Good afternoon. I'm Robbie Marcus, the MedTech analyst at JPMorgan. Very happy to have Integra as our next company presenting. We're going to have Glenn Coleman start off, COO. We're going to have Jan De Witte do a presentation afterwards, a new CEO. And then Carrie Anderson, the CFO, is going to join us afterwards for some Q&A. So with that, Glenn, if you just want to make sure you're not on mute, and I'll turn it over to you.
Great. Thank you, Robbie. Good afternoon, everyone. We are delighted to be here this afternoon. As Robbie mentioned, I'm Glenn Coleman, Executive Vice President and Chief Operating Officer at Integra. With me today is our new President and Chief Executive Officer, Jan De Witte, who's going to give an update on his first month at Integra and our strategic priorities. So if you go to the next slide, please. But first, please note our safe harbor disclosure, as it's a reminder that some of the comments made during this presentation are forward-looking. So with that, let's start today's presentation. And you can move to slide four, please. I'm going to provide a quick overview of the company. We are a mid-sized, diversified MedTech company with trailing 12-month revenues as of September 30, 2021, of $1.53 billion. And that translated to an adjusted EPS of about $3.18 over the same period.
The company has a market cap of approximately $6 billion. We trade on the NASDAQ stock market under the ticker symbol of IART. Over the last several years, we've built out our global footprint, which you'll hear more about later. Today, we have 3,700 employees around the world. Our products are sold in over 130 countries through both a direct sales force as well as distributors. International sales account for roughly 30% of our total revenue. Our business is split into two segments. Our largest segment, Codman Specialty Surgical, or CSS, comprises approximately two-thirds of our revenue, where we are the world leader in neurosurgery and also a top-three player in instruments that get used in precision, specialty, and general surgical procedures. Our second segment, Tissue Technologies, generates about one-third of our overall revenue and plays in higher growth markets.
Tissue Technologies has three main areas of focus: complex wound reconstruction, surgical reconstruction, and peripheral nerve repair. So let me now drill a little deeper into these two focus segments. And I'll start with CSS on slide five. If you could advance the slide, thank you. Our $1 billion CSS segment is largely concentrated in neurosurgery and has a market-leading portfolio with global scale comprising 14 leading brands, including DuraGen, DuraSeal, CUSA, and Bactiseal, and supported by the largest U.S. neuro direct sales force. This broad portfolio offers products and solutions for the management of multiple disease states, including brain tumors, traumatic brain injury, hydrocephalus, and hemorrhagic stroke. And these are all areas we see a lot of runway to grow. We've built a foundation that we believe positions us to capture additional market share going forward, with expected near- to long-term organic growth in the 3%-5% range.
Our near-term growth will be driven by geographic expansion and new product registrations in markets such as China, Japan, and Europe. And our longer-term growth will be enhanced by our innovation and new product launches through three different areas. First, expansion into new adjacencies, such as minimally invasive neurosurgery and the surgical management of intracerebral hemorrhages. Second, the development of new products and evidence-based solutions. And third, the expertise to redefine the standards of care for neurosurgery. So let me now move to slide six and cover our Tissue Technologies segment. Our Tissue Technologies segment includes four unique regenerative technology platforms: highly engineered collagen, bovine dermis, porcine, and amniotic tissue. This broad regenerative platform supports multiple leading brands, including Integra Dermal Matrices, AmnioExcel Plus, SurgiMend, and NeuraGen, which go far beyond wound care and are backed by some of the strongest clinical evidence.
We see significant growth potential based on our technology platforms through both new products and new clinical indications as we capture share in a market that's growing at approximately 8%, and that's a blended market rate that we use. Near-term opportunities include the launch of our mid-gap peripheral nerve repair conduit, NeuraGen 3D, which we expect to launch late in the first quarter, and also a specific indication for breast reconstruction with our SurgiMend product, for which we hope to receive FDA approval in early 2023. Let's now turn to slide seven and review some of our major accomplishments this past year. We made tremendous strides in 2021 and believe we're at another inflection point for accelerated growth, so let me highlight a few of our accomplishments.
