Slide 1: 4Q19 Earnings Conference Call
4Q19 Earnings Conference Call February 20, 2020 ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 1
Slide 2: Fourth Quarter 2019 Earnings Conference Call
Integer Holdings Corporation Fourth Quarter 2019 Earnings Conference Call 9 a.m. Eastern Time, February 20, 2020 Speakers: • A webcast of today’s call can be accessed in the “Investors” section of the Company’s Joe Dziedzic website: http://investor.integer.net President and Chief Executive Officer •
Slide 3: Presentation of Financial Information & Forward-Looking Statements
Presentation of Financial Information & Forward-Looking Statements Important Information This presentation contains summarized information concerning Integer Holdings Corporation (the “Company”) and its business, operations, financial performance and trends. The historical financial and operating da
Slide 4: Agenda
Agenda • Opening Comments • Strategy Update • Financial Results • Product Line Review • 2020 Outlook • Question & Answer Period ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 4
Slide 5: Opening Comments
Opening Comments ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 5
Slide 6: Strong 2019 Financial Results
Strong 2019 Financial Results … 4Q Financial Results • +7% sales growth … solid growth in all product lines All product lines posted solid sales growth • Adj. EBITDA +8%, Adj. EPS +20% • Debt leverage below 3 times Adjusted EBITDA Full-Year Financial Results Achieved two strategic objectives: grew p
Slide 7: Strategy Update
Strategy Update ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 7
Slide 8: Journey to Excellence
Journey to Excellence Sales Growth versus Prior Year: 2015 * 2015 2016 * 2016 2017 * 2017 2018 2018 7% 5% Strategy Financial Objectives (2)% •1 Sales growth 200 basis (4)% points above market Declined Market growth Declined ~1x sales growth >6x 5.6x 3.5x •2 Profit growth 2x sales growth rate Disrupt
Slide 9: Strategy Developed in 2nd half of 2017
Strategy Developed in 2nd half of 2017 Operational Strategy: Portfolio Strategy Strategic Imperatives How we win in the markets we serve How we achieve excellence in everything we do Invest to Grow Cardio & Vascular Neuromodulation Electrochem Portable Medical Protect & Preserve Cardiac Rhythm Manag
Slide 10: Leadership Team In Place
Leadership Team In Place Joe Dziedzic President & CEO July 2017 Business Presidents Functional Leaders Carter Houghton Elizabeth Giddens Joe Flanagan President, Electrochem General Counsel and Chief EVP, Quality & & Power Solutions Ethics & Compliance Officer Regulatory Affairs May 2019 August 2019
Slide 11: Building & Strengthening Culture
Building & Strengthening Culture Investing in Culture Strategic Imperatives 2018 & 2019 Actions Leadership Capability •1 Selection Process − Structured Interview Training • Talent Analytics − 430+ Leaders Trained • Talent Review / Evaluation − 350+ Interviews Conducted • Selection Process • Leadersh
Slide 12: Investing in Manufacturing Excellence and LEAN
Investing in Manufacturing Excellence and LEAN LEAN Headcount July 2018 to December 2019 Adj. EBITDA Margin(1) 20 LEAN Diagnosis events +50% Over 200 participants +190 bps 140 Projects/Kaizen events 22.6% 120 Site leaders trained 20.7% All sites trained & initial 2017 2019 LEAN Diagnosis executed 20
Slide 13: Delivering for Customers
Delivering for Customers Quality(1) On Time Delivery Sales +40% improvement +10% improvement Multi-year contracts signed in 2019 ~$425 million 2017 2019 2017 2019 Annual sales (1) Quality metric reflects improvement in customer complaints rate ITGR: 4Q19 Earnings Conference Call / February 20, 2020
