ITGR - Earnings call transcript Q2 2022 | Integer Holdings Corporation

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Operator

Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to the Integer Holdings Corporation’s Second Quarter Earnings Call. [Operator Instructions] It is now my pleasure to turn today’s call over to Tony Borowicz, Senior Vice President of Investor Relations. Sir, please go ahead.

Tony Borowicz

everyone. morning, Good joining XXXX for welcome Integer’s to Thank conference us call. quarter earnings second you and With are President and Jason Officer. me Executive Garland, Chief today our Joe Dziedzic, Executive Vice and Financial and Chief President Officer

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

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

execution at includes a our and For update forward-looking opening quarter integer.net. on presentation, and today’s results today’s the his reconciliation appendix the call, statements. of line available today’s that these for of of strategy. note an are financial guidance. our cause press me factors Please non-GAAP on Jason back up the second will XXXX review review and to filings open Please today’s on refer your to provide actual With insight trending will the questions. full discussion product come release presentation that for company’s SEC adjusted additional the we’ll provide let call to our Integer’s then to which our comments results that, on his risk our On measures, website will remarks, performance XXXX, for Joe. provide please over then call differ materially. year Joe turn of refer schedules, the Joe could closing and to earnings the

Joe Dziedzic

double-digits with year the today, second our strategy first line you, of last our associates everyone through Thank call the financial times. joining have especially Sales dynamic earnings In this call. during delivered shared the quarter, results Integer to continued Tony, and grew last execute these thanks versus who expectations the quarter and we year. to in our for

on grew year the impact Our XX% about environment second versus year. quarter labor flat the quarter last was had last current and as minimal chain our results versus adjusted first supply and profit operating

XX% to to XX% outlook full have by growth year our $XX sales increased year-over-year. deliver million We

second this We gross profit of half to grow year-over-year through to operating adjusted XX% XX% year. as expect the margin improves

executing our to accelerate to continue line make progress in We growth. our strategy top

executing high growth during customers the technology We to offer can and mature Integer our production emerging during phase full strategies and the growth scale – continuum across serve is disciplined with for technology growth. customer the the positioned technology supply uniquely finishing and cycle. chain and the line life phase. mature differentiated cycle to We and of are for sales simplify product vertically high emerging integrate our to from structured product

capacity on inorganic Our are focused growth heart, neurovascular concentrated structural organic and capabilities higher and adding end investments neuromodulation. of and in markets the electrophysiology,

organic to strategies. faster these this X% year, a result delivering growth are as of now We X%

of year. expect ramp continue rest next faster second growth from introductions that the We year the into to and product half new organic this

planned at Our with and million, the sales acquisitions of of extremely more supply partnered the track. delivering of well integration has as to strong are are opportunities than and Aran of deliver Oscor’s teams year. ahead plan Oscor and pipeline our by on a has chain the operations beginning $X is

will on strategic as opportunities remain customers now to these about strong on pipeline. over well capabilities call deliver as Jason. strong existing are and the financial generating We on our our are Integer objectives. We excited hand combined executing from and Aran new to strategy engagement Aran’s of the focused I

Jason Garland

Integer’s results, our XXXX consistent second were morning adjusted for our thank financial second results call. Thank XXXX you summarize details quarter you, line quarter to joining will and our Good sales trends, our updated increase product conclude with second our more provide and our income expectations Joe. the quarter and I with on versus again outlook. grew and year-over-year sales operating differences. XX% a quarter basis grew basis, adjusted on of from first grew currency XXXX the XX% which on a $XXX excludes first organic quarter the impact sequentially XX%. acquisitions sales X% and reported million, over year-over-year meaningfully At

quarter versus XXXX. and $XX up the EBITDA the $XX is an was slightly quarter million, $XX second was of quarter in sequentially the versus compared versus year million which XXXX increase X%. down quarter sequentially Adjusted up first Our $X last million, to the $XX operating million of income first adjusted or and million grew

