Integer Holdings Corporation · NYSE:ITGR
Integer — Greatbatch — JP Morgan Healthcare Conference 2014
37 slides from Integer's conference presentation, Jan 16, 2014
Slide 1: JP Morgan Conference
JP Morgan Conference January 13-16, 2014 1
Slide 2: Greatbatch Team
GREATBATCH TEAM Thomas J. Hook President & CEO Michael Dinkins Executive Vice President & CFO Betsy Cowell Vice President Finance & Treasurer 2
Slide 3: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS We will be making forward-looking statements during today’s presentation Please refer to the appendix of this presentation and our most recent SEC filings for more information and cautionary language surrounding these statements 3
Slide 4: Agenda
AGENDA Greatbatch Today Value Proposition 2013 Accomplishments 2014 Strategic Initiatives 2014 Financial Guidance 4
Slide 5: Greatbatch Today
GREATBATCH TODAY NYSE: GB $660 Million Diversified Revenue Base Over 3,300 Associates 1,500 Patents and Patents Pending Office and Manufacturing locations 5
Slide 6: Greatbatch Today: Revenue Growth & Diversification
GREATBATCH TODAY REVENUE GROWTH & DIVERSIFICATION (Dollars in millions) $662-$664 % of Sales Portable Medical 12% Energy, Environmental & Military 12% Orthopaedics 19% Vascular 8% $200 % of Sales Energy, Environmental CRM and & Military 14% Neuromodulation 49% CRM and Neuromodulation 86% 2004 2005 2
Slide 7: Greatbatch Today: Our Strategy
GREATBATCH TODAY A leader in critical technologies serving four large and growing medical device markets Cardiac & Neuromodulation Orthopaedics $1.5B Opportunity $3B Opportunity 3% Average Market Unit CAGR 6% - 12% Average Market Unit CAGR Enclosure Feedthrough Our Strategy Delivery System Battery I
Slide 8: Greatbatch Today: Our Value Proposition
GREATBATCH TODAY OUR VALUE PROPOSITION Organic Growth Greatbatch intellectual property helps Greatbatch customers gain greater share of the markets they serve Combination of intellectual property, world-class operations and sales expertise leading to long-term agreements with blue chip customers
Slide 9: 2013 Accomplishments
2013 Accomplishments 9
Slide 10: 2013 Accomplishments
2013 ACCOMPLISHMENTS Successfully completed strategic consolidation of Orthopaedics operation Increased operational capacity in the US and abroad Secured internationally recognized quality and manufacturing standards Delivering revenue growth consistent with our strategy Upgraded our sales for
Slide 11: 2014 Strategic Initiatives
2014 Strategic Initiatives 11
Slide 12: The Plan: Stay the Course of Executing Our Strategy
THE PLAN: STAY THE COURSE OF EXECUTING OUR STRATEGY Sales and marketing team expansion to leverage IP to drive sustainable organic top line growth Operational excellence to drive cost reduction and margin expansion Commercialization and continued development of full medical device systems In
Slide 13: Organic Growth
ORGANIC GROWTH STRATEGIC ] IMPERATIVE 288 Greatbatch 13
Slide 14: Organic Growth: Blue Chip Customer Base and Long-Term Agreements
ORGANIC GROWTH: BLUE CHIP CUSTOMER BASE AND LONG-TERM AGREEMENTS 14
Slide 15: Organic Growth: Our Intellectual Property Drives Market Share Gains
ORGANIC GROWTH: OUR INTELLECTUAL PROPERTY DRIVES MARKET SHARE GAINS INTELLECTUAL 1,489 PROPERTY 1,121 Leverage for long-term 858 agreements 576 325 21 118 # of patents 1995 1998 2001 2004 2007 2010 2013 952 804 COMPONENT 673 Designed into customer 478 FDA-approved products 286 102 18 # of patents 19
Slide 16: Organic Growth: Significantly Enhanced Marketing Capabilities
ORGANIC GROWTH: WE HAVE SIGNIFICANTLY ENHANCED OUR MARKETING CAPABILITIES Strategic Marketing Ongoing intensive market CARDIAC/ VASCULAR ORTHO PORTABLE MEDICAL/ research NEURO TEAM TEAM TEAM EME TEAM Drive intellectual property portfolio prioritization Sales enablement tools and training Sta
Slide 17: Organic Growth: Sales Force Productivity Driven Benefits
ORGANIC GROWTH: SALES FORCE PRODUCTIVITY DRIVEN BENEFITS Sales Force Placement of all account executives closer to major customers +31% U.S. expansion Upgraded 25% of remaining sales force with new sales talent Governance – sales and operations qualify all deals Variable sales compensation
Slide 18: Margin Expansion
MARGIN EXPANSION STRATEGIC 2 IMPERATIVE 288 Greatbatch 18
Slide 19: Continued Margin Expansion Across New and Improved Facilities
WE EXPECT CONTINUED MARGIN EXPANSION BY LEVERAGING OUR ORGANIC GROWTH ACROSS NEW AND IMPROVED FACILIITIES Year Number of Facilities Avg Size Revenue 2014 16 $>40 Million Cost effective, flexible and scalable infrastructure fully capable of supporting enhanced commercial strategy Global network o
Slide 20: Medical Device Systems
