ITGR - Earnings call transcript Q3 2017 | Integer Holdings Corporation

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Operator

Good afternoon. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2017 Integer Holdings Corporation Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Investor may VP, your Relations, Wakeham, begin you conference. Amy

Amy Wakeham

indicated. call everyone. you, third joining The copy live of Cheryl. with Thank replay Thanks the quarter the for the being The press webcast and Good data results release call. on the Integer's we and the consolidated of section discuss presentation Great. earnings Relations the the to afternoon, reflect results for and along Integer of webcast our periods available today welcome us are conference is Investor corporate website. and

non-GAAP During our call, we will discuss certain measures.

reconciliation non-GAAP notes appendix to a earnings please the of statements financial see in today's For the of the the release. and today's presentation measures,

Company’s that As the discussion a reminder, cause presentation could forward-looking today’s to the filings risk SEC of includes differ factors statements. actual to our results for materially. refer Please

quarterly Haire, today on and and call Gary discuss our to Officer. President are the Chief Joe business you On and President Executive Chief and Dziedzic, our to Financial update Officer, Vice Executive results

remarks, will I'd call come Q&A. the for turn line to like now to the Cheryl Joe. over Following back on prepared the

Joseph Dziedzic

and manufacturing of enable spent Thanks, CEO joined are I Amy. when hear continues grateful I be our to and results continued space. innovative to strong footprint customers our topline us to be that better. that to start guidance Integer team some within reflected which We've passion, you before evaluating the various where all generating that our even our point. quarter of us our We've The clear on has exciting talent technology such of strong focused for capability income plants, us we competitors customers, But understand visiting plan, to more quarter our the trends more and growth the happy meeting our commitment, to as of of with global we addition capabilities, customer and for as the thanking manufacturing Welcome objectives. to reviewing have focus dynamics will to our and part for and another our else markets will operating communicated both our do we report will positive want getting be by on into a and where objectives on our been capitalize you our for been manufacturing of know clearly our and we allocating customers the fourth we as quarter, are me, serve quarter by areas to high lines anyone a current enables are accelerate quality full results XXXX to results. technology market flow. will for in opportunities I've we with in our reviewing our than I opportunities customers to XXXX scalability, impressed ensure product next our on quarter at management resources what results of Thank to our inflection in a been Integer these share design be in achieving the will well to deliver across improve. first associates February. strategies to in discussions growth cash has The It delivering become at the Integer and trajectory to consider Integer third net XXXX continued improvement. team capability. in joining am segment to levels I third quarter about ensure row that everyone. a we and my an our with the have deeply. I'm differentiated all I compete and get Integer

review Let's results. third quarter our

Our solid continued third enabled we flow solid reflect growth. revenue accelerated our that guidance Once generated results again, are quarter cash consistent full-year debt and with repayment.

currency. Our details full-year year-to-date that outlook adjusting has and been you foreign reflect the changes range Gary in our of the guidance impact for provided highlight guidance these original through within take will reflect XXXX. to revised narrowed after current the foreign beginning owners, that currency, three revenue the With we at our is our deliver the of and the credibility operational mix guidance recognize We performance our actuals, range our of our must business. that of you, to have of guidance. with rebuild quarters we our on to current

X% sales growth. growth to growth, income expect organic demonstrating We and sales strong X.X% net to EPS adjusted XX% on X.X% leverage

is Turning progress our that X, is to growth. back the the of change on was for to product most it growth reflecting of trailing since a X.X% our lines. highlighting shows sales this sales quarter comparison of to fourth rolling four business to continues is to revised picture four the trailing sales X.X%. improve, Slide to growth the trajectory basis compared quarter Slide at our It difficult made The XXXX of four the again quarter X%, has quarter worth all quarter last of year. year X that guidance highest the

insight adjustments for market the product Neuro and realities financial management with going customer is in where this remain of is an now rhythm quarter. business, The market inventory our trajectory the reflecting Neuromodulation. With trajectory. of declines some is provide & the three of Gary value product which The of market, demonstrate is Cardiac offsetting lines for the line upward our growth Neuro, cardiac all positive exception results slide Cardiac current & are to the our the lines. on more very of product into to sales

