PRINCETON, N.J., May 07, 2020 (GLOBE NEWSWIRE) — Integra LifeSciences Holdings Corporation (NASDAQ: IART), a leading global medical technology company, today reported financial results for the first quarter ending March 31, 2020.
First Quarter 2020 Financial Summary
- Reported revenues were $354.3 million, representing a decrease of (1.5)% on a reported basis and (0.1)% on an organic basis, compared to the prior year. These results are in line with the preliminary results provided on April 7, 2020;
- GAAP earnings per diluted share were $0.11, compared to GAAP earnings of $0.38 in the first quarter of 2019. Adjusted earnings per diluted share were $0.48, compared to $0.65 in the prior year. The decline in earnings was largely attributable to the negative impact of COVID-19;
- For the first two and a half months of the first quarter of 2020, revenue was trending at the higher end of the Company’s expectations. The Company estimates the revenue impact from the decline in surgical procedures related to COVID-19 during the second half of March to be between $20 and $25 million;
- Consistent with our previous communication on April 7, 2020, the Company’s full-year 2020 guidance, provided on February 19, 2020, remains withdrawn due to the uncertainty related to the decline and recovery in surgical procedures resulting from COVID-19.
“The COVID-19 pandemic has had such a profound impact on families, communities and the global healthcare system. Throughout this period, Integra has remained focused on safeguarding the health and well-being of our people, while continuing to deliver lifesaving products to our customers and patients,” said Peter Arduini, Integra’s president and chief executive officer. “I remain extremely proud of our people’s spirit, resilience and professionalism, supporting each other, while navigating through these unprecedented times.”
The Company reported GAAP gross margin of 62.3%, compared to 64.2% in the first quarter of 2019. Adjusted gross margin was 68.3% compared to 68.4% in the prior year.
Adjusted EBITDA for the first quarter of 2020 was $75.7 million, or 21.4% of revenue, compared to $87.4 million, or 24.3% of revenue, in the prior year.
The Company reported GAAP net income of $9.2 million, or $0.11 per diluted share, in the first quarter of 2020, compared to GAAP net income of $32.8 million, or $0.38 per diluted share, in the prior year.
Adjusted net income for the first quarter of 2020 was $41.3 million, compared to $56.4 million in the prior year.
The decreases in gross margin, EBITDA and net income are primarily attributable to COVID-19, which resulted in lower than expected revenues, as non-emergent surgical procedures were deferred, primarily in the U.S. This decline in U.S. revenue relative to growth in international revenue resulted in an unfavorable gross margin compared to original expectations. Additionally, lower revenue levels relative to our selling, general and administrative costs, research and development costs and a higher tax rate contributed to the declines in net income, and were similarly driven by COVID-19.
Integra’s financial position and liquidity remain strong. In early February, the Company renegotiated the terms of its $2.2 billion bank facility, extended the maturity of its credit agreement by two years to 2025, and issued a $575 million convertible note with a 0.5% fixed interest rate. The Company ended the quarter with $358 million in cash and cash equivalents, $1.15 billion in undrawn revolver capacity, and a net debt bank leverage ratio of 3.1x. The Company previously reported in February that it had entered into an accelerated share repurchase (ASR) agreement to repurchase, in aggregate, approximately $92.4 million of the Company’s common stock. Approximately 80% of the shares to be repurchased were received by the company in the first quarter, and the Company expects that all repurchases under the ASR will be completed by the end of the second quarter.
Impact of COVID-19
Integra’s primary focus during this global crisis remains on supporting patients, providing customers with life-saving products and protecting the well-being of its employees.
For the first two and a half months of the first quarter of 2020, revenue was trending at the higher end of our expectations. However, as noted in the Company’s April 7, 2020 press release, surgical procedures declined significantly in the second half of March as healthcare providers reallocated resources to address the increasing demands caused by COVID-19.
The Company has estimated the revenue impact from the decline in surgical procedures to be approximately $20 to $25 million in the first quarter. Based on April trends and the ongoing impact from restrictions on surgical procedures and shelter-in-place policies, the Company expects a more substantial negative impact on second quarter performance.
In February, the Company implemented contingency plans to address the operational impact of COVID-19, focusing primarily on the Asia Pacific region. During March, the rapid and evolving spread of the virus resulted in an unprecedented challenge to the global healthcare industry. In response to the challenge, the Company expanded its contingency plans to enable its manufacturing and distribution sites around the world to continue operating at levels required to meet demand and to provide for the safety of its employees. In addition, in April, the Company initiated significant cost-savings measures, which include the following:
- Reduced executive management and board cash compensation
- Reduced cash compensation for all other employees through reduced commissions, reduction in hours and/or furloughs
- Hiring freeze, elimination of overtime, cessation of third-party services and temporary contractor relationships, and
- Significant reduction in capital expenditures and discretionary spending including travel, events and marketing programs
These comprehensive spending cuts were necessary to protect our financial strength in the face of near-term challenges. Yet, despite those challenges, the Company remains focused on managing the business for the long-term, including preserving full time jobs needed to support the expected rebound in surgical procedure volumes. Our adaptability and resiliency in the face of this unprecedented crisis is made possible in part by prior investments in technology infrastructure and operations as well as our talented and committed global workforce. And despite the current cost-reduction measures, we continue to prioritize and invest in our critical R&D and clinical programs.
2020 Full-Year Outlook
Given the existing uncertainty related to COVID-19, the Company’s guidance for the full-year 2020, issued on February 19, 2020, remains withdrawn as announced on April 7, 2020.
Supplemental financial and operational information is included in a presentation that can be found in the “Investor” section of the Company’s website at investor.integralife.com under “Events & Presentations”.
In the future, the company may record, or expects to record, gains or losses, 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, May 7, 2020, to discuss financial results for the first quarter. 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 (800) 263-0877 and using the passcode 5089204. The call can also be accessed via a webcast link provided on investor.integralife.com. A replay of the call will be available until May 15, 2020 by dialing (888) 203-1112 and using the passcode 5089204. The webcast will also be archived on the website.