INTEGRA LIFESCIENCES HOLDINGS CORP

Previous wording

We have made statements in this Quarterly Report that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including, but not limited to, statements regarding our business strategy and plans, growth and growth strategies, developments in the markets for our products and services, financial results, development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, objectives of management for future operations and current expectations or forecasts of future results, our expectations regarding the Boston facility and the Company’s plans to operationalize its Braintree facility, transition the manufacture of SurgiMend® and PriMatrix® to the Braintree facility, and to obtain pre-market approval of SurgiMend® PRS in implant-based breast reconstruction; restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts, are forward-looking statements. In some cases, these forward-looking statements may be identified by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or the negative version of these words or other similar words and expressions in this Quarterly Report.

Current wording

We have made statements in this Quarterly Report that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report, including, but not limited to, statements regarding our business strategy and plans, growth and growth strategies, developments in the markets for our products and services, financial results, development launches and effectiveness, research and development strategy, regulatory approvals, competitive strengths, objectives of management for future operations and current expectations or forecasts of future results, our expectations regarding the Boston facility and plans to operationalize the Company's Braintree facility, transition the manufacture of SurgiMend® and PriMatrix® to the Braintree facility, and to obtain pre-market approval of SurgiMend® PRS in implant-based breast reconstruction; our expectations regarding CMP (as defined below) implementation and engagement; restructuring and cost-saving initiatives, intellectual property rights, litigation and tax matters, governmental proceedings and investigations, mergers and acquisitions, divestitures, market acceptance of our products and services, accounting estimates, financing activities, ongoing contractual obligations, working capital adequacy, value of our investments, our effective tax rate, our expected returns to shareholders, and sales efforts, are forward-looking statements. In some cases, these forward-looking statements may be identified by forward-looking words such as “believe,” “may,” “might,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” or the negative version of these words or other similar words and expressions in this Quarterly Report.

Previous wording

Innovating for Outcomes. An important part of Integra’s growth strategy is introducing new products to strengthen and expand our portfolio through clinical evidence to support regulatory approval and strong reimbursement of our product portfolio around the world, including new indications for existing technologies. For example, in 2021, we filed a pre-market approval (“PMA”) application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. We cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree facility, where Surgimend® will be manufactured. In the late 2022, we acquired SIA, which is also pursuing a PMA for DuraSorb for use in implant-based breast reconstruction (“IBBR”). We completed enrollment for the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction in June 2023 and are conducting the primary follow-up one year after device implantation. We hope to secure approval for DuraSorb in 2025. In addition, in March 2024, we expanded our urinary bladder matrix platform with the U.S. launch of MicroMatrix® Flex, a dual-syringe system enabling the convenient mixing and precise delivery of MicroMatrix® paste to provide convenient access to hard-to-reach spaces and to help prepare an even wound surface in challenging wound areas.

Current wording

Innovating for Outcomes. An important part of Integra’s growth strategy is introducing new products to strengthen and expand our portfolio through clinical evidence to support regulatory approval and strong reimbursement of our product portfolio around the world, including new indications for existing technologies. For example, in 2021, we filed a pre-market approval (“PMA”) application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. We cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree, Massachusetts facility (the "Braintree facility"), where Surgimend® will be manufactured. We are also pursuing a PMA for DuraSorb for use in implant-based breast reconstruction (“IBBR”). We completed enrollment for the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction in June 2023 and are conducting the primary follow-up one year after device implantation. We hope to secure approval for DuraSorb in 2025.

Previous wording

We also continued to advance the development of pioneering neurosurgical technologies with the expansion of our product offerings. In 2023, we launched the CUSA® Clarity tips for use in surgical procedures requiring the controlled fragmentation, emulsification and aspiration of bone as well as in laparoscopic liver surgery.

Current wording

We also continued to advance the development of pioneering neurosurgical technologies with the expansion of our product offerings. In 2023, we launched additional CUSA® Clarity tips for use in surgical procedures requiring the controlled fragmentation, emulsification and aspiration of bone as well as in laparoscopic liver surgery.

