Integra LifeSciences(IART) - 2023 Q4 - Annual Results

Financial Performance Summary This section provides an overview of Integra LifeSciences' financial results for Q4 and full-year 2023, highlighting key revenue and earnings trends Fourth Quarter 2023 Financial Summary In the fourth quarter of 2023, Integra LifeSciences reported a slight revenue decrease of 0.2% to $397.0 million, with organic revenue declining 1.2% Excluding the impact of the Boston facility recall, organic revenue grew by 3.6% GAAP earnings per share fell sharply to $0.25 from $0.63 in Q4 2022, and adjusted EPS also decreased to $0.89 from $0.94 Q4 2023 Key Financial Metrics | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | Reported Revenues | $397.0M | $398.0M | -0.2% | | Organic Revenue Growth | -1.2% | N/A | N/A | | Organic Revenue Growth (Ex-Boston) | +3.6% | N/A | N/A | | GAAP EPS (Diluted) | $0.25 | $0.63 | -60.3% | | Adjusted EPS (Diluted) | $0.89 | $0.94 | -5.3% | | Adjusted EBITDA | $100.5M | $109.7M | -8.4% | Full-Year 2023 Financial Summary For the full year 2023, total reported revenues decreased by 1.0% to $1,541.6 million, while organic sales were flat Excluding the Boston recall impact, organic revenue grew 5.5% Both GAAP and adjusted earnings per share saw significant declines, with GAAP EPS at $0.84 compared to $2.16 in 2022, and adjusted EPS at $3.10 compared to $3.36 in 2022 Full-Year 2023 Key Financial Metrics | Metric | Full-Year 2023 | Full-Year 2022 | Change | | :--- | :--- | :--- | :--- | | Reported Revenues | $1,541.6M | $1,557.7M | -1.0% | | Organic Revenue Growth | 0.0% | N/A | N/A | | Organic Revenue Growth (Ex-Boston) | +5.5% | N/A | N/A | | GAAP EPS (Diluted) | $0.84 | $2.16 | -61.1% | | Adjusted EPS (Diluted) | $3.10 | $3.36 | -7.7% | | Adjusted EBITDA | $369.7M | $411.3M | -10.1% | Business Highlights Throughout 2023, Integra LifeSciences made significant strategic progress despite operational challenges Key achievements include advancing the Boston facility relaunch, completing the global CereLink® relaunch, integrating the SIA acquisition, and expanding its international product portfolio The company also executed $275 million in share repurchases and signed a definitive agreement to acquire the Acclarent® ENT business - The relaunch of products from the Boston facility is on track for mid-to-late Q2 2024[7] - Completed the global relaunch of CereLink® and successfully integrated the SIA acquisition[7] - Signed a definitive agreement to acquire the Acclarent® ENT business, expected to close by Q2 2024[7] - Executed $275 million in share repurchases during the year[7] Fourth Quarter 2023 Segment Performance This section details the revenue performance of Integra LifeSciences' Codman Specialty Surgical and Tissue Technologies segments in Q4 2023 Codman Specialty Surgical The Codman Specialty Surgical (CSS) segment, representing 69% of total revenue, reported Q4 revenues of $271.6 million, an increase of 2.7% on a reported basis and 2.3% organically Growth was driven by a 2.0% organic increase in Neurosurgery, led by Certas® Plus valves and DuraGen, and a 3.0% organic increase in Instruments CSS Q4 2023 Performance | Category | Revenue | Reported Growth | Organic Growth | | :--- | :--- | :--- | :--- | | Total CSS | $271.6M | +2.7% | +2.3% | | Neurosurgery | N/A | N/A | +2.0% | | Instruments | N/A | N/A | +3.0% | - Neurosurgery growth was driven by mid-single digit growth in CSF management (Certas® Plus valves) and dural access and repair (DuraGen)[14] Tissue Technologies The Tissue Technologies segment reported Q4 revenues of $125.4 million, a decrease of 6.0% on a reported basis and 8.0% organically The decline was primarily due to lost revenue from the Boston product recall, which was partially offset by double-digit growth from BioD® and Gentrix®, and mid-single-digit growth in Integra skin and MediHoney® Tissue Technologies Q4 2023 Performance | Category | Revenue | Reported Growth | Organic Decline | | :--- | :--- | :--- | :--- | | Total Tissue Technologies | $125.4M | -6.0% | -8.0% | - The revenue decline was driven by the Boston product recall[14] - The decline was partly offset by strong performance in other products, including double-digit growth from BioD® and Gentrix®[14] 2023 Balance Sheet, Cash Flow and Capital Allocation This section summarizes Integra LifeSciences' financial position at year-end 2023, including net debt, liquidity, and cash flow activities Year-End Financial Position As of year-end 2023, Integra's financial position included net debt of $1.2 billion and a consolidated total leverage ratio of 3.0x The company maintained strong liquidity of approximately $1.5 billion, comprising $309 million in cash and short-term investments and the rest available under its revolving credit facility Full-year cash flow from operations was $140.0 million, with capital expenditures of $67.0 million Key Financial Position Metrics (Year-End 2023) | Metric | Value | | :--- | :--- | | Cash Flow from Operations (FY) | $140.0M | | Capital Expenditures (FY) | $67.0M | | Net Debt | $1.2B | | Consolidated Total Leverage Ratio | 3.0x | | Total Liquidity | ~$1.5B | 2024 Revenue and Adjusted Earnings Per Share Guidance This section outlines Integra