ITGR - Earnings call transcript Q1 2021 | Integer Holdings Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Integer Holdings Corporation First Quarter 2021 Earnings Call. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Anthony Borowicz, Senior Vice President of Investor Relations. Thank you. ahead. go Please

Anthony Borowicz

and Thank Integer’s everyone. me joining and Executive us, are and Vice Good Financial Chief Quarter you XXXX to Officer. Officer; Chief and First Dziedzic, With Garland, Earnings welcome Executive Joe President morning, President for Jason Conference today Call.

reflect periods reminder, indicated. the today data of results we and a consolidated Integer As discuss results the for the

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

guidance. to presentation the non-GAAP measures, results statements please the factors and For the release, reconciliation filings today’s could notes integer.net. to Please differ our the and materially. will an earnings our on of over our Jason these today’s presentation provide On note call a first will available turn closing risk that open refer that cause on quarter questions. that, the remarks, the Please for for year company’s our financial then Joe I’ll will today’s to comments, statements. at appendix in to on we SEC provide call see up With and discussion are his and opening a today’s actual the of which will Joe. to forward-looking provide the call, includes Joe financial website of update come his for your back results review full

Joe Dziedzic

Thank you, Tony, today. joining to everyone call and thanks the for

to our start strong for a associates because continued of have XXXX to in off are We throughout deliver the dedicated who customers pandemic. our

on with of strategy. associates through pandemic care the I our our our During managed last focused remaining by call, you how has shared Integer earnings while taking executing

lead product and strategy our line talented in and invest associates adding by to strategies. continued capabilities, have operational capacity our to We

of our at strengthen improvement and sales of delivered to and and because sequential our the We strong profit end ability to the in deliver guidance. in I that it continued quarter our our strength is have all for stakeholders. high culture, confidence have Integer We our associates of high-performance first

not reported until of As second from of were first quarter our impact us and sales profit down the did the quarter expected, COVID because XXXX XXXX.

flow by The generate We guidance. increase quarter full cash our year first strength continued in supports strong reduced $XX to another the net of million. and our debt

by serves compare publicly as where exception diabetes best for no removed most We asked pre and this perfect is this Devices an get attempt to very segment Abbott, proxy chart their for both often you in that or the reported the quantifiably a We COVID back OEMS, we believe selected to quarter the question the acknowledgment a COVID as is are Boston to industry XXXX when of Integer pre that representative representative Integer. believe quarter. but COVID investors, with Scientific fourth from will their metric, analytic. there we it is because reported markets and developed comparison Medical We sales to similar little sales. total believe we answer that levels. We the care not very useful of the in end Abbott with impact was

the of be of SEC. first the are XXXX clear, and of we the XXXX investors how sales We as quarter to reported that the XXXX to of fourth to from Just sales using a publicly quarter first from We see reported to two quarter graph percentage quarter. the device each graphed were the industry. sales takeaways and the on representative sales is decline of COVID quarter recovery are from in believe to in the There are worth this the measure that this compared a highlighting. medical the impact pre COVID

believe fewer to Integer X quarter energy Abbott days compared in first perfect another to about to that the X% Abbott. segment is other as over This a COVID quarters, for both Boston first as this markets fourth is fourth XXXX as and the the as by measure. to XX%, the see is quarter industry last we of the approximately impacted that by question, XXXX. Boston variables our our We’ve similarly makes change very X% but over metric whereas was the our Non-Medical XX%. the driven decline Integer dispositions in by XXXX, acquisitions the but XXX% XXXX sales sales in of same were move this not decline investors the explained the was levels Scientific but variation are I fourth industry percentage the and Boston based XXXX. same pandemic representative COVID not takeaway explained Integer’s the There to compared is sales is compared quarter Integer. highlight, points Scientific how our this follow graphic the of easier The The is dynamic and did quarter to first of X at our would X that pattern. level puts industry and quarters, this at we but and is last of to which at Scientific the impacted pre is sales it Abbott to other such cause think quarter not XXXX, fourth on about below currency Again, quarter and answer each quarter even first view, to of a there the could

