Integra LifeSciences Reports Second Quarter 2023 Financial Results

On July 26, 2023 Integra LifeSciences Holdings Corporation (NASDAQ: IART), a leading global medical technology company, reported its financial results for the second quarter ending June 30, 2023 (Press release, Integra LifeSciences, JUL 26, 2023, View Source [SID1234633456]).

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Second Quarter 2023 Highlights
•Second quarter revenues of $381.3 million declined 4.2% on a reported basis and declined 2.7% on an organic basis compared to the prior year.

•Second quarter GAAP earnings per diluted share of $0.05, compared to $0.54 in the prior year; adjusted earnings per diluted share of $0.71, compared to $0.82 in the prior year
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•Appointed Lea Daniels Knight as executive vice president and CFO

Share repurchase and 2023 guidance

•Planning a $125 million share repurchase in the third quarter

•Updating full-year 2023 revenue and adjusted earnings per share guidance with a range of $1.548 billion to $1.560 billion and $3.10 to $3.18 respectively, reflecting the impact of the Boston recall and the solid performance of the underlying business

"The strong organic growth of our Codman Specialty Surgical segment and several product lines in our Tissue Technologies business demonstrate the resilience of our diversified portfolio of leading brands and technologies and strong market recovery. Excluding the impact of the Boston recall, we delivered solid, mid-single digit organic growth from the underlying business," said Jan De Witte, Integra LifeSciences’ president and chief executive officer. "We are confident in our plans for the CereLink relaunch and the restart of our Boston manufacturing facility, and we continue to advance our implant-based breast reconstruction (IBBR) PMA strategy."

Second Quarter 2023 Consolidated Performance

Total reported revenues of $381.3 million declined 4.2% on a reported basis and declined 2.7% on an organic basis compared to the prior year.
The Company reported GAAP gross margin of 54.3%, compared to 62.7% in the second quarter of 2022. Adjusted gross margin was 67.6%, compared to 68.0% in the prior year.
Adjusted EBITDA for the second quarter of 2023 was $88.8 million, or 23.3% of revenue, compared to $102.8 million, or 25.8% of revenue, in the prior year.
The Company reported GAAP net income of $4.2 million, or $0.05 per diluted share, in the second quarter of 2023, compared to a GAAP net income of $44.8 million, or $0.54 per diluted share, in the prior year.
Adjusted net income for the second quarter of 2023 was $57.4 million, or $0.71 per diluted share, compared to $68.3 million, or $0.82 per diluted share, in the prior year.

Second Quarter 2023 Segment Performance
Codman Specialty Surgical (~71% of Revenues)
•Total revenues were $271.0 million, representing reported growth of 5.1% and organic growth of 6.3% compared to the second quarter of 2022, due to high single-digit growth in Advanced Energy driven by CUSA capital and disposables; mid-single-digit growth in CSF management driven by Certas Plus valves and BactiSeal; mid-single-digit growth in Dural Access and Repair driven by Mayfield and DuraGen; low single-digit decline in Neuro Monitoring driven by CereLink and low double-digit growth in Instruments.

Tissue Technologies (~29% of Revenues)

•Total revenues were $110.2 million, representing reported decline of 21.2% and organic decline of 19.7% compared to the second quarter of 2022, due to the impact of the lost revenue and return provision for the Boston recall which was partially offset by double digit growth from MicroMatrix, Cytal, MediHoney and nerve franchise.
Key Products and Business Highlights

•Positive global demand performance across the portfolio
•Expect to restart manufacturing at the Boston facility late Q4’23 and resume commercial distribution in mid- to late Q2’24
•Relaunch of CereLink expected late Q3’23 in international markets and late Q4’23 in the US
•Advancing IBBR PMA strategy
◦Submitted clinical PMA amendment for SurgiMend
◦Completed enrollment In DuraSorb Monofilament Mesh U.S. investigational device exemption study
•Expanded global DuraGen portfolio with approvals in China and Japan
•Launched CUSA Lap Tip in Japan, Canada, South Africa and Israel
•Positive clinical and economic outcomes for Codman Bactiseal EVD Catheter from real-world evidence study in Europe
•Opened Dr. Richard E. Caruso Center of Innovation and Learning in Plainsboro, New Jersey

Balance Sheet, Cash Flow and Capital Allocation
The Company generated cash flow from operations of $28.3 million in the quarter. Total balance sheet debt and net debt at the end of the quarter were $1.44 billion and $1.13 billion, respectively, and the consolidated total leverage ratio was 2.6x.

As of quarter end, the Company had total liquidity of approximately $1.61 billion, including $309.2 million in cash and the remainder available under the revolving credit facility.

Share Repurchase Program

The Company is planning for a $125 million share repurchase during the third quarter under an authorization of the Company’s board of directors.

2023 Outlook
For the full year 2023, the Company is updating its revenue and adjusted EPS expectations to $1.548 to $1.560 billion and $3.10 to $3.18, respectively. The revenue range represents reported growth of -0.6% to 0.2%, with organic growth of 0.3% to 1.1% and reflects the full year impact of the Boston recall and the solid performance of the underlying business.

For the third quarter 2023, the Company expects reported revenues in the range of $386 million to $390 million, representing reported growth of 0.2% to 1.3% and organic growth of 0.3% to 1.3%. Adjusted earnings per diluted share are expected to be in the range of $0.76 to $0.80, including the impact of the Boston recall.

The Company’s guidance for the third quarter and full-year organic sales growth excludes acquisitions and divestitures, the effects of foreign currency and the year-over-year change in revenue from discontinued products. Organic growth excludes sales from the divestiture of the Company’s traditional wound care (TWC) business as of September 1, 2022, and sales from the acquisition of Surgical Innovation Associates, Inc. (SIA) through December 1, 2023. Adjusted earnings per share guidance reflects the impact of the divestiture of the TWC business, the SIA acquisition and the impact of foreign currency.

Conference Call and Presentation Available Online
Integra has scheduled a conference call for 8:30 a.m. ET on Thursday, July 27, 2023, to discuss second quarter 2023 financial results and forward-looking financial guidance. 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 call. Integra’s management team will reference a presentation during the conference call, which can be found on the Investor section of the website at investor.integralife.com.

A live webcast will be available on the Investors section of the Company’s website at investor.integralife.com. For those planning to participate on the call, register here to receive dial-in details and an individual pin. While not required, it is recommended to join 10 minutes prior to the event’s start. A webcast replay of the conference call will be available on the Investors section of the Company’s website following the call.