through year-over-year also As a of adjusted we in they labor support compared is headwind improved overtime and salary the driver are rest they of as basis but customers results, associates hiring challenges year, the patients to not are provide costs These Last meaningful the these these quarter first material from the of growth last costs. quarter were second on quarter well from constraints and and a our comparison we have key with XXX costs period. in constraints even the remain in not These until for higher XXXX. approximately a second X XXXX training the income managing labor to of and operating XXXX, high caused lower the chain XXXX the mostly margin from did to gross the basis. accelerating gross for delayed as quarter margin of incremental serve we supply of third half continued to to the second amount and and at and higher quarters, points impactful driven higher-than-normal have products inefficiencies therefore, costs by need, inefficiencies direct see incremental committed through and costs the

grew the impacted addition by expenses a year-over-year stock and on and in remain these basis, compensation primarily the including into XXXX. We also XXXX SG&A costs and of total operating reducing, temporary expense, continue rest RD&E through and costs, Outside are higher our of production they nature Aran. the increase to salaries though and to likely Oscor to due the They and believe in annual an incentives. were that of majority reported are of

the to of remainder items same timing We for the the to to year expect continue SG&A expense be due of spend. and the higher

We at would lumpiness the adjusted two maybe across Ordinarily, share, XXXX, of half adjusted net at income first a timing due similar of our second With remaining expect income to as XXXX. RD&E per half the discuss I delivered the programs. key to but diluted the second there spend quarter continue run-rate earnings of of $X.XX down million, year-over-year $XX $X.XX we next. from adjusted bridge net quarters

this free million flow, of However, cash of flow $XX the and expenditures activities for in in meaningful from the second are since elements, cash XXXX, of $XX capital any appendix changes of no moved there reference. million to million In have we inclusive operating quarter the the generated slide we in in generated $X year-over-year quarter.

so $XX recall call, second earnings versus million of You first during more in drivers grew the XXXX quarter, in another support our to conference $XX million, color, we million total the four the the million To quarter. there the highlighted that double-digit increased we quarter are of the $XX growth In to inventory first may end this inventory quarter in $XX key second half increase. a first sales by year. of provide the we

general the we closely capital. achieved positions rebuilding when the been our have from we we preserved working point pandemic low First, inventory during

demand increase to product continue and Second, stock increasing sales. match our raw to our we material

of million impacted expect business inventory in need our products but environment million we see by million our on efficiency partially $XXX Xst we of have of believe aggregate Xth the in to improves. reduced proactively the customers. where total we total in fund the levels to supply debt XXXX components as an to our delay this net ensure the borrowed new safety related delivery work and support by borrowings, finally, material to that in to to And April we inventory are products improvement the second quarter. investment been debt increase for revolver built Third, to from our continue stock as growth and to protect them Aran, as excluding in million, Net we increase increased and our acquisition $X $XXX and We $XXX chain an in availability levels our waiting are components. process critical inventory

end to at the acquisition. X.Xx second EBITDA. fourth adjusted ratio impact leverage includes quarter the trailing the debt fund Our This of Aran leverage borrowings new of the was quarter the

X.Xx expect range are to by back X.Xx we year-end. the above be we target leverage Although quarter in to due Aran second acquisition, to the of our within range temporarily our targeted

transition line, lines. with XXXX. quarter of Beginning second a & the first second Cardio now up our our sales. product quarter reported with & discussion were N our the & second will Electrochem XX% to across fourth Trailing Vascular XX% grew CRM quarter of in the compared sales Cardio line XXXX to strong growth product product We and quarter in sales of Vascular,

still face chain constraints. supply So we

also heart fourth sales Oscor cardio ability to our electrophysiology second was acquisition demand from across benefited quarter the of XX%, the vascular growth structural double-digit quarter strong on growth and by up and neurovascular, Trailing Aran. markets. and all in driven growth, with The strong deliver year-over-year strong market continued and

in continued Medical. In and Moving offset lower last Trailing Medical chain with Orthopedic in driven flat. second Advanced to Orthopedic to Portable components our flat Surgical quarter a Orthopedics with versus versus demand year-over-year sales sales supply our Surgical acquisition sales Advanced decline year-over-year by Medical grew Portable related strong COVID-related time patient product by ventilator from sales second XX%. Portable lead to & line, were the management growth, and and Trailing neuromodulation the X long X% our year decline in quarter and quarter prior line, and a flat up the the low X% declined single-digit sales year for product from sales rhythm components. Oscor four quarter year-over-year cardiac constraints, growth being Surgical, and due monitoring for labor primarily and Advanced sales