OEMs was XXXX rebound most as industry reduce their were largely third we out not what customers sales Our quarter, industry of the and to their frames is slide pattern is levels as and at it the level at pre the COVID for top on of Integer is COVID of The a Integer the second to the started highlight industry XX% in X% to second about Abbott has fourth reported quarters quarter the quarter approximately the recovered us slide COVID X% perfect we Integer were third industry. This that expected. XXXX, the the and last which and not also second third predicted in to modified Integer’s because of first industry. In into relative The that pandemic the as on stayed represent first as is much as about the of XXXX. version rapid declined. to of sales level and perspective sales Boston recovering. we’ve much that of the shared from and for a did levels pre a metric, sales the quarter as of not in of a the have we This same think quarters same quarter, slide of but the bars that bottom by the our X highlights that Integer our this investors sales, COVID. Again, Integer. is below with XXXX and graph the orders about impacted other saw not the pandemic half both but quarter a impact the declined, sales playing beginning with Scientific, the

we’re Our pre about as the quarter we quarter as continued prior and the sales the to same COVID fourth in on first started recovery to industry believe level slide, has of the highlighted And into relative levels. back I the sales XXXX. the

COVID medical our volumes over digit our to the sales Looking growth recover I’ll growing to resume as cover at financial least call then turn and to fully rates. to Jason continue forward, procedure pre results. we now expect mid-single

Jason Garland

our trends you, again our first provide everyone, our conclude results, Thank more flow, joining line results, morning, XXXX. for call. with continued details and and quarter product our be Joe. adjusted XXXX by pandemic. increased which Good summarize for thank financial to the impacted you COVID sales first on expectations with our I’ll start cash quarter I’ll including

of by and adjusted $XXX our was results $XX over we First million, our also the quarter net fourth was sequentially fourth of At with sales This $X delivered sequentially income impacted share. XXXX. with XX% over end income the million quarter this prior our per our than at at quarter high $X.XX prior operating at first were the and the diluted quarter. lower adjusted $XX XXXX At adjusted down not million XX% million, million, the $XX up guidance COVID. was being of year, up of versus high guidance was earnings year, end

sequential the income as continues fourth manufacturing of adjusted with of XXXX quarter more As the improved excellence as combined than the on sales trend profitability improvement operating a XXX our on over management. sales, and the first quarter’s increased percent in projected, points focus cost continued basis

that have As throughout we Integer, our the and mentioned strategic benefit. serve we the confident will are and ultimately customers patients we previously, pandemic maintained investments

expenditures. COVID peaked X.Xx and were our reduction of of cash the our the flow strategy, ratio primarily results. free compensation We of and to pandemic. and conversion year-over-year, had quarter, capital XXXX. we total exchange with saw lower $X leverage expect from generated million $X quarter to EBITDA after year-over-year continued by prior flow incentive pandemic quarter and tax product Our decline quarter, leverage expense of $XX the XXXX activity, in the our lowered reduced capital benefited We $X the our to cash, on XX% a In to to We of by Consistent adjusted full adjusted range. by believe reduction turn of to X.X the This income line year. has calculation. foreign compared At the $XX our debt total reduced improvement our was I’ll over the effective compensation. strong first total in debt net net the million focus volume the as ratio We cash flow, through $XX due The of to some of strength, expenditures The offset still LIBOR. the the XXXX declined by caused reduce we and deleveraging. from EBITDA, of a year, EBITDA incentive debt impact COVID the continue be income first quarters maintain it quarters in our steadily million impact interest target first million on million. working by of cash driven capital X.Xx as now limited. for continued $XX our now both X review in in payments first year inclusive $XX generating sales operating increases million decreased we in net million continued includes management rate to driven million debt up leverage adjusted of the our our all

continues. recovery we’ll and line, we review important to and insight pandemic believe we morning’s sequential color of recovery the as the detail, XXXX, results Though still COVID. impacted the impact cover sales line to not quarter continue are results significant first given improve from during the our each are them Therefore, on we the is presentation. product During more in product provide sales the it sales now in COVID, seeing majority did by this

reminder, a XX As organic sales X-quarter trailing rate. Slide reflects adjusted

the impacted XX% Sales been and the X including quarter past this XXXX, third quarters, sales were our of the over by by X-quarter results down period the COVID, Over impacted reduction. have COVID. significantly reflect

