- Sales: $436 million, 9% year-over-year growth on a reported basis, 5% organic growth.
- Adjusted Operating Income: Grew 20% year-over-year, 16.5% of sales, 152 basis points improvement.
- Adjusted EBITDA: $91 million, up $15 million or 19% year-over-year.
- Adjusted Net Income: $45 million, $1.30 adjusted earnings per share, up 14% year-over-year.
- Cardio & Vascular Product Line Sales: Trailing four quarter sales increased 17% year-over-year.
- Cardiac Rhythm Management and Neuromodulations Sales: Trailing four quarter sales increased 11% year-over-year.
- Cash Flow from Operations: $47 million, $10 million more year-over-year.
- Capital Expenditures: $31 million in Q2, expected full year spend of $90 million to $110 million.
- Free Cash Flow: $16 million, primarily used to reduce net total debt.
- Net Total Debt Leverage: 3.2 times trailing four quarter adjusted EBITDA.
- 2024 Sales Outlook: $1,735 million to $1,770 million, 9% to 11% growth year-over-year.
- 2024 Adjusted EBITDA Outlook: $357 million to $377 million, 15% to 22% growth year-over-year.
- 2024 Adjusted Operating Income Outlook: $275 million to $293 million, 14% to 21% growth year-over-year.
- 2024 Adjusted Net Income Outlook: $174 million to $189 million, 11% to 20% growth year-over-year.
- 2024 Adjusted EPS Outlook: $5.07 to $5.49, 9% to 18% growth year-over-year.
- 2024 Cash Flow from Operations Outlook: $185 million to $205 million, 8% year-over-year increase at midpoint.
- 2024 Free Cash Flow Outlook: $85 million to $105 million.
- 2024 Year-End Net Total Debt Outlook: $1,010 million to $1,030 million.
Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Integer Holdings Corp (ITGR, Financial) reported a 9% year-over-year sales growth in Q2 2024.
- Adjusted operating income grew by 20%, with operating margins expanding by 152 basis points.
- Adjusted earnings per share increased by 14% year-over-year.
- The company raised its full-year profit outlook, expecting 18% adjusted operating income growth on 10% sales growth.
- Strong visibility to customer demand and ramping programs in high-growth markets provide confidence in future performance.
Negative Points
- Higher interest expenses and a slightly higher adjusted effective tax rate impacted net income.
- Cash flow from operations was $9 million lower year-over-year due to non-repeating accounts receivable factoring.
- The CRM and Neuromodulation guidance was revised down to high single digits from low double digits.
- The non-medical segment experienced a 36% decline in the first half of 2024.
- Concerns about potential in-sourcing by customers, particularly in the PFA segment, could impact future growth.
Q & A Highlights
Q: Can you provide more detail around the sequential decline in organic growth in the Cardio and Vascular segment and expectations for recovery in the second half?
A: Joseph Dziedzic, President and CEO: The Cardio and Vascular product line sales on a trailing four-quarter basis were up 17%, with reported growth in the quarter at 11% and organic growth at 4%. The first quarter organic growth was 9%, and we expect high-single-digit organic growth for the full year. The rolling four-quarter basis is the best way to look at it due to non-linear customer manufacturing plans. We expect continued strong growth in electrophysiology and structural heart markets.
Q: What are the biggest swing factors driving operating margin expansion to the low-end versus the high-end of the range?
A: Joseph Dziedzic, President and CEO: We have a very strong order book close to $900 million, giving us tremendous visibility. Our first half sales growth was 9.3%, and margins were better in the second quarter, leading us to update the full-year profit outlook. Variability in the past was due to supply chain disruptions, but we now have a stable supply chain environment and improved manufacturing efficiencies.
Q: Can you provide more detail on the Cardio and Vascular segment's performance and visibility into second-half revenue?
A: Joseph Dziedzic, President and CEO: The Cardio and Vascular segment was in line with our expectations. We expect high-single-digit organic growth for the full year. The second half will see increased guidewire capacity from our Ireland facility and ramping programs in electrophysiology and structural heart. We have strong visibility to customer demand and expect sales to be slightly higher in the third quarter compared to the second, with further increases in the fourth quarter.
Q: What is the potential impact of customers in-sourcing their PFA manufacturing on Integer's business?
A: Joseph Dziedzic, President and CEO: We have strong visibility to the pipeline and multi-generation product development plans. PFA is expected to be a tailwind, and we have higher content on PFA devices compared to other technologies. Overall trends are towards outsourcing, and our vertical integration allows us to support customers' ramp plans effectively.
Q: Can you provide an update on the performance of recent acquisitions and your outlook on M&A?
A: Joseph Dziedzic, President and CEO: The acquisitions of InNeuroCo and Pulse Technologies are performing well, slightly ahead of our models. We are seeing strong operational synergies and margin improvements. Our M&A pipeline remains robust, and we continue to look for tuck-in acquisitions that align with our targeted growth markets and have accretive growth rates and margins.
Q: What are the lead times for electrophysiology devices, and have you seen any changes in order timing from customers?
A: Joseph Dziedzic, President and CEO: Lead times have not changed meaningfully. We often receive more orders for new programs further into the future, giving us better visibility to ramp plans. This helps us manage production and improve yields over time.
Q: What gives you confidence in continuing to deliver operating leverage in the second half of the year?
A: Joseph Dziedzic, President and CEO: We are executing on our manufacturing excellence initiatives, reducing scrap, overtime, and improving operator efficiency. Our direct labor turnover is below pre-pandemic levels, leading to better proficiency and reduced waste. This supports our strategy of growing operating profit twice as fast as sales, leading to margin expansion.
Q: Can you speak to the net benefit of PFA in the context of cannibalizing non-PFA ablation business and capturing price premiums?
A: Joseph Dziedzic, President and CEO: The price premium is on the finished device, and while it may not flow through to us directly, PFA is expected to accelerate market growth. We participate across the full procedure, benefiting from increased procedure volumes. The overall trend towards outsourcing supports our growth in this area.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