to constrained Though specific million Finally, the our strength demand, customer of the in quarter. impacting shortages approximately was sales $X product discussion Electrochem, supplier segment. non-medical with up in our see we fulfill line ability second we will our wrap by

our by with Trailing work to quarter addressing four the driven are year-over-year, market. XX% suppliers grew continue energy We recovering these sales and constraints.

to updated grow compared for compared outlook by to an sales, $X,XXX to million expect X% we $XX increasing XXXX. We to XXXX. now to to sales an to XX% increase million transition organic now On now to our are of will in Starting $X,XXX with sales expectations the be XXXX. basis, X% our expect and of range we XX% million,

for growth. expectations still XXXX million, $XXX million EBITDA XX% which unchanged. to XX% and We Our is to be between expect are $XXX adjusted year-over-year

increasing $X million. adjusted outlook operating by our are We income

to million, be We income XXXX XX% of to million operating and $XXX expect between adjusted $XXX growth XX%. reflecting

of the and growth our the X% of range. operating updated to between labor headwinds ends of environment. forecast the $X.XX from $X.XX to Our EPS reflecting but expected incorporates XX%, is Adjusted from a outlook cost be income now supply $X.XX adjusted chain on to prior both down

to the unchanged – to best Our U.S. our X.X%. adjusted will The our remains reaches low-end we interest approximately and range the be primarily and continue interest XX% projected increased the outlook through outcome EPS over expect year-end, forecast guidance $XX forward the to between driven the of and nearly high X-month an million. to our assumes index by view has the million outlook This rate will at About range LIBOR. XX.X%. have move effective from spend rate rest LIBOR expense, using is estimated environment tax $XX XX% our swap with driven to adjusted rate projected our while increasing from rise the interest reduce by X.X%, rate and now rate for the same the rate X-month evaluate by in range to our million produces which X.X% up increased of the market assumes average approaches a subscribe long by we is of a lower LIBOR with is floating previous to the underlying time $X fixed interest end rate is across between to the payments. of by the curve We debt an to and that interest June’s expense. about The term,

first from flow we guidance, we previous our the Consistent the maintaining increased inclusive our $XXX flow operations and year is net $XX also million in to prepare just lower we We to as now to continue used I of expect strategy, It and million. million free of $XXX in continuity for on than the million, expenditures still to inventory million the of growth. close, total organically business between to million made $X discussed. supply. of and on to by to $XX capital is the the to investment million drive expect have our flow are million. $XX As interest expense between cash between with Most cash expect spend generate expect cash we debt which $XX will reduce we payments higher free reflecting outlook invest $XX sales half CapEx to generate $XX be million and

between Thank acquisition. We of the expect to our you. in of our leverage from the This our will back leverage to that, had X.X EBITDA. With EBITDA, increased with end and ratio, target down X.Xx turn ratio the X.Xx Aran the year middle which due range second call adjusted to Joe. us put X.X I’ll adjusted to quarter

Joe Dziedzic

Thanks, Jason.

to sales to now second continue for XX% from Oscor turn sales adjusted strategy confident now by disciplined and line the the ability joining our including with strategy are and income in by objectives associates quarter you were We XX% call acquisitions year I shareholders. to morning. million earn Thank call our for growth results organic our our operating Aran, our double-digit the full recent and to I structured million. and our will our year expectations, back to to faster Q&A grow Our valuation our moderator execute increased for in premium our our expected and growth. our guidance Full this portion. sales $X financial we achieve our and guidance $XX remain a of

Operator

Mishan [Operator line of Your comes Instructions] KeyBanc. question from the first Matthew with

Your line open. is

Matthew Mishan

guys really a Hi, good and morning, on nice quarter. congratulations

Joe Dziedzic

morning, Thank Good Matt. you.