Gary Haire

our will outlook. our quarter and Thanks, to you results then third full-year going through I'm good afternoon. take through Joe, you I updated XXXX financial and walk

EBITDA, EPS and impact losses talk reminder, foreign are net or are a the exchange the as reference adjusted adjusted Any currency sales, non-operating we and organic to As of reported gains about income any activity. adjusted that foreign and in to when to of other impact excludes expense. referring organic income M&A reference we exclude

the at year-over-year X, Rico, Turning to quarter. Slide specifically growth. third a into shipments in solid increased To related do on our Puerto Puerto in have with address to X.X% third Sales for of and a here's quick impact X.X% the basis results Rico. row we organically, operations quarter a reported our customers look

However, of impact a the impact our have significant in did the Hurricane Maria quarter. not results on

the and ensure are a it that X% in in basis. will declined our be slide. Adjusted EBITDA by product will We we continue will trends reported too on I year-over-year sales to impact customers is say line Puerto cover early more in to on Rico any there supporting QX. next detail

strengthening During the due the loans euro exchange, primarily the dollar. to $X related versus million quarter, incurred we intercompany by of the to impacted losses of foreign

FX EBITDA adjusted this been Excluding have about would flat impact, to compared year. last

exclude a impacted losses But X% noting when mentioned. to our year-over-year. basis on a was X% reported $X.XX included related you for $X.XX dilution the Our adjusted FX improved about from increased by net and impact I this just basis. that on EPS was is reported income organically worth the of share year-over-year $X.XX FX. Adjusted earnings share Also

just For of two these from a about items. total $X.XX

last impact of that our will we the tell restructure the this be our on starting to the will I'm evaluating regarding our loans several completed remember the that significantly happy of non-cash results Now recently actions opportunities of impact you going QX. I intercompany exposure. we quarter mitigate you FX FX and discussed reduce FX would to forward, impact in

the lines for the over of rate growth you last seven year-over-year could the comparing trends see next our each performance. On Slide, product the quarters, specifically sales

at in this in the but two XXXX. are overall, our quarters to business. the we getting half right that seven has after first the One, that seen has weakness, the noting. graph of our Integer have You XXXX return performance, which quarters. to of Cardiac of this in quarters. and line the Medical growth last could Medical pleased last the see product of to around back the There we're We're total medical specifically to second growth the had page, decreases for of saw second broader on last business a in market X% Cardiac points each highlight since quarter ups, we a business step side XXXX, the worth also Neuro the due in X% CRM between us challenged to that & we in shown new this X% been growth wanted past growth exception a shows of have five with and & has where a the two the this on we business very in the direct I and a rate rate the solid positive over lines impact growth pleased the growth half added with is had quarters. three the level couple Neuro. all of of first At flat growth solid notable putting

to the to two last is which The quarters, total X.X% the which is second strength the growth business is medical revenue evident closer in in Integer non-medical being the growth point the around X%. in compared

Now moving to Slide XX.

full-year as declined headwind million quarter, foreign and while incentive exchange, spend our last which and on When development year-over-year timing year, third quarter You a diluted higher of of about compensation year-over-year EPS adjusted we development, the the In slightly by I slightly in versus foreign spend improved impacted and approximately QX, can adjusted this $X we EBITDA mentioned. well non-operating our prior had regards versus in research on EBITDA is in a that and and the versus to see to profitability basis. year X%. EPS be and exclude already the flat adjusted year's quarter year flat unfavorable impact other research basis. which expenses, quarter, the last expect QX adjusted was we currency impacts essentially higher In almost the was as a costs last income included was to spend

the we at that bottom If a non-GAAP you EBITDA nine-month on our have months, our page, adjusted organic same adjusted organic nine XX%, performance, organic growth FX. adjusted through up X%, over in of to the XXXX, our and income basis about net EPS you period while up nice Comparing look up shown is can XX%. is year-to-date excluding adjusted this of is see