First, we dramatically transformed our portfolio through the divestiture of our low-growth, unprofitable orthopedics business and the acquisition of ACell, a faster-growing and more profitable regenerative tissue business. In addition to delivering strong financial performance throughout 2021, we also made meaningful progress on several new innovative products in each of our segments. In CSS, we launched CereLink, which is an advanced monitoring system for measuring intracranial pressure. In the Aurora Surgiscope, a proprietary surgical solution for minimally invasive neurosurgery, which has integrated visualization and capabilities designed specifically for use in deep-seated brain lesions. In addition, we're gathering clinical evidence using the same technology for early surgical intervention for the treatment of ICH. Together, these two opportunities, MIS and ICH, significantly expand our neurosurgery addressable market by about $1 billion.
In Tissue Technologies, as I mentioned earlier, we filed the PMA for a specific breast indication for SurgiMend and completed the PriMatrix multicenter study regarding issues in diabetic foot ulcers in order to expand commercial coverage in 2022. Then finally, some of our most important accomplishments in 2021 happened outside of a clinical or a research setting. An integral part of our operating model is to have diverse and inclusive teams that are focused on getting things done. I'm so pleased to share that our diversity and inclusiveness achievements have been recognized by external sources, which named Integra as a 2021 Best Company for Diversity and the number two healthcare technology company in the Top 100 Healthcare Technology Company report. We're very proud of these external recognitions. Near the end of last year, we announced our CEO succession and executed a very smooth transition.
Our new President and CEO, Jan De Witte, brings 30 years of experience in deep technology and commercial expertise in the healthcare industry. Before I turn it over to Jan, let me review preliminary fourth quarter and full year 2021 revenue results, which we released last night. So if you please turn to the next slide. For the fourth quarter of 2021, despite a very challenging external environment, we expect revenues to be in the range of $404 million-$406 million and expect full year 2021 reported revenue to be approximately $1.54 billion. And that's slightly ahead of our guidance provided in early November. Our fourth quarter organic growth was approximately 8%, with expected full year organic growth of approximately 14%. Since the onset of the pandemic in the first quarter of 2020, we have met or exceeded external revenue estimates for the past seven consecutive quarters.
We believe this is a testament to our diverse portfolio and the strong execution of our teams in what's been a very dynamic environment. Cash flows in 2021 were also very strong. We've been trending below our long-term leverage ratio target range of 2.5 to 3.5 times, providing us with flexibility as we continue to evaluate ways to increase value for our shareholders. To that end, we just announced our plans to repurchase $125 million of Integra shares, which will create immediate shareholder value. We look forward to providing 2022 guidance on our fourth quarter and full year 2021 earnings call. That's scheduled for February the 23rd. Now I'd like to introduce our new President and CEO, Jan De Witte. Jan's hit the ground running, and we're excited to have him on board. Jan?
Thank you, Glenn. And good afternoon, everyone. It's a pleasure to be here today. At this point in time, I'm around six weeks on board, succeeding Peter Arduini to lead Integra through the next chapters. The past five years, I served as CEO of Barco, a Euronext-listed specialist in advanced visualization technologies for corporate entertainment and healthcare solutions, where I focused on creating shareholder value through digital innovation and new product development, commercial acceleration, international growth, and operations excellence. Before that, I spent 17 years in senior leadership roles at GE Healthcare, including as CEO of its healthcare IT business. And before that, I worked five years in strategic consulting at McKinsey and three years in operations at Procter & Gamble. Today, I'm happy to be fully back in a great healthcare technology business and living again in the US.
Over the past weeks, I've been busy, as you can imagine, with the high intensity of a business focused on closing a strong year, while at the same time listening and learning at a breakneck pace. But it's in these types of situations that I learn the most, and I certainly have. So let me spend a few moments on some of my early observations as the new guy. Next slide, please. For starters yeah, next slide, please. So for starters, Integra feels home to me. There definitely is a reality that Pete and I were groomed in the same stable of GE Healthcare. So a lot of how we operate Integra is recognizable and feels natural for me. This feeling is also strengthened by the strong company values that I've felt since my onboarding and even during the selection process with the board.
