Integer Holdings Corporation Reports Results for Fourth Quarter and Full Year 2022

Rhea-AI Summary

Integer Holdings Corporation (NYSE:ITGR) reported a 19% sales growth in Q4 2022, reaching $372 million, with annual sales up 13% to $1.376 billion. Despite the growth, GAAP income decreased 15% to $17 million in Q4 and 30% to $65 million for the full year. Adjusted net income rose 12% to $37 million in Q4. The company expects 7% to 9% sales growth in 2023, driven by improving operational efficiencies and capacity investments. Debt increased to $925 million, linked to the Aran Biomedical acquisition. Integer remains optimistic about sustained above-market growth despite challenges in the supply chain.

Positive

• Fourth quarter sales increased by 19% year-over-year to $372 million.
• Adjusted net income rose 12% to $37 million in Q4 2022.
• Sales for the full year increased 13% to $1.376 billion.
• Expected 7% to 9% sales growth in 2023 driven by operational efficiencies.
• Cash flow from operating activities generated $116 million.

Negative

• GAAP income from continuing operations decreased by 15% to $17 million in Q4.
• Full-year GAAP income decreased by 30% to $65 million.
• Total debt rose to $925 million, increasing financial leverage.

~ Strong sales growth over last year of 19% in 4Q22 and 13% for the full year ~
~ Expect 7% to 9% sales growth in 2023 with expanding margins ~

PLANO, Texas, Feb. 16, 2023 (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, 2022. Unless otherwise stated, all results and comparisons are from continuing operations.

Fourth Quarter 2022 Financial Results (compared to fourth quarter 2021, except as noted)

• Sales increased 19% to $372 million.
• GAAP income from continuing operations decreased $3 million to $17 million, a decrease of 15%. Adjusted net income increased $4 million to $37 million, an increase of 12%.
• GAAP operating income increased $8 million to $37 million, an increase of 29%. Adjusted operating income increased $13 million to $57 million, an increase of 30%.
• GAAP diluted EPS from continuing operations decreased $0.09 per share to $0.51 per share, a decrease of 15%. Adjusted EPS increased $0.12 per share to $1.11 per share, an increase of 12%.
• Adjusted EBITDA increased $15 million to $73 million, an increase of 25%.
  

Full Year 2022 Financial Results (compared to full year 2021)

• Sales increased 13% to $1.376 billion.
• GAAP income from continuing operations decreased $28 million to $65 million, a decrease of 30%. Adjusted net income decreased $6 million to $130 million, a decrease of 4%.
• GAAP operating income decreased $14 million to $121 million, a decrease of 11%. Adjusted operating income increased $5 million to $192 million, an increase of 3%.
• GAAP diluted EPS from continuing operations decreased $0.84 per share to $1.96 per share, a decrease of 30%. Adjusted EPS decreased $0.20 per share to $3.88 per share, a decrease of 5%.
• Adjusted EBITDA increased $13 million to $256 million, an increase of 5%.
• Generated $116 million of cash flow from operating activities.
• Total debt increased $97 million to $925 million and net total debt increased $89 million to $907 million, attributable to the Aran Biomedical acquisition for $129 million, resulting in a leverage ratio of 3.5x times adjusted EBITDA as of December 31, 2022.
  

“Integer delivered fourth quarter and full year 2022 sales and income at the high-end of 2022 earnings guidance, while continuing to improve its ability to manage a challenging supply chain environment and deliver for customers and the patients they serve,” said Joseph Dziedzic, Integer’s president and CEO.

“We expect 7% to 9% organic sales growth in 2023, which begins what we project will be sustained above-market growth. We expect adjusted operating income to grow 10% to 16% from operational efficiencies in what remains a challenging supply chain environment. We continue to execute our strategy, and to deliver sustained above-market sales growth we are making critical capacity investments in 2023.”

