Integer Holdings Corporation Reports Results for Fourth Quarter and Full Year 2023
- Strong sales growth in the fourth quarter and full year of 2023, with a 16% increase in full-year sales compared to 2022.
- Positive trends in GAAP income, adjusted net income, operating income, and EPS, showcasing a healthy financial performance.
- Acquisition of Pulse Technologies for $140 million, with expected sales growth and improved margins, contributing positively to the company's outlook.
- Expectation of 9-11% sales growth in 2024, with projected increases in operating income and EBITDA, demonstrating a positive trajectory for the company.
- Successful execution of strategic initiatives, including new product launches, acquisitions, and market expansions, driving growth across product lines.
- None.
Insights
The reported financial performance of Integer Holdings Corporation reflects a robust growth trajectory, with a 16% year-over-year increase in sales and significant improvements in profitability metrics such as GAAP income and adjusted net income. The expansion of margins and the projection of 9% to 11% sales growth in 2024 suggest operational efficiency and effective management of expenses. The acquisition of Pulse Technologies, which closed in January 2024, is likely to enhance Integer's capabilities in precision micro machining, contributing to the company's future growth.
From a financial perspective, the increased leverage, with total debt rising to $960 million, is noteworthy. The leverage ratio of 3.1 times adjusted EBITDA remains within the company's target range of 2.5x to 3.5x, which indicates a managed approach to leveraging despite the additional debt taken on for acquisitions. Investors should monitor this ratio as it can impact the company's financial flexibility and cost of capital.
The medical device industry is characterized by its reliance on innovation and the integration of advanced technologies. Integer's acquisition of Pulse Technologies aligns with the industry's trajectory towards specialization and precision manufacturing. The reported 20% increase in Cardio & Vascular (C&V) sales and the 15% increase in Cardiac Rhythm Management & Neuromodulation sales reflect strong demand and the successful integration of acquisitions like InNeuroCo. These figures are indicative of Integer's strategic positioning within high-growth segments of the medical device market.
However, the 42% decrease in Electrochem sales in Q4 2023 and a 7% decline in full-year sales suggest a normalization post supply chain recovery, which may require strategic adjustments. The projected growth for 2024, including the impact of the Pulse Technologies acquisition, suggests confidence in the company's ability to continue expanding its market share and improving its product offerings.
The positive financial results and forward-looking statements by Integer Holdings Corporation are indicative of a healthy market demand for medical devices, particularly in the areas of electrophysiology and structural heart products. The company's success in navigating supply chain challenges and executing strategic acquisitions positions it favorably in the competitive landscape. The anticipated sales growth in 2024, along with the expected increase in adjusted operating income, presents a case for Integer's continued market relevance and potential for shareholder value creation.
Investors should consider the broader industry trends, such as regulatory changes, technological advancements and competitive dynamics, which could influence Integer's performance. The company's strategic focus on targeted growth markets and new product launches is essential for maintaining its competitive edge and capitalizing on market opportunities.
~ Strong 4Q and Full Year sales and profit increase versus last year ~
~ Expect
PLANO, Texas, Feb. 15, 2024 (GLOBE NEWSWIRE) -- Integer Holdings Corporation (NYSE:ITGR), a leading medical device outsource manufacturer, today announced results for the three and twelve months ended December 31, 2023. Unless otherwise stated, all results and comparisons are from continuing operations.
Fourth Quarter 2023 Financial Results (compared to fourth quarter 2022, except as noted)
- Sales increased
11% to$413 million . - GAAP income from continuing operations increased
$9 million to$26 million , an increase of54% . Adjusted net income increased$10 million to$47 million , an increase of28% . - GAAP operating income increased
$7 million to$44 million , an increase of18% . Adjusted operating income increased$10 million to$68 million , an increase of18% . - GAAP diluted EPS from continuing operations increased
$0.27 per share to$0.78 per share, an increase of53% . Adjusted EPS increased$0.28 per share to$1.39 per share, an increase of25% . - Adjusted EBITDA increased
$13 million to$86 million , an increase of18% .
Full Year 2023 Financial Results (compared to full year 2022)
- Sales increased
16% to$1.59 7 billion. - GAAP income from continuing operations increased
$25 million to$91 million , an increase of39% . Adjusted net income increased$28 million to$158 million , an increase of22% . - GAAP operating income increased
$46 million to$167 million , an increase of38% . Adjusted operating income increased$50 million to$241 million , an increase of26% . - GAAP diluted EPS from continuing operations increased
$0.73 per share to$2.69 per share, an increase of37% . Adjusted EPS increased$0.79 per share to$4.67 per share, an increase of20% . - Adjusted EBITDA increased
$53 million to$309 million , an increase of21% . - Generated
$180 million of cash flow from operating activities. - Total debt increased
$35 million to$960 million and net total debt increased$43 million to$950 million , mostly attributable to approximately$50 million of costs related to the convertible note issuance and acquisition costs of approximately$50 million , resulting in a leverage ratio of 3.1 times adjusted EBITDA as of December 31, 2023.
