Integra LifeSciences(IART) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Highlights Integra LifeSciences reported $418.2 million in Q2 2024 revenues, a 9.7% increase, with adjusted EPS declining to $0.63, as compliance initiatives lead to temporary shipping holds and lowered full-year guidance, alongside strategic progress on Acclarent integration and future product relaunches Financial Highlights | Financial Metric | Q2 2024 | Q2 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenues (Millions USD) | $418.2 | $381.3 | +9.7% (Reported) | | Organic Revenues | - | - | +2.3% | | GAAP EPS | $(0.16) | $0.05 | - | | Adjusted EPS | $0.63 | $0.71 | -11.3% | - Updated full-year 2024 guidance to a revenue range of $1.609 billion to $1.629 billion and adjusted EPS of $2.41 to $2.57, reflecting temporary shipping holds and investments in quality system improvements[40] - The company is implementing a compliance master plan to address quality system and GMP compliance, resulting in temporary shipping holds on certain products that will primarily affect the third quarter[15] - Announced plans to focus the relaunch of SurgiMend® and PriMatrix® at a new manufacturing facility in Braintree, Massachusetts, with operational readiness expected in the first half of 2026, and received PMA approvable notification for SurgiMend, pending GMP certification[1][22] - Noted early integration success with the recently acquired Acclarent ENT business[39] Second Quarter 2024 Consolidated Performance In Q2 2024, reported revenues increased 9.7% to $418.2 million, but profitability declined, resulting in a GAAP net loss of $(12.4) million and a decrease in Adjusted EBITDA to $83.8 million Consolidated Performance Metrics | Performance Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Total Revenues (Millions USD) | $418.2 | $381.3 | | GAAP Gross Margin | 54.0% | 54.3% | | Adjusted Gross Margin | 65.2% | 67.6% | | GAAP Net Income (Loss) (Millions USD) | $(12.4) | $4.2 | | GAAP Diluted EPS | $(0.16) | $0.05 | | Adjusted Net Income (Millions USD) | $49.0 | $57.4 | | Adjusted Diluted EPS | $0.63 | $0.71 | | Adjusted EBITDA (Millions USD) | $83.8 | $88.8 | | Adjusted EBITDA Margin | 20.0% | 23.3% | Second Quarter 2024 Segment Performance The Codman Specialty Surgical segment grew 11.3% reported, driven by the Acclarent acquisition, while the Tissue Technologies segment grew 5.6% reported, fueled by strong performance in key products Codman Specialty Surgical The Codman Specialty Surgical segment reported $301.8 million in Q2 2024 revenue, with 11.3% reported growth, driven by neurosurgery and ENT, despite declines in instruments and CSF management Codman Specialty Surgical Segment Performance | Segment | Revenue (Q2 2024, Millions USD) | Reported Growth (Year-over-Year) | Organic Growth (Year-over-Year) | | :--- | :--- | :--- | :--- | | Codman Specialty Surgical | $301.8 | +11.3% | +0.9% | - Key growth drivers included: - Neurosurgery: Grew 1.2% organically, with high-single-digit growth in Dural access and repair (DuraGen®, Mayfield®)[43] - ENT: Grew low-double digits, reflecting contributions from MicroFrance ENT instruments[43] - Instruments: Declined 3.1% organically[43] - CSF management decreased low-double digits due to supply backorders[43] Tissue Technologies The Tissue Technologies segment generated $116.4 million in Q2 2024 revenue, with 5.6% reported growth, driven by strong performance in DuraSorb®, Gentrix®, and MicroMatrix®, despite a decline in Integra Skin sales Tissue Technologies Segment Performance | Segment | Revenue (Q2 2024, Millions USD) | Reported Growth (Year-over-Year) | Organic Growth (Year-over-Year) | | :--- | :--- | :--- | :--- | | Tissue Technologies | $116.4 | +5.6% | +5.7% | - Key growth drivers included: - High double-digit growth for DuraSorb®[44] - Mid-double-digit growth in Gentrix®[44] - Low double-digit growth in MicroMatrix®, Cytal®, and amniotics[44] - Private label sales increased 1.5% organically (excluding Boston)[44] - Integra Skin sales saw a low double-digit decline[44] Balance Sheet, Cash Flow and Capital Allocation As of Q2 2024, Integra maintained total liquidity of approximately $1.18 billion, generated $40.4 million in operating cash flow, and reported total debt of $1.83 billion with a leverage ratio of 3.8x Balance Sheet Highlights (as of June 30, 2024) | Metric | Amount | | :--- | :--- | | Cash and Short-term Investments (Millions USD) | $297 | | Total Liquidity (Billions USD) | ~$1.18 | | Total Debt (Billions USD) | $1.83 | | Net Debt (Billions USD) | $1.54 | | Consolidated Total Leverage Ratio (x) | 3.8 | Cash Flow Summary (Q2 2024) | Cash Flow | Amount (Millions