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Integra (IART) Q1 Earnings Beat Estimates, Gross Margin Down

·5 min read

Integra LifeSciences Holdings Corporation IART delivered adjusted earnings per share (EPS) of 69 cents in the first quarter of 2021, up 43.8% from a year ago. The metric surpassed the Zacks Consensus Estimate by 23.2%.

The adjustment excludes the impact of certain non-recurring charges like structural optimization, divestiture, acquisition and integration, intangible asset amortization expenses, among others.

GAAP EPS for the first quarter was 53 cents compared with the year-ago quarter of 11 cents.

Revenue Discussion

Total revenues in the reported quarter improved 1.6% year over year to $360.1 million. The metric exceeded the Zacks Consensus Estimate by 2.9%. Organically, revenues improved 2.9% year over year.

Total reported revenues include $14.1 million from the acquisition of ACell, which was completed on Jan 20, 2021.

Notably, the quarter’s figures were above the high end of the company’s preliminary estimate of $345-$355 million announced in February.

Segmental Details

Coming to product categories, revenues from the Codman Specialty Surgical (“CSS”) segment rose 4.2% year over year on a reported basis to $241.3 million (organically, 3.3%). However, the segment’s global neurosurgery sales were flat on an organic basis compared to the prior year. Sales in advanced energy increased mid-single digits. However, strength in Advanced Energy was offset by flat-to-low single-digit declines in dural access and repair, CSF management and neuromonitoring.

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise

Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise
Integra LifeSciences Holdings Corporation Price, Consensus and EPS Surprise

Integra LifeSciences Holdings Corporation price-consensus-eps-surprise-chart | Integra LifeSciences Holdings Corporation Quote

Tissue Technologies revenues totaled $118.8 million in the first quarter, down 3.3% year over year on reported basis and up 2.2% on organic basis. During the first quarter, sales in wound reconstruction improved 22.7% compared to the prior year. Sales in private label declined 0.5% in the first quarter. However, international sales of Tissue Technology increased mid-single digits on an organic basis.

Margin Trend

In the reported quarter, gross profit totaled $214.2 million, down 2.9% year over year. Gross margin contracted 282 basis points (bps) to 59.5%. The company-adjusted gross margin of 67.3% was also down 100 bps.

Selling, general and administrative expenses contracted 5.6% to $156.6 million in the quarter under review, while research and development expenses rose 7.5% to $22.4 million.

Overall, adjusted operating profit was $35.2 million, up 3.4% year over year. Adjusted operating margin saw a 17-bp expansion year over year to 9.8%.

Financial Position

Integra exited the first quarter of 2021 with cash and cash equivalents of $408.9 million, down from $470.2 million at the end of fourth-quarter 2020.

Cumulative net cash flow from operating activities at the end of the first quarter was $69.1 million compared with $203.8 million at the end of the last reported quarter.

2021 Outlook

The company has raised its financial guidance for fiscal 2021.

For 2021, the company raised revenues guidance by $5 million to $1.53 billion to $1.54 billion. The Zacks Consensus Estimate for the same is pegged at 1.53 billion.

The company currently expects to report at the high end of the adjusted earnings per diluted share guidance of $2.86 to $2.93 for fiscal 2021. The Zacks Consensus Estimate for the same is pegged at $2.89.

Our Take

Integra exited the first quarter of 2021 with better-than-expected earnings and revenue results. The ongoing recovery within the company’s business looks encouraging. The year-over-year growth in CSS segment buoys optimism. Robust demand for the company’s products is also a positive. Expansion of operating margin looks encouraging. Further, the company raised its financial guidance for 2021.

However, the drop in year-over-year Tissue Technologies revenues is disappointing. The contraction in gross margin looks worrying as well.

Zacks Rank and Other Key Picks

Integra currently carries a Zacks Rank #2 (Buy).

A few top-ranked stocks in the broader medical space are Semler Scientific Inc. SMLR, Owens & Minor, Inc. OMI and DENTSPLY SIRONA Inc. XRAY. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Semler is expected to release results on May 3. The Zacks Consensus Estimate for the company’s first-quarter 2021 adjusted EPS is currently pegged at 48 cents. The consensus mark for first-quarter revenues stands at $11.9 million. The company currently sports a Zacks Rank #1.

Owens & Minor is scheduled to release results on May 5. The Zacks Consensus Estimate for its first-quarter 2021 adjusted EPS is currently pegged at 97 cents. The consensus estimate for first-quarter revenues stands at $2.29 billion. The company currently carries a Zacks Rank #2.

DENTSPLY SIRONA is slated to release results on May 6. The Zacks Consensus Estimate for its first-quarter 2021 adjusted EPS is currently pegged at 55 cents. The consensus estimate for revenues stands at $929.3 million. The company currently carries a Zacks Rank #2.

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