Pulse Technologies Acquisition
- Integer acquired Pulse Technologies for approximately
$140 million , subject to customary purchase price adjustments, offset by an expected$15 million NPV tax benefit over 15 years, plus additional purchase consideration contingent on achieving specific revenue growth targets through 2025. - Pulse Technologies’ full year 2023 sales were
$42.5 million with 2023 adjusted EBITDA of$11.0 million . - Integer expects Pulse Technologies’ sales growth and adjusted EBITDA margin to be accretive.
- The transaction closed on January 5, 2024 utilizing borrowings under Integer’s existing revolving credit facility. Integer anticipates it will stay within the 2.5x – 3.5x leverage target following the transaction.
“Integer delivered strong fourth quarter and full year 2023 sales and income with full year sales up
“We expect
Discussion of Product Line Fourth Quarter and Full Year Sales
- Cardio & Vascular (C&V) sales increased
20% in the fourth quarter 2023 compared to fourth quarter 2022, driven by continued strong demand across all markets, new product ramps in electrophysiology and structural heart, the InNeuroCo acquisition and continued supply chain improvements. Full year sales increased20% year-over-year, with double-digit growth across all C&V markets, driven by strong demand, acquisition performance and supply chain improvements. - Cardiac Rhythm Management & Neuromodulation sales increased
7% in the fourth quarter 2023 compared to fourth quarter 2022, with double-digit growth in Neuromodulation, driven by strong demand from emerging customers with PMA (pre-market approval) products. Full year sales increased15% year-over-year, driven by double-digit CRM growth from strong customer demand, double-digit Neuromodulation growth from emerging customers, and supply chain improvements. - Advanced Surgical, Orthopedics & Portable Medical sales increased
1% in the fourth quarter 2023 compared to fourth quarter 2022, driven by execution of the planned multi-year Portable Medical exit announced in 2022, partially offset by single-digit decline of Advanced Surgical and Orthopedics. Full year sales increased9% year-over-year, driven by high double-digit growth in Portable Medical related to demand to support the multi-year Portable Medical exit. - Electrochem sales decreased
42% in the fourth quarter 2023 compared to fourth quarter 2022, returning to a normalized run-rate after previously higher sales from the supply chain recovery. Full year sales declined7% year-over-year, after sales returned to a normalized run-rate in the second half of 2023, following previously higher sales from the supply chain recovery.
2024 Outlook(a)
- 2024 Outlook includes the estimated impact of the Pulse Technologies acquisition in January 2024.
| (dollars in millions, except per share amounts) | GAAP | Non-GAAP(b) | ||||||
| As Reported | Change from Prior Year | Adjusted | Change from Prior Year | |||||
| Sales | N/A | N/A | ||||||
| Operating income | ||||||||
| EBITDA | N/A | N/A | ||||||
| Net income | ||||||||
| Diluted earnings per share | ||||||||
| Cash flow from operating activities | N/A | N/A | ||||||
(a) Except as described below, further reconciliations by line item to the closest corresponding GAAP financial measure for Adjusted operating income, Adjusted EBITDA, Adjusted net income and Adjusted Earnings per Share (“EPS”), all from continuing operations, included in our “2024 Outlook” above, and Adjusted total interest expense, Adjusted effective tax rate and Leverage ratio in “Supplemental Financial Information” below, are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and visibility of the charges excluded from these non-GAAP financial measures.
(b) Adjusted operating income for 2024 consists of GAAP operating income, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, and acquisition and integration costs, totaling approximately
Adjusted EBITDA is expected to consist of Adjusted net income, excluding items such as depreciation, interest, stock-based compensation and taxes totaling approximately
Supplemental Financial Information
| (dollars in millions) | 2024 Outlook | 2023 Actual | |
| Depreciation and amortization | |||
| Adjusted total interest expense(a) | |||
| Stock-based compensation | |||
| Restructuring, acquisition and other charges(b) | |||
| Adjusted effective tax rate(c) | |||
| Leverage ratio(d) | 2.5x to 3.5x | 3.1x | |
| Capital expenditures(d) | |||
| Cash income tax payments | |||
(a) Adjusted total interest expense refers to our expected full-year GAAP interest expense, expected to range from
(b) Restructuring, acquisition and other charges consists of restructuring and restructuring-related charges, acquisition and integration costs, other general expenses and incremental costs of complying with the new European Union medical device regulations.
(c) Adjusted effective tax rate refers to our full-year GAAP effective tax rate, expected to range from
(d) Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding leverage ratio. Capital expenditures is calculated as cash used to acquire property, plant, and equipment (PP&E) less cash proceeds from the sale of PP&E.