Discussion of Product Line Fourth Quarter and Full Year Sales

• Cardio & Vascular (C&V) sales increased 20% in the fourth quarter 2022 compared to fourth quarter 2021, driven by strong demand across all markets, especially structural heart, and key products, such as guidewires, as well as incremental sales from the acquisitions and the complex catheter supplier’s delivery performance gradually improving versus third quarter 2022. Full year sales increased 18% year-over-year, with double-digit growth across most C&V markets, driven by customer demand and strong acquisition performance.
• Cardiac Rhythm Management & Neuromodulation sales increased 14% in the fourth quarter 2022 compared to fourth quarter 2021 driven by growth from the Oscor acquisition and improved supplier delivery performance versus third quarter 2022 for neuromodulation products. Full year sales increased 6% year-over-year, driven by the Oscor acquisition, with mid-single digit growth in both Cardiac Rhythm Management and Neuromodulation.
• Advanced Surgical, Orthopedics & Portable Medical sales increased 32% in the fourth quarter 2022 compared to fourth quarter 2021, driven by higher demand to support the start of the multi-year Portable Medical exit announced in 2022 and low-double digit growth in Advanced Surgical and Orthopedics. Full year sales increased 12% year-over-year, driven by low double-digit growth in Portable Medical related to demand to support the multi-year Portable Medical exit.
• Electrochem sales increased 41% in the fourth quarter 2022 compared to fourth quarter 2021, driven by strong demand across all market segments and supplier delivery recovery. Full year sales increased 21% year-over-year driven by mid-single digit energy market growth and strong demand in military and environmental markets.

2023 Outlook^(a)

• 2023 Outlook includes the benefit of lower interest expense from the $500 million 2.125% coupon convertible note offering closed on February 3, 2023.
  

(dollars in millions, except per share amounts)		GAAP				Non-GAAP(b)
		As Reported		Change from Prior Year		Adjusted		Change from Prior Year
Sales		$1,470 to $1,500		7% to 9%		N/A		N/A
Operating income		$134 to $145		10% to 19%		$211 to $222		10% to 16%
EBITDA		N/A		N/A		$285 to $296		11% to 16%
Net income		$71 to $81		8% to 24%		$134 to $144		4% to 11%
Diluted earnings per share		$2.11 to $2.41		8% to 23%		$4.00 to $4.30		3% to 11%
Cash flow from operating activities		$180 to $200		55% to 72%		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 “2023 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 2023 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 $77 million, pre-tax. Adjusted net income and Adjusted EPS for 2023 consist of GAAP net income and diluted EPS, excluding items such as amortization of intangible assets, restructuring and restructuring-related charges, acquisition and integration costs, and gain or loss on equity investments totaling approximately $81 million, pre-tax. The after-tax impact of these items is estimated to be approximately $63 million, or approximately $1.89 per diluted share.

Adjusted EBITDA is expected to consist of Adjusted net income, excluding items such as depreciation, interest, stock-based compensation and taxes totaling approximately $151 million to $152 million.

Supplemental Financial Information

(dollars in millions)	2023 Outlook		2022 Actual
Depreciation and amortization	$100 to $110		$92
Adjusted total interest expense(a)	$45 to $50		$39
Stock-based compensation	$22 to $25		$21
Restructuring, acquisition and other charges(b)	$18 to $23		$21
Adjusted effective tax rate(c)	17.0% to 19.0%		16.1%
Leverage ratio(d)	2.5x to 3.5x		3.5x
Capital expenditures(d)	$100 to $120		$74
Cash income tax payments	$27 to $31		$11

^(a) Adjusted total interest expense refers to our expected full-year GAAP total interest expense, expected to range from $49 million to $54 million for 2023, adjusted to remove the full-year impact of charges associated with the accelerated write-off of deferred issuance costs and unamortized discounts (loss on extinguishment of debt) included in GAAP total interest expense, if any.

^(b) Restructuring, acquisition and other charges consists of restructuring and restructuring-related charges, acquisition and integration costs and other general expenses.

