~ Continued strong performance with 2Q23 financial results ~
~ Increasing full year 2023 outlook ~
PLANO, Texas, July 27, 2023 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (:ITGR), a leading medical device outsource manufacturer, today announced results for the three months ended June 30, 2023.
Second Quarter 2023 Highlights (compared to Second Quarter 2022, except as noted)
- Sales increased 14% to $400 million, with organic growth of 14%.
- GAAP net income increased $3 million to $24 million, an increase of 15%. Non-GAAP adjusted net income increased $4 million to $38 million, an increase of 11%.
- GAAP operating income increased $9 million to $42 million, an increase of 27%. Non-GAAP adjusted operating income increased $10 million to $60 million, an increase of 20%.
- GAAP diluted EPS increased $0.09 per share to $0.71 per share. Non-GAAP adjusted EPS increased $0.10 per share to $1.14 per share.
- Adjusted EBITDA increased $10 million to $76 million, an increase of 16%.
- From the end of 2022, total debt increased $60 million to $985 million and net total debt increased $56 million to $963 million, mostly attributable to fees associated with the $500 million convertible notes and the $35 million related capped call, resulting in a leverage ratio of 3.5 times adjusted EBITDA as of June 30, 2023.
“Integer delivered another strong quarter of sales and profit growth supported by an improving supply chain and labor environment,” said Joseph Dziedzic, Integer’s president and CEO. “As we continue to see strong customer demand across our product lines, we are increasing our full year sales outlook to 12% growth at the midpoint, up 400 basis points. Additionally, we are raising our adjusted operating income outlook to 19% growth at midpoint, up 600 basis points. The execution of our product line and operational strategies will drive sustained above-market growth and margin expansion in 2023 and beyond.”
Discussion of Product Line Second Quarter 2023 Sales
Cardio & Vascular sales increased 15% in the second quarter 2023 compared to the second quarter 2022, driven by continued strong demand across all markets, growth in key products such as guidewires, new product ramps in electrophysiology, and supply chain improvements.Cardiac Rhythm Management & Neuromodulation sales increased 13% in the second quarter 2023 compared to the second quarter 2022, driven by strong demand, including double-digit growth from emerging customers with PMA (premarket approval) products, and supply chain improvements.Advanced Surgical, Orthopedics & Portable Medical sales increased 17% in the second quarter 2023 compared to the second quarter 2022, driven by increased price and demand as a result of the execution of the multi-year Portable Medical exit announced in 2022, and low-single digit growth of Advanced Surgical and Orthopedics.Electrochem sales increased 7% in the second quarter 2023 compared to the second quarter 2022 driven by strong demand in military and environmental market segments partially offset by a decline in the energy market.2023 Outlook
(a)(dollars in millions, except per share amounts)
| GAAP | Non-GAAP(b) | |||||||
| As Reported | Change from Prior Year | Adjusted | Change from Prior Year | |||||
| Sales | $1,530 to $1,550 | 11% to 13% | N/A | N/A | ||||
| Operating income | $152 to $160 | 25% to 32% | $224 to $232 | 17% to 21% | ||||
| EBITDA | N/A | N/A | $294 to $302 | 15% to 18% | ||||
| Net income | $83 to $89 | 26% to 37% | $143 to $149 | 10% to 15% | ||||
| Diluted earnings per share | $2.45 to $2.65 | 25% to 35% | $4.23 to $4.43 | 9% to 14% | ||||
| Cash flow from operating activities | $185 to $205 | 59% to 76% | N/A | N/A | ||||
(a) Except as described below, further reconciliations by line item to the closest corresponding GAAP financial measure for Adjusted operating income, Adjusted EBITDA, Adjusted net income and Adjusted Earnings per Share (“EPS”) included in our “2023 Outlook” above, and Adjusted total interest expense, Adjusted effective tax rate and Leverage ratio in “Supplemental Financial Information” below, are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and visibility of the charges excluded from these non-GAAP financial measures.
