Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Integra Lifesciences Holdings Corp (IART, Financial) reported first quarter revenues of $369 million, surpassing the February guidance range.
- The Codman Specialty Surgical business grew by 4.1%, driven by strong product performance and brand strength in various surgical areas.
- International markets continued to show robust growth, contributing significantly to the overall revenue.
- The acquisition of Acclarent positions Integra Lifesciences Holdings Corp (IART) as a leader in the ENT segment, expected to provide scale and accretive growth.
- The company successfully relaunched CereLink, receiving strong market uptake and demonstrating resilience in its intracranial pressure monitoring portfolio.
Negative Points
- Organic revenue declined by 2.5% compared to the previous year, primarily due to the inclusion of Boston revenue in the first quarter of 2023.
- Tissue Technologies business experienced a 15.3% decline in revenue, significantly impacted by supply constraints on Integra Skin.
- The external audit of the Boston plant revealed more findings than anticipated, delaying the expected resumption of commercial distribution.
- Adjusted EPS for the quarter was down 25.7% compared to 2023, reflecting challenges in operational efficiency.
- Gross margins decreased by 290 basis points from the previous year, impacted by unfavorable revenue mix and higher scrap rates.
Q & A Highlights
Q: Regarding your Boston facility recall and restart, can you share some additional details around what the results of the audit revealed?
A: (Jan De Witte - President, CEO & Director) The final audit confirmed that there's more to be done than initially anticipated. Changes have been made to the operations and quality leadership to ensure the right focus and capabilities are applied to Boston and our broader quality system.
Q: In late April, 7 MACs published a proposed LCD for the treatment of DFUs and VLUs. What impact does this have on Integra and what percent of your products are exposed to this proposed LCD?
A: (Jan De Witte - President, CEO & Director) The proposed LCDs cover Omnigraft and PriMatrix, which remain covered and are a small part of our business. The impact to Integra is neutral short term but represents a future opportunity.
Q: What are the next steps in Boston? What milestones should investors look for?
A: (Jan De Witte - President, CEO & Director) We are currently determining the work plan and translating the latest audit observations into this plan, which will determine the milestones.
Q: Can you discuss the gross and operating margin assumptions in your EPS guidance for Q2 and the full year?
A: (Lea Daniels Knight - Executive VP & CFO) For the full year, gross margins will be moderately down year-on-year due to ongoing remediation costs and lower utilization. Q2 will see similar dynamics but with a modest sequential improvement from Q1.
Q: Could you provide an update on Integra Skin, the supply constraints, and when these might ease?
A: (Lea Daniels Knight - Executive VP & CFO) Production is running but not at full capacity. We expect to catch up to full demand in the second half of the year.
Q: On Acclarent, what are your assumptions for the growth profile of this business under your leadership?
A: (Lea Daniels Knight - Executive VP & CFO) We have assumed $80 million in revenue for the three quarters of 2024 that we will have Acclarent onboard. This acquisition is expected to be growth accretive and capable of operating at high single-digit levels annually.
Q: How confident are you that skin capacity will be fully back online in the second half, and what allows you to drive a step-up in margins?
A: (Lea Daniels Knight - Executive VP & CFO) We are confident because our production lines are up and running, though not yet at full capacity. The plan in place should allow us to meet full demand, improving margins as skin is a high-margin product.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
