Integer Holdings Corporation Reports Third Quarter 2024 Results
~ Continued strong performance with 3Q24 financial results ~~ Raising midpoint of 2024 operating profit and EPS outlook ~
PLANO, Texas, Oct. 24, 2024 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (NYSE:ITGR) today announced results for the three and nine months ended September 27, 2024.
Our previously announced sale of the Electrochem business for $50 million in cash remains on track and is expected to close later this month. Except for cash flow measures, prior period amounts have been recast to exclude the Electrochem business, which is a discontinued operation, consistent with GAAP continuing operations presentation. Unless otherwise stated, all results and comparisons set forth in this release are presented on a continuing operations basis.
Third Quarter 2024 Highlights (compared to Third Quarter 2023, except as noted)
Sales increased 9% to $431 million, with organic growth of 4%.
GAAP income from continuing operations increased $8 million to $36 million, an increase of 29%. Non-GAAP adjusted net income increased $6 million to $50 million, an increase of 14%.
GAAP operating income increased $9 million to $58 million, an increase of 19%. Non-GAAP adjusted operating income increased $11 million to $76 million, an increase of 17%.
GAAP diluted EPS from continuing operations increased $0.18 per share to $1.01 per share. Non-GAAP adjusted EPS increased $0.14 per share to $1.43 per share.
Adjusted EBITDA increased $15 million to $96 million, an increase of 18%.
From the end of 2023, total debt increased $119 million to $1.079 billion and net total debt increased $105 million to $1.055 billion, primarily to finance the acquisition of Pulse Technologies, resulting in a leverage ratio of 3.0 times adjusted EBITDA as of September 27, 2024.
Third Quarter 2024 YTD Highlights (compared to Third Quarter 2023 YTD, except as noted)
Sales increased 10% to $1.267 billion, with organic growth of 6%.
GAAP income from continuing operations increased $26 million to $88 million, an increase of 41%. Non-GAAP adjusted net income increased $25 million to $133 million, an increase of 23%.
GAAP operating income increased $31 million to $151 million, an increase of 26%. Non-GAAP adjusted operating income increased $40 million to $209 million, an increase of 23%.
GAAP diluted EPS from continuing operations increased $0.64 per share to $2.49 per share. Non-GAAP adjusted EPS increased $0.67 per share to $3.87 per share.
Adjusted EBITDA increased $48 million to $266 million, an increase of 22%.
"Third quarter year to date, Integer delivered 10% sales growth and a 23% increase in adjusted operating income versus a year ago," said Joseph Dziedzic, Integer's president and CEO. "We expect 2024 sales growth of 10% to 11% with above-market organic sales growth of 7% to 8%. We are raising the midpoint of our full year adjusted operating income outlook by $4 million dollars, to 20% year over year, up from 18% in our previous outlook."
Mr. Dziedzic added, "The divestiture of Electrochem will make Integer a pure-play medical technology company and provides additional capital to invest in capabilities and capacity that support our targeted growth markets."
Discussion of Product Line Third Quarter 2024 Sales
Cardio & Vascular sales increased 13% in the third quarter 2024 compared to the third quarter 2023, driven by new product ramps in electrophysiology and structural heart, and the InNeuroCo and Pulse acquisitions.
Cardiac Rhythm Management & Neuromodulation sales increased 3% in the third quarter 2024 compared to the third quarter 2023, driven by strong growth in emerging neuromodulation customers with PMA (pre-market approval) products.
Advanced Surgical, Orthopedics & Portable Medical sales increased 12% in the third quarter 2024 compared to the third quarter 2023, primarily driven by fulfillment timing of last-time-buy orders related to the planned multi-year Portable Medical exit announced in 2022.
2024 Outlook(a)
The 2024 Outlook excludes Electrochem. As previously communicated, the prior 2024 outlook included the following estimated amounts for Electrochem:
Sales of $36 million.
GAAP operating income of $3 million. Non-GAAP adjusted operating income of $4 million.
Adjusted EBITDA of $5 million.
GAAP net income of $0 million. Non-GAAP adjusted net income of $1 million.