^(c) Adjusted effective tax rate refers to our full-year GAAP effective tax rate, expected to range from 15.0% to 17.0% for 2023, adjusted to reflect the full-year impact of the items that are excluded in providing adjusted net income and certain other identified items.

^(d) Please see “Notes Regarding Non-GAAP Financial Information” for additional information regarding leverage ratio and capital expenditures.

Summary Financial Results
(dollars in thousands, except per share data)

	Three Months Ended December 31,									Year Ended December 31,
		2022			2021		Change				2022			2021		Change
Operating income	$	36,865		$	28,663		28.6	%		$	121,327		$	135,711		(10.6	)%
Income from continuing operations	$	17,090		$	20,001		(14.6	)%		$	65,350		$	93,020		(29.7	)%
Diluted EPS from continuing operations	$	0.51		$	0.60		(15.0	)%		$	1.96		$	2.80		(30.0	)%
EBITDA from continuing operations(a)	$	58,153		$	48,529		19.8	%		$	206,581		$	214,060		(3.5	)%
Adjusted EBITDA(a)	$	73,082		$	58,469		25.0	%		$	256,101		$	242,983		5.4	%
Adjusted operating income(a)	$	57,284		$	44,019		30.1	%		$	191,951		$	187,175		2.6	%
Adjusted net income(a)	$	37,030		$	33,057		12.0	%		$	129,548		$	135,550		(4.4	)%
Adjusted EPS(a)	$	1.11		$	0.99		12.1	%		$	3.88		$	4.08		(4.9	)%

^(a) EBITDA from continuing operations, 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,
		2022			2021		Change			Organic Change(a)
Medical Sales
Cardio & Vascular	$	185,697		$	154,952		19.8	%		13.1	%
Cardiac Rhythm Management & Neuromodulation		142,680			125,500		13.7	%		8.1	%
Advanced Surgical, Orthopedics & Portable Medical		28,401			21,462		32.3	%		32.4	%
Total Medical Sales		356,778			301,914		18.2	%		12.4	%
Non-Medical Sales		15,645			11,101		40.9	%		40.9	%
Total Sales	$	372,423		$	313,015		19.0	%		13.4	%
	Year Ended December 31,
		2022			2021		Change			Organic Change(a)
Medical Sales
Cardio & Vascular	$	699,469		$	593,117		17.9	%		11.5	%
Cardiac Rhythm Management & Neuromodulation		532,580			502,288		6.0	%		(1.5	)%
Advanced Surgical, Orthopedics & Portable Medical		97,502			87,221		11.8	%		11.9	%
Total Medical Sales		1,329,551			1,182,626		12.4	%		6.0	%
Non-Medical Sales		46,545			38,453		21.0	%		21.0	%
Total Sales	$	1,376,096		$	1,221,079		12.7	%		6.5	%

^(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 C 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 16, 2023, 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.

Contact Information

Tony Borowicz		Andrew Senn
SVP, Investor Relations		SVP, Strategy & Business Development
716.759.5809		763.951.8312
tony.borowicz@integer.net		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 rates.

Adjusted net income and adjusted EPS consist of GAAP amounts adjusted for the following to the extent occurring during the period: (i) amortization of intangible assets, (ii) certain legal expenses, (iii) restructuring and restructuring-related charges; (iv) acquisition and integration related costs; (v) other general expenses; (vi) (gain) loss on equity investments; (vii) extinguishment of debt charges; (viii) European Union medical device regulation incremental charges, (ix) inventory step-up amortization; (x) unusual, or infrequently occurring items; (xi) the income tax provision (benefit) related to these adjustments and (xii) 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 (benefit) for income taxes, depreciation expense, and amortization expense from intangible assets and financing leases, to net income, 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), (vii), (xi) and (xii). Adjusted operating income consists of operating income adjusted for the same items listed above except for items (vi), (vii), (xi) and (xii).