Slide 14: Strategy Execution … Status
Strategy Execution … Status Portfolio & Product Line Strategy ✓ Divested AS&O … $600 million price; EPS accretive day one ✓ Addressed Portable Medical profitability … “Invest to Grow” ✓ Launched Growth Teams in 4Q18 … Defined strategy process; own development and oversight of execution Operational S
Slide 15: Significantly Reduced Debt Leverage
Significantly Reduced Debt Leverage ($ in millions) Debt to Adj. EBITDA Leverage Ratio(1) Net Total Debt(2) $1,719 $1,598 $916 $812 (1) Leverage Ratio calculated as total principal amount of debt outstanding less Cash and Cash Equivalents divided by trailing 4 quarter Adjusted EBITDA (2) Net Total D
Slide 16: Delivered 67% Adjusted Earnings Per Share Growth
Delivered 67% Adjusted Earnings Per Share Growth +67% $4.68 $3.80 Adjusted EPS(1) $2.81 Adjusted Earnings Per Share Up $1.87 (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and organic growth rates to the most directly compar
Slide 17: Delivering for Investors … Met or Exceeded Guidance
Delivering for Investors … Met or Exceeded Guidance(1) ($ in millions) Adjusted Sales Adjusted EBITDA(2) Adjusted EPS $1,390 $1,175 $1,260 N/A $255 $275 $2.70 $3.35 $4.05 Guidance to to to to to to to to to $1,430 $1,200 $1,280 N/A $259 $283 $3.10 $3.80 $4.25 With AS&O $1,462 $4.68 $295 $1,258 $284
Slide 18: Profit Growth 2x Sales Growth Rate in 2019 … and Beyond
Profit Growth 2x Sales Growth Rate in 2019 … and Beyond ($ in millions) Adj. EBITDA to 0.1x 1.5x 2.5x sales growth ratio(1) Adj. EBITDA growth 0.1% 11% 9% Adj. Sales growth 5% 7% 4% $284 $259 Adj. EBITDA $234 2017 2018 2019 Continued Progress … Delivered Adj. EBITDA Growth 2.5x Sales Growth in 2019
Slide 19: Journey to Excellence
Journey to Excellence Sales Growth versus Prior Year: 2015 * 2015 2016 * 2016 2017 * 2017 2018 2018 2019 2020 7% Strategy 5% 4% 3% - 4% Financial Objectives 1 Sales growth (2)% 200 basis (4)% points above Declined Market growth Market growth market Declined ~1x sales growth 2x sales growth >6x 5.6x
Slide 20: Financial Results
Financial Results
Slide 21: 4Q19 Adjusted Financial Results
4Q19 Adjusted Financial Results(1) ($ in millions, except per share amounts) Sales Adjusted EBITDA Adjusted Net Income % Growth 7% 8% 20% $41 $326 $73 $303 $68 $34 Adjusted EPS $1.04 $1.25 (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Ad
Slide 22: 2019 Adjusted Financial Results
2019 Adjusted Financial Results(1) ($ in millions, except per share amounts) Adjusted Sales Adjusted EBITDA Adjusted Net Income % Growth 4% 9% 24% $284 $154 $259 $1,258 $1,213 $124 Adjusted EPS $3.80 $4.68 (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjust
Slide 23: 2019 Adjusted Net Income
2019 Adjusted Net Income(1) ($ in millions, except per share amounts) Adj. $3.80 $0.63 $0.02 $0.17 $0.06 $4.68 EPS (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and organic growth rates to the most directly comparable GAAP
Slide 24: 2019 Actual Results Compared to Original Guidance
2019 Actual Results Compared to Original Guidance ($ in millions, except per share amounts) Cash Flow From Ops Free Cash Flow(1) Debt Payments Leverage(2) Original Original Original Original Actual Actual Actual Actual Guidance(3) Guidance(3) Guidance(3) Guidance(3) $160 - $170 $165 2.5x - 3.5x $110
Slide 25: Product Line Review
Product Line Review
Slide 26: Year-over-Year Sales Growth Continues
Year-over-Year Sales Growth Continues(1) Trailing 4 Quarters Cardio & Vascular Integer – Trailing 4 Quarters Cardiac & Neuromodulation Advanced Surgical, Orthopedic & Portable Medical Electrochem (Non-Medical) (1) Excludes impact from changes in foreign currency exchange rates and US Bio Design Acqu