Previous wording

Growing Internationally: Over the years, we have been significantly expanding our global footprint through investments in our commercial and manufacturing organizations, the expansion and development of international markets and new product introductions. As part of our In-China-For-China strategy, we continue the build out of our assembly capabilities in our new facility in Suzhou, China. Several new products were introduced in select international markets in 2023 and 2024, including MicroMatrix® and Certas Plus® Programmable Valve, which were launched in Europe, and CUSA Clarity laparoscopic tip, which was launched in Australia, New Zealand, Japan, Canada, South Africa and Israel. In addition, DuraGen® Secure, received approval in Japan, while DuraGen Plus, an absorbable and sutureless collagen onlay indicated as a dura substitute for the repair of dura mater, was approved in China. CereLink, DuraSeal® and MediHoney® also continued their market uptake in international markets.

Current wording

Growing Internationally: Over the years, we have been significantly expanding our global footprint through investments in our commercial and manufacturing organizations, the expansion and development of international markets and new product introductions. As part of our In-China-For-China strategy, we continue the build out of our assembly capabilities in our new facility in Suzhou, China. Several new products were introduced in select international markets in 2023 and 2024, including MicroMatrix® and Certas Plus® Programmable Valve, which were launched in Europe, and CUSA Clarity laparoscopic tip, which was launched in Australia, New Zealand, Japan, Canada, South Africa and Israel. In addition, DuraGen® Secure, received approval in Japan, while DuraGen Plus, an absorbable and sutureless collagen onlay indicated as a dura substitute for the repair of dura mater, and Certas Plus were approved in China. We also continued to strengthen our presence in South Asia, Southeast Asia and South Korea with key leadership appointments.

Previous wording

Driving Operations and Customer Excellence. We have been making investments to build more responsive and scalable processes, enhance the reliability of our supply chain, and drive productivity initiatives to further supply and lower costs. Additionally, we continue to invest in technologies, systems and processes to enhance the customer experience. We continue to invest in our capacity expansion. This includes ongoing projects of transferring our Boston manufacturing to a new location in Braintree, Massachusetts, validating manufacturing processes in our manufacturing facility in Plainsboro, New Jersey and increasing capacity in our Memphis, Tennessee location.

Current wording

Driving Operations and Customer Excellence. We have been making investments to build more responsive and scalable processes, enhance the reliability of our quality systems and supply chain, and drive productivity initiatives to further supply and lower costs. We continue to invest in technologies, systems and processes to enhance the customer experience. We also continue to invest in our capacity expansion. This includes ongoing projects of transferring our Boston manufacturing to a new location in Braintree, Massachusetts, validating manufacturing processes in our manufacturing facility in Plainsboro, New Jersey and increasing capacity in our Memphis, Tennessee location.

Previous wording

Cultivating a High-Performance Culture. In seeking to sustain a culture of excellence and accountability, we have focused on employee empowerment and agility and building a diverse and inclusive workplace. These efforts resulted in our being named in several best workplace lists globally in 2023. Additionally, we have been making further strides in advancing our environmental, social and governance (“ESG”) agenda to drive sustainability across the organization and recently published our second annual ESG report in the third quarter of 2023. For more information on our ESG strategy, goals, performance, and achievements, please visit “Our Company—ESG Report” at https://www.integralife.com/esg-report. Information on our website is not incorporated by reference herein and is not part of this Quarterly Report.

Current wording

Cultivating a High-Performance Culture. In seeking to sustain a culture of excellence and accountability, we have focused on employee empowerment and agility and building a diverse and inclusive workplace. These efforts resulted in our being named in several best workplace lists globally in 2023 and 2024. Additionally, we have been making further strides in advancing our environmental, social and governance (“ESG”) agenda to drive sustainability across the organization and recently published our third annual ESG report in the third quarter of 2024. For more information on our ESG strategy, goals, performance, and achievements, please visit “Our Company—ESG Report” at https://www.integralife.com/esg-report. Information on our website is not incorporated by reference herein and is not part of this Quarterly Report.