Organic sales change is reported sales growth adjusted for the impact of foreign currency and the contribution of acquisitions. 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, and exclude the amount of sales acquired or divested during the period from the current/previous period amounts, respectively.

We believe that the presentation of adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA, adjusted operating income, and organic sales change rates, 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. Free cash flow is defined as Net cash provided by operating activities (as stated in our Condensed Consolidated Statements of Cash Flows) reduced by capital expenditures (acquisition of property, plant, and equipment (PP&E), net of proceeds from the sale of PP&E).

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; fourth quarter and full year 2022 performance, 2023 outlook, future sales, expenses, and profitability; customer demand; supplier performance (including delivery delays); costs (including wages, staffing levels and freight); future development and expected growth of our business and industry, including expansion of our manufacturing capacity; our ability to execute our business model and our business strategy, including completion and integration of 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; 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 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, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	24,272		$	17,885
Accounts receivable, net		224,325			182,310
Inventories		208,766			155,699
Refundable income taxes		2,003			4,735
Contract assets		71,927			64,743
Prepaid expenses and other current assets		27,005			27,610
Total current assets		558,298			452,982
Property, plant and equipment, net		317,243			277,099
Goodwill		982,192			924,704
Other intangible assets, net		819,889			807,810
Deferred income taxes		6,247			5,711
Operating lease assets		74,809			70,053
Financing lease assets		8,852			8,047
Other long-term assets		26,856			35,809
Total assets	$	2,794,386		$	2,582,215
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	18,188		$	15,250
Accounts payable		110,780			76,859
Income taxes payable		10,923			725
Operating lease liabilities		10,362			9,862
Accrued expenses and other current liabilities		73,499			56,933
Total current liabilities		223,752			159,629
Long-term debt		907,073			812,876
Deferred income taxes		160,671			171,505
Operating lease liabilities		64,049			59,767
Financing lease liabilities		8,006			7,450
Other long-term liabilities		13,379			16,291
Total liabilities		1,376,930			1,227,518
Stockholders’ equity:
Common stock		33			33
Additional paid-in capital		731,393			713,150
Retained earnings		680,701			614,324
Accumulated other comprehensive income		5,329			27,190
Total stockholders’ equity		1,417,456			1,354,697
Total liabilities and stockholders’ equity	$	2,794,386		$	2,582,215

Condensed Consolidated Statements of Operations - Unaudited
(in thousands except per share data)
	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Sales	$	372,423			$	313,015			$	1,376,096			$	1,221,079
Cost of sales (COS)		274,507				231,149				1,017,090				884,109
Gross profit		97,916				81,866				359,006				336,970
Operating expenses:
Selling, general and administrative (SG&A)		41,037				36,268				160,578				141,418
Research, development and engineering		13,841				12,736				60,918				51,985
Restructuring and other charges		6,173				4,199				16,183				7,856
Total operating expenses		61,051				53,203				237,679				201,259
Operating income		36,865				28,663				121,327				135,711
Interest expense		14,215				5,511				38,632				31,628
Loss on equity investments, net		2,025				1,276				7,636				3,143
Other (income) loss, net		33				(252	)			(899	)			(123	)
Income from continuing operations before income taxes		20,592				22,128				75,958				101,063
Provision for income taxes		3,502				2,127				10,608				8,043
Income from continuing operations	$	17,090			$	20,001			$	65,350			$	93,020
Discontinued operations:
Income from discontinued operations before income taxes		1,323				4,931				1,323				4,931
Provision for income taxes		296				1,143				296				1,143
Income from discontinued operations	$	1,027			$	3,788			$	1,027			$	3,788
Net income	$	18,117			$	23,789			$	66,377			$	96,808
Basic earnings per share:
Income from continuing operations	$	0.52			$	0.61			$	1.97			$	2.82
Income from discontinued operations		0.03				0.11				0.03				0.11
Basic earnings per share		0.55				0.72				2.00				2.93
Diluted earnings per share:
Income from continuing operations	$	0.51			$	0.60			$	1.96			$	2.80
Income from discontinued operations		0.03				0.11				0.03				0.11
Diluted earnings per share		0.54				0.71				1.99				2.91
Weighted average shares outstanding:
Basic		33,161				33,023				33,127				32,993
Diluted		33,438				33,280				33,357				33,258

