Invacare expects to end year on ‘strong note’

ELYRIA, Ohio – Invacare took a number of measures in the third quarter to address the supply chain issues that have dampened sales and gross margins this year, and it expects to see the benefits of those in the fourth quarter, company officials say. 

Invacare, for example, has expanded its network of freight providers for more timely shipments, found ways to improve staffing levels to increase throughput and further increased inventory to mitigate supply chain uncertainties. 

“We’re still early in the fourth quarter, (but) we’re seeing positive signs that our actions should be effective,” said Matt Monaghan, chairman, president and CEO during an Oct. 28 conference call to discuss the company’s financial results for the third quarter. 

Invacare has also adjusted price and freight charges to offset higher material and logistics costs. The company in August informed its provider customers that it would be implementing a 10% price increase on select bed and manual wheelchair spare parts on Oct. 11 and implementing surcharges on a select group of products on Aug. 30. 

Monaghan said, “nobody loves a price increase,” but in the current environment, “it’s everywhere.” 

“It’s in the market that we serve, and it’s outside the market we serve,” he said. “So, I think it’s understandable. It’s up to us to be judicious in how we’re doing that and it kind of differs by product and market. But we think, generally, the entire marketplace is absorbing the consequences of labor costs and availability of freight material, and I think it’s so far pretty competitive.”  

With strong demand for all product categories in all regions, the measures will improve Invacare’s ability to convert orders to revenue, company officials say, and allow it to more significantly reduce a running backlog of $15 million. 

“We do still anticipate that we will have higher levels of inventory on the balance sheet at the end of 2021 vs. 2020,” said Kathy Leneghan, senior vice president and CFO, “but there should be a significant amount that will turn in the fourth quarter into revenue.” 

While supply chain issues will continue into the fourth quarter, Monaghan expects them to become increasingly “predictable,” allowing the company to end the year on a “strong note.” 

“I think the secret is going to be when changes become more predictable, which I think is already starting to happen,” he said. “2021 has been a year of, I would say, accelerating changes through the summertime, maybe fall. I think as soon as we see the rate of change of input costs stabilizing, including labor availability, we'll be able to project something longer-term.” 

As part of releasing its financial results for the third quarter, Invacare reaffirmed its guidance for the full year: constant currency net sales growth of -1% to 2%; adjusted EBITDA range of $30 million to $37 million, excluding the CARES Act benefit; and free cash flow usage of $10 million to $20 million.