1Q19 Earnings Conference Call · reduction by energy customers and new product launch with a specific customer. • Trailing 4-quarter reflects flattening of North American drilling

ITGR: 1Q19 Earnings Conference Call / May 2, 2019 / Page 1

1Q19 Earnings Conference Call

May 2, 2019


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 generally accepted in

the United States, or GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial

measures in this presentation, which include Adjusted Net Income, Adjusted Diluted EPS, Earnings Before Interest Taxes

Depreciation and Amortization (EBITDA), Adjusted EBITDA, Adjusted Sales, and organic growth rates should be

considered in addition to, but not as substitutes for, the information prepared in accordance with GAAP. For

reconciliations of these non-GAAP financial measures to the most comparable GAAP measures, please refer to the

appendix to this presentation and the earnings release associated with this quarterly period which can be found in the

investor relations section of our corporate website (investor.integer.net).

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 Securities Exchange Act of 1934, as

amended, and involve a number of risks and uncertainties. These statements can be identified by terminology such as

“may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or

“continue” or “variations” or the negative of these terms or other comparable terminology. These statements are based on

the company’s current expectations and speak only as of May 2, 2019. The Company’s actual results could differ

materially from those stated or implied by such forward-looking statements. The Company assumes no obligation to

update forward-looking information, including information in this presentation, to reflect changed assumptions, the

occurrence of unanticipated events or changes in future operating results, financial conditions or prospects.

investor.integer.net


Agenda

• Opening Comments

• Financial Results

• Product Line Review

• 2019 Outlook

• Question & Answer Period


Opening Comments


1Q Financial Results

• Strong revenue growth of 8%; 4% excluding impact of long-term

agreement signed in 1Q19

• Strong profit growth; EBITDA +22%, EPS +59%

• Slight upward revision to sales and EPS guidance

Leadership Changes & Accelerating Strategy

• Jen Bolt promoted to SVP – Global Operations

• Joel Becker joined as President – CRMN

• Carter Houghton joining as President – Electrochem and

Portable Medical

• Portable Medical profitability improved; shifted to “Invest to Grow”

• Manufacturing Strategic Imperative accelerating

Strong Financial Results …

Integer delivered another

quarter of strong sales

and profit growth

Leadership team in place

to drive and accelerate

strategy execution


Leadership Changes to Accelerate Strategy

Jen Bolt Joel Becker Carter Houghton

President

Cardiac Rhythm Mgmt &

Neuromodulation

SVP

Global Operations

President

Electrochem &

Portable Medical

• Leading manufacturing

excellence strategy

• 14+ years leadership roles

at Integer

• 12+ years manufacturing

leadership roles at

GM/Delphi

• Industrial Engineer, MIT

MBA

• 20 years St Jude Medical,

including President of

Americas

• Deep product, industry and

customer knowledge

• CRM, neuro,

electrophysiology,

structural heart,

interventional vascular

• Univ of Minnesota MBA

• 15 years in medical device

industry

• 10 years as GM or

President of business units

• Haemonetics, Hologic,

Corning

• Univ of Virginia MBA


Customers

CultureCosts

Portfolio StrategyProduct Line Leaders

Operational StrategyStrategic Imperative Leaders

Joel Becker

President, CRM&N

Kirk Thor

CHRO

Joel Becker

President,

Cardiac Rhythm Management

& Neuromodulation

Payman Khales

President,

Cardio & Vascular

Carter Houghton

President,

Electrochem &

Portable Medical

Jen Bolt

SVP, Global Ops

Joe Flanagan

EVP, Quality and Regulatory

Manufacturing

Excellence

Business Process Excellence

Performance Excellence

Leadership Capability

Sales Force

Excellence

Market Focused

Innovation

Payman Khales

President, C&V

Executive Alignment to Drive Our Strategy


Cardio & Vascular

Neuromodulation

Electrochem

Portable Medical

Invest to Grow

Protect & Preserve

Portfolio Strategy Operational Strategy:

Strategic Imperatives

Cardiac Rhythm Management

How we win

in the markets we serveHow we achieve excellence in everything we do

Focused Strategy to Drive Long-term Growth


Manufacturing Excellence: Business Optimization and

Margin Expansion

Integer

Production

System

(IPS)

Lean

Diagnosis

KPI and

Dashboard

Standardization

Continuous

Improvement

Culture

Status

• Framework and detailed system

elements of our Integer

manufacturing processes

• Defined & scoped 16 elements

that comprise the IPS

• Building IPS element tools,

templates and resources

• Comprehensive diagnosis and

current-state mapping

• Prioritized and aligned site

transformation plans

• Eight facilities complete, three

in process this month

• Remaining four facilities

complete by Aug 2019

• Performance metrics with clear

definition and reporting

• Safety, Quality, Delivery, Cost,

People

• All site-level key process

indicators defined

• Leadership dashboard

developed

• Clear training and expectations

of leaders and all associates

• Organizational design aligned

to optimized operations.

