Slide 1: 2015 Second Quarter Earnings Call
2015 Second Quarter Earnings Call July 30, 2015
Slide 2: Forward-Looking Statements
Forward-Looking Statements Some of the statements made in this presentation whether written or oral may be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and involve a numbe
Slide 3: Earnings Call Participants
Earnings Call Participants Thomas J. Hook President & CEO Michael Dinkins Executive Vice President & CFO Betsy Cowell Vice President Finance & Treasurer 3
Slide 4: Agenda
Agenda Thomas J. Hook Executive Summary Second Quarter 2015 Performance Nuvectra Update Michael Dinkins Balance Sheet Review 2015 Guidance Update Question & Answer 4
Slide 5: Executive Summary
Executive Summary We are confirming 2015 guidance We delivered solid growth in the Cardiac/Neuro, Orthopaedics, and Portable Medical product lines resulting in an overall 4% constant currency organic growth Our operating margin declined 90 bps this quarter primarily because of product mix We
Slide 6: Selected Q2 2015 Highlights
Selected Q2 2015 Highlights Three Months Ended July 3, July 4, % (Dollars in thousands, except per share 2015 2014 Change data) Sales $ 174,890 $ 172,081 2% Organic Constant Currency Sales Growth 4% —% Adjusted Operating Income* $ 22,243 $ 24,188 (8)% Adjusted Operating Income as % of Sales 12.7% 14
Slide 7: Q2 2015 Revenue
Q2 2015 Revenue Q2 2015 Q2 2014 % Organic Actual Actual Change CC Growth Greatbatch Medical CN $90,153 $80,005 12.7% 12.7% Orthopaedics 35,481 37,865 -6.3% 8.2% Portable Medical 17,700 16,737 5.8% 5.8% Vascular 12,907 15,257 -15.4% -15.4% Energy & Other 16,545 21,352 -22.5% -22.5% Total Greatbatch M
Slide 8: Cardiac/Neuromodulation
Cardiac/Neuromodulation Q2 YTD R4Q Revenue $89,516* $165,085* $319,719 % of Total 52%* 50%* 48% Revenue Battery Growth 12%* -1%* -6% Feedthrough Q2 revenue up 18% on a sequential quarter basis … YTD in line with expectations Strong Neuromodulation growth Enclosure Batteries and shield assembli
Slide 9: Orthopaedics
Orthopaedics Q2 YTD R4Q Revenue $35,481 $74,452 $147,452 % of Total Revenue 21% 23% 22% Implant Organic CC Growth 8% 13% 11% Implant and instruments growing double digits Reamer Greatbatch Sustainable Advantages Strong and expanding customer relationships 70% secured by long term agreements De
Slide 10: Portable Medical
Portable Medical Q2 YTD R4Q Revenue Amounts in millions $17,700 $31,367 $64,470 % of Total 10% 10% 10% Revenue Growth 6% -13% -12% Integrated Power Executing the shift to higher value technologies Supplies Building pipeline with new power solutions technology Leveraging our global footprint to
Slide 11: Vascular
Vascular Amounts in millions Q2 YTD R4Q Revenue Amounts in millions $12,907 $23,263 $53,726 % of Total 7% 7% 8% Revenue Growth -15% -18% 0% Customer inventory management programs easing Steerable Sheath New product introductions in the 2nd half will mitigate EOL headwind On track with product
Slide 12: EME
EME Q2 YTD R4Q Revenue Amounts in millions $16,545 $34,255 $76,529 % of Total 10% 10% 12% Revenue Growth -23% -13% -3% Battery Cells Weak demand in Energy market Wide range and high temperature battery technologies enhances the customers exploration and production activity efficiencies Greatbatc
Slide 13: Nuvectra Update
13 Nuvectra Update $83 Greatbatch
Slide 14: Nuvectra Update: We filed the Form 10 on July 30, 2015
Nuvectra Update We filed the Form 10 on July 30, 2015 Our platform has the capability to provide treatment to patients in several established Neurostimulation markets such as SCS, SNS, DBS and other emerging Neurostimulation markets Our Algovita SCS system is the first application of our Neurost
Slide 15: Nuvectra Spin-off Will Benefit Our Shareholders Three Different Ways
Nuvectra Spin-off Will Benefit Our Shareholders Three Different Ways: Dividend of Nuvectra shares to our Greatbatch shareholders Reduced operating expenses of $12 to $16 million annually Long term manufacturing agreement with Nuvectra 15
Slide 16: Balance Sheet & ROIC
16 Balance Sheet & ROIC $83 Greatbatch
Slide 17: Balance Sheet Metrics