Matthew Mishan

of platforms I in execute strategies? reporters kind business to they some like of perspective, times forward. of those the or number Are how to of longer-term some And of shortening plan suppliers consolidate reduce heard want plan that new of we’ve products throughout and to are long and early looking that they to takes but any I supply on starting I the of number just of the complexity your the seeing the chain winning start that off, cycle? new from going a you talked customers know movement the it kind over. a Is it on at really move about from

Joe Dziedzic

happening number very they trend is to And to a and that been industry been have that to have the the they’re in able not demonstrate there That’s committed and honor at that who reliable under their financial existing throughout the there What more great to the strategic that’s and I we chain have then be is, movement been agreed list in we that’s during And a of not the challenges moving even with that to doing around They’re stream an consolidate their continue there. fulfill, apparent needs. the Unfortunately, has question think, the at to. of to quite to. supply have away that. to just think, suppliers customers want And stronger companies our resiliency are I practices, is operating frankly, haven’t product to commitments resiliency not they’re suppliers perfect agreements ship prices stronger, that and supply that. honoring creating clearly suppliers, and who that they’ve are able move to high-level been And towards the we think that partners. prices from. more I discussions a trend going accelerating meeting the

on take that’s broader the we We’ve economy. throughout adding that investments. fulfill to labor, of patients, continue the and business necessary cost customers been incurring We priority made the help challenges the our feel our the commitments the necessary we’ve inventory the But care and pandemic. industry are the our in to to and to immune move in not what to made

our that’s demonstrated to serving we’ve and commitment success their in to that over our customers to believe absolutely that, run. differentiate I us long going the enabling so time patients in And and

us commitments now? to And to They’re They our environment, with consolidate, of and so them to to issues. question right that’s chain in everyone who’s And and we happening labor their those confident and delivering not. changes, making the I’m in tell to deal today think serving that But am that patients. meeting know see is who’s track investments strategic think serving is the can And them to the most do environment and for in is who’s because supply we they honoring that, keeping customers. the right confident category continuing put we suppliers. who’s do with towards and are. who’s know reality challenging that is is, and And able we’re our making meaningful the of making near-term in need working in that is But demand interest they partner who we’re who investments. that I not. very advantage this deliver this and continuing most your and about with to I their focus resources immediate it’s on now, that

incurring We’re costs. the necessary

the to and to the more an sales making are we’ve although grown We labor In half the X.X% on taking serve direct organically. first only first business, half, XX% that’s added – our associates have in organic basis, them. actions

grow minimize second and they going once digit $XX that’s the to and of first delivery serve in to that’s committed of investments that their on strength going going we’re are added us being resiliency kinds demonstrate And them able the financial ship our our with specifically and to customers. to inventory proficient, that added, it’s to half, trained unable going that the way labor think able a strategic the given point the half, us our grow make on partnership to the who to are to million date second of from we differentiation reduce chain meet customers disruption we’ve We’ve deliver to that’s And work to need. them and these half. are The and supply I And to to to suppliers help examples enable continue of allow in double and it’s enable to that fully get fully us. our patient organically.

Matthew Mishan

thank for really And good a you answer. Excellent.

and if model correctly margins, at a the On am if. that’s I my looking big

Second half first your And the improvement it the in of like over in if low big mark where a XXs. guidance, looks should as should it the at somewhere margin be been be the was you’ve half. gross midpoint

in like already First you’re you? the if off, And of your you’re environment half ramp margins? XH driving become in at seeing that sort improvement looking bit is for the gross XH, a of second level how manufacturing easier the little what’s