• Site leadership lean training

complete for eight sites

• All sites complete in 2019

Financial Results


(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 measure

(2) Organic sales growth rate converts current period sales from local currency to U.S. dollars using the previous period’s foreign currency exchange rates.

(3) Organic growth for Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS exclude the impact of foreign currency reported in other (income) loss, net

In the first quarter, signed a long-term agreement containing terms that resulted in an accrual of $11.5 million of sales for in-process material.

($ in millions, except per share amounts)

Adjusted Sales Adjusted EBITDA Adjusted Net Income

$315$66

$54

1Q19 Adjusted Financial Results(1)

Reported

$292

$20

$33

8% organic(2) 19% organic(3) 53% organic(3)

8% reported 22% reported 61% reported% Growth

1Q18 1Q19

Adj Reported 0.63$ 1.00$

EPS FX Adjusted 0.66$ 1.00$



1Q19 Adjusted Net Income

Adj.

EPS$0.63 $0.26 $0.03 $0.03 $0.06 $1.00

Product Line Review


Cardio & Vascular

Year-over-Year Sales Growth Continues(1)

Trailing 4 Quarters

Integer – Trailing 4 Quarters

(1) Excludes impact from changes in foreign currency exchange rates

Advanced Surgical, Orthopedic & Portable Medical

Non-Medical (Electrochem)

Cardiac & Neuromodulation

1Q18 2Q18 3Q18 4Q18 1Q19

1Q18 2Q18 3Q18 4Q18 1Q19


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

Steerable Sheaths Catheters & Sheaths Guidewires, Stylets & Accessories

Introducers

%C

hange

Reported Trailing 4-Quarter Sales($ in millions)

Organic Quarterly Y-o-Y Growth

0%

Cardio & Vascular

10% 11% 11% 10% 10%

• 1Q growth driven by customer share gains, new product

launches, and the impact of the long-term agreement with a

current customer for their existing products.

Electrophysiology and peripheral vascular growing above

market due to catheter components. Excluding customer

agreement, growth was consistent with prior two quarters.

• Trailing 4-quarter growth is driven by increased demand in

the electrophysiology and peripheral vascular.

• Expect above-market growth trend to continue, led by arterial

and neurovascular catheters and structural heart penetration;

partially offset by slowing electrophysiology due to the

maturing life cycle of a specific customer program.


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

Pulse Generator Components &

Assemblies

Leads & Lead Components, Adaptors & Assemblies

Pulse Generators & External Solutions (Programmers, Chargers,

Patient Devices)

%C

hange



0%

CRM & Neuromodulation

(0)% 2% 6% 4% 4%

• 1Q growth was low single-digit excluding the long-term

agreement with a current customer for their existing products,

as neuromodulation continued to grow double-digit and CRM

declined slightly consistent with prior trend.

• Trailing 4-quarter growth led by spinal cord stimulation and

increasing revenue from small, early-stage neuro customers.

• Expect neuromodulation growth to remain in the low to mid

double-digit range due to the spinal cord stimulation market

and increasingly stronger revenue from early-stage

neuromodulation companies.


Supporting our divested AS&O business and providing technologies

and solutions to Portable Medical markets

Orthopedic Implants &

Instruments

Core Battery

Pack AssembliesLi-Ion Battery

Packs

Electrosurgical

Accessories

%C

hange



0%

Advanced Surgical, Orthopedics & Portable Medical

11% 14% 14% 14% 7%

• 1Q sales decline primarily due to a difficult Portable Medical

prior-year comparable. This decline was partially offset by

higher orthopedic product demand.

• The slower 4-quarter trend is attributable to the leveling-off

of portable medical, offsetting the continued above-market

growth in advanced surgical and orthopedic.

• Expect renewed portable medical growth in the second half

of 2019 from new customer product launches and continued

strong orthopedic product demand.