GAAP diluted EPS of $0.00. Non-GAAP adjusted EPS of $0.02.
$3 million of allocated interest expense as part of discontinued operations.
Unless otherwise stated, 2024 Outlook and comparisons are presented on a continuing operations basis.
We have raised the midpoint of our full year profit and EPS outlook, compared to the 2024 outlook from July, revised to exclude Electrochem.
(dollars in millions, except per share amounts)
GAAP
Non-GAAP(b)
As Reported
Change from Prior Year
Adjusted
Change from Prior Year
Sales
$1,707 to $1,727
10% to 11%
N/A
N/A
Operating income
$205 to $213
26% to 30%
$280 to $288
18% to 22%
EBITDA
N/A
N/A
$358 to $368
18% to 21%
Income from continuing operations
$122 to $128
37% to 44%
$181 to $188
16% to 21%
Diluted earnings per share
$3.42 to $3.61
30% to 37%
$5.24 to $5.43
14% to 18%
Cash flow from operating activities(c)
$195 to $205
8% to 14%
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 "2024 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 2024 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 $75 million, pre-tax.Adjusted net income for 2024 consists of GAAP income from continuing operations, 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 $73 million, pre-tax. The after-tax impact of these items is estimated to be approximately $59 million, or approximately $1.67 per diluted share.Adjusted EPS for 2024 consists of GAAP diluted EPS from continuing operations, excluding the after-tax impact of the Adjusted net income items noted above and the estimated dilution resulting from the potential conversion of our 2028 Convertible Notes expected to be offset by capped call option contracts, which is approximately $0.15 per diluted share.Adjusted EBITDA is expected to consist of GAAP income from continuing operations, excluding items such as depreciation, interest, stock-based compensation and taxes totaling approximately $177 million to $181 million.
(c)
Cash flows from operating activities includes an immaterial amount related to discontinued operations.
Please see "Notes Regarding Non-GAAP Financial Information" for additional information regarding our use of non-GAAP financial measures.
Supplemental Financial Information
(dollars in millions)
2024Outlook
2023Actual
Depreciation and amortization
$106 to $110
$96
Adjusted total interest expense(a)
$55 to $57
$47
Stock-based compensation
$24 to $25
$23
Restructuring, acquisition and other charges(b)
$20 to $22
$21
Adjusted effective tax rate(c)
18.0% to 19.0%
17.6%
Leverage ratio(d)
2.6x to 2.7x
3.1x
Capital expenditures(e)
$100 to $110
$120
Cash income tax payments
$36 to $40
$30
(a)
Adjusted total interest expense refers to our expected full-year GAAP interest expense, expected to range from $55 million to $57 million for 2024, adjusted to remove the full-year impact of charges associated with the accelerated write-off of debt discounts and deferred issuance costs (loss on extinguishment of debt) included in GAAP interest expense, if any. Adjusted total interest expense of $46.8 million for 2023 consists of GAAP interest expense of $51.3 million less $4.5 million of losses from the extinguishment of debt.
(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 18.0% to 19.0% for 2024, adjusted to reflect the full-year impact of the items that are excluded in providing adjusted net income and certain other identified items. Adjusted effective tax rate of 17.6% for 2023 consists of GAAP effective tax rate of 15.4% adjusted to reflect the impact on the income tax provision related to Non-GAAP adjustments.
(d)
Please see "Notes Regarding Non-GAAP Financial Information" for additional information regarding leverage ratio.
(e)
Capital expenditures is calculated as cash used to acquire property, plant, and equipment (PP&E) less cash proceeds from the sale of PP&E.