Joe Dziedzic

Matt, your the model half is rate correct. is accurate math second on and your margin

trained As to and what added we organic the and be coming as incurred double-digit us into you us helps first the and you associates we in the some are year-over-year teens low of in incentives year-end. that’s look look training half, half incentives first it’s us see additional to that’s high getting at versus work going help that’s to been enables we’ve point single for to an about overtime, to those lots significant double the training. on is We’ve digit drive on at incentives the We’ve new well the direct product that’s inefficiencies that half, for from bonuses, basis, introductions of when rate. lots the us that and been look the as sales would allow digit, labor already I fully costs. to reduce incurring mid to growth And we’ve proficient going line. that improve overtime, organic growth that an in incurring. of sign-on building top the and more XX% half margins new on When at the to high basis product going think sales second second giving volume

much is plant So manufacturing on us going second drive that in cost that of the efficiencies bringing half. to help greater labor the in

of inventory of And year. minimize in all-in the the finished that in we Additionally, suppliers. basically where on from end some flat disruptions first inventory $XX purpose with were process. to and we’ve that’s the is goods done half, of million help added we at the work The have and

companies of delivery the And so to delivery you or manufacturing from inefficiencies dates the factories. dates suppliers’ the to reschedule inability have talk heard about a lot to and meet committed meet having

second to helps manage inventory it way those to inventory we mitigate it added and with, to the we’ve is help a half won’t the inventory more there But year. the Maybe weren’t critical extra because close going it. us the that build efficient able we’re still gaps. us facilities So of is the components in to eliminate working in

to materials to I’d thing half. the third the of in struggled enough lead point some first get long that of The we is

those in the of than more second of higher some getting margin half products We’re average. those and the are

give second in favorable we half do to mix get us the in the and shipping And margin some the products so we’re that favorable compared half first mix. will

we’ve reduce more variables So quite trained drive margin delivery we some of them there’s additional are made what It’s and on judgment running be the additional suppliers’ a improvement. our feel efficiently sales plants with combination good that think and about inefficiencies into scheduling reasonable mix. headcount the to half really the of frankly, for get second top fully then commitments overtime favorable to helps that other line. the inventory we a able the the a schedule the and And

demand their can – there. even even end to demand help of proficient sales proficient half, get or the more for or get patients, do of our we But products, ship is faster, training more the we supplier – associates because that’s sales is deliveries, match could In forecast cost in back the there. even fact, some the can end the we if probably materials faster sales customers what to we second come our delivery and some more them to we think at high patients get our than we margins, from from get even the But can can We’ve our high get we if if there. going they’re and we the higher exceed range be to get ship and faster, the lower the end supplier of the the sales get though, exceed get we because dialed the get. can to we can – help and looking we

so upon mentioned. And but can, are I all on and to variables our much as going as getting be it to be will of we factors we customers get to working product dependent those

feel top So will what demand high great to meet the it possibly and it the our and end line higher, on about that’s we ultimately at But come getting need, the customers lower likely even and but balance, will or margins. our goal.

Matthew Mishan

And do you acquisitions exit of with and business feel going XX% growth that’s of with composition have you the more rate a kind comfortable a that we’re that normalized in the run you environment? market as and margin that ‘XX forward gross assuming plus new good

Joe Dziedzic

adding profit we’re made and of operating the executing they’re get. given we’ve confident leverage some in as as the I’ll I investments given a said. in normal to we’re to products normal system going XX% grow just the and we in But and to at environment. – rate have, a sales that twice you twice from that we’re can what a key fast profit normal margins we’re If get the environment. environment, absolutely, then qualify you just more that the to to more continuing to production get know capacity, don’t gross environment, of efficiencies grow the we we’ll the Yes. point normal Integer sales stable operating more we new the when when of driving there more pipeline

as gross and a are normal we growing we XX% absolutely twice environment, confident that as I more can’t margins sales. So environment. normal profit more predict when to fast get in

Matthew Mishan

thank Okay, guys. much, you very

Joe Dziedzic

Thanks, Matt.

Operator

Instructions] line [Operator Sidoti the Your Company. Sidoti of with question & next comes Jim from

open. is line Your

Jim Sidoti

taking questions. for and morning Good thanks the

estimate. you top So beat line my

word line top raised You up product the of on come supply lines. constraint the several heard I but guidance,

have you sales have could improve And So are been didn’t starting all? higher to at constraints? they if these

