Slide 1: 1Q18 Earnings Conference Call
1Q18 Earnings Conference Call May 3, 2018
Slide 2: Presentation of Financial Information & Forward-Looking Statements
Presentation of Financial Information & Forward-Looking Statements Historical financial and operating data in this presentation reflect the consolidated results of Integer for the periods indicated. This presentation includes financial information prepared in accordance with accounting principles ge
Slide 3: Agenda
Agenda • Opening Comments • Financial Results • Product Line Review • Strategy Update • Question & Answer Period ITGR: 1Q18 Earnings Conference Call / May 3, 2018 / Page 3
Slide 4: Opening Comments
Opening Comments
Slide 5: Strong 1Q18, Increased 2018 Outlook, Executing Strategy
Strong 1Q18, Increased 2018 Outlook, Executing Strategy First Quarter Highlights “Integer delivered • Organic sales up 9%, record sales growth another strong ‒ YOY sales growth across all product-lines • Adjusted results quarter of sales ‒ EBITDA increased 7% organically growth … net income ‒ Net In
Slide 6: Financial Results
Financial Results
Slide 7: 1Q18 Adjusted Financial Results
1Q18 Adjusted Financial Results(1) ($ in millions, except per share amounts) Sales Adjusted EBITDA Adjusted Net Income 8.8% organic(2) 7% organic(3) 48% organic(3) % Growth 10.5% reported 7% reported 53% reported $382 Reported $70 FX Adjusted $(6) FX $66 FX Adjusted $376 $69 Reported FX $64 Reported
Slide 8: Adjusted EBITDA & Adjusted Net Income
Adjusted EBITDA & Adjusted Net Income ($ in millions except per share amounts) Adjusted EBITDA Adjusted Net Income $69 • +$5M YOY $64 – Includes $4M $4 $20 unfavorable incentive compensation impact $1 1Q18 vs 1Q17 $4 Tax Rate $13 $(3) Interest Incentive Operational Compensation Improvement 1Q17 1Q18
Slide 9: Continued Strong & Steady Cash Flow Generation
Continued Strong & Steady Cash Flow Generation Cash Flow From Ops Free Cash Flow (1) ($ in millions) ($ in millions) $46 $36 • Record cash flows - highest $39 $39 $38 since acquisition in 2015 $34 $28 $26 $27 • Reduced leverage to 5.4x $21 • No significant maturities until 2020; well within covenant
Slide 10: Increased Cash Flow Outlook
Increased Cash Flow Outlook Cash Flow From Ops Free Cash Flow(1) Debt Payments Leverage(2) ($ in millions) ($ in millions) ($ in millions) $160+ $110+ $129 $149 $103 6.1x $115+ 5.6x $106 $98 $47 $44 $15 $29 $31 $30 (3) 2016 2017 2018 2016 2017 2018 2016 2017 2018 YE16 YE17 YE18 Outlook Outlook Outlo
Slide 11: Updated Full-Year 2018 Outlook
Updated Full-Year 2018 Outlook ($ in millions except per share amounts) Sales Adjusted EBITDA Adjusted EPS Growth % 3% - 6% 9% - 12% 14% - 25% $1,510 - $1,550 $310 - $320 $3.20 - $3.50 $1,462 $286 $2.81 2017 2018 2017 2018 2017 2018 Outlook Outlook Outlook Adj. Effective 20% 21% - 24% Tax Rate Prior
Slide 12: Product Line Review
Product Line Review
Slide 13: Advanced Surgical, Orthopedics & Portable Medical
Advanced Surgical, Orthopedics & Portable Medical Providing a wide range of technologies and solutions to the Advanced Surgical and Orthopedic markets Organic Quarterly YOY Growth 12% 8% 9% 6% Orthopedic Implants & Laparoscopy & Arthroscopy Biopsy & Drug Portable Medical Instruments General Surgery