(b) Adjusted operating income for 2023 consists of GAAP operating income, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, and acquisition and integration costs, totaling approximately $72 million, pre-tax. Adjusted net income and Adjusted EPS for 2023 consist of GAAP net income and diluted EPS, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, acquisition and integration costs, and gain or loss on equity investments totaling approximately $77 million, pre-tax. The after-tax impact of these items is estimated to be approximately $60 million, or approximately $1.78 per diluted share.
Adjusted EBITDA is expected to consist of Adjusted net income, excluding items such as depreciation, interest, stock-based compensation and taxes totaling approximately $152 million to $153 million.
Supplemental Financial Information
| (dollars in millions) | 2023 Outlook | 2022 Actual | |
| Depreciation and amortization | $100 to $105 | $92 | |
| Adjusted total interest expense(a) | $45 to $50 | $39 | |
| Stock-based compensation | $22 to $25 | $21 | |
| Restructuring, acquisition and other charges(b) | $15 to $20 | $22 | |
| Adjusted effective tax rate(c) | 17.0% to 19.0% | 16.1% | |
| Leverage ratio(d) | 2.5x to 3.5x | 3.5x | |
| Capital expenditures(d) | $100 to $120 | $74 | |
| Cash income tax payments | $27 to $31 | $11 |
(a) Adjusted total interest expense refers to our expected full-year GAAP total interest expense, expected to range from $49 million to $55 million for 2023, adjusted to remove the full-year impact of charges associated with the accelerated write-off of deferred issuance costs and unamortized discounts (loss on extinguishment of debt) included in GAAP total interest expense, if any.
(b) Restructuring, acquisition and other charges consists of restructuring and restructuring-related charges, acquisition and integration costs, other general expenses, and incremental costs of complying with the new European Union medical device regulations.
(c) Adjusted effective tax rate refers to our full-year GAAP effective tax rate, expected to range from 15.0% to 17.0% for 2023, adjusted to reflect the full-year impact of the items that are excluded in providing adjusted net income and certain other identified items.
(d) Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding leverage ratio and capital expenditures.
Summary Financial Results
(dollars in thousands, except per share data)
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, 2023 | July 1, 2022 | QTD Change | June 30, 2023 | July 1, 2022 | YTD Change | ||||||||||||
| Operating income | $ | 41,576 | $ | 32,707 | 27.1 | % | $ | 75,742 | $ | 55,204 | 37.2 | % | |||||
| Net income | $ | 23,971 | $ | 20,836 | 15.0 | % | $ | 37,036 | $ | 32,203 | 15.0 | % | |||||
| Diluted EPS | $ | 0.71 | $ | 0.62 | 14.5 | % | $ | 1.10 | $ | 0.97 | 13.4 | % | |||||
| EBITDA(a) | $ | 65,794 | $ | 55,407 | 18.7 | % | $ | 123,171 | $ | 97,865 | 25.9 | % | |||||
| Adjusted EBITDA(a) | $ | 76,300 | $ | 65,897 | 15.8 | % | $ | 142,645 | $ | 120,102 | 18.8 | % | |||||
| Adjusted operating income(a) | $ | 59,824 | $ | 49,679 | 20.4 | % | $ | 109,686 | $ | 88,484 | 24.0 | % | |||||
| Adjusted net income(a) | $ | 38,372 | $ | 34,651 | 10.7 | % | $ | 67,432 | $ | 60,730 | 11.0 | % | |||||
| Adjusted EPS(a) | $ | 1.14 | $ | 1.04 | 9.6 | % | $ | 2.01 | $ | 1.82 | 10.4 | % | |||||
(a) EBITDA, Adjusted EBITDA, Adjusted operating income, Adjusted net income, and Adjusted EPS are non-GAAP financial measures. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures. Refer to Tables A and B at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.
