On November 2, 2021 Integra LifeSciences Holdings Corporation (NASDAQ: IART), a leading global medical technology company, reported financial results for the third quarter ending September 30, 2021 (Press release, Integra LifeSciences, NOV 2, 2021, View Source [SID1234594111]).
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"Strength across most of our product portfolio, driven by commercial and operational execution and a contribution from our recently launched CereLink ICP monitor, led to third quarter results near the high end of our guidance range, despite ongoing COVID and supply challenges," said Peter Arduini, Integra’s president and chief executive officer. "Last week we announced Jan De Witte as the next president and CEO of Integra. It has been an honor to serve the many talented Integra colleagues who are so dedicated to fulfilling our mission of improving patients’ lives around the world every day. I am confident that under the leadership of Jan and the strong management team in place, Integra is well-positioned for continued growth and success in the coming years."
Third Quarter 2021 Consolidated Performance
Total reported revenues of $386.9 million increased 4.5% on a reported basis and 6.7% on an organic basis compared to the prior year. Total reported revenues include $16.8 million from the acquisition of ACell, which was completed on January 20, 2021.
The Company reported GAAP gross margin of 62.7%, compared to 63.6% in the third quarter of 2020. Adjusted gross margin was 68.3%, compared to 68.6% in the prior year.
Adjusted EBITDA for the third quarter of 2021 was $104.3 million, or 27.0% of revenue, compared to $103.2 million, or 27.9% of revenue, in the prior year. Adjusted EBITDA benefited from higher revenue, partially offset by higher operating expenses attributable to the gradual return of spending, which was below normal levels in the prior year in response to the global pandemic.
The Company reported GAAP net income of $43.2 million, or $0.51 per diluted share, in the third quarter of 2021, compared to a GAAP net income of $32.3 million, or $0.38 per diluted share, in the prior year.
Adjusted net income for the third quarter of 2021 was $73.1 million, or $0.86 per diluted share, compared to $67.7 million, or $0.80 per diluted share, in the prior year.
Third Quarter 2021 Segment Performance
Codman Specialty Surgical (66% of Revenues)
Total revenues were $256.5 million, representing reported growth of 7.2% and organic growth of 8.0% compared to the third quarter of 2020. Sales in Instruments benefited from a strong recovery in order demand, while the strength in Neurosurgery was broad-based and included sales of our recently launched CereLink ICP Monitor System.
Tissue Technologies (34% of Revenue)
Total revenues were $130.4 million, representing a decrease on a reported basis of (0.4)% and organic growth of 3.7% compared to the third quarter of 2020. Growth in Wound Reconstruction and Care was led by sales in our Integra Dermal Matrices and SurgiMend, and sales in Private Label benefited from continuing recovery in customer orders.
Strategic Initiatives and Key Developments
CEO transition update
On October 28, 2021, the Company’s board of directors announced Jan De Witte as its next president and chief executive officer. Mr. De Witte succeeds Peter Arduini, who previously announced he will step down as chief executive officer to accept the role of president and chief executive officer of GE Healthcare. Mr. De Witte will join Integra prior to the end of the year, at which time he will also be appointed to Integra’s board of directors.
Advancing key products
CereLink, the Company’s next generation intracranial pressure monitor, was launched in the third quarter in both the U.S. and Europe.
Aurora Surgiscope, which is a novel and proprietary minimally invasive surgical solution with integrated visualization and capabilities designed specifically for use in neurosurgery, was released in a phased, limited clinical launch in the third quarter of 2021. During the fourth quarter, the Company expects to further expand its phased launch to generate clinical evidence and gain insights for a broader commercial launch expected in the second half of 2022. We also continued to expand the MIRROR registry to collect data on the use of Aurora for early surgical intervention in the treatment of intracerebral hemorrhage (ICH).
NeuraGen 3D, the Company’s new peripheral nerve repair product, was on display at the recent American Society for Surgery of the Hand meeting. This innovative product is a nerve guide matrix designed to optimize the environment for nerve regeneration and may allow for more complete functional recovery. The Company partnered with leading hand surgeons to provide training and professional education to attendees in anticipation of its planned product launch in early 2022.
The Company submitted a PMA for SurgiMend for a breast reconstruction indication that was the subject of an FDA Advisory Committee meeting on October 20, 2021. At this meeting we gained valuable insights to further inform our submission and we look forward to working with the FDA in the coming months as it completes its review of our PMA.
Balance Sheet, Cash Flow and Capital Allocation
The Company generated cash flow from operations of $82.8 million in the quarter. Net debt at the end of the quarter was $1.1 billion, and the consolidated total leverage ratio was 2.3x.
As of quarter end, the Company had total liquidity of approximately $1.75 billion, including approximately $470 million in cash and the remainder available under the revolving credit facility.
2021 Outlook
The Company is providing forward-looking guidance regarding adjusted earnings per diluted share, but is not providing a reconciliation to GAAP earnings per share, because certain GAAP expense items are highly variable and management is unable to predict them with reasonable certainty and without unreasonable effort. Specifically, the financial impact and timing of divestitures, acquisitions, integrations, structural optimization and efforts to comply with the EU Medical Device Regulation are uncertain, depend on various dynamic factors and are not reasonably ascertainable at this time. These expense items could have a material impact on GAAP results. Adjusted earnings per diluted share also excludes the impact of intangible asset amortization associated with prior business acquisitions, which we expect to be approximately $0.74 per diluted share for the full-year 2021.
In addition, the Company will continue to monitor the ongoing uncertainty around the scope and duration of the pandemic and its impact on financial performance. The Company does not expect the ongoing impact of the pandemic to be uniform across all markets and product lines.
Full-Year 2021 Outlook
Taking into account year-to-date revenue performance, the risk of ongoing effects of the pandemic and unfavorable changes in foreign currency rates, the Company is reaffirming its previous full-year 2021 revenue guidance of $1,540 million to $1,550 million, with an expectation to be at the low end of the range. The Company is increasing its full-year 2021 adjusted earnings per share guidance range from $2.98 to $3.05 to a new range of $3.16 to $3.20.
Fourth Quarter Outlook
Based on our expectations for the full year, we are targeting fourth quarter revenue of $403 million, representing reported growth of approximately 3.5% and organic growth of approximately 6.5%. Adjusted earnings per diluted share are expected to be in a range of $0.82 to $0.86.
In the future, the Company may record, or expects to record, gains or losses, expenses, or charges as described in the Discussion of Adjusted Financial Measures below, which will be excluded from the calculation of adjusted EBITDA, adjusted earnings per share for historical periods and in adjusted earnings per share guidance.
Conference Call and Presentation Available Online
Integra has scheduled a conference call for 8:30 a.m. ET today, Tuesday, November 2, 2021, to discuss financial results for the third quarter. The conference call will be hosted by Integra’s senior management team and will be open to all listeners. Additional forward-looking information may be discussed in a question and answer session following the prepared remarks.
Integra’s management team will reference a presentation during the conference call. The presentation can be found on investor.integralife.com.
Access to the live call is available by dialing (888) 394-8218 and using the passcode 7732018. The call can also be accessed via a webcast link provided on investor.integralife.com. A replay of the call will be available until November 12, 2021 by dialing (888) 203-1112 and using the passcode 7732018. The webcast will also be archived on the website.