back to Steve for some concluding remarks.

Stephen Griffin

Great. Thank you, everybody, for joining our conference call today, and we look forward to speaking with you soon.

Operator

Ladies and gentlemen, this concludes your conference call for today. We sinaticipating and ask that you please disconnect your lines. Have a great day.