Slide 14: Cardio & Vascular
Cardio & Vascular Offering a full-range of services for the design, development, and manufacturing of diagnostic and interventional cardiac and endovascular delivery and retrieval devices, along with comprehensive supply-chain solutions Organic Quarterly YOY Growth 11% 10% 9% % Change 8% Steerable S
Slide 15: Cardiac & Neuromodulation
Cardiac & Neuromodulation Providing technology solutions for the active implantable medical device industry by partnering with customers to bring high-quality products to established and emerging markets – from initial concept through to high-volume manufacturing Organic Quarterly YOY Growth 5% 1% %
Slide 16: Electrochem
Electrochem Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customers’ critical applications Organic Quarterly YOY Growth 71% 60% Battery Cells Battery Packs Battery Chargers 30% % Change 12% 0% (3%) 1Q17 2Q17 3Q17 4Q17 1Q18 • 1Q18 sales
Slide 17: Strategy Update
Strategy Update
Slide 18: Strategy to Drive Long-Term Growth
Strategy to Drive Long-Term Growth Portfolio Strategy Operational Strategy – Strategic Imperatives Invest to Grow Cardio & Vascular Customers Neuromodulation “earn business Electrochem daily” Protect & Preserve • Sales Force Excellence • Market Focused Innovation Cardiac Rhythm Management Improve Pr
Slide 19: Announced Planned Sale of Advanced Surgical and Orthopedics (AS&O) Product Lines
Announced Planned Sale of Advanced Surgical and Orthopedics (AS&O) Product Lines Transaction Rationale Deal Summary • 2H17 Integer strategic review identified • Signed agreement on May 3, 2018 opportunity to unlock value in AS&O with MedPlast LLC • Highly fragmented AS&O CMO market • Cash sale price
Slide 20: Impact of AS&O Sale on Integer Positioning Integer to Earn a Valuation Premium
Impact of AS&O Sale on Integer Positioning Integer to Earn a Valuation Premium Strategic Financial Impact • Clear leader in remaining product lines • Margin expansion of ~200bps to 250bps with differentiated technology • After planned debt reduction of ~$550 • Cardio & Vascular, Cardiac & Neuromodul
Slide 21: Summary
Summary Vision Enhance patient’s lives by being our First Quarter 2018 customers partner of choice • Strong growth in sales, profit and cash flow • Increased 2018 outlook Strategic Imperatives - Sales Force Excellence - Market Focused Innovation Portfolio Strategy - Manufacturing Excellence • Unlock
Slide 22: Question & Answer Period
Question & Answer Period
Slide 23: Appendix
APPENDIX
Slide 24: Historical Financial Results
Historical Financial Results ($ in millions, except per share amounts) (1)(2) Sales Adjusted EPS Organic $345 $363 $363 $390 $382 Adjusted $0.44 $0.76 $0.87 $0.98 $0.64 EPS(3) $15 $13 $16 $15 $11 $119 $0.02 $122 $109 $108 $105 $0.05 $0.14 $117 $0.03 $106 $102 $109 $104 $0.96 $0.03 $0.82 $0.62 $0.61
Slide 25: Quarterly YOY % Change – Organic
YOY Sales Improvement Continues in 1Q18 Advanced Surgical, Orthopedics & Portable Medical (1) Integer 0% 1Q 2Q 3Q 4Q 1Q 17 17 17 17 18 Quarterly YOY % Change - Organic Cardio & Vascular 8.8% Quarterly YOY % Change – Organic 7.6% 8.7% 6.9% 5.0% 4.5% 4.4% 0% 4.8% Cardiac & Neuromodulation 2.8% 2.6% 0%