MEDICAL DEVICE SYSTEMS STRATEGIC 5 IMPERATIVE 222 Greatbatch 20
Slide 21: Emerging Medical Device Portfolio
EMERGING MEDICAL DEVICE PORTFOLIO QiG was established in 2008 to facilitate the development of complete medical devices 120 R&D professionals across the US working on a portfolio of new and innovative product opportunities QiG has established relationships with highly specialized physicians ac
Slide 22: Emerging Medical Device Portfolio: Future NewCo's
EMERGING MEDICAL DEVICE PORTFOLIO Future NewCo’s 1st complete active 2 additional neuro Entry into cardiac implantable system newco’s in process diagnostic systems Implantable Loop Entry into $1.5B Target approved & SCS* market Recorder (ILR) emerging indications Address unmet needs
Slide 23: Algostim System Accomplishment
ALGOSTIM SYSTEM ACCOMPLISHMENT Surgical / Paddle Leads Perc Leads Patient Programmer Clinician Programmer Charger Patient Feedback Tool CP PPC PFT Pocket Programmer External PoP Pulse Generator EPG Anchors Implantable Pulse Generators Trial / Screening Cable Extensions IPG 23
Slide 24: Algostim Value Proposition
ALGOSTIM VALUE PROPOSITION “A highly differentiated complete SCS system and platform with extensive offering of innovation, IP, advanced safety features, and future generation capabilities in the fast growing 2013E $1.5B SCS market” Highly under-penetrated market (<10%) History of large market s
Slide 25: Algostim Regulatory Plan
ALGOSTIM REGULATORY PLAN Status FDA: Dec 2013: PMA submitted Approval: TBD pending regulatory cycle CE mark: Jan 2014: Dossier submitted to notified body (TÜV SÜD) Approval: Anticipated in 2H 2014 Proposed Indication The Algostim SCS* system is indicated as an aid in the management of chroni
Slide 26: Algostim Milestones
ALGOSTIM MILESTONES 2013 2014 2015 DVT Completed all testing Acute & Chronic animal studies Usability verifications Regulatory Cycle PMA submitted (FDA) Dossier submitted (CE mark) 2H 2014 estimated CE mark Manufacturing Revenue Screening Greatbatch Commercialization ROI Partners Commercialization B
Slide 27: Targeted Acquisitions
TARGETED ACQUISITIONS STRATEGIC 4 IMPERATIVE 222 Greatbatch 27
Slide 28: Targeted Acquisitions: Objective and Criteria
TARGETED ACQUISITIONS Objective: Identify and close targeted acquisitions to enhance top line and bottom line growth trajectory with a focus on innovative solutions Criteria: Complementary to existing business model Drive expansion in core markets Enter adjacent growth markets Focus on propr
Slide 29: Capacity to Fund Targeted Acquisitions
CAPACITY TO FUND TARGETED ACQUISITIONS Credit facility matures September 2018 $500 M In Dry Powder $30 M Cash $200 M Available Accordion $300 M Unused Borrowing Capacity $500 M Line of Credit 29
Slide 30: 2014 Financial Guidance
2014 Financial Guidance 30
Slide 31: 2014 Guidance
2014 GUIDANCE ($ in millions except for EPS) 2013E(1) 2014 Guidance Change Sales $662 - 664 $685 – $705 3.5 – 6.5% Adjusted Operating Margin ~13.0% 13.0 – 13.3% 30 bps Adjusted Diluted EPS(3) ~$2.10(2) $2.25 – $2.35 7 – 12% Adj. Operating Cash Flows(3) $80 - $90 $90 - $100 ~12% Capex ~$20 $25 – $35
Slide 32: Valuation: Strategic Initiatives and Execution Delivering Shareholder Value
VALUATION: OUR STRATEGIC INITIATIVES AND EXECUTION ARE DELIVERING SHAREHOLDER VALUE Strategic Initiatives Organic Growth Medical Device Systems Margin Expansion Targeted Acquisitions Market 2013E 2014E 2013E 2014E 2013E 2014E Cap P/E P/E EV/EBITDA EV/EBITDA EV/Sales EV/Sales ($MM) $1,050 20.
Slide 33: Appendix
Appendix #82 Greatbatch
Slide 34: 2014 Guidance EPS Reconciliation
2014 GUIDANCE EPS Reconciliation 2014 2013E(1) Guidance GAAP Diluted EPS $1.45 - $1.50 $1.94 - $1.99 Adjustments: Other Operating Expense(2) $0.42 - $0.46 $0.31 - $0.35 DVT Builds(2) $0.14 - $0.16 CSN conversion option discount and $0.12 deferred fee accelerated amortization(2) R&D Tax Credits and o
Slide 35: 2014 Guidance Operating Cash Flows Reconciliation
2014 GUIDANCE Operating Cash Flows Reconciliation ($ in millions) 2014 2013E(1) Guidance GAAP Operating Cash Flows $35 - $45 $83 - $91 Adjustments: Other Operating Expense After Tax(2) $10 - $11 $7 - $9 DVT Builds After Tax(2) $3 - $4 Tax Payments on Convertible Notes maturity(2) $30 Adjusted Operat
Slide 36: Forward-Looking Statement
FORWARD-LOOKING STATEMENT Some of the statements made in the 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 Securities Exchange Act of 1934, as amended, and involve a number of r
Slide 37: Contact Information
CONTACT INFOMATION Betsy Cowell Vice President Finance & Treasurer Greatbatch 2595 Dallas Parkway Suite 310 Frisco, Texas 75034 214 618 4982 ecowell@greatbatch.com www.greatbatch.com 37