Previous wording

Electromechanical Technologies and Instrumentation. The CSS business consists of a broad portfolio of market-leading brands, such as Codman®, DuraGen®, DuraSeal®, CUSA®, Mayfield®, Bactiseal®, and Certas® Plus, which are used for the management of multiple disease states, including brain tumors, traumatic brain injury, hydrocephalus and other neurological conditions. The growth in this business in recent years has been fueled by geographic expansion and new product registrations in markets, such as China, Japan, and Europe, which we expect to continue in the near-to-long term. Because our electromechanical products and instruments address significant needs in surgical procedures and limit uncertainty for surgeons, we continue to invest in registrations, clearances, and approvals for new indications and next generation improvements to our market-leading products. We have several active programs focused on life cycle management and innovation for capital and disposable products in our portfolio. Our product development efforts are focused on core clinical applications in cerebrospinal fluid (“CSF”) management, neuro-critical care monitoring, minimally invasive instruments and electrosurgery and ultrasonic medical technologies, as well as our ambition to transform the standard of care in neurosurgery with product advancements in minimally invasive surgery (“MIS”) and the surgical management of intracerebral hemorrhage (“ICH”). Our lighting franchise is among the most dynamic in the industry.

Current wording

Neurosurgical Solutions and Surgical Instruments. The CSS business consists of a broad portfolio of market-leading brands, such as Codman®, DuraGen®, DuraSeal®, CUSA®, Mayfield®, Bactiseal®, and Certas® Plus, which are used for the management of multiple disease states, including brain tumors, traumatic brain injury, hydrocephalus and other neurological conditions. The growth in this business in recent years has been fueled by geographic expansion and new product registrations in markets, such as China, Japan, and Europe, which we expect to continue in the near-to-long term. Because our electromechanical products and instruments address significant needs in surgical procedures and limit uncertainty for surgeons, we continue to invest in registrations, clearances, and approvals for new indications and next generation improvements to our market-leading products. We have several active programs focused on life cycle management and innovation for capital and disposable products in our portfolio. Our product development efforts are focused on core clinical applications in cerebrospinal fluid (“CSF”) management, neuro-critical care monitoring, minimally invasive instruments and electrosurgery and ultrasonic medical technologies, as well as our ambition to transform the standard of care in neurosurgery with product advancements in minimally invasive surgery (“MIS”) and the surgical management of intracerebral hemorrhage (“ICH”). Our lighting franchise is among the most dynamic in the industry.

Previous wording

In the third quarter of 2021, we filed a PMA application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction. In 2022, we acquired SIA, which has also submitted a PMA application for DuraSorb with IBBR, and in June 2023 we completed enrollment in the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction; the primary follow-up period is one year after device implantation. By offering two distinct product solutions, we believe we have the opportunity to build a leading position in the IBBR market. We hope to secure approval for DuraSorb in 2025. For SurgiMend®, we cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree facility.

Current wording

In the third quarter of 2021, we filed a PMA application for a specific indication for Surgimend® in the use of post-mastectomy breast reconstruction and in July 2024 received approvable pending GMP status from FDA, which approved and closed out the clinical portion of this PMA application. In 2022, we acquired SIA, which has also submitted a PMA application for DuraSorb with IBBR, and in June 2023 we completed enrollment in the DuraSorb U.S. investigational device exemption clinical study for two-stage breast reconstruction; the primary follow-up period is one year after device implantation. By offering two distinct product solutions, we believe we have the opportunity to build a leading position in the IBBR market. We hope to secure approval for DuraSorb in 2025. For SurgiMend®, we cannot predict an approval date because of the timeline of restarting manufacturing at the Braintree facility.

Previous wording

As part of our ongoing efforts to remain compliant, the Company continues to work towards European Union Medical Device Regulation (“EU MDR”) certifications. In 2023, the Company received EU MDR certification in the CSS segment for Hakim Programmable Valves, Certas Plus without Bactiseal catheters, and DuraSeal Dural. Additionally, the Company received EU MDR certification in the TT segment for IDRT and BioPatch in 2023, and MicroMatrix and Cytal in 2024.