Summary Financial Results
(dollars in thousands, except per share data)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||
| 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||
| Operating income | $ | 43,513 | $ | 36,865 | 18.0 | % | $ | 167,330 | $ | 121,327 | 37.9 | % | |||||
| Income from continuing operations | $ | 26,357 | $ | 17,090 | 54.2 | % | $ | 90,650 | $ | 65,350 | 38.7 | % | |||||
| Diluted EPS from continuing operations | $ | 0.78 | $ | 0.51 | 52.9 | % | $ | 2.69 | $ | 1.96 | 37.2 | % | |||||
| EBITDA(a) | $ | 67,105 | $ | 58,153 | 15.4 | % | $ | 258,867 | $ | 206,581 | 25.3 | % | |||||
| Adjusted EBITDA(a) | $ | 86,135 | $ | 73,082 | 17.9 | % | $ | 309,336 | $ | 256,101 | 20.8 | % | |||||
| Adjusted operating income(a) | $ | 67,570 | $ | 57,284 | 18.0 | % | $ | 241,468 | $ | 191,951 | 25.8 | % | |||||
| Adjusted net income(a) | $ | 47,393 | $ | 37,030 | 28.0 | % | $ | 157,796 | $ | 129,548 | 21.8 | % | |||||
| Adjusted EPS(a) | $ | 1.39 | $ | 1.11 | 25.2 | % | $ | 4.67 | $ | 3.88 | 20.4 | % | |||||
(a) EBITDA, Adjusted EBITDA, Adjusted operating income, Adjusted net income, and Adjusted EPS are Non-GAAP financial measures. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of Non-GAAP financial measures. Refer to Tables A, B and C at the end of this release for reconciliations of adjusted amounts to the closest corresponding GAAP financial measures.
Summary Product Line Results
(dollars in thousands)
| Three Months Ended December 31, | |||||||||||
| 2023 | 2022 | Change | Organic Change(a) | ||||||||
| Medical Sales | |||||||||||
| Cardio & Vascular | $ | 222,642 | $ | 185,697 | 19.9 | % | 16.9 | % | |||
| Cardiac Rhythm Management & Neuromodulation | 152,806 | 142,680 | 7.1 | % | 7.1 | % | |||||
| Advanced Surgical, Orthopedics & Portable Medical | 28,613 | 28,401 | 0.7 | % | (9.1) | % | |||||
| Total Medical Sales | 404,061 | 356,778 | 13.3 | % | 11.9 | % | |||||
| Non-Medical Sales | 9,090 | 15,645 | (41.9) | % | (41.9) | % | |||||
| Total Sales | $ | 413,151 | $ | 372,423 | 10.9 | % | 9.5 | % | |||
| Year Ended December 31, | |||||||||||
| 2023 | 2022 | Change | Organic Change(a) | ||||||||
| Medical Sales | |||||||||||
| Cardio & Vascular | $ | 836,342 | $ | 699,469 | 19.6 | % | 18.0 | % | |||
| Cardiac Rhythm Management & Neuromodulation | 610,577 | 532,580 | 14.6 | % | 14.6 | % | |||||
| Advanced Surgical, Orthopedics & Portable Medical | 106,421 | 97,502 | 9.1 | % | (6.5) | % | |||||
| Total Medical Sales | 1,553,340 | 1,329,551 | 16.8 | % | 15.8 | % | |||||
| Non-Medical Sales | 43,333 | 46,545 | (6.9) | % | (6.9) | % | |||||
| Total Sales | $ | 1,596,673 | $ | 1,376,096 | 16.0 | % | 15.0 | % | |||
(a) Organic sales change is a Non-GAAP financial measure. Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of Non-GAAP financial measures and refer to Table D at the end of this release for a reconciliation of these amounts.
Conference Call Information
The Company will host a conference call on Thursday, February 15, 2024, at 8 a.m. CT / 9 a.m. ET to discuss these results. The scheduled conference call will be webcast live and is accessible through our website at investor.integer.net or by dialing (888) 330-3567 (U.S.) or (646) 960-0842 (outside U.S.) and the conference ID is 9252310. The call will be archived on the Company’s website. An earnings call slide presentation containing supplemental information about the Company’s results will be posted to our website at investor.integer.net prior to the conference call and will be referenced during the conference call.
From time to time, the Company posts information that may be of interest to investors on its website at investor.integer.net. To automatically receive Integer financial news by email, please visit investor.integer.net and subscribe to email alerts.
About Integer®
Integer Holdings Corporation (NYSE: ITGR) is one of the largest medical device outsource (MDO) manufacturers in the world serving the cardiac rhythm management, neuromodulation, vascular, portable medical and orthopedics markets. The Company provides innovative, high-quality medical technologies that enhance the lives of patients worldwide. In addition, the Company develops batteries for high-end niche applications in energy, military, and environmental markets. The Company's brands include Greatbatch Medical®, Lake Region Medical® and Electrochem®. Additional information is available at www.integer.net.
Investor Relations
| Andrew Senn | ||
| 763.951.8312 | ||
| andrew.senn@integer.net | ||
Notes Regarding Non-GAAP Financial Information
In addition to our results reported in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we provide adjusted net income, adjusted EPS, earnings before interest, taxes, depreciation and amortization (“EBITDA”), adjusted EBITDA, adjusted operating income, and organic sales change.
Adjusted net income and adjusted EPS consist of GAAP income from continuing operations and diluted EPS from continuing operations, respectively, adjusted for the following to the extent occurring during the period: (i) amortization of intangible assets, (ii) restructuring and restructuring-related charges; (iii) acquisition and integration related costs; (iv) other general expenses; (v) (gain) loss on equity investments; (vi) extinguishment of debt charges; (vii) European Union medical device regulation incremental charges; (viii) inventory step-up amortization; (ix) unusual, or infrequently occurring items; (x) the income tax provision (benefit) related to these adjustments and (xi) certain tax items that are outside the normal tax provision for the period. Adjusted EPS is calculated by dividing adjusted net income by diluted weighted average shares outstanding.