continued third well prior million and focused flow growth. cash cash operating in generating remained the to flow. We reducing from sustainable for cash our quarters, to in continuing as operations invest have in turning leverage delivered as on Consistent flow quarter. while we comments Now $XX with

our consisting to Our a fifth payment. strong us again, million debt Once cash capital, We million our repayments interest row allowed our and payments. in $XX working generation debt year. million $XXX quarter, brings very the debt near-term our our payments and With flow accelerate repaid for to debt effectively of $XX total manageable. in efforts are now of to of flow quarter cash in flow. cash the accelerated strong This manage

additional regular We will continue evaluate markets to a basis monitor appropriate. opportunities as on and

for turning to our outlook Now XXXX. full-year

million, are updating XXXX. sales end low another We outlook adjusted in solid quarter million, $XX our growth are of X.X% we updating and top X.X% reflect end to the outlook year. by our progress first quarter. the raising and $X for of through therefore, With range three our growth range third sales, be quarters had to by raising of the the the to the EPS We

tightening outlook. previously, as in quarter are was fourth had the quarter XXXX. year we comparisons much From However, mentioned quarter perspective, EPS as last in our tougher a strongest fourth we profitability our adjusted the we

As impact our previous $X.XX that I guidance. not we in was had mentioned, an QX FX of in additional

not However, range. our the we of reducing end bottom are

beginning reducing year. After range our our guidance the well is the as expected in range show FX the of will our are still the I given impact within performance. well FX, our the original slide. adjusting at of we the And gave you We as top current for impact end to the next revenue on that this operational mix of this of

from we are For $XXX outlook our flow cash of cash operations. reiterating million flow, of approximately

we that remains I to generate our with capital XX, and come capital as with want outlook to updating sales to sales. the Starting outlook X.X%. X%. And appropriate a compare spending a well focus has as said, year. and today on we originally provided outlook have Slide On it original solid that at X% ensuring returns. X.X% cash we would back and beginning management to to our continue the revised of We flow We priority working between growth are our of the

share. are the now to EPS, regards of we high-end per estimating our guidance be between $X.XX or that was range So it. be the $X.XX original above to between and In

would impact FX year. the last anticipate the did for range mentioned this we quarter be we been Joe. the today have and not the the $X.XX we the have outlook the the impact months original the to the of FX for now been large $X.XX $X.XX, And of during When is we original turn adjusting outlook $X.XX that between only, to during right nine updating are $X.XX. That As middle FX. year. will adjust guidance call in our which incurred back to I has after

Joseph Dziedzic

cover Thanks, discussion and results line can Gary. vision and brief about then we product with our our they what sales strategy I'll current believe close and deliver. a

of customer's, product activity of related Advanced initiatives. improved Surgical, driven further new tailwind management products, complete is in their ramping line, plant quarter, the now to by one year-over-year Medical sales the Turning well as from growth to and one up Orthopedics Portable that as inventory transfer stabilization the third

activity We factors third expect driving a of the quarter fourth into as see continue sales quarter. that the the higher same we result will

manufactured However, we vascular. four demand particularly we line specific The in in growing modest of transfer existing the particular. access, products and X% the own to to our from anticipate large from electrophysiology. strength and quarter growth instruments vascular and sales access product The components, inventory trends primarily strong XXXX us provides overall driven sales continues quarter the quarter. up by with Driven this with accelerate and is cardiovascular Integer year. contract management, four & to and Advanced and offsetting Surgical drive The strong product plan significant peripheral customer’s X% more Cardio will opportunities in improvement overall continues next expect on market arthroscopy impact by lead new vascular Vascular product rolling peripheral in one the The trajectory growth and activities leverage growth especially implants, trailing Orthopedic quarter, of the vascular, the sales rate in year-over-year to offering, completion to of in which capabilities for launches.

the come has some Additionally, of customers growth inventory. rebuilding from

customers emerging success We as established well and have to continue with well customers. large both faster of as

investing like growing and are higher faster structural peripheral the segments We vascular electrophysiology. value heart, in

we're our overall goal customers capabilities and with accelerating addition, to prototyping turnaround faster the of speed developing success. In market