Current wording

As part of our ongoing efforts to remain compliant, the Company continues to work towards European Union Medical Device Regulation (“EU MDR”) certifications. In 2023, the Company received EU MDR certification in the CSS segment for Hakim Programmable Valves, Certas Plus without Bactiseal catheters, and DuraSeal Dural, as well as IDRT and BioPatch for the TT segment. In 2024, the Company also received EU MDR certification for DuraGen Suturable for the CSS segment and MicroMatrix, as well as Cytal for the TT segment.

Previous wording

As required by the 2023 Warning Letter, we retained an outside expert consultant to perform an audit of the Boston facility in March 2024. Since receiving the third-party audit findings for the Boston facility in March, the Company has reassessed its plans and timeline to resume the manufacture of PriMatrix® and SurgiMend®. In parallel, the Company has been furthering its plans to complete the construction and operationalization of its new tissue manufacturing facility in Braintree, Massachusetts (the “Braintree facility”). Based on these assessments, the Company no longer plans to restart the manufacture of PriMatrix® and SurgiMend® at its Boston facility and will, instead, restart manufacturing of these products at the Braintree facility. The Company expects to operationalize the Braintree facility in the first half of 2026. As a result of these decisions, during the three months ended June 30, 2024, the Company recorded a $4.6 million impairment charge, comprised of a $1.7 million impairment of an operating lease right-of-use asset and a $2.9 million write-off of fixed assets, which was recorded as a component of cost of goods sold in the condensed consolidated statements of operations. For further detail on the impairment, see Note 10. Leases and Related Party Leases.

Current wording

As required by the 2023 Warning Letter, we retained an outside expert consultant to perform an audit of the Boston facility in March 2024. Since receiving the third-party audit findings for the Boston facility in March, the Company has reassessed its plans and timeline to resume the manufacture of PriMatrix® and SurgiMend®. In parallel, the Company has been furthering its plans to complete the construction and operationalization of its new tissue manufacturing facility in Braintree, Massachusetts. The Company announced in the second quarter of 2024 that it no longer plans to restart the manufacture of PriMatrix® and SurgiMend® at its Boston facility and will, instead, restart manufacturing of these products at the Braintree facility. The Company expects to operationalize the Braintree facility in the first half of 2026. As a result of these decisions, in the second quarter of 2024, the Company recorded a $4.6 million impairment charge, comprised of a $1.7 million impairment of an operating lease right-of-use asset and a $2.9 million write-off of fixed assets, which was recorded as a component of cost of goods sold in the condensed consolidated statements of operations. For further detail on the impairment, see Note 10. Leases and Related Party Leases.

Previous wording

We continue to work with our customers in wound reconstruction and care as we move toward commercialization. Revenues of products manufactured in the Boston facility for the year ended December 31, 2022 were approximately 5.3% of consolidated revenues.

Current wording

Revenues of products manufactured in the Boston facility for the year ended December 31, 2022 were approximately 5.3% of consolidated revenues.

Previous wording

Net loss for thethree and sixmonths ended June 30, 2024 was $(12.4) million and $(15.7) million, or $(0.16) and $(0.20) per diluted share, as compared to net income of $4.2 million and $28.4 million or $0.05 and $0.35 per diluted share for thethree and six months ended June 30, 2023. The decrease in net income for the three and six months ended June 30, 2024, was driven by costs related to the Acclarent acquisition, as well as higher manufacturing costs.

Current wording

Net loss for thethree and nine months ended September 30, 2024 was $(10.7) million and $(26.4) million, or $(0.14) and $(0.34) per diluted share, as compared to net income of $19.5 million and $47.9 million or $0.24 and $0.59 per diluted share for thethree and nine months ended September 30, 2023. The decrease in net income for the three and nine months ended September 30, 2024, was driven by impacts from quality and operational issues, along with costs related to the Acclarent acquisition.

Previous wording

We typically define special charges as items for which the amounts and/or timing of such expenses may vary significantly from period to period, depending upon our acquisition, divestiture, integration and restructuring activities, and for which the amounts are non-cash in nature, and for which the amounts are not expected to recur at the same magnitude. We believe that given our ongoing strategy of seeking acquisitions, our continuing focus on rationalizing our existing manufacturing and distribution infrastructure and our continuing review of various product lines in relation to our current business strategy, some of the special charges discussed above could recur with similar materiality in the future.