We expect recovery. industry to at this rate trend a consistent with reverse the

Moving to to XX% is was This by our first quarter. first sales the impacted XXXX, quarter were product first vascular not of organically which Cardio down COVID. and line. in compared the

also existing the on contracts Additionally, XXXX the sales customer of first discrete included quarter benefit business. of timing and

As in peripheral of increased evidence double electrophysiology trend XXXX. vascular and structural point sequentially to fourth the see our The and X% of quarter recovery, lowest line increased expectations sequentially. of to in single compared increase from market the low is digits heart have as continued This sales quarter third the digits an sequentially we XXXX. increased of sales with sequential the improvement

COVID Compared next year product offset quarter X% grew by single partially the neuromodulation XXXX, grew organically inventory CRM while fourth was as the quarter by first of market, digits. the increasing of sales the to in the increased prior and the to levels first growth negative line. quarter sequentially, XX% as double-digit compared of XXXX. impact in Cardiac driven Moving to customers CRM in the neuromodulation

advanced shown cardiac as includes surgical, We medical Slide of part our year, to driven AS&O Medical the XX under sales today and the our demand. product and mainly sales supply in final to of of half orthopedics which acquirer expect July shows product segment. portable our line, former second neuromodulation neuromodulation XXXX. first medical well we the of our the by sales agreement as line divested portable half The grow over

of First patient negatively quarter prior XX% first impacted COVID portable prior sales fourth medical declined the a versus demand organic quarter and in from after periods declined Sequentially, decreased quarter year. high by and monitoring also the were components XX% as supporting sales for the pandemic. XXXX ventilator sales

of sales flat remain to X-quarter to and sales ventilators in due to partially prior We slightly sales expect declining, the patient trailing higher component monitoring year.

Electrochem’s versus XX% summarizes a on sales quarter first segment. decreased Slide demand in market decline of reduction organically Electrochem, energy Finally, XXXX and the the due quarter COVID. XX Non-Medical first to our

XXXX, decreased sequentially continue also energy versus a sales fourth the We’ll on our fourth from market the quarter digits impact XXXX. the XX% driven market, have in First while our energy quarter increased that the high military quarter by decline our sales. of will monitor to XXXX market single of

the However, in market XXXX. energy recovery we expect

move will we our Next, to for XXXX. expectations

current backlog. sales project both of quarter, with second XXXX. increasing outlook the XX, orders to sequential $X.XXX billion, of We’re growth an we Slide this in range We and tightening expect be XX% $X.XXX versus XXXX Starting to supported our with XX% and the now increase range. profit improvement to in sales modest by the

year, largely by of improvement We expect market half pace the the second recovery. of will which determined in continued be the

growth We industry in our our to range $X.XXX impacts now COVID to differences XXXX. differ due the With sales $X.XXX to also that will expect year the quarterly of from in of the we rates expected billion. timing continue to be full the year-over-year saw

now end and million, the follows adjusted XX% of be income low our XX%. An updated for operating growth we and million $XXX be income and a between are $XXX million, reflecting for $XXX range range to of growth XX%. to as million expect reflecting also We a increasing to expect between $XXX of to net XX% adjusted

the while our expect important it the the expenses the of first rest profit operating remaining run rate grow As estimated we XXXX, is to that we level. year look will note revenues, for to our of the with increase at profit in quarters quarter above spending of

pandemic to R&D through support ramps some impact including to investments, And reduced to growth the of volume of of mitigate be that year. we spending strategic some need increase, the will discretionary the future the continues as replaced. Our to

of as of was the it commensurate compensation incentive as ramp payout. mentioned impact year-over-year a the Additionally, in call, the The will levels. we increase variable normal year to the prior during earnings with compensation returns pandemic-driven reduced XXXX

We $XXX expect total X.Xx. total the our to of EBITDA is increase debt $XXX the for $XXX of of expected cash flow as percent range outlook finally, leverage in you. expect Free XXX range to an million to return see with operations point Joe. maintained that, call to back equivalent our from be And expect to reduction basis a in cash sales X.X generate in AOI net year. Thank amount to a targeted $XX and I’ll XXX turn of the to million range million. year-over-year million to With we what to we the flow adjusted to in our to debt of to be