Slide 26: Working Capital
Working Capital ($ in millions) 1Q17 2Q17 3Q17 4Q17 1Q18 Inventory $231 $236 $247 $228 $239 (1) Inventory Turns 4.5 4.5 4.4 4.8 4.9 Capital Expenditures $12 $10 $12 $13 $10 Working Capital ($ in millions) $324 $328 $323 $323 $304 1Q17 2Q17 3Q17 4Q17 1Q18 (1) Inventory Turns calculated as “COGS divid
Slide 27: Other Operating Expenses – Historical
Other Operating Expenses – Historical ($ in millions) Three Months Ended YTD Three Mos. 1Q17 2Q17 3Q17 4Q17 FY17 1Q18 Strategic Reorganization -- -- -- $5.9 $5.9 $3.5 and Alignment Manufacturing and -- -- -- -- -- $0.5 Alignment to Support Growth Consolidation and $2.4 $2.8 $3.2 $4.9 $13.3 $0.6 Opti
Slide 28: Non-GAAP Reconciliation
Non-GAAP Reconciliation Net Income and Diluted EPS Reconciliation – QTD ($ in thousands, except per share amounts) Three Months Ended March 30, 2018 March 31, 2017 Per Net Per Net Diluted Income Diluted Pre-Tax Income Share Pre-Tax (Loss) Share As reported (GAAP) $ 12,209 $ 8,118 $ 0.25 $ (4,195) $
Slide 29: Non-GAAP Reconciliation
Non-GAAP Reconciliation 1Q18 QTD Net Income and Diluted EPS Reconciliation – Detailed View ($ in thousands, except per share amounts) GAAP Non-GAAP Adj. (a) Non-GAAP Manufacturing Asset Debt / Litigation Strategic Alignment to Disposition, Investment Related Reorganization Support Consolidation & Se
Slide 30: Non-GAAP Reconciliations
Non-GAAP Reconciliations Footnotes to “Net Income and Diluted EPS Reconciliations” (a) The difference between pre-tax and net income (loss) amounts is the estimated tax impact related to the respective adjustment. Net income amounts are computed using a 21% U.S. tax rate (35% U.S. tax rate for 2017
Slide 31: Non-GAAP Reconciliations
Non-GAAP Reconciliations EBITDA and Adjusted EBITDA Reconciliation ($ in thousands) Three Months Ended March 30, March 31, 2018 2017 Net Income (loss) (GAAP) $ 8,118 $ (4,339) Interest expense 26,445 28,893 Benefit for income taxes 4,091 144 Depreciation 14,621 13,628 Amortization 11,713 10,978 EBIT
Slide 32: Non-GAAP Reconciliations
Non-GAAP Reconciliations Organic Sales Growth Rate Reconciliation (% Change) GAAP Impact of Non-GAAP Reported Foreign Organic Growth Currency(a) Growth QTD Change (1Q 2018 vs. 1Q 2017) Medical Sales Cardio & Vascular 10.6% (1.2)% 9.4% Cardiac & Neuromodulation 4.9% — 4.9% Advanced Surgical, Orthoped
Slide 33: Non-GAAP Reconciliations
Non-GAAP Reconciliations Non-GAAP Organic Growth Rate Reconciliation (% Change) GAAP Impact of Impact of Non-GAAP Reported Non-GAAP Foreign Organic Growth Adjustment(a) Currency(b) Growth QTD Change (1Q 2018 vs. 1Q 2017) EBITDA 31.8% (24.7)% (0.3)% 6.8% NM Net Income 52.7% (4.5)% 48.2% NM Diluted EP
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations 2018 Full-Year Outlook ($ in millions, except per share amounts) 2018 Outlook GAAP Non-GAAP As Reported Growth Adjusted Growth Revenue $1,510 - $1,550 3% - 6% $1,510 - $1,550 3% - 6% Net Income $50 - $60 (25)% - (10)% $103 - $113 14% - 25% EBITDA N/A N/A $310 - $320 9% - 12%
Slide 35: Contact Information
Contact Information Amy Wakeham VP, Investor Relations Integer ir@integer.net (O) 214.618.4978 (M) 214.430.7208 www.integer.net