Current wording

We typically define special charges as items for which the amounts and/or timing of such expenses may vary significantly from period to period, depending upon our acquisition, divestiture, integration and restructuring activities, and for which the amounts are non-cash in nature and are not expected to recur at the same magnitude. We believe that given our ongoing strategy of seeking acquisitions, our continuing focus on rationalizing our existing manufacturing and distribution infrastructure and our continuing review of various product lines in relation to our current business strategy, some of the special charges discussed above could recur with similar materiality in the future.

Previous wording

For the six months ended June 30, 2024, total revenues increased by $24.9 million to $787.0 million from $762.1 million for the same period in 2023. Excluding the impacts of the Acclarent acquisition, the Boston recall and foreign currency impact, revenues remained flat compared to the same period in the prior year.

Current wording

For the three months ended September 30, 2024, total revenues decreased by $1.6 million to $380.8 million from $382.4 million for the same period in 2023. Excluding the impacts of the Acclarent acquisition, the Boston recall and foreign currency impact, revenues declined low double digits compared to the same period in the previous year, driven by impacts from quality and operational issues.

Previous wording

In the TT segment, revenues were $116.4 million which was an increase of $6.2 million, or 5.6% from the prior-year period. Excluding the impact of the Boston recall, the TT segment showed a low single-digit decrease in sales as compared to the same period in the prior year. This is primarily attributable to a decline in Integra Skin due to supply constraints, partially offset by growth in DuraSorb and Gentrix.

Current wording

In the TT segment, revenues were $110.1 million which was an decrease of $4.2 million, or 3.6% from the prior-year period. Excluding the impact of the Boston recall, the TT segment decreased high single-digits as compared to the same period in the prior year. This is primarily attributable to a decline in Integra Skin due to production challenges, partially offset by growth in our private label business, MicroMatrix® & Cytal, and Durasorb.

Previous wording

Gross margin was $225.9 million for the three months ended June 30, 2024, an increase of $18.9 million from $207.0 million for the same period in 2023. Gross margin as a percentage of revenues was 54.0% for the three months ended June 30, 2024 and 54.3% for the same period in 2023. For the three months ended June 30, 2024, gross margins were impacted by Boston impairment charges, Acclarent inventory step up, and higher manufacturing costs. For the three months ended June 30, 2023, gross margins were impacted by expenses associated with the Boston recall.

Current wording

Gross margin was $200.2 million for the three months ended September 30, 2024, a decrease of $18.1 million from $218.3 million for the same period in 2023. Gross margin as a percentage of revenues was 52.6% for the three months ended September 30, 2024 and 57.1% for the same period in 2023. For the three months ended September 30, 2024, gross margins were impacted by expenses associated with quality and operational issues. For the three months ended September 30, 2023, gross margins were impacted by expenses associated with the Boston recall.

Previous wording

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $34.4 million, or 17.7%, to $228.9 million in the three months ended June 30, 2024, compared to $194.5 million in the same period in 2023.

Current wording

Total operating expenses, which consist of research and development, selling, general and administrative, and amortization expenses, increased by $16.6 million, or 8.7%, to $208.4 million in the three months ended September 30, 2024, compared to $191.8 million in the same period in 2023.

Previous wording

Research and development expenses for the six months ended June 30, 2024 increased by $3.4 million as compared to the same period in the prior year primarily due to the Acclarent acquisition.

Current wording

Research and development expenses for the three months ended September 30, 2024 increased by $0.8 million as compared to the same period in the prior year.

Previous wording

Selling, general and administrative costs for the three months ended June 30, 2024 increased by $30.6 million as compared to the same period in the prior year due to the professional fees and costs associated with the Acclarent acquisition and higher spending in commercial selling activities for both legacy and Acclarent products.

Current wording

Selling, general and administrative costs for the three months ended September 30, 2024 increased by $15.2 million as compared to the same period in the prior year due to higher spending in commercial selling activities for both legacy and Acclarent products.