EBITDA is calculated by adding back interest expense, provision for income taxes, depreciation expense, and amortization expense from intangible assets and financing leases, to income from continuing operations, which is the most directly comparable GAAP financial measure. Adjusted EBITDA consists of EBITDA plus adding back stock-based compensation and the same adjustments as listed above except for items (i), (vi), (x) and (xi). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (v), (vi), (x) and (xi).
Adjusted EBITDA for Pulse Technologies is calculated as GAAP net income adjusted for the following items: interest expense, depreciation and amortization expense, as well as items affecting comparability, including adjustments to eliminate expenses associated with excess executive compensation costs and above-market lease expense, and add certain expenses to align with Integer’s accounting policies.
Beginning in the fourth quarter of 2023, we changed the method of calculating Organic sales change to exclude the impact on the growth rate attributable to Portable Medical sales for all periods presented. Organic sales change is reported sales growth adjusted to remove the impact of foreign currency, the contribution of acquisitions and the strategic exit of the Portable Medical market. To calculate the impact of foreign currency on sales growth rates, we convert any sale made in a foreign currency by converting current period sales into prior period sales using the exchange rate in effect at that time and then compare the two, negating any effect foreign currency had on our transactional revenue. For contribution of acquisitions, we exclude the impact on the growth rate attributable to the contribution of acquisitions in all periods where there were no comparable sales. For the strategic exit of the Portable Medical market, we exclude the impact on the growth rate attributable to Portable Medical sales for all periods presented.
We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income, and organic sales change, provides important supplemental information to management and investors seeking to understand the financial and business trends relating to our financial condition and results of operations. In addition to the performance measures identified above, we believe that net total debt and leverage ratio provide meaningful measures of liquidity and a useful basis for assessing our ability to fund our activities, including the financing of acquisitions and debt repayments. Net total debt is calculated as total principal amount of debt outstanding less cash and cash equivalents. We calculate leverage ratio as net total debt divided by adjusted EBITDA for the trailing 4 quarters.
Forward-Looking Statements
Some of the statements contained in this press release are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to; 2024 outlook including future sales, expenses, and profitability; our ability to stay within our leverage targets in future periods; our ability to execute our business model and our business strategy; our ability to execute our business model and our business strategy, including integration of Pulse Technologies and completion and integration of other current or future acquisition targets; having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; projected capital spending; labor attrition; and other events, conditions or developments that will or may occur in the future. You can identify forward-looking statements by terminology such as “outlook,” “projected,” “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “project,” or “continue” or variations or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those stated or implied by these forward-looking statements. In evaluating these statements and our prospects, you should carefully consider the factors set forth below.
Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties that arise from time to time are described in Item 1A, “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC and include the following:
- operational risks, such as the duration, scope and impact of the COVID-19 pandemic, including the evolving health, economic, social and governmental environments and the effect of the pandemic on our associates, suppliers and customers as well as the global economy; our dependence upon a limited number of customers; pricing pressures that we face from customers; our reliance on third party suppliers for raw materials, key products and subcomponents; our ability to attract, train and retain a sufficient number of qualified associates; the potential for harm to our reputation caused by quality problems related to our products; the dependence of our energy market-related revenues on the conditions in the oil and natural gas industry; interruptions in our manufacturing operations; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; and our dependence upon our senior management team and technical personnel;
- strategic risks, such as the intense competition we face and our ability to successfully market our products; our ability to respond to changes in technology; our ability to develop new products and expand into new geographic and product markets; and our ability to successfully identify, make and integrate acquisitions to expand and develop our business in accordance with expectations;
- financial and indebtedness risks, such as our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under our senior secured credit facilities; economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; financial and market risks related to our international operations and sales; our complex international tax profile; and our ability to realize the full value of our intangible assets; and
- legal and compliance risks, such as regulatory issues resulting from product complaints, recalls or regulatory audits; the potential of becoming subject to product liability or intellectual property claims; our ability to protect our intellectual property and proprietary rights; our ability and the cost to comply with environmental regulations; our ability to comply with customer-driven policies and third party standards or certification requirements; our ability to obtain necessary licenses for new technologies; legal and regulatory risks from our international operations; and the fact that the healthcare industry is highly regulated and subject to various regulatory changes.