Condensed Consolidated Statements of Cash Flows(a) - Unaudited
(in thousands)
	Year Ended December 31,
		2022				2021
Cash flows from operating activities:
Net income	$	66,377			$	96,808
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		91,991				81,369
Debt related charges included in interest expense		2,036				6,954
Inventory step-up amortization		798				301
Stock-based compensation		21,023				16,185
Non-cash gains related to customer bankruptcy		—				(348	)
Non-cash lease expense		10,914				8,235
Non-cash loss on equity investments		7,636				3,143
Contingent consideration fair value adjustment		3,097				133
Other non-cash losses		5,854				1,901
Deferred income taxes		(17,498	)			(10,270	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(41,380	)			(17,539	)
Inventories		(56,721	)			4,700
Prepaid expenses and other assets		764				(2,409	)
Contract assets		(7,543	)			(24,923	)
Accounts payable		26,038				19,525
Accrued expenses and other liabilities		(9,529	)			(22,984	)
Income taxes payable		12,524				(4,115	)
Net cash provided by operating activities		116,381				156,666
Cash flows from investing activities:
Acquisition of property, plant and equipment		(74,728	)			(53,463	)
Proceeds from sale of property, plant and equipment		639				443
Proceeds from return of capital from equity investments		304				—
Acquisitions, net of cash acquired		(126,636	)			(217,978	)
Net cash used in investing activities		(200,421	)			(270,998	)
Cash flows from financing activities:
Principal payments of term loans		(25,249	)			(741,786	)
Proceeds from issuance of term loans		—				818,250
Proceeds from revolving credit facility		166,000				82,300
Payments of revolving credit facility		(45,000	)			(63,000	)
Proceeds from the exercise of stock options		150				743
Payment of debt issuance costs		—				(8,139	)
Tax withholding payments related to vested and released restricted stock units		(2,929	)			(4,592	)
Proceeds from contingent consideration		1,319				—
Payment of contingent consideration		(972	)			(1,621	)
Principal payments on finance leases		(843	)			(169	)
Net cash provided by financing activities		92,476				81,986
Effect of foreign currency exchange rates on cash and cash equivalents		(2,049	)			1,025
Net increase (decrease) in cash and cash equivalents		6,387				(31,321	)
Cash and cash equivalents, beginning of year		17,885				49,206
Cash and cash equivalents, end of year	$	24,272			$	17,885