At Integra, we drive by the values of integrity, respect for people and inclusiveness, agility, and entrepreneurial spirit, and change readiness as we strive for excellence and positive customer impact. I've been thoroughly impressed while learning from our colleagues in R&D, operations, and commercial about our distinctive technologies, as well as processes and care area domain expertise. We have excellence in products and in our people, which is also reflected by the trust and strength that Integra brands enjoy in our markets. Also, as an old software and services business leader, I've been pleasantly surprised about a significant recurring revenue dynamic in our portfolio. I've also discovered a robust pipeline of innovation opportunities and great financial discipline, cash conversion, and dry powder on the balance sheet that provides optionality to continue leveraging Integra's synergistic M&A muscle.
Based on these early observations and facts, I can only conclude that Integra is a very sound business platform with a great legacy, but also with untapped potential and acceleration opportunities. First, with the portfolio transformation substantially complete, there is now an opportunity to step up our focus on execution excellence and predictability across operations and in the synchronization between R&D, operations, and commercial. And second, I've been impressed with our international growth and expansion success, both in EMEA and Asia, and specifically in China and Japan. That said, with 70% of our revenue still coming from the U.S., I believe we are only at the start of our international growth journey. But also, what we commercialize today are, in most cases, technology products.
While these are mission-critical products, we have opportunities to expand our impact on customer outcomes by leveraging digital innovation and services and deliver broader solutions in care areas and along care pathways. Through those more holistic solutions, we'll also build deeper and stickier relationships with our customers. Now let's turn to slide 11 and go a bit deeper into these opportunities. Next slide, please. The markets we play in and where we have strong, often number one or number two positions, are sizable. And they have an inherent growth dynamic driven by a growing and aging population with increased rates of morbidity in those clinical areas where our distinctive technology can make a strong positive impact. In addition, emerging markets show further ambition to catch up with access to quality care for their populations.
So when I translate that to my thinking about Integra growth, I see four vectors that I'd like to explore. Next slide. The first factor is the momentum we have today in our core portfolio. When I look back into the results of the past four years, I see an organic growth rhythm of between 4% and 5%. This core forms the foundation to, first of all, step up our execution excellence, and then second, over the near and midterm, to start fully capturing the acceleration potential of our current innovation pipeline, which I see as a second vector. These allow us to expand our TAM and strengthen positions in existing segments and will get us above that 5% organic growth mark. The third factor then is about expanding our activity along the international axis, as well as broadening our value added in adjacencies, leveraging digital capabilities.
This is the factor that should get us solidly into a new organic growth rhythm of 5%-7%, the target that we've set as our long-term organic growth. And then the fourth factor is further executing on our synergistic M&A capability to further strengthen our business portfolio with a creative growth opportunity. Now let me briefly touch deeper on each of these. Next slide, please. As we think about the near term, say over the next 12 to 18 months, there are a lot of great catalysts like the Aurora Surgiscope, CereLink , NeuraGen 3D that we expect will provide wind in our sales. We're investing behind these projects and are relentlessly focused on consistent execution around this list. Next slide, please. On innovation, our focus is not just on the near term, but over a much longer-term time horizon. I won't go into the detail on these products.
However, the point I want to leave you with is that we are developing a very full and diversified portfolio of new products across both of our business segments. Over the near to midterm, this provides us the opportunity to add $1.5 billion to our addressable market through new product introduction. Next slide, please. As mentioned earlier, Integra has the opportunity to expand in high growth and high profitability pockets around the world. We have increased our international sales from about 20% of revenue in 2014 to 30% presently. But we're only at the early stages of our global expansion. I do not consider this 30% to be close to our eventual entitlement.
To capture significant additional international market opportunity, we will continue to build out regulatory and market access capacity around the globe, better understand and innovate on our international customers' needs, and build out our in-country operational and commercial capabilities in high-growth markets like China. This is about a multi-year effort of building a product-market game board, a time-phased what, where, when, how planning exercise, and executing the step-by-step capabilities to build the leading positions for more of our product portfolio in more markets. With that, let's turn to digital as a next opportunity. Next slide, please. Digital is about leveraging analytics and software capabilities to bring more value added in and around our mission-critical products, as well as providing workflow capabilities and analytics that improve patient and provider outcomes. We are in the early stages of building out digital capability.