We growth solid expect inventory the more rebuilding. potentially continued from and quarter in customer fourth

this reflects management Sales penetration and fast growth relationships is and sales trend rolling lower market The capabilities were third but range quarter in product customer decline last sales overall inventory this opportunities not by this to in and are a We existing remain strong growing declined offset the clear the Neuromodulation quarter. line our Cardiac over our smaller, CRM large Integer. wide the market & increased year. line customers, to the headwinds is and in have for for opportunities and The in line. growing Customer the They resulting product partnership Neuromodulation continue trend four and in leverage leader future product of broad revenue. a enabling resonating market. investments and new deeper in approach well with

to anticipate with management strategy full to this component and our providing Cardiac the growth on the quarter of in execute our capability year. continue no the fourth customers. quarter the XXXX manufacturing the year in development against of highest of were they design, sales We fourth We

this but key component a product a product driver of line, long-term for the of smaller Although Neuromodulation growth market remains overall line.

systems the development are active leading of full applications. manufacture sizes We’re accelerating components everything the the MDO support customer market of customers from in focused all growth for and on and Neuromodulation through of to design,

their to with the Neuro outpace manage to up Our growth delivered Neuro of the partner costs, on outlook a and the is in a the but to Electrochem improvement only outstanding enabled implementing effectively of downturn capitalize on and deliver gains. enabling is downturn Electrochem reached market the to growth quarter market in the energy market. third efficiencies the year-over-year energy the for them quarter by XX%. very do of rate four not share the that the top of growth enable our same management significant point It reducing The CRM to on rhythm cardiac order growth. XX% own is and are success & in another XXXX basis, XX%, but facilitate recovering combination gains during positive, since Electrochem low and market growth share realities customers not strategy of clear. quarters fourth expect the rolling have market growth. in Cardiac of The of quarter We downturn for plus quarter the after Electrochem. was level also to two

progress back sustained and growth, vision our we trajectory. our in long-term see are quarterly pleased business growth a strategy, transitioning review to demonstrating Turning our to to

look grow our forward, we we further have business. opportunities believe significant to As we expand and

leader multiple component serve the medical market device manufacturing, can a continuum the entire or of in capability complete product developed anything deliver. unique a engineered to customer outsourced whether or we in we breath our device have customers product a across that an needs As between, we've across and lines,

and footprint for scalability, to Our customer our and our us space. customers deliver innovative design our manufacturing high-quality our and than anyone capabilities, else focus enable more global our in

shareholders. We and commitments, other to our growth, earn and continue recognized is long-term to execute growth to credibility we by strategy valuation delivering growth from cash EBITDA rate, a our we flow expect and our to expect our each realize our desire to customers, to our we above premium we deliver the to our we consistently accelerate As on that sales market vision, to shareholders. earn

the call on on is remainder part We of now It for we Integer. exciting open be questions. to are excited about the time XXXX. future of focused and truly the an remain will delivering Cheryl,

Operator

comes from of Our Mishan [Operator KeyBanc. first Matthew Instructions] question

open. Your line is

Matthew Mishan

the thank questions. and afternoon, Good for taking you

Joseph Dziedzic

Matt. Hey,

Matthew Mishan

Hey.

you've free generated story more generate in been you been operational could a I positive not and revenue for leverage, mix it’s similar I'm performance. looking you leverage, me, quarters, and see curious flow I've has whether all cash like solid But that three very think growth, just operating that's good. really been the mentioned think for I last or to more

the had more not EBITDA in the You second that thought are in the half, factors correct to some first half, in the business? going you seeing certain flattish why we driving and you’re had leverage that

Gary Haire

certain are drop Hey, basis, right This looking as Great more question, drive point absolutely good it just quarter, a make the happened through Matt, to are that going items. and be as to definitely couple that you're On a don't there that Gary. look that leverage I’ll what in it’s business. we particular you quarter-to-quarter items to should.

first is through And goes compensation, incentive in particular was million one The gross year-over-year part that a that profit. of $X headwind.