LifeSciences' financial projections for full-year and first-quarter 2024, including revenue and adjusted EPS guidance Full-Year and First-Quarter 2024 Outlook Integra LifeSciences projects full-year 2024 revenues between $1,603 million and $1,618 million, representing 4.0% to 5.0% reported and organic growth Adjusted EPS is expected to be in the range of $3.15 to $3.25 For the first quarter of 2024, the company anticipates revenues of $360 million to $365 million and adjusted EPS between $0.53 and $0.57 This guidance excludes the pending acquisition of the Acclarent ENT business Full-Year 2024 Guidance | Metric | Range | | :--- | :--- | | Revenues | $1,603M - $1,618M | | Reported Growth | 4.0% - 5.0% | | Organic Growth | 4.0% - 5.0% | | Adjusted EPS (Diluted) | $3.15 - $3.25 | First Quarter 2024 Guidance | Metric | Range | | :--- | :--- | | Revenues | $360M - $365M | | Reported Growth | -5.5% to -4.1% | | Organic Growth | -5.1% to -3.7% | | Adjusted EPS (Diluted) | $0.53 - $0.57 | - The 2024 guidance does not include the impact of the pending acquisition of the Acclarent ENT business[16] Financial Statements This section presents Integra LifeSciences' condensed consolidated financial statements, including statements of operations, balance sheet, and cash flows Condensed Consolidated Statements of Operations For the twelve months ended December 31, 2023, total revenues decreased to $1.54 billion from $1.56 billion in 2022 Operating income fell sharply to $111.5 million from $238.9 million, and net income decreased to $67.7 million ($0.84 per diluted share) from $180.6 million ($2.16 per diluted share) in the prior year, driven by higher costs of goods sold and operating expenses Full-Year Statement of Operations Summary (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Total revenues | $1,541,573 | $1,557,666 | | Operating income | $111,526 | $238,920 | | Net income | $67,741 | $180,550 | | Diluted net income per share | $0.84 | $2.16 | Condensed Balance Sheet Data As of December 31, 2023, Integra's balance sheet showed cash and cash equivalents of $276.4 million, a decrease from $456.7 million in 2022 Inventory increased to $389.6 million from $324.6 million, while total stockholders' equity declined to $1.59 billion from $1.80 billion over the same period Balance Sheet Summary (in thousands) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $276,402 | $456,661 | | Inventory, net | $389,608 | $324,583 | | Total Borrowings* | $1,499,049 | $1,481,444 | | Stockholders' equity | $1,587,884 | $1,804,403 | Condensed Statement of Cash Flows For the full year 2023, net cash provided by operating activities was $140.0 million, a significant decrease from $264.5 million in 2022 Net cash used in investing activities was $94.2 million, and cash used in financing activities was $229.9 million This resulted in a net decrease in cash and cash equivalents of $180.3 million for the year Full-Year Cash Flow Summary (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $139,955 | $264,469 | | Net cash used in investing activities | ($94,178) | ($58,580) | | Net cash used in financing activities | ($229,925) | ($251,953) | | Net (decrease) in cash and cash equivalents | ($180,259) | ($56,787) | Reconciliation of GAAP to Non-GAAP Measures This section provides detailed reconciliations of Integra LifeSciences' GAAP financial results to various non-GAAP measures, such as Adjusted EBITDA and Adjusted EPS Reconciliation to Adjusted EBITDA For the full year 2023, Adjusted EBITDA was $369.7 million, down from $411.3 million in 2022 The reconciliation from GAAP net income of $67.7 million includes major adjustments for depreciation and amortization ($122.5 million), EU Medical Device Regulation charges ($46.6 million), and charges related to the Boston Recall ($40.0 million) Full-Year Reconciliation to Adjusted EBITDA (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | GAAP net income | $67,741 | $180,550 | | Total of non-GAAP adjustments | $301,964 | $230,796 | | Adjusted EBITDA | $369,705 | $411,346 | Reconciliation to Adjusted Net Income and Adjusted EPS Adjusted net income for the full year 2023 was $247.8 million ($3.10 per share), compared to $280.9 million ($3.36 per share) in 2022 Key adjustments to GAAP net income included intangible asset amortization ($82.8 million), EU Medical Device Regulation charges ($46.6 million), and Boston Recall charges ($40.0 million) Full-Year Reconciliation to Adjusted Net Income (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | GAAP net income | $67,741 | $180,550 | | Total of non-GAAP adjustments | $180,036 | $100,316 | | Adjusted net income | $247,777 | $280,866 | | Adjusted diluted net income per share | $3.10 | $3.36 | Reconciliation of Net Debt The company's net debt increased to $1.20 billion at the end of 2023 from $998.0 million at the end of 2022 The calculation sums total short- and long-term borrowings and subtracts cash, cash equivalents, and short-term investments Net Debt Calculation (in thousands) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Borrowings* | $1,499,549 | $1,443,315 | | Less: Short-term investments | ($32,694) | $0 | | Less: Cash & Cash Equivalents | ($276,402) | ($456,661) | | Net Debt | $1,200,104 | $998,039 |