Joe Dziedzic

the and quarter, profit first end Thanks, and compared Jason. improvement delivered of our sales sequential high To summarize to our at of guidance we the fourth strong delivered XXXX. quarter

associates creates manufacturing first the entry, the continue business Integer’s The us amongst with reduced strategy. positions sales mid- values, our in development outlook to investing vision, our creates profit strength deep Integer’s high increase very for remarks and a all research on our enables talented conclude We with footprint, customer most year and continued model. combined same by of outsourcers. to today capabilities, well debt. I’ll and compelling dynamics with the offering and an shareholder. cash flow The growth to generate quarter to strong why our believe We good to single-digit portfolio breadth time combined our is a net relationships, a last world-class our product executing a clear and the with quarter, as which be message global now device strategy. resilient a compelling strong and strategy Integer view us of combined have industry and we barriers medical growth is

Our creating culture on that a in to investment our performance our deliver focus coupled is advantage. and commitment leadership their with to creates associates building competitive growth, excellence, performance a capability

ability Finally, confident a in our portion now execute to this strong for shareholders. call delivering to earn to financial our turn the reinforces and our strategy, for for premium and our strength. generating commitments the strategy our in am call. of back Thank our cash track joining call our flow, financial our of associates I’ll Q&A morning. you our record valuation I moderator our on

Operator

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

Matthew Mishan

assumes of It’s moving Joe, good everything it doing the does the is here. I static that your analysis to see you’re in But right it the one really with direction, customers. the industry. appreciate you’re versus things

goes versus or it the to the came when thinking. end level first in So can at what to inventory the quarter numbers a question attributable back higher outperformance build? market the Integer, And of the start you in doing. what do first the an showing quarter, outperformance Is the were also think is industry of in you you

Joe Dziedzic

the strategy. to on focus Well, we’re our focused your Matt, thank for We the question. remain our that absolutely markets love because outperform serving is and industry you the that. on outperform And us I accelerating growth

of a engineers year lot to steps and continue as and growth. robustness we talked precursor more about and accelerated we pipeline about And our what the programs we the sales more making are on this We’ve -- that. increase that and development what’s taking, are we’ve were growth the in the those brought lot in how We’re of deliver more deliver we We’ve necessary believe to opportunities. going programs, leaders. the all, of the reorganized development have in add number that winning engineers to that of structure, are different about talked talked and our to team team a investments

those don’t time And we’re when and we’ll get within they’re we hit advance because focused confident will can there. to once to the of sales that of you are. that we deliver we’re as and programs and investors. the converting to frame that make ready have frame, We communicate but see as a to once enough we financial reasonable P&L, see development commitment investors, on in commitments we’re So you our time enough we’ll on

call we from January, hospitalizations and U.S. all November, to your the accounted our that question of quarter frame, we over some so quarter, industry in degree And first our had first high were mid-February. we about earnings for because the we the in the end carried February, for range pullback had in saw, December the time the of higher at it particularly into allowed in

So visibility. some we had

So that beginning experience that we pullback. allowed We we very landed much expected We, for some customer gave did the where of quarter. the fact, of the at guidance not in potential when we we would pullback.

our year. we is their our and We guidance. the around low you the we And rest our they We does Cautious year during as in the at the have our at as most pullback. what are. look way end of if high positive, we were and the bit end of ordered frame guidance, customers performance -- optimism little we increased of for orders more customers in would in from that our higher from because improve backlog little a the the it the very meaningfully of it the because We that actually view us so with And but as that a end we the where it. raised guidance than a second look view first that confidence. inventory of because planning commentary quarter assume year, also what half our the low quarter the on gives confidence see customers the not second But the of industry confident raised the and into have the bit. we’re the customers us may

high any variation in would And the of being end variation of given us. that normal the quarter say our so for just I at guidance was the happens

would I outperforming So rate. from it would not us. a the not we’re attribute I to industry growth say

top soon the think industry tracking going communicate we’ll We industry have sequential forward quarter-to-quarter the industry. will -- the as the visibility I to track on we as we basis. line, And think on we’re outperforming that. we’re a