Slide 27: Cardio & Vascular
Cardio & Vascular Offering a full-range of products and services for catheter-based interventional vascular devices and a suite of supply chain solutions to support the development and manufacturing of complex components, sub-assemblies and finished devices Quarterly Adjusted Sales Change(1) Steerab
Slide 28: CRM & Neuromodulation
CRM & Neuromodulation Providing technology solutions for the active implantable medical device industry by partnering with customers to bring high-quality products to established and emerging markets – from initial concept through high-volume manufacturing Quarterly Adjusted Sales Change(1) Pulse Ge
Slide 29: Advanced Surgical, Orthopedics & Portable Medical
Advanced Surgical, Orthopedics & Portable Medical Offering a broad portfolio of power solutions and technologies to Portable Medical markets and supporting the divested AS&O product line Quarterly Adjusted Sales Change(1) Orthopedic Implants & Electrosurgical Li-Ion Battery Core Battery Instruments
Slide 30: Electrochem
Electrochem Enhancing lives worldwide by providing superior power solutions that enable the success and advancement of our customers’ critical applications Quarterly Adjusted Sales Change(1) Battery Cells Battery Packs Battery Chargers • 4Q19 growth driven by increased military market demand and gro
Slide 31: 2020 Outlook
2020 Outlook
Slide 32: 2020 Sales Outlook
2020 Sales Outlook ($ in millions) Growth Headwinds % Growth 5% - 6% (2)% 3% - 4% Fewer Days Nuvectra in 2020 $59 - $79 $1,290 - $1,310 Sales 5 to 6% Growth Offset by 2% Headwinds ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 32
Slide 33: 2020 Full-Year Outlook
2020 Full-Year Outlook(1) ($ in millions, except per share amounts) Sales Adjusted EBITDA Adjusted EPS % Growth 3% - 4% 6% - 8% 9% - 13% $1,290 - $1,310 $300 - $307 $1,258 $284 $5.10 - $5.30 $4.68 (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net In
Slide 34: 2020 Cash Flow Outlook
2020 Cash Flow Outlook ($ in millions, except per share amounts) Cash Flow From Ops Free Cash Flow(1) Debt Payments Leverage(2) $700 CAPEX $60 - $70 $44 $48 Divestiture Proceeds $175 - $185 Accelerated Repayment Required Repayment $548 $105 - $125 $117 $90 - $110 Target 2.5x - 3.5x $52 - $72 Memo: B
Slide 35: Summary
Summary
Slide 36: Journey to Excellence
Journey to Excellence Sales Growth versus Prior Year: 2015 2015 * 2016 2016 * 2017 * 2017 2018 2018 2019 2020 Strategic Objectives 7% Market + 2% 5% 4% 3% - 4% (2)% (4)% Declined Market growth Market growth 200 bps above market Declined ~1x sales growth 2x sales growth 2x sales growth >6x 5.6x 3.5
Slide 37: Investing in Capabilities for Growth
Investing in Capabilities for Growth Capabilities R&D Headcount Sales & Marketing $ Spend Salem +Laser machining +25% +30% Chaska, Plymouth +C&V quick-turn US BioDesign (M&A) +Complex braiding Inomec (M&A) +Delivery systems, catheters +ERP at 4 sites Investing ~$35 million ‘18-’20 2017 202
Slide 38: Investing in Capacity for Growth
Investing in Capacity for Growth Juarez Salem Montevideo +Site expansion +Site expansion +Site expansion Tijuana South Tijuana North +Build-out +First IPG device manufacturing site in Mexico, FDA approved +IPG manufacturing capacity Investing ~$40 Million 2018 to 2020 ITGR: 4Q19 Earnings Conference
Slide 39: Attractive Value Proposition
Attractive Value Proposition Integer Strategy Financial Objectives Status Profit Debt Leverage Sales Profit growth 2.5x – 3.5x Sales growth 2x sales adjusted 200 bps above growth rate EBITDA market Earn a valuation premium •1 Clear Strategy •3 Delivering Strong Operational & Financial Results •2 Str
Slide 40: Questions?
