On October 26, 2022 Integra LifeSciences Holdings Corporation (NASDAQ: IART), a leading global medical technology company, reported financial results for the third quarter ending September 30, 2022 (Press release, Integra LifeSciences, OCT 26, 2022, View Source [SID1234622401]).
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Third Quarter 2022 Highlights
Third quarter revenues of $385 million decreased 0.4% on a reported basis and increased 3.5% on an organic basis compared to the prior year.
Third quarter GAAP earnings per diluted share of $0.60, compared to $0.51 in the prior year; adjusted earnings per diluted share of $0.86, compared to $0.86 in the prior year.
The Company completed the sale of its non-core traditional wound care ("TWC") business at the end of August 2022.
The Company is raising its earnings per share outlook to a range of $3.29 to $3.33 and reaffirming its full-year 2022 revenue guidance at the midpoint of its prior guidance with a tightened range of $1,551 million to $1,563 million. The revenue range represents reported growth of 0.5% to 1.3%, inclusive of the divestiture of the TWC business and an updated foreign currency outlook, with organic growth of 3.7% to 4.5%.
"We are pleased with our sales performance in the third quarter. Our diverse portfolio continues to deliver solid, profitable growth for our shareholders," said Jan De Witte, Integra’s president and chief executive officer. "We continue to see strong demand for our products globally and are focused on our execution in achieving our short- and long-term targets."
Third Quarter 2022 Consolidated Performance
Total reported revenues of $385.2 million decreased 0.4% on a reported basis and increased 3.5% on an organic basis compared to the prior year.
The Company reported GAAP gross margin of 61.5%, compared to 62.7% in the third quarter of 2021. Adjusted gross margin was 66.7%, compared to 68.3% in the prior year.
Adjusted EBITDA for the third quarter of 2022 was $105.3 million, or 27.3% of revenue, compared to $104.3 million, or 27.0% of revenue, in the prior year.
The Company reported GAAP net income of $49.9 million, or $0.60 per diluted share, in the third quarter of 2022, compared to a GAAP net income of $43.2 million, or $0.51 per diluted share, in the prior year.
Adjusted net income for the third quarter of 2022 was $71.7 million, or $0.86 per diluted share, compared to $73.1 million, or $0.86 per diluted share, in the prior year.
Third Quarter 2022 Segment Performance
Codman Specialty Surgical (~65% of Revenues)
Total revenues were $249.8 million, representing reported decline of 2.6% and organic growth of 1.6% compared to the third quarter of 2021, driven by strength in both advanced energy and CSF management partially offset by the impact of the CereLink recall in neuro monitoring.
Tissue Technologies (~35% of Revenues)
Total revenues were $135.4 million, representing reported growth of 3.9% and organic growth of 7.2% compared to the third quarter of 2021, driven by sales of Integra skin, amniotics and ACell MicroMatrix.
Key Products and Business Highlights
Advancing Key Products
Return-to-market plans for the CereLink ICP monitor are progressing, targeting first half of 2023.
Third quarter results include a $1.5 million recall returns provision and a $0.8 million rework accrual in cost of goods sold, both of which impacted gross margin.
Expanded the CUSA Clarity portfolio
CUSA Clarity extended laparoscopic tip launched in the U.S., bringing the benefits of ultrasonic ablation technology to minimally invasive laparoscopic liver procedures.
CUSA single-sided bone tip received 510(k) approval. Commercial launch is expected in the first quarter of 2023.
Advanced the science for the Aurora Surgiscope with the publication, in Operative Neurosurgery, of the first peer-reviewed journal article. The Aurora Surgiscope is intended for use in neurosurgery and endoscopic neurosurgery and pure neuroendoscopy (i.e., ventriculoscopy) for visualization, diagnostic and/or therapeutic procedures such as ventriculostomies, biopsies and removal of cysts, tumors and other obstructions.
Business Highlights
Completed the previously announced sale of the non-core TWC business to Gentell, LLC for $28.8 million, which consists of $27.8 million in cash plus $1.0 million in contingent consideration which may be received upon achieving certain revenue-based performance milestones. The transaction included the sale of the Company’s TWC products, such as sponges, gauze and conforming bandages, and certain advanced wound care dressings, such as supportive, calcium alginate, hydrogel, and foam dressings.
Issued our inaugural Environmental, Social and Governance (ESG) report. The report highlights 2021 performance in key areas such as employee health and safety, diversity and inclusion, community impact, ethics and compliance, and environmental responsibility. The report also includes the company’s ESG strategy and roadmap to long-term sustainability.
Appointed two new key executives
Harvinder Singh, EVP & President, International, based in Singapore with a focus on setting and executing product-market strategies and building out Integra’s local commercial capabilities in international markets.
Mark Jesser, CVP & Chief Digital Officer, based in our Princeton, N.J. headquarters with a focus on partnering with our commercial, strategic marketing and business development teams to define and execute digital proposition strategies that enhance Integra’s device portfolio and its positioning within the digital health ecosystem.
Balance Sheet, Cash Flow and Capital Allocation
The Company generated cash flow from operations of $68 million in the quarter. Net debt at the end of the quarter was $1.04 billion, and the consolidated total leverage ratio was 2.4x.
As of quarter end, the Company had total liquidity of approximately $1.75 billion, including approximately $512 million in cash and the remainder available under the revolving credit facility.
2022 Outlook
For the full year 2022, the Company is reaffirming its revenue expectations at the midpoint of its August 2022 guidance with a tightened range of $1,551 million to $1,563 million. The revenue range represents reported growth of 0.5% to 1.3%, inclusive of the divestiture of the TWC business and an updated foreign currency outlook, with organic growth of 3.7% to 4.5%. Our guidance reflects our solid revenue performance through the first 9 months while considering the macro environment, continuing supply constraints, and potential adjustments to the CereLink reserve.
Full-year 2022 reported revenue guidance reflects an additional 25 basis points of unfavorable foreign currency impact relative to guidance provided in August 2022. Foreign currency is now expected to unfavorably impact full year reported growth by approximately 250 basis points compared to the prior year due to the continuing strength of the US Dollar.
Full year 2022 adjusted EPS guidance is being raised to a range of $3.29 to $3.33, an increase of $0.15 at the mid-point compared to the Company’s August guidance.
For the fourth quarter 2022, the Company expects reported revenues in the range of $391 million to $403 million, representing reported growth of -3.5% to -0.6% and organic growth of 1.3% to 4.3%. Adjusted earnings per diluted share is expected to be in a range of $0.87 to $0.91.
The Company’s guidance for fourth 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 includes ACell as of January 20, 2022 and excludes sales from the TWC divestiture as of September 1, 2022. Adjusted earnings per share guidance reflects the impact of the divestiture of the TWC business as well as an updated foreign currency outlook.
Conference Call and Presentation Available Online
Integra has scheduled a conference call for 8:30 a.m. ET on Wednesday, October 26, 2022, to discuss third quarter 2022 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.
Access to the live call is available by dialing 866-571-0905 and using the passcode 1121226#. A simultaneous webcast of the call will be available via the Company’s website at www.integralife.com. A webcast replay of the call can be accessed through the Investor Relations homepage of Integra’s website at www.integralife.com. A replay of the call will be available until November 7, 2022 by dialing 866-583-1035 and using the passcode 1121226#.