Matthew Mishan

they previously commercialization you on give All right. progressed? like some from little have are communicated commercialization here? Excellent. how potential extension bit for accelerated up the you track revenue in those customers. early a efforts their or Were Can a update of they due held some an us COVID to generally And of on

Joe Dziedzic

Yes.

the on time, about in that shared probably those we the you’re XXXX. product $XX call, of referring customers that revenue our $XX And shared we in at X $XX phase. the expected back got quarter Matt, had for guided pipeline or to to third earnings where we’ve customers that, million X and did in customers emerging on So are sales We we we introduction in during -- million deliver about of XXXX. million same that

roll meaningfully delivering meet we on much exceed to the of that outlook not it impact in new they’re they have the couple we impacted that. that in didn’t confidence were, to introduction. $XX ability it -- and demand. products. track because million innovation their that We’re not -- their have is fact, those customers or And in the high product ability does it’s potentially products of A out -- patients finish the XXXX for by very the for and even to slightly But

during customers. pipeline pandemic -- impact with them, very, clinical, to we’ve had in sales be well. to not move through from and time least comment, very XXXX got regulatory. X the hospitals as we’ve just in I’ll but the with we development, And and at well emerging to with in that those those our in we shared, outlook change impacted was for X And we development get additional that at customers it customers pipeline, XX to everybody being added X continue million the able inability and that that of and did does so doctors, $XX

our that about very remain help us and excited have growth. ability their to we accelerate the customers we emerging So revenue

Matthew Mishan

with this making right some an the in of sequential about for then on maybe investments And you the with I’m to sequential Jason swing. engineers what’s to think increases a understand of growth. starting And point the you -- I of sure start mentioned minus guys acceleration, programs. level was ramps not in you are bunch customers. about not the get hiring to talking just development to trying And I’m support million $XX.X R&D from reimbursement sequential does it’s right investment? that base just R&D, expect is not whether the your it’s R&D of it the a R&D because

Joe Dziedzic

that Matt, we’re you are add understand that dynamic also that the for doing. we well us work as customers reimbursing engineers,

so what the And the quarter if of traction accelerate gain lot as the The you we the you a tends are largest year the look fourth from half revenue R&D at progresses. the see quarter. in typically, is Oftentimes, customers typical second profile, year. to beginning to programs of collect that

look $XX year, last high million was if the our in example, profile low quarter. the for first the R&D quarter, So you $XX in of million was the point at fourth point

you’re the we million fourth -- customers. you’re year. $XX.X $XX.X first is the our million seeing good in see we shifting the from million, of a $XX went And to dynamic. we rest pattern of what up run rate when for get sales revenue can quarter, We you from in that this is seeing think quarter. So that

robust pipeline we We’re more we keep a year to during the development have development begin And engineers to programs. programs. again, execute going of adding as on

customers we to milestones. as going add more costs. hit will adding collect we’re But keep year as engineers, progresses, from which So the we’ll

a thinking XXXX. development the a revenue investment the for that which year kind number rest $XX.X you’re million in accelerated continued growth. our full rate run is of for as and is year, for the good of reflects about to That precursor programs, these R&D So the

Matthew Mishan

question. it’s then question, a cyclical And last Yes.

I Non-Medical is think cyclical your business. a

where are about, on we that, entering $X.X I not are you are time thinking and just cycle, just guys we’re business here? early I period talking think should people getting early about million. mid-cycle bottoming that of be How at to we’re we think a into maybe

Joe Dziedzic

So to our referring Electrochem, you’re Non-Medical.

Matthew Mishan

Non-Medical, Yes. The yes.