Except as may be required by law, we assume no obligation to update forward-looking statements in this press release whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.
| Condensed Consolidated Balance Sheets - Unaudited | |||||
| (in thousands) | |||||
| December 31, 2023 | December 31, 2022 | ||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 23,674 | $ | 24,272 | |
| Accounts receivable, net | 238,277 | 224,325 | |||
| Inventories | 239,716 | 208,766 | |||
| Refundable income taxes | 1,998 | 2,003 | |||
| Contract assets | 85,871 | 71,927 | |||
| Prepaid expenses and other current assets | 28,132 | 27,005 | |||
| Total current assets | 617,668 | 558,298 | |||
| Property, plant and equipment, net | 407,954 | 317,243 | |||
| Goodwill | 1,011,007 | 982,192 | |||
| Other intangible assets, net | 783,146 | 819,889 | |||
| Deferred income taxes | 7,001 | 6,247 | |||
| Operating lease assets | 81,632 | 74,809 | |||
| Financing lease assets | 11,828 | 8,852 | |||
| Other long-term assets | 22,417 | 26,856 | |||
| Total assets | $ | 2,942,653 | $ | 2,794,386 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Current portion of long-term debt | $ | — | $ | 18,188 | |
| Accounts payable | 120,293 | 110,780 | |||
| Income taxes payable | 3,896 | 10,923 | |||
| Operating lease liabilities | 8,692 | 10,362 | |||
| Accrued expenses and other current liabilities | 88,088 | 73,499 | |||
| Total current liabilities | 220,969 | 223,752 | |||
| Long-term debt | 959,925 | 907,073 | |||
| Deferred income taxes | 145,625 | 160,671 | |||
| Operating lease liabilities | 72,339 | 64,049 | |||
| Financing lease liabilities | 10,388 | 8,006 | |||
| Other long-term liabilities | 14,365 | 13,379 | |||
| Total liabilities | 1,423,611 | 1,376,930 | |||
| Stockholders’ equity: | |||||
| Common stock | 33 | 33 | |||
| Additional paid-in capital | 727,435 | 731,393 | |||
| Retained earnings | 771,351 | 680,701 | |||
| Accumulated other comprehensive income | 20,223 | 5,329 | |||
| Total stockholders’ equity | 1,519,042 | 1,417,456 | |||
| Total liabilities and stockholders’ equity | $ | 2,942,653 | $ | 2,794,386 | |
| Condensed Consolidated Statements of Operations - Unaudited | |||||||||||||
| (in thousands except per share data) | |||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Sales | $ | 413,151 | $ | 372,423 | $ | 1,596,673 | $ | 1,376,096 | |||||
| Cost of sales (COS) | 302,895 | 274,507 | 1,178,384 | 1,017,090 | |||||||||
| Gross profit | 110,256 | 97,916 | 418,289 | 359,006 | |||||||||
| Operating expenses: | |||||||||||||
| Selling, general and administrative (SG&A) | 45,804 | 41,037 | 175,619 | 160,578 | |||||||||
| Research, development and engineering | 13,257 | 13,841 | 63,771 | 60,918 | |||||||||
| Restructuring and other charges | 7,682 | 6,173 | 11,569 | 16,183 | |||||||||
| Total operating expenses | 66,743 | 61,051 | 250,959 | 237,679 | |||||||||
| Operating income | 43,513 | 36,865 | 167,330 | 121,327 | |||||||||
| Interest expense | 12,690 | 14,215 | 53,370 | 38,632 | |||||||||
| Loss on equity investments, net | 2,219 | 2,025 | 5,691 | 7,636 | |||||||||
| Other (income) loss, net | (724 | ) | 33 | 975 | (899 | ) | |||||||
| Income from continuing operations before income taxes | 29,328 | 20,592 | 107,294 | 75,958 | |||||||||
| Provision for income taxes | 2,971 | 3,502 | 16,644 | 10,608 | |||||||||
| Income from continuing operations | $ | 26,357 | $ | 17,090 | $ | 90,650 | $ | 65,350 | |||||
| Discontinued operations: | |||||||||||||
| Income from discontinued operations before income taxes | — | 1,323 | — | 1,323 | |||||||||
| Provision for income taxes | — | 296 | — | 296 | |||||||||
| Income from discontinued operations | $ | — | $ | 1,027 | $ | — | $ | 1,027 | |||||
| Net income | $ | 26,357 | $ | 18,117 | $ | 90,650 | $ | 66,377 | |||||
| Basic earnings per share: | |||||||||||||
| Income from continuing operations | $ | 0.79 | $ | 0.52 | $ | 2.72 | $ | 1.97 | |||||
| Income from discontinued operations | — | 0.03 | — | 0.03 | |||||||||
| Basic earnings per share | 0.79 | 0.55 | 2.72 | 2.00 | |||||||||
| Diluted earnings per share: | |||||||||||||
| Income from continuing operations | $ | 0.78 | $ | 0.51 | $ | 2.69 | $ | 1.96 | |||||
| Income from discontinued operations | — | 0.03 | — | 0.03 | |||||||||
| Diluted earnings per share | 0.78 | 0.54 | 2.69 | 1.99 | |||||||||
| Weighted average shares outstanding: | |||||||||||||
| Basic | 33,364 | 33,161 | 33,320 | 33,127 | |||||||||
| Diluted | 33,987 | 33,438 | 33,758 | 33,357 | |||||||||
| Condensed Consolidated Statements of Cash Flows(a) - Unaudited | |||||||
| (in thousands) | |||||||
| Year Ended December 31, | |||||||
| 2023 | 2022 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 90,650 | $ | 66,377 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 98,841 | 91,991 | |||||