^(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,
	2022												2021
	Pre-Tax				Net of Tax				Per Diluted Share				Pre-Tax				Net of Tax				Per Diluted Share
Income from continuing operations (GAAP)	$	20,592			$	17,090			$	0.51			$	22,128			$	20,001			$	0.60
Adjustments(a):
Amortization of intangibles		12,298				9,720				0.29				10,524				8,323				0.25
Certain legal expenses (SG&A)(b)		—				—				—				175				139				—
Restructuring and restructuring-related charges(c)		3,370				2,647				0.08				1,692				1,318				0.04
Acquisition and integration costs(d)		4,209				3,375				0.10				2,252				1,811				0.05
Other general expenses(e)		61				41				—				255				203				0.01
Loss on equity investments		2,025				1,600				0.05				1,276				1,008				0.03
Loss on extinguishment of debt		114				90				—				—				—				—
Medical device regulations(f)		493				389				0.01				270				214				0.01
Customer bankruptcy(g)		(12	)			(11	)			—				(113	)			(89	)			—
Inventory step-up amortization (COS)(h)		—				—				—				301				266				0.01
Tax adjustments(i)		—				2,089				0.06				—				(137	)			—
Adjusted net income (Non-GAAP)	$	43,150			$	37,030			$	1.11			$	38,760			$	33,057			$	0.99
Diluted weighted average shares outstanding						33,438												33,280
	Year Ended December 31,
	2022												2021
	Pre-Tax				Net of Tax				Per Diluted Share				Pre-Tax				Net of Tax				Per Diluted Share
Income from continuing operations (GAAP)	$	75,958			$	65,350			$	1.96			$	101,063			$	93,020			$	2.80
Adjustments(a):
Amortization of intangibles		48,313				38,185				1.14				41,597				32,898				0.99
Certain legal expenses (SG&A)(b)		—				—				—				1,454				1,149				0.03
Restructuring and restructuring-related charges(c)		9,265				7,251				0.22				4,804				3,755				0.11
Acquisition and integration costs(d)		10,075				8,029				0.24				2,544				2,051				0.06
Other general expenses(e)		1,188				902				0.03				508				372				0.01
Loss on equity investments		7,636				6,033				0.18				3,143				2,483				0.07
Loss on extinguishment of debt		114				90				—				3,774				2,981				0.09
Medical device regulations(f)		1,105				873				0.03				744				588				0.02
Customer bankruptcy(g)		(120	)			(95	)			—				(488	)			(385	)			(0.01	)
Inventory step-up amortization (COS)(h)		798				630				0.02				301				266				0.01
Tax adjustments(i)		—				2,300				0.07				—				(3,628	)			(0.11	)
Adjusted net income (Non-GAAP)	$	154,332			$	129,548			$	3.88			$	159,444			$	135,550			$	4.08
Diluted weighted average shares outstanding						33,357												33,258

^(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 21% U.S. tax rate, and the statutory tax rates applicable in foreign tax jurisdictions, as adjusted for the existence of net operating losses (“NOLs”). Expenses that are not deductible for tax purposes (i.e. permanent tax differences) are added back at 100%.

^(b) Expenses associated with non-ordinary course legal matters.

^(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.

^(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) Other general expenses are discrete transactions occurring sporadically and affect period-over-period comparisons. The expenses for the 2022 and 2021 periods primarily include severance, information technology systems conversion expenses, and expenses related to the restructuring of certain legal entities of the company.

^(f) The charges represent incremental costs of complying with the European Union medical device regulations for previously registered products and primarily include charges for contractors supporting the project and other direct third-party expenses.

^(g) In November 2019, one of our customers, Nuvectra Corporation, filed a voluntary Chapter 11 bankruptcy petition (the “Customer Bankruptcy”). The 2022 and 2021 amounts are predominantly due to favorable settlements on supplier purchase order termination clauses and benefits recognized from the utilization or sale of previously reserved inventory.

^(h) 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.

⁽ⁱ⁾ For the 2022 periods, tax adjustments predominately relate to acquisition costs that are not deductible for tax purposes and the establishment of uncertain tax benefits and interest related to acquired foreign tax credits. For the 2021 periods, tax adjustments predominately related to discrete tax benefits associated with the reversal of previously unrecognized tax benefits resulting from the effective settlement of tax audits and the utilization of acquired foreign tax credits during the periods presented.

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,
		2022				2021				2022				2021
Operating income (GAAP)	$	36,865			$	28,663			$	121,327			$	135,711
Adjustments:
Amortization of intangibles		12,298				10,524				48,313				41,597
Certain legal expenses		—				175				—				1,454
Restructuring and restructuring-related charges		3,370				1,692				9,265				4,804
Acquisition and integration costs		4,209				2,252				10,075				2,544
Other general expenses		61				255				1,188				508
Medical device regulations		493				270				1,105				744
Customer bankruptcy		(12	)			(113	)			(120	)			(488	)
Inventory step-up amortization		—				301				798				301
Adjusted operating income (Non-GAAP)	$	57,284			$	44,019			$	191,951			$	187,175