Balance Sheet Metrics ($ in millions except for EPS) Trailing 12 months Q2 2015 Q2 2014 YTD Q2 2015 Q2 2014 Working Capital $256.8 $232.6 Adjusted EBITDA $123.8 $125.0 Operating Cash Flow $22.5 $26.5 ROIC 7.8% 8.2% CapEx $22.2 $12.0 Q2 2015 Q2 2014 FY2014 Days Sales Outstanding 65 65 66 Days Invento
Slide 18: 2015 Guidance
18 2015 Guidance $83 Greatbatch
Slide 19: 2015 Guidance – Confirming Guidance
2015 Guidance – Confirming Guidance (In millions, except for EPS amounts) 2014 2015 Guidance Sales $687.8 $715 - $730 Adjusted Operating Margin 13.3% 13.7% - 14.0% Adjusted Diluted EPS $2.42 $2.61 - $2.71 Operating Cash Flows $81.3 $80 - $100 Capex $24.8 $40 - $50 ROIC 8.4% 9.0% 19
Slide 20: Nuvectra Spin-off Will Enhance Our Financial Performance
Nuvectra Spin-off Will Enhance Our Financial Performance Annualized Adjusted EBITDA* EPS Value of Nuvectra shares TBD TBD Reduced Operating Expenses $12M - $16M $0.29 to $0.39 Incremental revenue from manufacturing contract with Nuvectra TBD TBD * Timing of FDA approval will impact the 2015/2016 cal
Slide 21: Management Focused On Delivering Shareholder Value
Management Focused On Delivering Shareholder Value Strategic Initiatives Organic Growth Medical Device Systems Margin Expansion Targeted Acquisitions ($MM) Market 2014A 2015E 2014A 2015E 2014A 2015E Cap P/E P/E EV/EBITDA EV/EBITDA EV/Sales EV/Sales $1,375 22.3 19.2 11.6 10.9 2.2 2.1 150% 140
Slide 22: Appendix
22 Appendix $83 Greatbatch
Slide 23: Selected 1st Half 2015 Highlights
Selected 1ST Half 2015 Highlights 2015 2014 (Amounts in millions except for EPS) YTD YTD Variance Sales* $336.2 $346.4 -3% Adjusted:** Operating Income $40.2 $46.7 -14% EBITDA $58.4 $65.4 -11% ROIC (TTM) 7.8% 8.2% -40 BPS Operating Cash flow $22.5 $26.5 -15% Diluted EPS $1.19 $1.16 3% Adj. EPS Comme
Slide 24: 1st Half 2015 Revenue
1st Half 2015 Revenue 1H 2015 1H 2014 % Organic Actual Actual Change CC Growth Greatbatch Medical CN $166,426 $166,785 -0.2% -0.2% Orthopaedics 74,452 74,296 0.2% 13.0% Portable Medical 31,367 35,940 -12.7% -12.7% Vascular 23,263 28,307 -17.8% -17.8% Energy & Other 34,255 39,483 -13.2% -13.2% Total
Slide 25: Q2 2015 Financial Results
Q2 2015 Financial Results Three Months Ended July 3, July 4, % 2015 2014 Change (Dollars in thousands, except per share data) Sales $ 174,890 $ 172,081 2% Organic Constant Currency Sales Growth 4% —% GAAP Operating Income $ 13,034 $ 19,539 (33)% GAAP Operating Income as % of Sales 7.5 % 11.4 % Adjus
Slide 26: 1st Half 2015 Cash Flow
1st Half 2015 Cash Flow ($ in millions) Net income* $17.3 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and Amortization 18.2 Debt related Amortization included on Int Expense 0.4 Stock Based Compensation/Discount Amortization 6.0 Other non-
Slide 27: GAAP Reconciliation
GAAP Reconciliation Operating Income Reconciliation – 3 Months Three Months Ended Greatbatch Medical QiG Unallocated Total July 3, July 4, July 3, July 4, July 3, July 4, July 3, July 4, (dollars in thousands) 2015 2014 2015 2014 2015 2014 2015 2014 Sales $172,786 $171,216 $ 2,741 $ 865 $ (637) $ —
Slide 28: GAAP Reconciliation
GAAP Reconciliation Operating Income Reconciliation – 6 Months Six Months Ended Greatbatch Medical QiG Unallocated Total July 3, July 4, July 3, July 4, July 3, July 4, July 3, July 4, (dollars in thousands) 2015 2014 2015 2014 2015 2014 2015 2014 Sales $ 329,763 $ 344,811 $ 7,788 $ 1,551 $ (1,341)
Slide 29: GAAP Reconciliation
GAAP Reconciliation Net Income and Diluted EPS Reconciliation Three Months Ended Six Months Ended July 3, July 4, July 3, July 4, 2015 2014 2015 2014 Per Per Per Per Net Diluted Net Diluted Net Diluted Net Diluted (in thousands except per share amounts) Income Share Income Share Income Share Income
Slide 30: GAAP Reconciliation
GAAP Reconciliation Adjusted EBITDA reconciliation Three Months Ended Six Months Ended July 3, July 4, July 3, July 4, (dollars in thousands) 2015 2014 2015 2014 Sales $ 174,890 $ 172,081 $ 336,210 $ 346,362 Adjusted operating income* $ 22,243 $ 24,188 $ 40,187 $ 46,872 Add: Depreciation and amortiz
Slide 31: Contact Information
Contact Information Betsy Cowell Vice President Finance & Treasurer Greatbatch 2595 Dallas Parkway Suite 310 Frisco, Texas 75034 214 618 4982 ecowell@greatbatch.com www.greatbatch.com 31