| Debt related charges included in interest expense | 8,054 | 2,036 | |||||
| Inventory step-up amortization | 590 | 798 | |||||
| Stock-based compensation | 23,283 | 21,023 | |||||
| Non-cash lease expense | 11,248 | 10,914 | |||||
| Non-cash loss on equity investments | 5,691 | 7,636 | |||||
| Contingent consideration fair value adjustment | (736 | ) | 3,097 | ||||
| Other non-cash losses | 4,379 | 5,854 | |||||
| Deferred income taxes | (9,490 | ) | (17,498 | ) | |||
| Changes in operating assets and liabilities, net of acquisitions: | |||||||
| Accounts receivable | (7,437 | ) | (41,380 | ) | |||
| Inventories | (30,178 | ) | (56,721 | ) | |||
| Prepaid expenses and other assets | (930 | ) | 764 | ||||
| Contract assets | (13,646 | ) | (7,543 | ) | |||
| Accounts payable | (520 | ) | 26,038 | ||||
| Accrued expenses and other liabilities | 7,908 | (9,529 | ) | ||||
| Income taxes payable | (7,494 | ) | 12,524 | ||||
| Net cash provided by operating activities | 180,213 | 116,381 | |||||
| Cash flows from investing activities: | |||||||
| Acquisition of property, plant and equipment | (119,938 | ) | (74,728 | ) | |||
| Proceeds from sale of property, plant and equipment | 173 | 639 | |||||
| Proceeds from return of capital from equity investments | — | 304 | |||||
| Acquisitions, net of cash acquired | (43,602 | ) | (126,636 | ) | |||
| Net cash used in investing activities | (163,367 | ) | (200,421 | ) | |||
| Cash flows from financing activities: | |||||||
| Principal payments of term loans | (415,938 | ) | (25,249 | ) | |||
| Proceeds from issuance of convertible notes, net of discount | 486,250 | — | |||||
| Proceeds from revolving credit facility | 383,103 | 166,000 | |||||
| Payments of revolving credit facility | (424,801 | ) | (45,000 | ) | |||
| Purchase of capped calls | (35,000 | ) | — | ||||
| Payment of debt issuance costs | (2,181 | ) | — | ||||
| Proceeds from the exercise of stock options | 2,303 | 150 | |||||
| Tax withholdings related to net share settlements of restricted stock units | (3,098 | ) | (2,929 | ) | |||
| Proceeds from contingent consideration | — | 1,319 | |||||
| Payment of contingent consideration | (7,660 | ) | (972 | ) | |||
| Principal payments on finance leases | (992 | ) | (843 | ) | |||
| Net cash provided (used in) by financing activities | (18,014 | ) | 92,476 | ||||
| Effect of foreign currency exchange rates on cash and cash equivalents | 570 | (2,049 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (598 | ) | 6,387 | ||||
| Cash and cash equivalents, beginning of year | 24,272 | 17,885 | |||||
| Cash and cash equivalents, end of year | $ | 23,674 | $ | 24,272 | |||
(a) The Condensed Consolidated Statements of Cash Flows - Unaudited includes cash flows related to discontinued operations.
Reconciliations of Non-GAAP Measures from Continuing Operations
Table A: Income from Continuing Operations and Diluted EPS Reconciliations
(in thousands, except per share data)
| Three Months Ended December 31, | |||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||
| Pre-Tax | Net of Tax | Per Diluted Share | Pre-Tax | Net of Tax | Per Diluted Share | ||||||||||||||
| Income from continuing operations (GAAP) | $ | 29,328 | $ | 26,357 | $ | 0.78 | $ | 20,592 | $ | 17,090 | $ | 0.51 | |||||||
| Adjustments(a): | |||||||||||||||||||
| Amortization of intangible assets(b) | 13,394 | 10,584 | 0.31 | 12,298 | 9,720 | 0.29 | |||||||||||||
| Restructuring and restructuring-related charges(c) | 4,820 | 4,238 | 0.12 | 3,370 | 2,647 | 0.08 | |||||||||||||
| Acquisition and integration costs(d) | 1,729 | 1,324 | 0.04 | 4,209 | 3,375 | 0.10 | |||||||||||||
| Other general expenses(e) | 1,973 | 1,330 | 0.04 | 61 | 41 | — | |||||||||||||
| Loss on equity investments(f) | 2,219 | 1,753 | 0.05 | 2,025 | 1,600 | 0.05 | |||||||||||||
| Loss on extinguishment of debt(g) | — | — | — | 114 | 90 | — | |||||||||||||
| Medical device regulations(h) | 364 | 287 | 0.01 | 493 | 389 | 0.01 | |||||||||||||
| Other adjustments(i) | 1,187 | 938 | 0.03 | (12 | ) | (11 | ) | — | |||||||||||
| Inventory step-up amortization (COS)(j) | 590 | 466 | 0.01 | — | — | — | |||||||||||||
| Tax adjustments(k) | — | 116 | — | — | 2,089 | 0.06 | |||||||||||||
| Adjusted net income (Non-GAAP) | $ | 55,604 | $ | 47,393 | $ | 1.39 | $ | 43,150 | $ | 37,030 | $ | 1.11 | |||||||
| Weighted average shares for diluted EPS | 33,987 | 33,438 | |||||||||||||||||
| Year Ended December 31, | |||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||
| Pre-Tax | Net of Tax | Per Diluted Share | Pre-Tax | Net of Tax | Per Diluted Share | ||||||||||||||
| Income from continuing operations (GAAP) | $ | 107,294 | $ | 90,650 | $ | 2.69 | $ | 75,958 | $ | 65,350 | $ | 1.96 | |||||||
| Adjustments(a): | |||||||||||||||||||
| Amortization of intangible assets(b) | 52,530 | 41,518 | 1.23 | 48,313 | 38,185 | 1.14 | |||||||||||||
