Invacare shows improvements in 'unprecedented' tough market

ELYRIA, Ohio - Invacare sees “encouraging signs” that the demand for mobility and seating products is recovering from a slowdown related to the COVID-19 pandemic.

Order rates were up in July and into August, Matt Monaghan, chairman, president and CEO, told investors during a recent conference call to discuss the company's second quarter financial results.

“In mobility and seating, the good momentum we had in the first quarter began to slow in early parts of the second quarter as public health restrictions limited access to clinicians for custom fitting, which reduced sales,” he said. “Looking ahead, we see encouraging signs that demand for mobility and seating products is starting to recover as third quarter quote and order rates are improving over second quarter numbers.”

For the second quarter ended June 30, 2020, Invacare reported mobility and seating product sales declined 12%.

But power mobility sales specifically, which carry higher margins, declined only 1%. The bulk of the reduction was due to lower sales of manual mobility and seating products.

“When we gave guidance at the end of the first quarter, we had anticipated that margins would decline in Q2,” said Kathy Leneghan, senior vice president and CFO. “And what we actually saw in Q2 was a move to higher-value products, higher-end power wheelchairs, higher-end beds, for COVID-19 higher-end respiratory products, as well. So that was a pleasant surprise. As the business continues to rebound in Q3 and Q4, we're anticipating that the product mix will come down slightly.”

The declines in mobility and seating more than offset revenue growth in respiratory and bed products, growth driven by increased demand due to the pandemic. The big question: How long will that increased demand last?

“Predominantly, we're a northern hemisphere company in terms of revenue,” Monaghan said. “As we get into the winter months, there is some likelihood that the incident rate continues to be elevated, which we believe would lead us to have elevated demand for oxygen concentrators of all varieties. So there is potential. I obviously can't call where the pandemic is going to go better than other people, but there is a chance that this is going to continue for some time. And for now, we see no abatement in that elevated demand.”

Overall, Invacare noted its continued improvements, including its 11th consecutive quarter of year-over-year improvement in adjusted EBITDA and the return to profitability for the North America business unit.

“North America returned to profitability and generated $4.8 million in operating income in an unprecedently tough market,” Monaghan said. “The North America segment has been undergoing a multi-year transformation after the impact of competitive bidding and sales restrictions related to the FDA consent decree, which combined to significantly reduce sales and profitability starting nearly a decade ago.”