Integer Holdings Corp Q2 FY2024 earnings call

• Delivered strong second quarter results with sales growing 9%, adjusted operating income growing 20%, and adjusted earnings per share growing 14% year-over-year.
• Manufacturing excellence initiatives are driving operational improvements in direct labor turnover, direct material scrap, lower overtime, and direct labor efficiency.
• Strong first-half OpEx leverage and high visibility to customer demand, including ramping programs in high-growth markets and additional guidewire capacity in Ireland.
• Acquisitions of InNeuroCo and Pulse Technologies are contributing to growth, and the strategic exit of the Portable Medical market is factored in.

In the second quarter of 2024, C&V and CRM&N product line sales, which represent approximately 91% of total sales, continued strong year-over-year growth on a trailing 4-quarter basis. Cardio and Vascular product line trailing 4-quarter sales increased 17% year-over-year. Cardiac Rhythm Management and Neuromodulations trailing 4-quarter sales increased 11% year-over-year.

• Reiterated sales outlook of $1,735 million to $1,770 million for 2024, with organic growth of 6% to 8% and contributions from acquisitions and Portable Medical exit.
• Raised adjusted EBITDA outlook to $357 million to $377 million (15% to 22% growth).
• Raised adjusted operating income outlook to $275 million to $293 million (14% to 21% growth).
• Adjusted net income outlook is $174 million to $189 million (11% to 20% growth), with adjusted EPS between $5.07 and $5.49.
• Expect sales in second half to be higher due to new product ramps, Ireland expansion, and emerging PMA customer growth.

• Potential disruption from customers insourcing manufacturing, though long lead times and visibility to product development pipelines provide some comfort.
• Supply chain disruptions could impact operational efficiencies and growth.

Q: Brett Fishbin asked about the sequential decline in organic growth in the Cardio and Vascular segment and if there would be a recovery in the second half.

A: Joseph Dziedzic stated that looking at a rolling 4-quarter basis, Cardio and Vascular has strong growth, expects high-single-digit organic growth for the full year, and the rolling 4-quarter view is the best way to assess it.

Q: Craig Bijou inquired about Cardio and Vascular being below Street expectations, if it was below their expectations, and visibility into second half revenue.

A: Joseph Dziedzic said Cardio and Vascular and the rest of the business were in line with expectations, and visibility to the order book gives confidence in delivering guidance.

Q: Richard Newitter asked about changes in OEM customers' end market demand curves and acceleration in the second half.

A: Joseph Dziedzic mentioned no material change in customer expectations, strong order book, and second half sales expected to be higher due to new programs, Ireland expansion, and emerging customers.

Q: Kristen Stewart asked about updates on acquisitions and M&A outlook.

A: Joseph Dziedzic said acquisitions are doing well, ahead of modeling, and they have a robust pipeline of tuck-in acquisitions aligned with strategy.

Q: Suraj Kalia asked about incremental contribution from PFA to Cardio and Vascular organic growth and timeframe for insourcing.

A: Joseph Dziedzic stated PFA is a tailwind, C&V has high-single-digit organic growth expected, and insourcing takes 3 to 5 years.

Q: Nathan Treybeck asked about CRM and Neuromodulation guidance change and PMA portfolio outlook.

A: Joseph Dziedzic said CRM growth is normalizing, emerging PMA customers are on track to deliver $100 million to $120 million in sales.

Q: Felipe Lamar asked about order lead times for electrophysiology devices and seasonality.

A: Joseph Dziedzic said no meaningful seasonality, balanced engineering revenue profile, and no significant change in lead times.