Previous wording

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended June 30, 2024 was $3.7 million compared to $3.0 million for the same period in the prior year.

Current wording

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the three months ended September 30, 2024 was $3.8 million compared to $3.2 million for the same period in the prior year.

Previous wording

Interest income for the three months ended June 30, 2024 increased by $1.1 million ascompared to the same period in the prior year primarilydue to higher interest rates.

Current wording

Interest income for the three months ended September 30, 2024 increased by $0.4 million ascompared to the same period in the prior year.

Previous wording

Interest expense for the three months ended June 30, 2024 increased by $6.2 million ascompared to the same period in the prior year primarilydue to incremental borrowing to fund Acclarent acquisition and higher interest rates.

Current wording

Interest expense for the three months ended September 30, 2024 increased by $6.3 million ascompared to the same period in the prior year primarilydue to incremental borrowing to fund the Acclarent acquisition.

Previous wording

Other income (expense), net for the three months ended June 30, 2024 increased by $1.6 million compared to the same period in the prior year, primarily driven by favorable foreign exchange impact.

Current wording

Other income, net for the three months ended September 30, 2024 increased by $1.6 million compared to the same period in the prior year, primarily driven by favorable foreign exchange impact.

Previous wording

Our effective income tax rates for the three months ended June 30, 2024 and 2023 were 18.3% and (9.4)%, respectively.

Current wording

The Company’s effective income tax rates for the three months ended September 30, 2024 and 2023 were 47.5% and (4.8)%, respectively. For the three months ended September 30, 2024, the higher tax rate is primarily due to the limitation of foreign tax credits in the U.S. and the limitation of federal tax credits in Switzerland, caused by lower three month book income, as compared to the previous year. For the three months ended September 30, 2023,the primary drivers of the lower tax rate relate to a reduction to book income in higher-taxed jurisdictions and a $3.3 million benefit related to the filing of prior year tax returns.

Previous wording

The OECD released model rules related to a new 15% global minimum tax regime (“Pillar 2”). Several of the jurisdictions in which we operate have already adopted some form of the model rules, which could impact the amount of taxes that the Company pays during 2024 and future taxable periods. The rules are complex and provide for delays of implementing the tax during the early transition years, if certain conditions are met. At this time, the Company is projecting an immaterial amount related to Pillar 2 tax liability for the 2024 year. The Company will continue to analyze the new Pillar 2 laws and any related guidance to determine potential impacts. Such changes in U.S. and non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate.

Current wording

The OECD released model rules related to a new 15% global minimum tax regime (“Pillar 2”). Several of the jurisdictions in which we operate have already adopted some form of the model rules, which could impact the amount of taxes that the Company pays during 2024 and future taxable periods. The rules are complex and provide for delays for implementing the tax during the early transition years, if certain conditions are met. At this time, the Company is projecting an immaterial expense related to Pillar 2 tax liability for the 2024 year. The Company will continue to analyze the new Pillar 2 laws and any related guidance to determine potential impacts. Such changes in U.S. and non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate.

Previous wording

Six Months Ended June 30, 2024 as Compared to Six Months Ended June 30, 2023

Current wording

Nine Months Ended September 30, 2024 as Compared to Nine Months Ended September 30, 2023

Previous wording

For the three months ended June 30, 2024, total revenues increased by $36.9 million to $418.2 million from $381.3 million for the same period in 2023. Excluding the impacts of the Acclarent acquisition, the Boston recall and foreign currency impact, revenues remained flat compared to the same period in the prior year.

Current wording

For the nine months ended September 30, 2024, total revenues increased by $23.3 million to $1,167.9 million from $1,144.5 million for the same period in 2023. Excluding the impacts of the Acclarent acquisition, the Boston recall and foreign currency impact, revenues declined low single digits compared to the same period in the prior year, primarily driven by impacts from quality and operational issues.

Previous wording

In the CSS Segment, revenues were $558.2 million an increase of $39.0 million, or 7.5% from the prior period, inclusive of $31.3 million related to the Acclarent acquisition, and $5.4 million unfavorable foreign currency impact on revenue. Excluding these impacts, the Neurosurgery portfolio grew low single digits primarily due to increased sales in Dural Access and Neuro Monitoring.