But in my first six weeks, I've come across promising areas that I'm excited about. For example, our new CereLink gives the physician greater choice in intracranial pressure monitoring with durable and flexible sensors that provide greater accuracy. But it also provides real-time data streaming and advanced data presentation to help guide therapeutic decisions. And by building out connectivity, we can further enhance analytical support and workflow enablement for the caregivers. Another great example is our Aurora Surgiscope, which is a great platform for simplification in OR, but also a platform on which we can aim to build out augmented visualization and image recognition capabilities. These are just two examples of several that serve as pilots to build into a broader digital ecosystem. Now, digital is a lot more than technical IT capabilities.
It's about developing new ways of thinking about customer propositions and deeper relationships, while also enabling us to capture high-quality, recurring organic growth. With that, let's turn to our capital deployment priorities that will support our growth aspirations. Next slide, please. Our strong balance sheet and cash flow give us capital deployment optionality as we prioritize investing for growth. The top priority is internal reinvestment. We expect to increase R&D spend over time to 6% of sales as we gain momentum in early pipeline research, new product launches, and investment in clinical studies. In addition, we also have ample balance sheet flexibility as we consider strategic M&A. Integra has a great M&A discipline, and it will ensure to maintain and leverage it. We will continue to review deals through strict strategic and financial filters, including earnings growth, accretion, and ROIC.
As excess cash becomes available, we will seek to return value to our shareholders, as evidenced by our plan to repurchase under $125 million of Integra stock, while still leaving us ample room to do strategic M&A. Let me turn now to our strategic framework to sum up our imperatives. Next slide, please. Our strategy is quite straightforward. OK, one, enable an execution-focused and engaged culture; one, that can execute with focus; two, optimize relevant scale and achieve top-tier share positions, focusing on building propositions and accessing markets where we can win; three, further advance innovation and agility to execute with speed in a dynamic market; and finally, lead in customer experience with an increased focus on customer outcomes, bringing solutions that enhance quality and operating results for providers, as well as clinical outcomes for the patient. Executing on these pillars will drive the achievement of our long-term goals.
Now, today, I'd also like to announce that we're adding sustainability as a strategic enabler. I'm excited to bring some of my experiences in driving ESG, as well as my belief that building capabilities to drive ESG objectives is very consistent with the organizational, operational, and governance capabilities required to drive sustainable, profitable growth. The next page provides an overview of our near-term goals on this imperative. Let's turn to slide 19. Next slide. Because ESG principles are aligned with our mission of doing well by doing good, it's been quite natural to integrate ESG into our plans. In 2021, we've added a new director of EHS, as well as a new diversity and inclusion officer. We also have a diverse board of directors that comprises independent business leaders. In 2022, we're planning to strengthen our environmental sustainability and reduce our carbon footprint.
We also plan to introduce a three-year ESG roadmap in 2022, along with publishing an inaugural ESG report. More to come on this front, but we believe very strongly that aligning our ESG drivers with our capabilities is essential for our ongoing profitable growth. Next slide, please. As I've spent time learning about Integra during my many conversations with our board, our leadership, and our colleagues, I'm confident we can achieve our long-term financial goals. This includes the 5%-7% organic growth we covered throughout this presentation, as well as an industry-leading adjusted gross margin and EBITDA margin. As we invest for growth using our strong operating cash flow, we will also achieve double-digit EPS growth over time. With our portfolio transformation now substantially complete, we are focusing on operational and commercial excellence and are stepping up emphasis on growth, specifically with NPIs, international expansion, and digital capabilities.
We believe we're on the right path to deliver a sustainable, higher growth and higher margin portfolio and we're laser-focused on execution. I'd like to close today's presentation by reiterating a few key points on slide 21. Next slide, please. So as my key takeaways, I would like investors and analysts to take home that, one, Integra is a global leader with distinctive capabilities in both neurosurgery and regenerative tissue technologies, with a strong financial profile and market-leading positions. Two, we play in a large and growing $7 billion market with multiple opportunities to further capture share and broaden our TAM through a disciplined focus on our profitable growth vectors, and three, our leadership team is tested and resilient and has a strong track record of delivering on strategic imperatives. We are relentlessly focused on increasing value for our stakeholders.