| Restructuring and restructuring-related charges(c) | 10,444 | 8,723 | 0.26 | 9,265 | 7,251 | 0.22 | |||||||||||||
| Acquisition and integration costs(d) | 3,444 | 2,606 | 0.08 | 10,075 | 8,029 | 0.24 | |||||||||||||
| Other general expenses(e) | 2,110 | 1,437 | 0.04 | 1,188 | 902 | 0.03 | |||||||||||||
| Loss on equity investments(f) | 5,691 | 4,496 | 0.13 | 7,636 | 6,033 | 0.18 | |||||||||||||
| Loss on extinguishment of debt(g) | 4,518 | 3,569 | 0.11 | 114 | 90 | — | |||||||||||||
| Medical device regulations(h) | 1,605 | 1,268 | 0.04 | 1,105 | 873 | 0.03 | |||||||||||||
| Other adjustments(i) | 3,415 | 2,698 | 0.08 | (120 | ) | (95 | ) | — | |||||||||||
| Inventory step-up amortization (COS)(j) | 590 | 466 | 0.01 | 798 | 630 | 0.02 | |||||||||||||
| Tax adjustments(k) | — | 365 | 0.01 | — | 2,300 | 0.07 | |||||||||||||
| Adjusted net income (Non-GAAP) | $ | 191,641 | $ | 157,796 | $ | 4.67 | $ | 154,332 | $ | 129,548 | $ | 3.88 | |||||||
| Weighted average shares for diluted EPS | 33,758 | 33,357 | |||||||||||||||||
(a) The difference between pre-tax and net of tax amounts is the estimated tax impact related to the respective adjustment. Net of tax amounts are computed using a
(b) Total expense from amortization of intangible assets and financing leases less amounts included in Restructuring and restructuring-related charges.
(c) We initiate discrete restructuring programs primarily to realign resources to better serve our customers and markets, improve operational efficiency and capabilities, and lower operating costs or improve profitability. Depending on the program, restructuring charges may include termination benefits, contract termination, facility closure and other exit and disposal costs. Restructuring-related expenses are directly related to the program and may include retention bonuses, accelerated depreciation, consulting expense and costs to transfer manufacturing operations among our facilities. Included in restructuring charges for the fourth quarter of 2023 are
(d) Acquisition and integration costs are incremental costs that are directly related to a business or asset acquisition. These costs may include, among other things, professional, consulting and other fees, system integration costs, and fair value adjustments relating to contingent consideration.
(e) The expenses for the 2023 and 2022 periods include gains and losses in connection with the disposal of property, plant and equipment. The 2023 amounts also include
(f) During the third and fourth quarters of 2023, we determined that investments in our non-marketable equity securities were impaired and recorded impairment charges of of
(g) Loss on extinguishment of debt consists of accelerated write-offs of unamortized deferred debt issuance costs and discounts which are included in interest expense. The 2023 amounts represent a write-off of unamortized deferred debt issuance costs and discounts in connection with the amendments to the credit agreement governing our credit facilities, prepayments of portions of our Term Loan A facility, and repayment in full of our Term B Loan Facility.
(h) The charges represent incremental costs of complying with the new European Union medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses.
(i) For the 2023 periods, amounts relate to costs associated with leadership transitions and certain formal strategic projects. Leadership transition costs primarily include severance costs associated with the departure of executives and incremental costs associated with the related leadership transitions. Strategic projects primarily involve system reconfiguration to support our manufacturing excellence operational strategic imperative and investments in certain technology and platform development to align our capabilities to meet customer needs. Other adjustments for the quarter and year ended December 31, 2023 included pre-tax leadership transition costs of
(j) The accounting associated with our acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of inventory. The increase in inventory value is amortized to cost of sales over the period that the related inventory is sold. We exclude inventory step-up amortization from our non-GAAP financial measures because it is a non-cash expense that we do not believe is indicative of our ongoing operating results.
(k) For the 2023 and 2022 periods, tax adjustments predominately relate to acquired foreign tax credits, including utilization, changes to uncertain tax benefits and associated interest. For the 2023 periods, tax adjustments also include equity investment impairments that are not deductible for tax purposes. For the 2022 periods, tax adjustments also include acquisition costs that are not deductible for tax purposes.
Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding our use of non-GAAP financial measures.