Summary Financial Results
(dollars in thousands, except per share data)
Three Months Ended
Nine Months Ended
September 27,2024
September 29,2023
QTD Change
September 27,2024
September 29,2023
YTD Change
Operating income
$
58,011
$
48,776
18.9
%
$
151,206
$
119,791
26.2
%
Income from continuing operations
$
36,282
$
28,174
28.8
%
$
88,080
$
62,330
41.3
%
Diluted EPS from continuing operations
$
1.01
$
0.83
21.7
%
$
2.49
$
1.85
34.6
%
EBITDA(a)
$
86,346
$
68,944
25.2
%
$
232,225
$
186,839
24.3
%
Adjusted EBITDA(a)
$
95,526
$
80,681
18.4
%
$
265,597
$
217,669
22.0
%
Adjusted operating income(a)
$
75,647
$
64,596
17.1
%
$
208,667
$
169,158
23.4
%
Adjusted net income(a)
$
49,832
$
43,638
14.2
%
$
133,183
$
107,876
23.5
%
Adjusted EPS(a)
$
1.43
$
1.29
10.9
%
$
3.87
$
3.20
20.9
%
(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, B and C 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
September 27,2024
September 29,2023
QTD Change
Organic Change(a)
Product Line Sales
Cardio & Vascular
$
241,009
$
214,004
12.6
%
6.2
%
Cardiac Rhythm Management & Neuromodulation
165,094
160,121
3.1
%
2.2
%
Advanced Surgical, Orthopedics & Portable Medical
25,314
22,678
11.6
%
(1.0)%
Total Sales
$
431,417
$
396,803
8.7
%
4.3
%
Nine Months Ended
September 27,2024
September 29,2023
YTD Change
Organic Change(a)
Product Line Sales
Cardio & Vascular
$
694,278
$
613,701
13.1
%
6.5
%
Cardiac Rhythm Management & Neuromodulation
490,086
459,643
6.6
%
5.7
%
Advanced Surgical, Orthopedics & Portable Medical
82,735
77,808
6.3
%
6.5
%
Total Sales
$
1,267,099
$
1,151,152
10.1
%
6.2
%
(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, October 24, 2024, 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 (800) 715-9871 (U.S.) or (646) 307-1963 (outside U.S.) and the conference ID is 4525826. 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 (NYSE:ITGR) is one of the largest medical device contract development and manufacturing organizations (CDMO) in the world, serving the cardiac rhythm management, neuromodulation, and cardio and vascular markets. As a strategic partner of choice to medical device companies and OEMs, Integer is committed to enhancing the lives of patients worldwide by providing innovative, high-quality products and solutions. The company's brands include Greatbatch Medical® and Lake Region Medical®. Additional information is available at www.integer.net.
Investor Relations:
Andrew
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. Unless otherwise indicated, all financial metrics presented reflect continuing operations only.
Adjusted net income and adjusted EPS consist of GAAP income from continuing operations and diluted EPS from continuing operations, respectively, adjusted for the following to the extent occurring during the period: (i) amortization of intangible assets, (ii) restructuring and restructuring-related charges; (iii) acquisition and integration related costs; (iv) other general expenses; (v) (gain) loss on equity investments; (vi) extinguishment of debt charges; (vii) European Union medical device regulation incremental charges; (viii) inventory step-up amortization; (ix) unusual, or infrequently occurring items; (x) the income tax provision (benefit) related to these adjustments and (xi) certain tax items that are outside the normal tax provision for the period. Adjusted EPS is calculated by dividing adjusted net income by adjusted weighted average shares.
The weighted average shares used to calculate diluted EPS in accordance with GAAP includes dilution, when applicable, resulting from the potential conversion of our 2.125% Convertible Senior Notes due 2028 (the "2028 Convertible Notes"). In connection with the issuance of the 2028 Convertible Notes, we entered into capped call contracts which are expected to reduce the potential dilution on our common stock in connection with any conversion of the 2028 Convertible Notes, subject to a cap. Adjusted weighted average shares consists of GAAP weighted average shares used to calculate diluted EPS, excluding, when applicable, dilution resulting from the potential conversion of our 2028 Convertible Notes expected to be offset by the capped call contracts.
EBITDA is calculated by adding back interest expense, provision for income taxes, depreciation expense, and amortization expense from intangible assets and financing leases, to income from continuing operations, 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), (vi), (x) and (xi). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (v), (vi), (x) and (xi).
