On July 29, 2024 Integra LifeSciences Holdings Corporation (NASDAQ: IART), a leading global medical technology company, reported financial results for the second quarter ending June 30, 2024.

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Second Quarter 2024 Highlights
•Second quarter revenues of $418.2 million increased 9.7% on a reported basis and 2.3% on an organic basis compared to the prior year. Revenue increased 0.3% on an organic basis excluding Boston.

•Second quarter GAAP earnings per diluted share of $(0.16), compared to $0.05 in the prior year; adjusted earnings per diluted share of $0.63, compared to $0.71 in the prior year.

•Early integration success with the Acclarent ENT acquisition.

•Announced plans to focus relaunch of SurgiMend and PriMatrix at new state-of-the-art manufacturing facility in Braintree, Massachusetts, with operational readiness expected in the first-half of 2026.

•Received PMA approvable notification pending GMP certification for SurgiMend.

•Implementing compliance master plan to address quality system and GMP compliance learnings. As a result, the company has initiated temporary shipping holds on certain products that will primarily impact the third quarter.

•Updating full-year 2024 revenue guidance to a range of $1.609 billion to $1.629 billion and adjusted EPS guidance to a range of $2.41 to $2.57 per share reflecting the temporary shipping holds and significant second half investments in quality system and GMP compliance improvements.

"Our second quarter financial performance continues to reflect the persistent market demand for our diversified portfolio and the commitment of our teams," said Jan De Witte, Integra LifeSciences’ president and chief executive officer. "Using the learnings from our Boston facility, we are continuing a thorough analysis of our operations and are committed to enhancing the quality, reliability and resilience of our manufacturing operations and supply chain. The reduction in our full-year guidance reflects an updated view of our operational challenges and critical investments in our compliance improvement program that will allow our supply to meet our strong commercial demand strength over time."

Second Quarter 2024 Consolidated Performance

Total reported revenues of $418.2 million increased 9.7% on a reported basis and 2.3% on an organic basis compared to the prior year. Organic growth excluding Boston was 0.3%.
The Company reported GAAP gross margin of 54.0%, compared to 54.3% in the second quarter of 2023. Adjusted gross margin was 65.2%, compared to 67.6% in the prior year.
Adjusted EBITDA for the second quarter of 2024 was $83.8 million, or 20.0% of revenue, compared to $88.8 million, or 23.3% of revenue, in the prior year.

The Company reported a GAAP net loss of $(12.4) million, or $(0.16) per diluted share, in the second quarter of 2024, compared to GAAP net income of $4.2 million, or $0.05 per diluted share, in the prior year.
Adjusted net income for the second quarter of 2024 was $49.0 million, or $0.63 per diluted share, compared to $57.4 million or $0.71 per diluted share, in the prior year.

Second Quarter 2024 Segment Performance
Codman Specialty Surgical (~70% of Revenues)
Total revenues were $301.8 million, representing reported growth of 11.3% and organic growth of 0.9% compared to the second quarter of 2023.

•Sales in Neurosurgery grew 1.2% on an organic basis. Key drivers for the quarter include:
•Dural access and repair grew high-single-digits driven by DuraGen and Mayfield
•Advanced energy grew low-single digits driven by Aurora
•CSF management decreased low-double digits due to supply backorders
•Neuro monitoring was down low-single digits driven by double-digit growth in CereLink monitors and micro sensors offset by supply challenges
•Sales in international markets grew low-single digits
•Sales in Instruments declined 3.1% on an organic basis
•ENT grew low-double digits reflecting MicroFrance ENT instruments

Tissue Technologies (~30% of Revenues)

Total revenues were $116.4 million, representing reported growth of 5.6% and organic growth of 5.7% compared to the second quarter of 2023. Tissue Technologies sales were down 1% excluding Boston. Key drivers for the quarter include:

•High double-digit growth for DuraSorb
•Mid-double-digit growth in Gentrix
•Low double-digit growth in MicroMatrix, Cytal and amniotics
•Low double-digit decline in Integra Skin
•Sales in private label increased 1.5% on an organic basis excluding Boston

Advancing our Strategy

•Broad demand for Integra’s diverse portfolio of leading brands
•Continued successful market uptake of CereLink monitors and microsensors
•Expanded international commercial footprint and portfolio for CUSA, DuraGen and Mayfield
•Growth in DuraSorb above expectations
•Early integration success with the Acclarent ENT acquisition
•Positive early clinical response to MicroMatrix Flex launch
•Finalized plans to restart the manufacture of PriMatrix and SurgiMend at our new manufacturing facility in Braintree, Massachusetts with operational readiness expected in the first half of 2026
•Received PMA approvable notification pending GMP certification from the FDA for SurgiMend
•Significantly stepping up investments in quality, reliability and capacity

Balance Sheet, Cash Flow and Capital Allocation
The Company generated cash flow from operations of $40.4 million in the quarter. Total balance sheet debt and net debt at the end of the quarter were $1.83 billion and $1.54 billion, respectively, and the consolidated total leverage ratio was 3.8x.

As of quarter end, the Company had total liquidity of approximately $1.18 billion, including $297 million in cash plus short-term investments and the remainder available under its revolving credit facility.

2024 Outlook
For the full year 2024, the Company is updating its revenue and adjusted EPS expectations to $1.609 to $1.629 billion and $2.41 to $2.57, respectively. The revenue range represents reported growth of 4.4% to 5.7%, with organic growth of –1.0% to 0.3%, reflecting third quarter quality and labeling compliance shipping holds and significant second half investments in quality and compliance improvement.

For the third quarter 2024, the Company expects reported revenues in the range of $372 million to $382 million, representing reported growth of -2.6% to 0.0% and organic growth of -9.4% to –6.7%. The Company expects adjusted EPS in a range of $0.36 to $0.44.

The Company’s organic sales growth guidance for the third quarter and the full-year excludes acquisitions and divestitures, as well as the effects of foreign currency.

Conference Call and Presentation Available Online
Integra has scheduled a conference call for 8:30 a.m. ET on Monday July 29, 2024, to discuss second quarter 2024 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.