2018 barclays global healthcare conference 2018-03-14آ  non-gaap reconciliations. footnotes to...

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  • 2018 Barclays Global Healthcare Conference Integer Holdings Corporation March 14, 2018

  • 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), and Adjusted EBITDA, 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 the relevant 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 March 14, 2018. The Company’s actual results could differ materially from those stated or implied by such forward-looking statements. Except as required by applicable law, 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.

    2 ITGR: Barclays Global Healthcare Conference / Mar 14, 2018

  • Our Vision

    3

  •  World’s Leading Medical Device Outsource (MDO) Manufacturer

     ~$1.5bn in revenue, 2x Larger than closest competitor

     25 Manufacturing locations

     10,000+ associates

     Products sold in 100+ countries

     More than 1,250 patents

    What We Do

    ITGR: Barclays Global Healthcare Conference / Mar 14, 2018 4

  • Product Lines

    5

  • Cardio & Vascular

    Cardiac & Neuromodulation

    Advanced Surgical, Orthopedics, and Portable

    Medical

    Cardiovascular / Structural Heart

    Peripheral Vascular

    Neurovascular

    Urology

    Oncology

    Electrophysiology

    Vascular Access

    Laparoscopy / General Surgery Arthroscopy (knees)

    Biopsy / Drug Delivery

    Energy

    Military

    Environmental

    Joint Preservation & Reconstruction

    Tachycardia

    SCS / Neurostimulation

    Bradycardia

    2017 Sales by Product Line

    $1,462M

    $1.5B Revenue by Markets Served

    6

    30%

    4%

    37% 29%

    Large Joint / Extremities / Trauma / SpineAdv Energy & EndoMechanical Devices

  • Positioned to Accelerate Growth

    ITGR: Barclays Global Healthcare Conference / Mar 14, 2018 7

    • Sales Growth Above Market

    • Profit Growth at least 2x Sales Growth

    • Earn a Valuation Premium

    • Portfolio Management

    • Operational Strategy • Six Strategic

    Imperatives

    • Appointed since 2Q17 • CEO, CFO, CHRO,

    President C&V

    • Aligned to Execute Strategic Imperatives

    STRATEGY TO ACCELERATE GROWTH

    MANAGEMENT TEAM IN PLACE CLEAR OBJECTIVES

  • Costs “fuel for growth”

    Culture “how we act,

    every interaction”

    Focused Strategy to Drive Long-Term Growth

    8

    Cardio & Vascular Neuromodulation

    Electrochem

    Invest to Grow

    Protect & Preserve

    Improve Profitability

    Cardiac Rhythm Management

    Orthopedics Advanced Surgical Power Solutions

    Portfolio Strategy

    • Sales Force Excellence • Market Focused Innovation

    Customers “earn business

    daily”

    • Manufacturing Excellence • Business Process Excellence

    • Performance Excellence • Leadership Capability

    Operational Strategy Strategic Imperatives

    ITGR: Barclays Global Healthcare Conference / Mar 14, 2018

  • • 25+ yrs talent management & leadership development expertise

    • Multi-industry background • PhD Industrial/Organizational Psychology

    Kirk Thor CHRO

    Organization Aligned to Drive Strategic Imperatives

    9

    Organization Updates Strategic Imperatives

    Costs “fuel for growth”

    Culture “how we act,

    every interaction”

    Customers “earn business

    daily”

    Jeremy Friedman COO

    Kirk Thor CHRO

    Jen Bolt President, Electrochem

    Mary Holler VP, CIO

    Joe Flanagan EVP, Quality

    Manufacturing Excellence

    Business Process Excellence

    • 2018 Focus ◦ Improve AS&O profitability ◦ Customer strategic imperatives

    • Anticipated retirement YE18 Jeremy Friedman COO

    • Strong commercial and general management background

    • 20 yrs at Ingersoll Rand • Mechanical Engineer, MBA

    Payman Khales President, C&V

    ITGR: Barclays Global Healthcare Conference / Mar 14, 2018

  • 2017 Turnaround and Strategic Imperatives Position Integer for Accelerated Growth

    10

    2016 2017 2018

    2% - 5%5%

    (4)%

    Outlook 2016 2017 2018

    Outlook

    $280 $286

    $305 - $315

    2016 2017 2018 Outlook

    $2.68 $2.81

    $3.15 - $3.45

    Sales Adjusted EBITDA Adjusted EPS

    ($ in millions, except per share amounts)

    2% 7%-10%YOY Growth 5% 12%-23%YOY Growth

    Refer to the appendix of this presentation for a reconciliation of historical Adjusted EBITDA and Adjusted EPS figures to the most directly comparable GAAP measure. Also, refer to the appendix of this presentation for a discussion of the 2018 Outlook figures.

    ITGR: Barclays Global Healthcare Conference / Mar 14, 2018

  • 2016 2017 2018

    $29 $31 $30

    $15

    $98

    2016 2017 20182016 2017 20182016 2017 2018

    Deleveraging Through Improving Free Cash Flow

    Cash Flow From Ops Debt Payments

    ($ in millions)

    Free Cash Flow (1)

    $129

    Required Repayment Accelerated Repayment

    $100+

    $47

    $103 $100+

    OutlookOutlook

    $106

    $149 $150+

    Outlook

    Leverage (3)

    6.1x 5.6x

    $44

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

    (2) Reflects debt payments excluding $55M of borrowings used to fund $76M of cash provided to Nuvectra as part of the spin-off on March 14, 2016.

    (3) Leverage calculated as Total Debt less Cash and Cash Equivalents divided by Adjusted EBITDA

    Refer to the Appendix of this presentation for discussion of Outlook and Supplemental Items affecting Cash Flow in FY18

    Outlook

    11 ITGR: Barclays Global Healthcare Conference / Mar 14, 2018

    (2)

  • Improved Performance, Well-Positioned to Accelerate Growth

    12

    Strategy to Accelerate Growth

    Management Team in Place

    Steady Deleveraging

    Clear Objectives

    • Sales Growth Above Market

    • Profit Growth at least 2x Sales Growth

    • Earn a Valuation Premium

    ITGR: Barclays Global Healthcare Conference / Mar 14, 2018

  • Question & Answer Period

    13

  • APPENDIX

    14

  • Non-GAAP Reconciliation Net Income and Diluted EPS Reconciliation

    See the Footnotes to this table on Slide 16 of this presentation

    ($ in thousands, except per share amounts)

    Year Ended December 29, 2017 December 30, 2016

    Pre-Tax Net

    Income

    Per Diluted Share Pre-Tax

    Net Income

    Per Diluted Share

    As reported (GAAP) $ 21,827 $ 66,679 $ 2.09 $ 1,185 $ 5,961 $ 0.19 Adjustments:

    Amortization of intangibles (excluding OOE)(a) 44,174 31,255 0.98 37,862 26,771 0.86

    IP related litigation (SG&A)(a)(b) 4,375 2,844 0.09 3,040 1,976 0.06

    Consolidation and optimization expenses (OOE)(a)(c) 13,349 10,529 0.33 26,490 21,582 0.69

    Acquisition and integration expenses (OOE)(a)(d) 10,870 7,202 0.22 28,316 18,554 0.59

    Asset dispositions, severance and other (OOE)(a)(e) 7,182 4,808 0.15 6,931 5,760 0.18 Strategic reorganization and alignment (OOE)(a)(f) 5,891 3,829 0.12 — — — Loss on cost and equity method investments, net(a) 1,565 1,017 0.03 833 541 0.02 Loss on extinguishment of debt(a)(g) 3,525 2,291 0.07 — — —