So XX gross on year-over-year headwind points it basis the is used margin. profit

we is year. did performing in it that think be targets than like and the because business targets, within last I better

don't to I like there. one So drop why through, like that reason I but the is

around timing one showed research $X alone second $X With it’s just through year-over-year those had some our much two would actually going a it drop The and our be the but million items quarter, development. as to flat. in about and a is be would've million on It’s improved basis than headwind full-year was. more

Matthew Mishan

But outperformed I'm beginning driving raise just Okay, the the share that think is to actually what's guidance, you and side, on in forecast full-year. able have you the the curious and similar range is to not your for the EPS would you're revenue I but that. the on comp

Joseph Dziedzic

Yes.

thank and that. question, for you great another So

last look was the On we’re quarter, we to a midpoint $X.XX $X.XX. and to had $X.XX, $X.XX, back basis, so full-year midpoint if of you guidance, the so at the on

down our you which another quarter $X.XX we so well our I If FX at had have the heard let with the that just at the sure we felt you still of are of last move kind after make we deliver comment, that if I of we my guidance Now what credibility within to because $X.XX I focused beginning $X.XX, that had the margins FX that forward. I actions And guidance so within outlined making our our said on like midpoint to year before, the is, is as took at last at it going we guidance. the revenue have was we’re as slide. sure not appropriate and that to thing gross we $X.XX. provided the really we we mix, But significant and will it’s portion our have just looking other impact mitigate our on midpoint of in reestablishing

Matthew Mishan

sounds segments last positive. and sounded Orthopedics were then Electrochem positive positive my be – positive, quarter side. Vascular Okay. headwind like at Is what quarter in and are be on is In as X% it's Advanced Portable minus positive, Cardio growth it if so cardiac getting should Medical fourth still the are fourth the But organic of that being way in back just the if neuromodulation we as should the the the And that they look is and should that you into it sort the in this should be and quarter, fourth previously, it implies the still that or you it Surgical, still quarter? a not question. fourth as in those expecting worse midpoint,

Joseph Dziedzic

Yes.

you're at Matt. at think the looking right way I it

last fourth we be was around in think than an was have and last the quarters. going prior or see headwind the expect that year should growth prior versus Slide positive, is to on the the when CRM/N. won’t of quarter that's more I is why increase that of overall. quarters in don't look really thing we CRM/N trying the the It Cardiac X%. that certainly be of show about the fourth quarter or like to you businesses so uptick XX% And medical big any the X% at the we separate in Neuro other X% higher we're of other up the year, reason that the so in And and mean not & Electrochem again, the to X kind is CRM/N, I definitely business that’s

the strongest big year a part quarter So that's last in year. why the was of of fourth the quarter

due be, not we should the on year-over-year expect see really not basis product a don't growth going that's to comps. that So it's to to be – tough the line,

Matthew Mishan

Great. Thank much. very you

Joseph Dziedzic

Matt. Thanks Sure.

Operator

line from comes question Baranowski of Lucas next Craig-Hallum Your the of Capital.

open. is line Your

Lucas Baranowski

for Yes. This Charles is Baranowski Haff. Lucas on

one believe recently Abbott Just Biotronik here. was the MRI recently well question safe it received and high-voltage quick safe approval. as MRI had an I received [indiscernible] approval. for a

on all these you anticipate any So do your approvals, business? of with impact

Joseph Dziedzic

so We their so they – can you plan always approval, them. see expectations or expect accelerate as set to for to ahead can expectations receive growth that to that overseas that. can are glad customer they their and continue our win prepare of they each customers serve own and And imagine, have these approvals and

So as ways serve we everybody different industry look each serve we customers components the those in devices. for in at different our business, and of them we those with

reality And to see so them all of their of like at that That's the results as you're as growing. looking in aggregate, marketplace well. not we

not to with already we recognize some you our because approvals possible was revenues rate the part sometimes even customer. might the actually or in or approval them change back on so customers we're the advanced more, those customer, the of run have and for get that track. So glad industry but outlook got we to that change growth always by when it obviously your our every planned customers get prepare those But and it participate see plan get of is not for with you've they that

Lucas Baranowski

had. I very That's you Thank all much. Okay.