Current wording

In the CSS segment, revenues were $829.0 million, an increase of $41.6 million, or 5.3% from the prior period, inclusive of $62.3 million related to the Acclarent acquisition, and $5.2 million unfavorable foreign currency impact on revenue. Excluding these impacts, the Neurosurgery portfolio revenues declined low single digits, primarily driven by lower sales due to temporary shipping holds in CSF Management and Dural Access & Repair.

Previous wording

In the TT segment, revenues were $228.9 million, a decrease of $14.1 million, or 5.8% from the prior-year period. Excluding the impact of the Boston recall, the TT segment decreased low single digits as compared to the same period in the prior year. This is primarily attributable to a decline in Integra Skin due to supply constraints, partially offset by growth in DuraSorb and Gentrix.

Current wording

In the TT segment, revenues were $338.9 million, a decrease of $18.3 million, or 5.1% from the prior-year period. Excluding the impact of the Boston recall, the TT segment decreased mid single digits as compared to the same period in the prior year. This is primarily attributable to a decline in Integra Skin due to production challenges, partially offset by growth in our private label business, MicroMatrix® & Cytal, and Durasorb.

Previous wording

Gross margin was $432.8 million for the six months ended June 30, 2024, a decrease of $7.1 million from $439.9 million for the same period in 2023. Gross margin as a percentage of total revenue decreased to 55.0% for the six months ended June 30, 2024 from 57.7% in the same period in 2023. For the six months ended June 30, 2024, gross margins were impacted by Boston impairment charges, Acclarent inventory step up, and higher manufacturing costs. For the six months ended June 30, 2023 gross margins were impacted by expenses associated with the Boston recall.

Current wording

Gross margin was $633.0 million for the nine months ended September 30, 2024, a decrease of $25.3 million from $658.2 million for the same period in 2023. Gross margin as a percentage of total revenue decreased to 54.2% for the nine months ended September 30, 2024 from 57.5% in the same period in 2023. For the nine months ended September 30, 2024, gross margins were impacted by impairment charges associated with the Boston recall, Acclarent inventory step up, and expenses associated with quality and operational issues. For the nine months ended September 30, 2023 gross margins were impacted by expenses associated with the Boston recall.

Previous wording

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, and amortization expenses, increased by $40.8 million, or 10.4% to $431.8 million in the six months ended June 30, 2024, compared to $391.0 million in the same period in 2023.

Current wording

Total operating expenses, which consist of selling, general and administrative expenses, research and development expenses, and amortization expenses, increased by $57.4 million, or 9.8% to $640.2 million in the nine months ended September 30, 2024, compared to $582.8 million in the same period in 2023.

Previous wording

Research and development expenses for the three months ended June 30, 2024 increased by $3.2 million as compared to the same period in the prior year primarily due to the Acclarent acquisition.

Current wording

Research and development expenses for the nine months ended September 30, 2024 increased by $4.3 million as compared to the same period in the prior year primarily due to the Acclarent acquisition.

Previous wording

Selling, general and administrative costs increased by $29.7 million as compared to the same period in the prior year driven primarily due to the professional fees and costs associated with the Acclarent acquisition and higher spending in commercial selling activities for both legacy and Acclarent products.

Current wording

Selling, general and administrative costs increased by $45.0 million as compared to the same period in the prior year driven primarily by Acclarent acquisition costs and related commercial activities, as well as higher spending in commercial selling activities for legacy products.

Previous wording

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the six months ended June 30, 2024 was $13.8 million compared to $6.1 million for the same period in the prior year. The increase is driven by the impairment of customer relationship intangible related to our Boston facility of $7.1 million.

Current wording

Amortization expense (excluding amounts reported in cost of product revenues for technology-based intangible assets) for the nine months ended September 30, 2024 was $17.6 million compared to $9.3 million for the same period in the prior year. The increase is driven by the impairment of customer relationship intangible related to our Boston facility of $7.1 million.