Enhancing lives worldwide by providing superior power solutions that

enable the success and advancement of our customers’ critical applications

Battery Packs Battery ChargersBattery Cells

%C

hange

0%



Electrochem

41% 22% 3% (7)% (8)%

• 1Q growth due to recovery from prior year inventory

reduction by energy customers and new product launch

with a specific customer.

• Trailing 4-quarter reflects flattening of North American

drilling activity and energy market conditions, and decrease

in military funding.

• Expect strong growth to ramp up in 2H 2019 from new

customers, new products, and renewed military funding

2019 Outlook


Managing Interest Expense

• Inverted yield curve created

opportunity

• Executed $400 million, twelve

month swap to fixed

– Reduced rate risk

– Lowered interest expense

– Maintains cap structure flexibility

• Increased EPS guidance

Floating

Interest

Rate

Fixed

Interest

Rate

% of Debt

Total Debt

Outstanding ($M)

34%21%

65%

66%

79%35%

100% 100% 100%

Dec2017

Dec2018

Apr2019

$1,609 $926 $912


2019 Outlook

Adjusted EPS

$1,213 $3.80

$1,265 - $1,280 $4.15 - $4.35

($ in millions except per share amounts)

Growth % 4% - 6% 9% - 15%

Adjusted Sales

$259

$275 - $283

6% - 9%

Adjusted EBITDA

$1,260 - $1,280 $275 - $283 $4.05 - $4.25Prior Guidance


Debt Payments

(1) Free Cash Flow defined as Cash Flow from Operations less Capital Expenditures, net

(2) Leverage calculated as total principal amount of debt outstanding less Cash and Cash Equivalents divided by Trailing 4 Quarter Adjusted EBITDA

Cash Flow From Ops Free Cash Flow(1) Leverage(2)

2019 Cash Flow Outlook($ in millions)

$548

$160 - $170

$110 - $120

$105 - $115

$67 - $77

Target

2.5x - 3.5x

Divestiture Proceeds

Accelerated Repayment

Required Repayment

$700

$160 - $170 $110 - $120 $105 - $115 2.5x - 3.5xPrior

Guidance

Summary


Summary

Management Team

• Senior operating team complete

• Dedicated SVP, Jen Bolt, to drive manufacturing excellence

Strategy

• Product line strategy – growth teams established in focused markets

• Operational strategic imperatives – being led by senior executives

Clear Objectives

• Accelerate sales growth to 200 bps above market

• Profit growth at 2x sales growth

• Earn a valuation premium


APPENDIX


Cash Flow & Leverage

Debt Payments($ in millions)

(1) Free Cash Flow defined as Cash Flow from Operations

less Capital Expenditures, net

(2) Leverage calculated as total principal amount of debt

outstanding less Cash and Cash Equivalents divided by

trailing 4 quarter Adjusted EBITDA

(3) 3Q18 Accelerated Repayments totaled $588M; $548 from

divestiture proceeds plus $40M from operations

Cash Flow From Ops($ in millions)

Free Cash Flow (1)

($ in millions)

Accelerated Repayment from Divestiture Proceeds

Accelerated Repayment

Required Repayment

• Cash flows in line with

expectations

• Increase in working

capital balances due

to timing of cash

receipts and

payments

• Reduced leverage ratio to

3.4 times adjusted EBITDA

• No significant maturities

until 2021; well within

covenants

Leverage (2)

$595

$40

$548

(3)

2019 1Q Highlights


$0.58 $0.91 $0.98 $0.89 $0.66 $1.01 $1.10 $1.04 $1.00

Historical Financial Results($ in millions except per share amounts)

Adjusted Sales Adjusted EPS

(1) Refer to the appendix of this presentation for a reconciliation of Adjusted Sales and Adjusted EPS to the most directly comparable GAAP measure

(2) The quarterly and annual EPS numbers are calculated independently and may not sum to the total

(3) Excludes impact of foreign currency reported in other gain or loss, net

Impact of foreign currency reported in other gain or loss, net

Adjusted EPS, as reported

Organic

Adjusted

EPS(3)

(2)

$265

$313 $305 $303$(0.05)

$280 $285$301

$292

$315

(1)


2019 Full-Year OutlookSupplemental Items Affecting Cash Flow($ in millions, except per share amounts)


Non-GAAP ReconciliationIncome from Continuing Operations and Diluted EPS Reconciliation – QTD

See the Footnotes to this table on Slide 30 of this presentation

($ in thousands, except per share amounts)