Organic sales change is reported sales growth adjusted to remove the impact of foreign currency, the contribution of acquisitions and the strategic exit of the Portable Medical market. 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. For contribution of acquisitions, we exclude the impact on the growth rate attributable to the contribution of acquisitions in all periods where there were no comparable sales. For the strategic exit of the Portable Medical market, we exclude the impact on the growth rate attributable to Portable Medical sales for all periods presented.
We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income, and organic sales change, 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.
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 statements relating to: our 2024 outlook including future sales, expenses, and profitability; the timing for the closing of the Electrochem sale transaction; our ability to execute our business model and our business strategy; 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," "expects," "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 our dependence upon a limited number of customers; pricing pressures and contractual pricing restraints we face from customers; our reliance on third-party suppliers for raw materials, key products and subcomponents; interruptions in our manufacturing operations; our ability to attract, train and retain a sufficient number of qualified associates to maintain and grow our business; the potential for harm to our reputation and competitive advantage caused by quality problems related to our products; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; global climate change and the emphasis on Environmental, Social and Governance matters by various stakeholders; our dependence upon our senior management team and key technical personnel; our energy market revenues' dependence on conditions in the historically volatile oil and natural gas industries; and consolidation in the healthcare industry resulting in greater competition;
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 and indebtedness risks, such as our ability to accurately forecast future performance based on operating results that often fluctuate; our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under the credit agreement governing our Senior Secured Credit Facilities; economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; the conditional conversion feature of the 2028 Convertible Notes adversely impacting our liquidity, the conversion of our 2028 Convertible Notes, if it were to occur, diluting ownership interests of existing holders of our common stock; the counterparty risk associated with our capped call transaction; the counter 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;
legal 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 to comply with customer-driven policies and third-party standards or certification requirements; our ability to obtain and/or retain necessary licenses from third parties for new technologies; our ability and the cost to comply with environmental regulations; legal and regulatory risks from our international operations; the fact that the healthcare industry is highly regulated and subject to various regulatory changes; and our business being indirectly subject to healthcare industry cost containment measures that could result in reduced sales of our products; and
other risks and uncertainties that arise from time to time.
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)
September 27,2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
35,574
$
23,674
Accounts receivable, net
241,708
231,283
Inventories
265,415
229,102
Refundable income taxes
8,216
1,998
Contract assets
99,287
85,871
Prepaid expenses and other current assets
24,956
28,035
Current assets of discontinued operations held for sale
54,876
17,705
Total current assets
730,032
617,668
Property, plant and equipment, net
472,315
392,569
Goodwill
1,033,078
994,007
Other intangible assets, net
805,174
779,598
Deferred income taxes
6,782
7,001
Operating lease assets
78,624
81,319
Financing lease assets
17,205
11,675
Other long-term assets
24,439
22,407
Noncurrent assets of discontinued operations held for sale
—
36,409
Total assets
$
3,167,649
$
2,942,653
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
$
5,000
$
—
Accounts payable
116,837
118,258
Income taxes payable
571
3,896
Operating lease liabilities
8,883
8,564
Accrued expenses and other current liabilities
86,138
86,748
Current liabilities of discontinued operations held for sale
4,969
3,503
Total current liabilities
222,398
220,969
Long-term debt
1,074,339
959,925
Deferred income taxes
143,236
143,552
Operating lease liabilities
69,115
72,126
Financing lease liabilities
13,996
10,272
Other long-term liabilities
23,379
14,303
Noncurrent liabilities of discontinued operations held for sale
—
2,464
Total liabilities
1,546,463
1,423,611
Stockholders' equity:
Common stock
34
33
Additional paid-in capital
736,125
727,435
Retained earnings
858,544
771,351
Accumulated other comprehensive income
26,483
20,223
Total stockholders' equity
1,621,186
1,519,042
Total liabilities and stockholders' equity
$
3,167,649
$
2,942,653
Condensed Consolidated Statements of Operations - Unaudited
(in thousands, except per share data)
Three Months Ended
Nine Months Ended
September 27,2024
September 29,2023
September 27,2024
September 29,2023
Sales
$
431,417
$