And finally, I hope you leave today with an appreciation for my excitement about the future of Integra. I'm honored to have the opportunity to lead this great company, which is a strong legacy and sound business platform. Our team is on its way to delivering on our long-term goals, and we look forward to providing progress updates along the way. So thank you for your time and your interest in Integra. And with this, we can move to the Q&A where Carrie Anderson, our CFO, will join Glenn and myself.
Yeah, great. Yeah, and maybe we could start off. I definitely want to talk about some of the long-term trajectory you have on those slides there. Excuse me.
But I want to, since this is your first big public presentation for investors, I thought it'd be great to just start off with what attracted you to Integra now that you've had some time to look under the hood. What did you find that is better about Integra than what you were expecting? And what are some of the areas you think need to focus on for improvement?
Yeah. So what attracted me to Integra? First, I mean, we're a player in the surgical space. And over the past 20 years, I've been spending a lot of time in diagnostic imaging, and I've seen technology shift or technology investment shift from diagnostic imaging to beyond in the surgery space. So I mean, definitely following where I think technology opportunities are going. I like the market. I like the business.
I'm definitely in the process with our chairman and the board. You could start to feel what I'm feeling even stronger today. This is a company with great people, with good people, a strong culture based on values, one where I personally feel home. In addition, as I said, the way how we operate, given what Pete has built, feels home to me, feels comfortable to me. I've been positively surprised by the distinctive technologies we have in this business. I spent over the past six weeks quite a bit of time with our R&D people. I've seen at this point about half of our factories. What we do is distinctive, is exciting for me, both in our tissue technologies, also what we do in neurosurgery. Our capability on micro machines is just outstanding. And then working with the team, I mean, there's good, strong discipline in this business.
Now being in this business for six months, I understand and feel more what people mean when they say this is an acquisitive business. This is a business where M&A is a clear strength, is a clear part of the DNA, and a great opportunity together with our balance sheet to leverage that to drive growth in the business.
Great. So I want to spend probably a good part of the rest of the time on the long-term outlook. Maybe we could start with slide 12, which is where you have your top-line growth targets. I've had a couple of investor questions on it during the presentation, so I thought it'd be good to clear it up. We all love to look at the exact what percentage of 5%-7% it is.
So should we be thinking about the near to midterm at the lower end of that 5%-7%, getting towards maybe 6, 7 over time, as the chart might imply, or are we just looking at the graphics incorrectly?
Clearly, the focus I have today is making sure that those near to midterm catalysts that we reflect, and we can go through some of them later, that they come to fruition. I think that's step one to get over that 5% benchmark. The next vector, those about international and building digital capabilities as one are where we need to build capabilities, and definitely in the case of international, some of the pipeline is driven by the regulatory situation in the different countries. So moving up towards that 7% is going to take time to get there.
Some of that timeline over the next months will be defining the project plans, and that will inform us on what is the slope or what is the shape of that curve to get beyond the five and get towards that 7%.
Okay. Think about the next few years and that five-ish percent , and hopefully over time we can move above that?
I would say yes. The near midterm, get over that five in a, I would say, convincing way, and then work our way up to the seven.
Great. M&A, is that necessary to get to that seven, or is that on top of the 7%?
I'm not counting on M&A to get to the seven. The question whether the M&A will further be accretive to that number will depend on the opportunities.
But definitely, as we've done, I think in the recent past, the acquisitions we've done have been adding to the growth targets that were set.
Great. And you mentioned also, Jan, going from 5% of sales R&D up to 6%. How should we be thinking about the timeframe for that increase in investment?
Yeah. I'm looking a bit at Carrie. I would say, over the next two years, as I see us build out, on the one hand, R&D capacity. But I'm equally focused on the more upstream, the product management and upstream marketing. And those are, I think, the two elements to further accelerate and build return on our R&D investments.
Yeah. Certainly, we're going to try to step that up in 2022, Robbie. So we've talked about that we're going to stand behind our catalyst here and invest behind those.
2022 will be a build year for us as we kind of accelerate those catalysts for us. Over time, you'll see that kind of move up. I think that target of over a couple of years to get to 6%, two to three years is probably reasonable.