Joe Dziedzic

We bottom. is sure. the Sure, definitely this think

We We we from sales. in think in to improvement the our seen about the going $XX an don’t were have demand and change that’s XXXX, rest customers. million year. outlook We of meaningfully for orders --

as maybe higher. to few We about a be a higher, the expect this little same year million that, maybe

So run quarter if million a you look million, at rate. at that’s $XX the $X.X first

up it million to year. a for get number that we’re So assuming that to to $XX bit has pick to little million $XX the

recover is market that publicly, baseline and that XXXX. hearing to operating That’s assumption privately. the from really until Our folks oil customers That’s what fully we’re gas doesn’t the seem be with.

maybe assuming being much assumption. flow $XX it on rest so better, from see the year we year. a you’ll And meaningful little the it we’re that XXXX, over our of guidance not XXXX into year-over-year we’re change very by that’s through If basis growth the conservative baseline our see but gets recovery. million, the But being with assuming

Operator

[Operator Instructions] & Your next question comes from Jim Sidoti from Sidoti Company.

Jim Sidoti

call in Hopefully, things are were the a they in little Texas. more normal than this call last

Joe Dziedzic

Thank you. Jim. Absolutely,

Jim Sidoti

R&D how for expense topic. projects. to these sense give us long some it know Can the top line into revenue? takes translate of Just up a that on you are longer-term following I

months, should So be for be in this looking XX something you sooner? or is could XX, it maybe

Joe Dziedzic

it Jim, to for the regulatory so can clinicals, be at a to years. something X needs existence through go through a that’s process. and component takes If can doing. But complexity don’t think time the tailored clinicals, that already then product you’re complete years X X qualification the to now have year. longer work looking it’s and develop the it’s is a if also fastest multiple When it get to product customers of our obviously, the years. about And it you of if to X depends take it’s oftentimes, the on through we’re or it in you And go device.

business we in both long that can the need medium term. recognize drive that winning we sales So to be short, our and enough

opportunities building of end the are growth allow serving. and targets so accelerate and our strategies, pipeline to product us that our as they the will above markets product And growth revenue the part the that management we’re organizations, sustainably line deliver teams, growth of then

wins term, of -- we it is both answer near the medium going to pipeline term, cover but need a that’s recognize term. So we we long depends, to deliver need

staying So and that to we’re on sales accelerated there. getting level then focused

Jim Sidoti

All right. is capacity. for the to me And then follow-up with regard

think. the you’re with that about than say you some recovery faster rolling Let’s started happens up. mean to out, much things I really wrong and indications have industry pick we’ve it the seen vaccines

If and a increased position fast demand. can a demand? your Are you where meet see do you recovery customers in that

Joe Dziedzic

And heads in -- in headcount step are. we we a reduction change last point, believe on step XXX sales, saw in we Jim, your year we have basis. we’re function year-over-year the a did to as about reduction down function

back And so we are now. adding

the look bottom adding the our to revenue that. showed Obviously, labor from chart for at million in direct of has we to quarter. ramp where required the to We’re the million We’ve back. accelerated going $XXX that in progression fourth, -- the back the the begin you bring sales as quarterly growth. us people That first doing million been around $XXX $XXX preparation

have We back advance. them to bring in

Because actually is a the So there’s sale arriving. training cycle.

them you And first retrain into time extra train folks demand. them to when so the back that plant, to is or recovery, think for bringing about cost the the meet there

recovery understand could range And the with what potential of working of that that be our rate to ensure closely we’re so prepared. we’re customers to

are. we confident are We

that our confident we insights what are the customers on us potential We that can are be. need giving

acts of amount Another our have inventory the buffer. is variable, that well, customers a Jim, that as as

customers’ at turns to You inventory X.X X.Xx. know our

demand. amount what on of inventory. based inventory the the So they need they But carry is matters fair a

we’re strategy. we’re them, dynamic prepared serve feel understand with point focal is closely that which customers working well to we a our our that and to of So

and we’re So the we that, we’re patients feel managing prepared recover at our rate to customers that and need.

Operator

remarks. for questions back over Borowicz the time. further at Anthony are no to this I will turn closing There call

Anthony Borowicz

you Thank for and website our continued Thank concludes interest your be call can replayed The at us your Great. interest today, call today’s our in joining on Integer. call. integer.net. for you and on that

Operator

concludes This call. for today’s Thank conference participating. you

now may disconnect. You

Integer (ITGR) 1 May 212021 Q1 Earnings call transcript