Summary Product Line Results
(dollars in thousands)
| Three Months Ended | |||||||||||
| June 30, 2023 | July 1, 2022 | QTD Change | Organic Change(a) | ||||||||
| Medical Sales | |||||||||||
| Cardio & Vascular | $ | 208,494 | $ | 180,604 | 15.4 | % | 15.3 | % | |||
| Cardiac Rhythm Management & Neuromodulation | 153,411 | 135,945 | 12.8 | % | 12.8 | % | |||||
| Advanced Surgical, Orthopedics & Portable Medical | 27,206 | 23,285 | 16.8 | % | 16.8 | % | |||||
| Total Medical Sales | 389,111 | 339,834 | 14.5 | % | 14.4 | % | |||||
| Non-Medical Sales | 10,933 | 10,247 | 6.7 | % | 6.7 | % | |||||
| Total Sales | $ | 400,044 | $ | 350,081 | 14.3 | % | 14.2 | % | |||
| Six Months Ended | |||||||||||
| June 30, 2023 | July 1, 2022 | YTD Change | Organic Change(a) | ||||||||
| Medical Sales | |||||||||||
| Cardio & Vascular | $ | 399,697 | $ | 339,641 | 17.7 | % | 16.4 | % | |||
| Cardiac Rhythm Management & Neuromodulation | 298,550 | 259,269 | 15.2 | % | 15.2 | % | |||||
| Advanced Surgical, Orthopedics & Portable Medical | 55,130 | 42,951 | 28.4 | % | 28.4 | % | |||||
| Total Medical Sales | 753,377 | 641,861 | 17.4 | % | 16.7 | % | |||||
| Non-Medical Sales | 25,452 | 19,132 | 33.0 | % | 33.0 | % | |||||
| Total Sales | $ | 778,829 | $ | 660,993 | 17.8 | % | 17.2 | % | |||
(a) Organic sales change is a non-GAAP financial measure. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures and refer to Table D at the end of this release for a reconciliation of these amounts.
Conference Call Information
The Company will host a conference call on Thursday, July 27, 2023, at 8 a.m. CT / 9 a.m. ET to discuss these results. The scheduled conference call will be webcast live and is accessible through our website at investor.integer.net or by dialing (888) 330-3567 (U.S.) or (646) 960-0842 (outside U.S.) and the conference ID is 9252310. The call will be archived on the Company’s website. An earnings call slide presentation containing supplemental information about the Company’s results will be posted to our website at investor.integer.net prior to the conference call and will be referenced during the conference call.
From time to time, the Company posts information that may be of interest to investors on its website at investor.integer.net. To automatically receive Integer financial news by email, please visit investor.integer.net and subscribe to email alerts.
About Integer®
Integer Holdings Corporation (: ITGR) is one of the largest medical device outsource (MDO) manufacturers in the world serving the cardiac, neuromodulation, vascular, portable medical and orthopedics markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, the Company develops batteries for high-end niche applications in energy, military, and environmental markets. The Company's brands include Greatbatch Medical®, Lake Region Medical® and Electrochem®. Additional information is available at www.integer.net.
Investor Relations:
Andrew Senn
763.951.8312
[email protected]
Notes Regarding Non-GAAP Financial Information
In addition to our results reported in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we provide adjusted net income, adjusted EPS, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted operating income, and organic sales change rates.
Adjusted net income and adjusted EPS consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) amortization of intangible assets, (ii) certain legal expenses, (iii) restructuring and restructuring- related charges; (iv) acquisition and integration related costs; (v) other general expenses; (vi) (gain) loss on equity investments; (vii) extinguishment of debt charges; (viii) European Union medical device regulation incremental charges, (ix) inventory step-up amortization; (x) unusual, or infrequently occurring items; (xi) the income tax provision (benefit) related to these adjustments and (xii) certain tax items that are outside the normal tax provision for the period. Adjusted EPS is calculated by dividing adjusted net income by diluted weighted average shares outstanding.
EBITDA is calculated by adding back interest expense, provision (benefit) for income taxes, depreciation expense, and amortization expense from intangible assets and financing leases, to net income, which is the most directly comparable GAAP financial measure. Adjusted EBITDA consists of EBITDA plus adding back stock-based compensation and the same adjustments as listed above except for items (i), (vii), (xi) and (xii). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (vi), (vii), (xi) and (xii).
Organic sales change is reported sales growth adjusted for the impact of foreign currency and the contribution of acquisitions. To calculate the impact of foreign currency on sales growth rates, we convert any sale made in a foreign currency by converting current period sales into prior period sales using the exchange rate in effect at that time and then compare the two, negating any effect foreign currency had on our transactional revenue, and exclude the amount of sales acquired or divested during the period from the current/previous period amounts, respectively.