Footnotes to Non-GAAP Reconciliation


Non-GAAP Reconciliation1Q19 Income from Continuing Operations and Diluted EPS Reconciliation – Detailed View ($ in thousands, except per share amounts)

2018

GAAP Non-GAAP Non-GAAP

Sales 314,676$ -$ -$ -$ -$ 314,676$ 291,731$ 7.9%

Cost of sales 226,066 (3,262) - - - 222,804 207,319 7.5%

Gross profit 88,610 3,262 - - - 91,872 84,412 8.8%

Gross margin 28% 1% 0% 0% 0% 29% 29% 0.3%

Operating expenses:

Selling, general and administrative 34,956 (6,592) (1,396) - - 26,968 29,210 -7.7%

SG&A as a % of sales 11% -2% 0% 0% 0% 9% 10% -1.4%

Research, development and engineering 11,595 - - - - 11,595 13,237 -12.4%

RD&E as a % of sales 4% 0% 0% 0% 0% 4% 5% -0.9%

Other operating expenses 2,890 - - (2,890) - - - 0.0%

Total operating expenses 49,441 (6,592) (1,396) (2,890) - 38,563 42,447 -9.2%

Operating income 39,169 9,854 1,396 2,890 - 53,309 41,965 27.0%

Operating margin 12% 3% 0% 1% 0% 17% 14% 2.6%

Interest expense 13,830 - - - (412) 13,418 14,538 -7.7%

Loss on equity investments 41 - - - (41) - - 0.0%

Other loss, net 166 - - - - 166 960 -82.7%

Income before taxes 25,132 9,854 1,396 2,890 453 39,725 26,467 50.1%

Provision for income taxes 3,766 2,058 293 673 95 6,885 6,048 13.8%

Effective tax rate 15% 21% 21% 23% 21% 17% 23% -5.5%

Income from Continuing Operations 21,366$ 7,796$ 1,103$ 2,217$ 358$ 32,840$ 20,419$ 60.8%

Diluted earnings per share 0.65$ 0.24$ 0.03$ 0.07$ 0.01$ 1.00$ 0.63$ 58.7%

Weighted average shares - Diluted 32,980 32,980 32,980 32,980 32,980 32,980 32,423 1.7%

Adjusted

Continuing

Operations

2019

Adjusted

Continuing

Operations CHANGE

Adjustments

Continuing

Operations

Amortization

of intangibles

IP related

litigation

Other

operating

expenses

Debt /

investment

related

charges


Non-GAAP ReconciliationEBITDA and Adjusted EBITDA Reconciliation($ in thousands)


Non-GAAP ReconciliationOrganic Sales Growth Rate Reconciliation (% Change)


Non-GAAP ReconciliationNon-GAAP Organic Growth Rate Reconciliation (% Change)


Non-GAAP Reconciliation2019 Full-Year Outlook(a)



03/29/19 Original 06/30/18 12/28/19 03/29/19

As Reported Rate Rate Rate Rate

Cash & Cash Equivalents 14$

$200M Revolver [Due 2020] 20$ L + 325 L + 325 L + 250 L + 250

TLA [Due 2021] 296$ L + 325 L + 325 L + 250 L + 250

TLB [Due 2022] 611$ L + 425 L + 325 L + 300 L + 300

Total Secured Debt 927$

Senior Unsecured Notes [Due 2023] -$ 9.125% 9.125% -- --

Total Principal Amount of Debt Outstanding 927$

Deferred Fees and OID (15)$

Principal Amount of Debt Outstanding Less Deferred Fees and Discounts 912$

Principal Amount of Debt Outstanding Less Cash 913$

Continuing Operations Statistics

TTM Adjusted EBITDA 271$

TTM Cash Interest Expense 50$

TTM Capital Expenditures 41$

Credit Statistics

Net Total Debt / TTM Adjusted EBITDA 3.4

TTM Adjusted EBITDA / Cash Interest Expense 5.4

Capitalization

(1)

(1) Principal amount of debt outstanding, not reduced for unamortized discount and debt issuance costs

($ in millions)


Contact Information

Tony BorowiczSVP, Strategy, Corporate Development & Investor Relations

[email protected]

www.integer.net

(O) 716.759.5809

http://www.integer.net/

Documents

1Q19 Earnings Conference Call · reduction by energy customers and new product launch with a specific customer. • Trailing 4-quarter reflects flattening of North American drilling