Any projects that you've identified that you could point us to of where the increased spending is going to?
I think it's the list that we had on the slide right after the catalyst slide. It was a slide, a compilation of new product introductions that we took from our May Investor Day. That gives you an opportunity to look at across the portfolio between CSS and TT, a number of opportunities in our pipeline on the innovation side that we're getting behind.
Yeah.
I would highlight too that most likely we're going to be doing a, hopefully, a post-approval clinical study around SurgiMend, which we're working on getting the PMA there. So that would be obviously a spend in R&D that's not in the current run rate.
Great. And the $125 million share repurchase, I think investors will be happy to see that. How should we think about the timeframe for the buying of shares from that? Is that over the whole year, or is that right up front now?
Yeah. Ideally, that would be affected pretty quickly there, Robbie. But this is a way for us to return value pretty immediately to shareholders. So I'd expect that to be more accelerated than over the course of the year.
Is it going to be an ASR or just in the beginning of the year?
Yeah.
I think we'll execute those plans and let you know as soon as we're done with those.
Great. Jan, let me ask you, one of the big benefits of the Codman deal was global expansion. It brought Integra to a place it probably couldn't have done on its own in the same timeframe. How happy are you with what you see outside the U.S. from Integra, and is that an area you're going to continue to invest in?
Short answer is yes. One, I'm happy with the talents that I've seen. I spent a bit of time in Europe very early on in the six weeks. I think we've brought great people on board. I think we've brought experience on board in how to approach the international market. And that's both in Europe, but also in Asia, specifically Japan and China.
It has allowed us over the past few years to start also building confidence that we can do this. We can bring our technologies, which are great in the U.S. They're equally great in the international market. And when Glenn and I are going through what we've done, it's about doing more of the same. We have success cases. We can extrapolate. But it will require the investment of feet on the ground, regulatory capability in those markets. And then you have, of course, I mean, big places like China where we may take it further and really build local capability to fully capture the opportunities in that market. Again, the Codman acquisition has helped us to learn quicker than we would have done on our own.
Great. Maybe with the last few minutes, we can talk about fourth quarter.
You pre-announced a few million dollars above where the sell side was thinking for the quarter. Any commentary you could give us on CSS versus, I guess it's just now Tissue Technologies, and any commentary around ACell and how that performed in the quarter?
Yeah. Well, let me start with just comments on Q4. I mean, it largely played out as we expected. So when we did our November guidance, we knew that COVID would be a disruptor in the quarter, and it played out as well. I would say FX probably became a bigger headwind than we had thought, probably a couple of million dollars' worth of headwind. So had it not been for FX, we probably would have been more squarely in the middle of our guidance range. So very pleased with everything going on in the quarter, that we landed in that range of $404-$406.
In terms of some additional color, we'll provide a lot of that on our February 23rd call. But I will say that capital was a nice performer in the quarter for us. We expected that. So as we thought about our guidance for the fourth quarter, fourth quarter typically is a heavier capital quarter as many hospitals fiscal years end in at the end of the calendar year. And capital in the fourth quarter was double-digit grower when you compare it to 2020 or 2019. Very nice contributions from our CUSA, our larger capital unit, as well as CereLink there. From an ACell perspective, Robbie, I would say I would characterize it as we stabilized the business. So our guidance in November was to finish at $65 million, and we finished just slightly above that. So I would say characterize Q4 as flattish to Q3, so stabilized ACell.
And so as we think about some of those areas of where we're accelerating in terms of adding some additional sales, coverage, and territory coverage, that's what we believe will help us as we accelerate and get ACell on track here in 2022. And as a reminder, that does move into organic growth here on January 20th. And we feel confident that we've got the right actions in place. They'll start to see fruition here middle of 2022 on that additional sales coverage that we've got on ACell.
Sorry, I was on mute. Unfortunately, we're out of time here. But Jan, welcome. Good luck. And Glenn and Carrie, thanks so much. Great to see you. Hope everybody has a great rest of their evening. And thanks for tuning in.
Thank you.
Thank you, Robbie. Great opportunity.
Bye-bye.
Have a great day. Bye-bye.