We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income, and organic sales change rates, provides important supplemental information to management and investors seeking to understand the financial and business trends relating to our financial condition and results of operations. In addition to the performance measures identified above, we believe that net total debt and leverage ratio provide meaningful measures of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of acquisitions and debt repayments. Net total debt is calculated as total principal amount of debt outstanding less cash and cash equivalents. We calculate leverage ratio as net total debt divided by adjusted EBITDA for the trailing 4 quarters. Free cash flow is defined as Net cash provided by operating activities (as stated in our Condensed Consolidated Statements of Cash Flows) reduced by capital expenditures (acquisition of property, plant, and equipment (PP&E), net of proceeds from the sale of PP&E).
Forward-Looking Statements
Some of the statements contained in this press release are “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, as amended, including 2023 financial results and guidance; statements relating to future sales, expenses, and profitability; customer demand; supplier performance (including delivery delays); costs (including wages, staffing levels and freight); future development and expected growth of our business and industry, including expansion of our manufacturing capacity; our ability to execute our business model and our business strategy, including completion and integration of current or future acquisition targets; having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; projected capital spending; and other events, conditions or developments that will or may occur in the future. You can identify forward-looking statements by terminology such as “outlook,” “projected,” “may,” “will,” “should,” “could,” “expect,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “project,” or “continue” or variations or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those stated or implied by these forward-looking statements. In evaluating these statements and our prospects, you should carefully consider the factors set forth below.
Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties that arise from time to time are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC and include the following:
operational risks, such as the duration, scope and impact of global supply chain issues and the military conflict between Russia and Ukraine, including the evolving economic, social and governmental environments and their effects on our associates, suppliers and customers as well as the global economy; our dependence upon a limited number of customers; pricing pressures that we face from customers; our reliance on third party suppliers for raw materials, key products and subcomponents; the competitive labor market and our ability to attract, train and retain a sufficient number of qualified associates; the potential for harm to our reputation caused by quality problems related to our products; the dependence of our energy market-related revenues on the conditions in the oil and natural gas industry; interruptions in our manufacturing operations; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; and our dependence upon our senior management team and technical personnel;strategic risks, such as the intense competition we face and our ability to successfully market our products; our ability to respond to changes in technology; our ability to develop new products and expand into new geographic and product markets; and our ability to successfully identify, make and integrate acquisitions to expand and develop our business in accordance with expectations;financial risks, such as our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under our senior secured credit facilities; economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; financial and market risks related to our international operations and sales; our complex international tax profile; and our ability to realize the full value of our intangible assets; andlegal and compliance risks, such as regulatory issues resulting from product complaints, recalls or regulatory audits; the potential of becoming subject to product liability or intellectual property claims; our ability to protect our intellectual property and proprietary rights; our ability and the cost to comply with environmental regulations; our ability to comply with customer-driven policies and third party standards or certification requirements; our ability to obtain necessary licenses for new technologies; legal and regulatory risks from our international operations, including trade regulation; and the fact that the healthcare industry is highly regulated and subject to various regulatory changes.Except as may be required by law, we assume no obligation to update forward-looking statements in this press release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.