Joe Dziedzic

$XX We cardiac We have million of $XX our somewhere battery about neighborhood $X the million. of it about business the in could in to rhythm million in range the management sales highlighted Electrochem neuromodulation been absolutely Jim, higher. in million $XX business. quantified

planning we more given could And frankly, have So are material say than shipped that was we that of getting that yes, better. had have There’s demand weren’t we shipped more can’t shift more more. but than what could I the availability. things even scheduled. that, quite to

they’re at about level. I same think the

of getting lot can’t got lot of – us. we’re think inventory the that becomes able as manage better because I we’ve challenges. addition The ship The a inventory all you have until being challenge product you at to the a components. now helps know, some helps a you

critical that so lot of products, mouth the missing have us we’re we on hand And we’re most of for where to items some but the a still critical components some items allow more to finish sales, some shipments deliver those as up potentially products. of quarter ramp in of which are we to think fourth particularly the and could drive suppliers higher our able

the train variability as them small quarter that’s expect fourth would the we our we where And in expect grow new a to And quarter to stronger associates even at is sales fourth fully million so would that have growth. relatively And our a little fully amount. the when get see $XX is third over the and quarter, think bit second you quarter. we that range, look our that proficient. sales outlook, going to range we a we because be range in But

fourth Some more it’s I the in say could the that that to be and of better. fourth I our But wish range suppliers we gave reflected guidance in quarter. are can us to ramp the – quarter think going product. able getting fourth is We ours of really strong be give could a that and quarter

consistent helps, and others last hearing are environment in still customers. – that’s the in with industry I the industry very I taken calls earnings but inventory And we’ve to remains clearly the think very, talking that heard week and you’ve think it’s helping from more actions by adding fairly week. the more adding challenging. And this what that we’re and resources

Jim Sidoti

the And Alright. related sheet, your the that to well. balance I around $XX up at addressed you but as looking the inventory acquisitions? issue, million Is receivable think went accounts

Jason Garland

sales, the quarter-over-quarter of would of we piece period. Jim, that right, see a of a coming normally it but the John, towards and also with as the That’s it, end can that lot – just

driven by the omen that’s more but of So that. is the of acquisition sales, timing a

Jim Sidoti

Alright. from last one then me. And

have in you that on do the growth that Aran and in your Now organic what Oscor XXXX XXXX? have you the think will mix, rate and impact

Joe Dziedzic

I organic growth. absolutely helps the it think

me annualized $XX $XX we’ve Let of million $XX Oscor the And this year. million talking we’re sales. recognize million sales or an Aran’s about of on got to basis,

sales. numbers, of So call it $XX round $XX million million,

growing the the kind or is So even of of to $X.X $X $XX sales million Integer industry if above XXX XXX average, it $X of sales million to billion. to million adds organic basis points

maybe we of so And organic part and it It faster of to as XX pipelines, from very bps rates, to is pipeline continue pipelines were growth grow – grow that’s helps. strong have average they development those them faster and helps. and continue at at absolutely businesses would above what But those it And to of growth. adds looking grow acquisitions for we rates. expect

to Integer interest Aran which we thought capability, integrate really across seen strategic our over would, discussions therapies Aran’s the number the margins had scale from help helps. able we’re and There of Oscor and technology that about and with them of strong by $X it performing and So differentiated The teams having and Oscor we’re what of million brings early the kind We of we collaborating raised customers. at is helps for and round the year. finish a forecast where well. have. able excited is ability is definitely we We’ve also well, the incredibly well. exactly we Oscor sales beginning getting as really, been products out we’ve The we’ve are to better out sharing to teamwork super capabilities well. some as great the been and learn and vertically incredibly are

early customers opportunities the the So Aran are discussions on with and growth exciting.

Jim Sidoti

Alright. That’s Thank it for me. you.

Joe Dziedzic

Thank you, Jim.

Jason Garland

Jim. Thanks,

Operator

There Borowicz. are the at questions to no time. over back I Mr. turn call further will this now Tony

Tony Borowicz

call. everyone Great. joining Thank you for today’s

Integer, appreciate look Thank a you you our any Have have. We may we your replay always, questions you. access in follow-up call today’s can good day. a to again on answering website. of As and forward interest

Operator

today’s for you concludes Ladies conference participating. This and gentlemen call. thank

disconnect. now You may

Integer (ITGR) 31 Jul 222022 Q2 Earnings call transcript