Joseph Dziedzic

Thanks Lucas.

Gary Haire

Thanks Lucas.

Operator

of Your comes next Company. Sidoti of Sidoti line & from question Jim the

Your is open. line

Jim Sidoti

Hi, good afternoon. me now? Can you hear

Joseph Dziedzic

We can hear you. Jim. Great

Gary Haire

Jim. Hi,

Jim Sidoti

right. Great. All

impact the the Hurricane Texas there impact in had and the about curious, quarter Puerto from the little any fourth Rico, in Florida do a that that quarter? Hurricane if any think there in be you will or Hurricanes You was just talked any

Joseph Dziedzic

if actually in Jim, Houston a have it any employees from is we impact impact significant any few see don’t don't is on it but few our very we is have and results. do impact area we employees, any not me we see and say there let Florida, very just customer

Gary Haire

did so customers that redirection that customers either them, by to or very they had either they expect our seem other be us shipments well, be the managed to and certainly able could we Jim, but and redeploy have and to product to were facilities. receive whole

Jim Sidoti

be the I you the the you change would on been that beginning intercompany And FX loans the have unchanged if the saying guidance at Or from was impact where and effect want to the Okay. of just on have clear don't that the basically year? it guidance? your

Joseph Dziedzic

Not no Jim. I mean yes and

let just explain. me So

primarily not FX, original that. $X.XX is guidance is is our of So for range to to all. year-to-date the saying is right months $X.XX $X.XX, you $X.XX just the related it FX But that the and is in $X.XX middle $X.XX if loans have which that was that would we’re intercompany nine exclude to now $X.XX, to

Jim Sidoti

the so due intercompany the Okay, of is lion's share adjustment the Is to loans. that correct?

Joseph Dziedzic

statement. correct That's

Jim Sidoti

XXXX, business years Okay. five become away? headwinds will years big that And that growth one part at CRM XXXX or if still enough Neuromodulation that at four business, the is you CRM in Neuromodulation business, of then look or point is a Neuromodulation offset the in the

Gary Haire

is is a than it question was great even today. wish Neuromodulation I bigger And It Jim.

on When the able We lot realities well-positioned products to to CRM. everybody are somewhere We how doing to markets. customers we or and with grow see products CRM rate particularly in of The lead Neuromod components. they serving and well, are the opportunities but the they wish enough it bring that get be the participating significant emerging incredibly a grow, to had share clear to a and answer. growth realities company CRM in will to today companies we in when compensate were of extremely It’s participate market fighting can I for Neuromod. bring of big Neuromod market really from be with space these market. emerging market that quickly companies I and dependent and up participate some continue lead in will to

there and but participating and sure to make facing. we to really in that think capacitors, CRM, work growth and that we're we're towards investing in well-positioned the there is feed-throughs for headwind continue we market batteries, We’re next-generation

I have we're for accelerate clear So but to doing don't you, you timeline. can that answer we a should know everything

Jim Sidoti

quarter last do past like up primary December. in another picked it And continue quarters, then be down the cash sounds to flows good pay couple definitely one debt for you’re to or see going flow to me Okay. other opportunities. of the use is cash the But expecting you

Gary Haire

going appropriate I But definitely primary we're is our primary use to pay cash slightly say of and down Gary, going as the are which to good it’s cash near-term. really going are is grow Jim, debt help us those quarters. reinvest to to in the excess think to returns. an several in be going Obviously be as that would going just the of that on definitely be next the or uses well business level –

Jim Sidoti

you. Okay. Thank

Gary Haire

You’re of Q&A welcome. End

Operator

That will presenters. over concludes to the I back the question-and-answer session. call turn the

Amy Wakeham

for Cheryl taking everyone join thank Thanks Integer. and time for to the continued call your interest and in our you

please Investor you a If directly. full-year to have fiscal me results our XXXX feel February. follow-up We great look Have any in on outlook questions, and forward Relations updating contact to evening. free

Operator

This concludes today's conference call.

You may now disconnect.

Integer (ITGR) 26 Oct 172017 Q3 Earnings call transcript