Condensed Consolidated Balance Sheets - Unaudited(in thousands) June 30,2023 December 31, 2022ASSETS Current assets: Cash and cash equivalents$38,615 $24,272Accounts receivable, net 236,526 224,325Inventories 228,931 208,766Refundable income taxes 3,030 2,003Contract assets 80,010 71,927Prepaid expenses and other current assets 28,816 27,005Total current assets 615,928 558,298Property, plant and equipment, net 348,895 317,243Goodwill 985,982 982,192Other intangible assets, net 797,594 819,889Deferred income taxes 6,447 6,247Operating lease assets 70,281 74,809Financing lease assets 8,537 8,852Other long-term assets 27,680 26,856Total assets$2,861,344 $2,794,386LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt$5,000 $18,188Accounts payable 107,507 110,780Income taxes payable 3,036 10,923Operating lease liabilities 10,075 10,362Accrued expenses and other current liabilities 74,214 73,499Total current liabilities 199,832 223,752Long-term debt 980,398 907,073Deferred income taxes 152,926 160,671Operating lease liabilities 59,988 64,049Financing lease liabilities 7,677 8,006Other long-term liabilities 14,868 13,379Total liabilities 1,415,689 1,376,930Stockholders’ equity: Common stock 33 33Additional paid-in capital 715,715 731,393Retained earnings 717,737 680,701Accumulated other comprehensive income 12,170 5,329Total stockholders’ equity 1,445,655 1,417,456Total liabilities and stockholders’ equity$2,861,344 $2,794,386
2023 July 1,
2022 June 30,
2023 July 1,
2022Sales$400,044 $350,081 $778,829 $660,993Cost of sales (COS) 294,240 257,184 576,352 486,621Gross profit 105,804 92,897 202,477 174,372Operating expenses: Selling, general and administrative (SG&A) 45,827 41,786 87,713 81,346Research, development and engineering (RD&E) 16,883 14,871 35,975 30,954Restructuring and other charges (R&O) 1,518 3,533 3,047 6,868Total operating expenses 64,228 60,190 126,735 119,168Operating income 41,576 32,707 75,742 55,204Interest expense 11,459 7,773 28,713 13,741(Gain) loss on equity investments (134) 320 21 2,724Other loss, net 359 191 1,119 368Income before taxes 29,892 24,423 45,889 38,371Provision for income taxes 5,921 3,587 8,853 6,168Net income$23,971 $20,836 $37,036 $32,203 Earnings per share: Basic$0.72 $0.63 $1.11 $0.97Diluted$0.71 $0.62 $1.10 $0.97 Weighted average shares outstanding: Basic 33,312 33,111 33,285 33,101Diluted 33,686 33,350 33,631 33,326
2023 July 1,
2022Cash flows from operating activities: Net income$37,036 $32,203 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 48,569 45,753 Debt related charges included in interest expense 6,118 962 Inventory step-up amortization — 798 Stock-based compensation 11,603 10,951 Non-cash lease expense 5,473 5,344 Non-cash loss on equity investments 21 2,724 Contingent consideration fair value adjustment (265) — Other non-cash losses (1,437) 7,510 Deferred income taxes (4) (969)Changes in operating assets and liabilities, net of acquisition: Accounts receivable (9,742) (37,642)Inventories (21,646) (41,471)Prepaid expenses and other assets 1,308 (783)Contract assets (7,983) (6,189)Accounts payable 797 25,554 Accrued expenses and other liabilities 1,781 (7,295)Income taxes payable (9,296) (439)Net cash provided by operating activities 62,333 37,011 Cash flows from investing activities: Acquisition of property, plant and equipment (57,416) (22,610)Proceeds from sale of property, plant and equipment 50 587 Acquisitions, net — (126,636)Net cash used in investing activities (57,366) (148,659)Cash flows from financing activities: Principal payments of term loans (398,438) (7,625)Proceeds from issuance of convertible notes, net of discount 486,250 — Proceeds from revolving credit facility 229,604 160,000 Payments of revolving credit facility (263,443) (34,000)Purchase of capped calls (35,000) — Payment of debt issuance costs (2,181) — Proceeds from the exercise of stock options 1,948 — Tax withholdings related to net share settlements of restricted stock unit awards (2,930) (1,926)Contingent consideration payments (7,660) (493)Principal payments on finance leases (557) (353)Net cash provided by financing activities 7,593 115,603 Effect of foreign currency exchange rates on cash and cash equivalents 1,783 (6,247)Net increase (decrease) in cash and cash equivalents 14,343 (2,292)Cash and cash equivalents, beginning of period 24,272 17,885 Cash and cash equivalents, end of period$38,615 $15,593
Table A: Net Income and Diluted EPS Reconciliations
(in thousands, except per share amounts)
| Three Months Ended | |||||||||||||||||||||
| June 30, 2023 | July 1, 2022 | ||||||||||||||||||||
| Pre-Tax | Net of Tax | Per Diluted Share | Pre-Tax | Net of Tax | Per Diluted Share | ||||||||||||||||
| Net income (GAAP) | $ | 29,892 | $ | 23,971 | $ | 0.71 | |||||||||||||||