USD) | | :--- | :--- | | Cash Flow from Operations | $40.4 | | Free Cash Flow | $10.7 | 2024 Outlook The company updated its full-year 2024 guidance, lowering expectations due to Q3 shipping holds and quality investments, projecting Q3 revenues between $372 million and $382 million with adjusted EPS of $0.36 to $0.44 Full-Year 2024 Updated Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues (Billions USD) | $1.609 - $1.629 | | Reported Growth | +4.4% to +5.7% | | Organic Growth | -1.0% to +0.3% | | Adjusted EPS | $2.41 - $2.57 | Third Quarter 2024 Guidance | Metric | Guidance Range | | :--- | :--- | | Revenues (Millions USD) | $372 - $382 | | Reported Growth | -2.6% to 0.0% | | Organic Growth | -9.4% to -6.7% | | Adjusted EPS | $0.36 - $0.44 | Conference Call and Presentation Available Online Integra scheduled a conference call for July 29, 2024, at 8:30 a.m. ET to discuss Q2 2024 results and guidance, with a live webcast and presentation available online - A conference call to discuss Q2 2024 results was scheduled for 8:30 a.m. ET on July 29, 2024[29] - A live webcast and presentation materials are available on the Investors section of the company's website, investor.integralife.com[30] Financial Statements The financial statements show Q2 2024 total revenues of $418.2 million and a net loss of $(12.4) million, with $296.9 million in cash and short-term investments and $1.53 billion in stockholders' equity as of June 30, 2024 Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show Q2 2024 total revenues of $418,175 thousand, resulting in an operating loss of $(3,029) thousand and a net loss of $(12,402) thousand Condensed Consolidated Statements of Operations (Thousands USD) | (In thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total revenues, net | $418,175 | $381,267 | | Cost of goods sold | $192,258 | $174,241 | | Operating income (loss) | $(3,029) | $12,504 | | Net income (loss) | $(12,402) | $4,184 | | Diluted net income (loss) per share | $(0.16) | $0.05 | Condensed Balance Sheet Data The Condensed Balance Sheet Data as of June 30, 2024, shows $215,236 thousand in cash and equivalents, $1,825,297 thousand in total borrowings, and $1,534,195 thousand in stockholders' equity Condensed Balance Sheet Data (Thousands USD) | (In thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $215,236 | $276,402 | | Short term investments | $81,691 | $32,694 | | Inventories, net | $421,775 | $389,608 | | Total Borrowings | $1,825,297 | $1,499,549 | | Stockholders' equity | $1,534,195 | $1,587,884 | Condensed Statement of Cash Flows The Condensed Statement of Cash Flows for the six months ended June 30, 2024, shows $56,157 thousand in net cash from operations, $(376,163) thousand used in investing, and a net decrease of $(61,166) thousand in cash and equivalents Condensed Statement of Cash Flows (Thousands USD) | (In thousands) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56,157 | $54,435 | | Net cash used in investing activities | $(376,163) | $(29,252) | | Net cash provided by (used by) financing activities | $264,928 | $(173,376) | | Net increase (decrease) in cash and cash equivalents | $(61,166) | $(147,469) | Reconciliation of GAAP to Non-GAAP Measures The company provides non-GAAP measures like adjusted EBITDA and net income, with Q2 2024 adjustments including $14.7 million for Boston recall/Braintree transition and $18.7 million for acquisition costs, reconciling a GAAP net loss of $(12.4) million to an adjusted net income of $49.0 million - Non-GAAP measures like organic revenues, adjusted EBITDA, and adjusted net income are provided to offer supplemental information on business trends, excluding items such as currency effects, acquisition/divestiture costs, restructuring charges, and amortization[49][32] Reconciliation of GAAP Net Income to Adjusted Net Income (Q2 2024, Thousands USD) | Description | Amount | | :--- | :--- | | GAAP net income (loss) | $(12,402) | | Boston Recall/Braintree Transition | $14,698 | | Acquisition, divestiture and integration-related charges | $18,666 | | EU Medical Device Regulation charges | $12,508 | | Intangible asset amortization expense | $25,383 | | Structural optimization charges | $5,095 | | Estimated income tax impact from adjustments | $(14,942) | | Adjusted net income | $49,007 | Reconciliation of GAAP Net Income to Adjusted EBITDA (Q2 2024, Thousands USD) | Description | Amount | | :--- | :--- | | GAAP net income (loss) | $(12,402) | | Depreciation and intangible asset amortization | $35,782 | | Interest expense, net | $13,592 | | Income tax expense | $(2,783) | | Other non-GAAP adjustments | $51,067 | | Adjusted EBITDA | $83,755 |