Table B: Adjusted Operating Income Reconciliations
(in thousands)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Operating income (GAAP) | $ | 43,513 | $ | 36,865 | $ | 167,330 | $ | 121,327 | |||||
| Adjustments: | |||||||||||||
| Amortization of intangible assets | 13,394 | 12,298 | 52,530 | 48,313 | |||||||||
| Restructuring and restructuring-related charges | 4,820 | 3,370 | 10,444 | 9,265 | |||||||||
| Acquisition and integration costs | 1,729 | 4,209 | 3,444 | 10,075 | |||||||||
| Other general expenses | 1,973 | 61 | 2,110 | 1,188 | |||||||||
| Medical device regulations | 364 | 493 | 1,605 | 1,105 | |||||||||
| Other adjustments | 1,187 | (12 | ) | 3,415 | (120 | ) | |||||||
| Inventory step-up amortization | 590 | — | 590 | 798 | |||||||||
| Adjusted operating income (Non-GAAP) | $ | 67,570 | $ | 57,284 | $ | 241,468 | $ | 191,951 | |||||
Table C: EBITDA Reconciliations
(in thousands)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| Income from continuing operations (GAAP) | $ | 26,357 | $ | 17,090 | $ | 90,650 | $ | 65,350 | |||||
| Interest expense | 12,690 | 14,215 | 53,370 | 38,632 | |||||||||
| Provision for income taxes | 2,971 | 3,502 | 16,644 | 10,608 | |||||||||
| Depreciation | 11,324 | 10,736 | 44,306 | 42,617 | |||||||||
| Amortization of intangible assets and financing leases(a) | 13,763 | 12,610 | 53,897 | 49,374 | |||||||||
| EBITDA (Non-GAAP) | 67,105 | 58,153 | 258,867 | 206,581 | |||||||||
| Stock-based compensation(b) | 6,148 | 4,783 | 23,170 | 19,573 | |||||||||
| Restructuring and restructuring-related charges | 4,820 | 3,370 | 10,444 | 9,265 | |||||||||
| Acquisition and integration costs | 1,729 | 4,209 | 3,444 | 10,075 | |||||||||
| Other general expenses | 1,973 | 61 | 2,110 | 1,188 | |||||||||
| Loss on equity investments | 2,219 | 2,025 | 5,691 | 7,636 | |||||||||
| Medical device regulations | 364 | 493 | 1,605 | 1,105 | |||||||||
| Other adjustments | 1,187 | (12 | ) | 3,415 | (120 | ) | |||||||
| Inventory step-up amortization | 590 | — | 590 | 798 | |||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 86,135 | $ | 73,082 | $ | 309,336 | $ | 256,101 | |||||
(a) Total expense from amortization of intangible assets and financing leases less amounts included in Restructuring and restructuring-related charges.
(b) Total stock-based compensation expense less amounts included in Restructuring and restructuring-related charges and Acquisition and integration costs.
2023 Adjusted EBITDA for Pulse Technologies of
Table D: Organic Sales Change Reconciliation (% Change)
| GAAP Reported Growth | Impact of Foreign Currency(a) | Impact of Strategic Exits and Acquisitions(a) | Non-GAAP Organic Change | ||||||||
| QTD Change (4Q 2023 vs. 4Q 2022) | |||||||||||
| Medical Sales | |||||||||||
| Cardio & Vascular | 19.9 | % | 0.2 | % | 2.8 | % | 16.9 | % | |||
| Cardiac Rhythm Management & Neuromodulation | 7.1 | % | — | % | — | % | 7.1 | % | |||
| Advanced Surgical, Orthopedics & Portable Medical | 0.7 | % | — | % | 9.8 | % | (9.1 | )% | |||
| Total Medical Sales | 13.3 | % | 0.1 | % | 1.3 | % | 11.9 | % | |||
| Non-Medical Sales | (41.9 | )% | — | — | (41.9 | )% | |||||
| Total Sales | 10.9 | % | 0.1 | % | 1.3 | % | 9.5 | % | |||
| YTD Change (2023 vs. 2022) | |||||||||||
| Medical Sales | |||||||||||
| Cardio & Vascular | 19.6 | % | 0.2 | % | 1.4 | % | 18.0 | % | |||
| Cardiac Rhythm Management & Neuromodulation | 14.6 | % | — | % | — | % | 14.6 | % | |||
| Advanced Surgical, Orthopedics & Portable Medical | 9.1 | % | — | % | 15.6 | % | (6.5 | )% | |||
| Total Medical Sales | 16.8 | % | — | % | 1.0 | % | 15.8 | % | |||
| Non-Medical Sales | (6.9 | )% | — | — | (6.9 | )% | |||||
| Total Sales | 16.0 | % | — | % | 1.0 | % | 15.0 | % | |||
(a) Sales growth has been adjusted to exclude the impact of foreign currency exchange rate fluctuations and acquisitions and strategic exits.
Table E: Net Total Debt Reconciliation
(in thousands)
| December 31, 2023 | September 29, 2023 | December 31, 2022 | ||||||
| Total debt | $ | 959,925 | $ | 941,383 | $ | 925,261 | ||
| Add: Debt discounts and deferred issuance costs included in Total debt | 14,075 | 14,864 | 5,977 | |||||
| Total principal amount of debt outstanding | 974,000 | 956,247 | 931,238 | |||||
| LESS: Cash and cash equivalents | 23,674 | 32,142 | 24,272 | |||||
| Net Total Debt (Non-GAAP) | $ | 950,326 | $ | 924,105 | $ | 906,966 | ||
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