Previous wording

We expect total annual amortization expense to be approximately $50.8 million for the remainder of 2024, $101.6 million in 2025, $101.4 million in 2026, $100.4 million in 2027, $96.9 million in 2028, $91.6 million in 2029 and $506.8 million thereafter.

Current wording

We expect total annual amortization expense to be approximately $25.6 million for the remainder of 2024, $102.4 million in 2025, $102.2 million in 2026, $101.2 million in 2027, $97.6 million in 2028, $92.4 million in 2029 and $511.8 million thereafter.

Previous wording

Interest income for the six months ended June 30, 2024 increased by $2.1 million as compared to the same period in the prior year due to higher interest rates.

Current wording

Interest income for the nine months ended September 30, 2024 increased by $2.5 million as compared to the same period in the prior year due to higher interest rates.

Previous wording

Interest expense for the six months ended June 30, 2024 increased by $7.7 million as compared to the same period in the prior year due to incremental borrowing and higher interest rates.

Current wording

Interest expense for the nine months ended September 30, 2024 increased by $14.0 million as compared to the same period in the prior year mainly due to incremental borrowing for the Acclarent acquisition.

Previous wording

Other income, net for the six months ended June 30, 2024, decreased by $0.4 million as compared to the same period in the prior year.

Current wording

Other income, net for the nine months ended September 30, 2024, increased by $1.2 million as compared to the same period in the prior year, primarily driven by favorable foreign exchange impact.

Previous wording

Domestic revenues increased by $33.4 million for the three months ended June 30, 2024 compared to the same period in the prior year. European sales increased by $3.2 million for the three months ended June 30, 2024 compared to the same period in the prior year. Sales to customers in Asia Pacific decreased by$1.8 million for the three months ended June 30, 2024. Sales to customers in the the Rest of World for the three months ended June 30, 2024 increased by$2.0 million compared to the same period in the prior year. The international revenues were impacted by $3.0 million of unfavorable foreign exchange impact. The increase in domestic revenues is primarily the result of the Acclarent acquisition.

Current wording

Domestic revenues increased by $20.4 million for the three months ended September 30, 2024 compared to the same period in the prior year. European sales decreased by$7.2 million for the three months ended September 30, 2024 compared to the same period in the prior year. Sales to customers in Asia Pacific decreased by$11.7 million for the three months ended September 30, 2024. Sales to customers in the the Rest of World for the three months ended September 30, 2024 decreased by$3.1 million compared to the same period in the prior year. The increase in domestic revenues for the three months ended September 30, 2024 is primarily the result of the Acclarent acquisition, offset by a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management. The decrease in international revenues for the three months ended September 30, 2024 was also the result of a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management.

Previous wording

Domestic revenues increased by $18.7 million for the six months ended June 30, 2024 compared to the same period in the prior year. European sales increased by $3.8 million for the six months ended June 30, 2024 compared to the same period in the prior year. Sales to customers in Asia Pacific decreased by $2.7 million for the six months ended June 30, 2024. Sales to customers in the Rest of World for the six months ended June 30, 2024 increased by $5.2 million compared to the same period in the prior year. The international revenues were impacted by $5.4 million of unfavorable foreign exchange impact. The increase in domestic revenues is primarily the result of the Acclarent acquisition, which is offset by decreases related to the Boston recall.

Current wording

Domestic revenues increased by $39.0 million for the nine months ended September 30, 2024 compared to the same period in the prior year. European sales decreased by $3.4 million for the nine months ended September 30, 2024 compared to the same period in the prior year. Sales to customers in Asia Pacific decreased by $14.4 million for the nine months ended September 30, 2024. Sales to customers in the Rest of World for the nine months ended September 30, 2024 increased by $2.1 million compared to the same period in the prior year. The increase in domestic revenues for the nine months ended September 30, 2024 is primarily the result of the Acclarent acquisition, offset by a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management. The decrease in international revenues for the nine months ended September 30, 2024 was also the result of a decline in sales of Integra Skin, Dural Access & Repair, and CSF Management. The international revenues were impacted by $5.2 million of unfavorable foreign exchange impact.