Integra LifeSciences(IART) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q2 revenues of approximately $418 million, representing a 9.7$0.63, down 11% compared to 2023 [16] - Adjusted EBITDA margins were 20%, down 330 basis points compared to 2023, primarily due to a decrease in gross margins [34][62] - Operating cash flow for the second quarter was $40 million [34] Business Line Data and Key Metrics Changes - The Codman Specialty Surgical (CSS) business reported Q2 revenues of$302 million, up 11.3% on a reported basis and 0.9% on an organic basis [17] - The ENT business saw 18% growth for the second quarter, reflecting early synergies from the Acclarent acquisition [35] - Tissue Technologies increased 5.6% on a reported basis and 5.7% on an organic basis, with high-double-digit growth in DuraSorb [36] Market Data and Key Metrics Changes - Global sales in neurosurgery grew 1.2% on an organic basis, with strong growth in certain franchises offset by backorders [17] - International business saw low-single-digit growth, with strong demand in many markets but unable to meet demand due to backorders [18] Company Strategy and Development Direction - The company is focused on a compliance master plan to improve quality systems and GMP compliance across its manufacturing and supply network, which will increase spending in the second half of 2024 [6][7] - The company remains committed to bringing PriMatrix and SurgiMend back to market and believes in its product portfolio and long-term growth prospects despite recent performance [8][12] - The integration of Acclarent is expected to expand addressable markets and provide immediate scale and accretive growth [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged operational and quality system gaps and emphasized the need for investments to strengthen compliance processes [23][24] - The company expects revenue and adjusted EPS guidance for the year to be impacted by supply holds and backorders, with a forecasted revenue range of $1.609 billion to$1.629 billion [31][70] - For 2025, the company anticipates mid-single-digit organic revenue growth, but also pockets of supply disruption due to the compliance master plan [43] Other Important Information - The company has total liquidity of $1.2 billion, including$297 million in cash and short-term investments [39] - The Braintree facility is expected to be operational in the first half of 2026, which will support the production of SurgiMend and PriMatrix [59][135] Q&A Session Summary Question: Can you provide more color on the shipping holds in Q3? - Management stated that the temporary shipping holds impact several SKUs across the CSS business and expects most holds to be cleared by Q3 [46][47] Question: Why are you confident that the shipping holds won't extend into 2025? - Management expressed confidence based on their plan to clear the majority of holds by the end of 2024, indicating that the issues are isolated to 2024 [50][51] Question: What are the anticipated investments over the next 18 months? - Investments will focus on improving quality compliance and supply chain capabilities, with capital spending expected to remain consistent with 2024 levels [101] Question: How do you plan to retain your sales force amid these challenges? - Management emphasized the importance of supporting the sales force to maintain relationships with customers and drive future growth [95][112] Question: What is the expected contribution of Acclarent to growth in 2025? - Acclarent is expected to contribute positively to growth, with the company seeing continued strength across other parts of the business [138]