On October 26, 2017 Integra LifeSciences Holdings Corporation (NASDAQ: IART), a leading global medical technology company, reported financial results for the third quarter ending September 30, 2017 (Press release, Integra LifeSciences, OCT 26, 2017, View Source [SID1234521199]).
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Highlights
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Third quarter revenue increased 11.4% to $278.8 million over the same quarter in the prior year, and organic revenue increased 1.5%. The recent storms had a negative impact of approximately $7 million in the third quarter. Derma Sciences contributed $24.1 million of revenue in the quarter;
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Third quarter GAAP earnings per share was $0.04, down from prior year quarter largely due to acquisition and integration related expenses. Third quarter adjusted earnings per share was $0.45, compared to $0.46 in the same quarter in the prior year;
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Third quarter cash flow from operations was $45.2 million, a slight decrease from $46.8 million in the prior year’s quarter due to higher cash outlays for acquisition and integration expenses. Trailing twelve-month free cash flow conversion was 70.8%, compared to 75.6% in the prior-year period;
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The company is revising its full-year 2017 revenue guidance to a new range of $1.165 billion to $1.175 billion, primarily reflecting the addition of the Codman Neurosurgery business acquired from Johnson & Johnson. This results in a full-year 2017 reported revenue growth range of 17.4% to 18.4%;
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The company is lowering its 2017 full-year organic sales growth to about 4%, from its previous guidance of 6.0% to 7.0%, reflecting the impact from storm-related disruptions and lower base business sales growth; and
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The company is revising 2017 full-year GAAP earnings per share to a new range of $0.24 to $0.30 and adjusted earnings per share guidance to a new range of $1.83 to $1.87.
Total revenues for the third quarter were $278.8 million, reflecting an increase of $28.5 million, or 11.4%, over the third quarter of 2016. Sales in Orthopedics and Tissue Technologies increased by 25.5%, which includes the acquired revenues from Derma Sciences and strength in our regenerative and orthopedic total ankle and shoulder portfolios. Sales in Specialty Surgical Solutions increased 3.4% compared to the third quarter of 2016. The increase resulted from strength in global tissue ablation sales driven by the recent launch of CUSA Clarity.
Excluding the revenue contribution from acquisitions and the effect of currency exchange rates and discontinued products, total organic revenues increased 1.5% over the third quarter of 2016. Excluding the impact of the recent storms, organic growth was approximately 4.4%.
"Despite the challenges that we encountered during the third quarter, we were able to mitigate much of the impact on adjusted earnings per share with tighter expense controls, resulting in better than expected cash flows," said Peter Arduini, Integra’s president and chief executive officer. "We are pleased to have closed the acquisition of Codman Neurosurgery and look forward to the increased scale and profitability that this strategic deal enables."
The company reported GAAP net income of $3.2 million, or $0.04 per diluted share, for the third quarter of 2017, compared to a GAAP net income of $20.1 million, or $0.25 per diluted share, in third quarter of 2016. The decline primarily reflects expenses associated with the Derma Sciences and Codman Neurosurgery transactions.
The adjusted measures discussed below are computed with the adjustments to GAAP reporting set forth in the attached reconciliation.
Adjusted EBITDA for the third quarter of 2017 was $63.0 million, or 22.6% of revenue, compared to $58.6 million, or 23.4% of revenue, in the third quarter of 2016. The decrease in adjusted EBITDA margin on a year-over-year basis primarily results from dilution from Derma Sciences.
Adjusted net income for the third quarter of 2017 was $36.1 million, unchanged from the prior year quarter. Adjusted earnings per share for the third quarter of 2017 were $0.45, a decrease of 2.2% over the prior year quarter.
2017 Full-Year Outlook
The company is adjusting its full-year 2017 revenue guidance to a new range of $1.165 billion to $1.175 billion, from $1.125 billion to $1.140 billion, primarily reflecting the addition of sales from the Codman acquisition in the fourth quarter. The company is reiterating Codman’s fourth quarter revenue contribution of $60 million to $65 million, net of divestitures. The company is revising its full-year GAAP earnings per share guidance to a new range of $0.24 to $0.30 from its previous range of $0.49 to $0.55. Adjusted earnings per share guidance is being revised to a new range of $1.83 to $1.87 from its previous range of $1.88 to $1.94, entirely because of storm related disruptions.
Based on third quarter results and the outlook for the remainder of the year, the company is revising its full-year 2017 organic revenue growth to about 4%, down from its previous range of 6.0% to 7.0%, which reflects storm related disruptions of approximately 1.5% and lower growth in the base business of approximately 1%.
"We expect some storm-related disruptions to continue to impact revenues in the fourth quarter as production at our manufacturing facility and local infrastructure in Puerto Rico gradually return to full operating capacity," said Glenn Coleman, Integra’s chief financial officer. "Full-year 2017 organic revenue growth is now expected to be about 4%, which reflects the impact from the storms and slower run rates in our dural repair and SurgiMend product lines."
In the future, the company may record, or expects to record, certain additional revenues, gains, 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 AM ET today, Thursday, October 26, 2017, to discuss financial results for the third quarter 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. The presentation can be found on investor.integralife.com.
Access to the live call is available by dialing (323) 794-2551 and using the passcode 6660907. The call can also be accessed via a webcast link provided on investor.integralife.com. A replay of the call will be available through October 30, 2017, by dialing (719) 457-0820 and using the passcode 6660907. The webcast will also be archived on the website.