Table C: EBITDA Reconciliations
(in thousands)
	Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Income from continuing operations (GAAP)	$	17,090			$	20,001			$	65,350			$	93,020
Interest expense		14,215				5,511				38,632				31,628
Provision for income taxes		3,502				2,127				10,608				8,043
Depreciation		10,736				10,366				42,617				39,772
Amortization of intangible assets and financing leases		12,610				10,524				49,374				41,597
EBITDA from continuing operations (Non-GAAP)		58,153				48,529				206,581				214,060
Certain legal expenses		—				175				—				1,454
Stock-based compensation(a)		4,783				3,832				19,573				15,913
Restructuring and restructuring-related charges		3,370				1,692				9,265				4,804
Acquisition and integration costs		4,209				2,252				10,075				2,544
Other general expenses		61				255				1,188				508
Loss on equity investments		2,025				1,276				7,636				3,143
Medical device regulations		493				270				1,105				744
Customer bankruptcy		(12	)			(113	)			(120	)			(488	)
Inventory step-up amortization		—				301				798				301
Adjusted EBITDA (Non-GAAP)	$	73,082			$	58,469			$	256,101			$	242,983

^(a) Total stock-based compensation expense less amounts included in Restructuring and restructuring-related charges and Acquisition and integration costs.

Table D: Organic Sales Change Reconciliation (% Change)
	GAAP Reported Growth		Impact of Acquisitions and Foreign Currency(a)		Non-GAAP Organic Change
QTD Change (4Q 2022 vs. 4Q 2021)
Medical Sales
Cardio & Vascular	19.8%		6.7%		13.1%
Cardiac Rhythm Management & Neuromodulation	13.7%		5.6%		8.1%
Advanced Surgical, Orthopedics & Portable Medical	32.3%		(0.1)%		32.4%
Total Medical Sales	18.2%		5.8%		12.4%
Non-Medical Sales	40.9%		—		40.9%
Total Sales	19.0%		5.6%		13.4%
YTD Change (2022 vs. 2021)
Medical Sales
Cardio & Vascular	17.9%		6.4%		11.5%
Cardiac Rhythm Management & Neuromodulation	6.0%		7.5%		(1.5)%
Advanced Surgical, Orthopedics & Portable Medical	11.8%		(0.1)%		11.9%
Total Medical Sales	12.4%		6.4%		6.0%
Non-Medical Sales	21.0%		—		21.0%
Total Sales	12.7%		6.2%		6.5%

^(a) Sales have been adjusted to exclude the impact of foreign currency exchange rate fluctuations and acquisitions.

Table E: Net Total Debt Reconciliation
(in thousands)
	December 31, 2022			September 30, 2022			December 31, 2021
Total debt		925,261			938,646			828,126
Add: Unamortized discount and deferred debt issuance costs included above		5,977			6,404			7,361
Total principal amount of debt outstanding		931,238			945,050			835,487
LESS: Cash and cash equivalents		24,272			20,187			17,885
Net Total Debt (Non-GAAP)	$	906,966		$	924,863		$	817,602

FAQ

What were Integer Holdings' Q4 2022 sales growth figures?

Integer Holdings reported a 19% sales growth in Q4 2022, reaching $372 million.

What is Integer Holdings' expected sales growth for 2023?

Integer expects a sales growth of 7% to 9% in 2023.

How did Integer Holdings' GAAP income perform in 2022?

GAAP income from continuing operations decreased by 30% to $65 million for the full year 2022.

What was the adjusted net income for Integer Holdings in Q4 2022?

The adjusted net income for Q4 2022 was $37 million, reflecting a 12% increase.

What impact did the Aran Biomedical acquisition have on Integer's debt?

Integer's total debt increased by $97 million to $925 million, largely due to the Aran Biomedical acquisition.