Questions? ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 40
Slide 41: Appendix
APPENDIX ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 41
Slide 42: 4Q19 Adjusted Net Income
4Q19 Adjusted Net Income (1) ($ in millions, except per share amounts) Adj. $1.04 $0.17 $(0.01) $0.05 $0.00 $1.25 EPS (1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and organic growth rates to the most directly comparable GA
Slide 43: Cash Flow & Leverage
Cash Flow & Leverage ($ in millions) Cash Flow From Ops Free Cash Flow (1) 2019 Highlights • Reduced leverage ratio to 2.9 times adjusted EBITDA • No significant maturities until 2022; well within covenants Debt Payments Leverage (2) $595 (3) $548 $40 (1) Free Cash Flow defined as Cash Flow from Ope
Slide 44: Historical Financial Results
Historical Financial Results(1) ($ in millions, except per share amounts) (2) Adjusted Sales Adjusted EPS Organic Adjusted EPS(3) $0.58 $0.91 $0.98 $0.89 $0.66 $1.01 $1.10 $1.04 $1.00 $1.23 $1.19 $1.26 $315 $314 $326 $313 $305 $304 $301 $292 $303 $280 $285 $265 $(0.01) $(0.05) Impact of foreign curr
Slide 45: 2020 Full-Year Outlook
2020 Full-Year Outlook ($ in millions, except per share amounts) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 45
Slide 46: Non-GAAP Reconciliation
Non-GAAP Reconciliation Income from Continuing Operations and Diluted EPS Reconciliation – QTD ($ in thousands, except per share amounts) See the Footnotes to this table on page 48 of this presentation ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 46
Slide 47: Non-GAAP Reconciliation
Non-GAAP Reconciliation Income from Continuing Operations and Diluted EPS Reconciliation – YTD ($ in thousands, except per share amounts) See the Footnotes to this table on page 48 of this presentation ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 47
Slide 48: Footnotes to Non-GAAP Reconciliation
Footnotes to Non-GAAP Reconciliation ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 48
Slide 49: Non-GAAP Reconciliation
Non-GAAP Reconciliation 4Q19 Income from Continuing Operations and Diluted EPS Reconciliation – Detailed View ($ in thousands, except per share amounts) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 49
Slide 50: Non-GAAP Reconciliation
Non-GAAP Reconciliation YTD Income from Continuing Operations and Diluted EPS Reconciliation – Detailed View ($ in thousands, except per share amounts) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 50
Slide 51: Non-GAAP Reconciliation
Non-GAAP Reconciliation EBITDA and Adjusted EBITDA Reconciliation ($ in thousands) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 51
Slide 52: Non-GAAP Reconciliation
Non-GAAP Reconciliation Organic Sales Growth Rate Reconciliation (% Change) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 52
Slide 53: Capitalization
Capitalization ($ in millions) 12/31/19 Original 12/31/19 As Reported Rate Rate Cash & Cash Equivalents $ 13 $200M Revolver [Due 2022] $ - L + 325 L + 200 TLA [Due 2022] $ 267 L + 325 L + 200 TLB [Due 2022] $ 558 L + 425 L + 250 (1) Total Principal Amount of Debt Outstanding $ 825 Deferred Fees and
Slide 54: Non-GAAP Reconciliation for Fiscal Year 2017 & 2016
Non-GAAP Reconciliation for Fiscal Year 2017 & 2016 GAAP income from continuing operations to Adj. EBITDA from continuing operations ($ in thousands) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 54
Slide 55: Non-GAAP Reconciliation for Fiscal Year 2017 & 2016
Non-GAAP Reconciliation for Fiscal Year 2017 & 2016 GAAP income from total operations to Adj. EBITDA from total operations ($ in thousands) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 55
Slide 56: Non-GAAP Reconciliation for Fiscal Year 2017
Non-GAAP Reconciliation for Fiscal Year 2017 YTD Income from Continuing Operations and Diluted EPS Reconciliation – Detailed View ($ in thousands, except per share amounts) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 56
Slide 57: Non-GAAP Reconciliation for Fiscal Year 2017
Non-GAAP Reconciliation for Fiscal Year 2017 GAAP net income and diluted EPS to adjusted amounts ($ in thousands, except per share amounts) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 57
Slide 58: Non-GAAP Reconciliation for Fiscal Year 2017
Non-GAAP Reconciliation for Fiscal Year 2017 GAAP net income and diluted EPS to adjusted amounts – detailed view ($ in thousands, except per share amounts) (a) (a) ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 58
Slide 59: Contact Information
Contact Information Tony Borowicz SVP, Strategy, Business Development & Investor Relations Integer Tony.Borowicz@Integer.net (O) 716.759.5809 www.integer.net ITGR: 4Q19 Earnings Conference Call / February 20, 2020 / Page 59