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2Q18 Earnings Conference Call

August 2, 2018

ITGR: 2Q18 Earnings Conference Call / August 2, 2018 / Page 2

Presentation of Financial Information &

Forward-Looking Statements

Historical financial and operating data in this presentation reflect the consolidated results of Integer for the periods

indicated.

This presentation includes financial information prepared in accordance with accounting principles generally accepted in

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

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

Depreciation and Amortization (EBITDA), Adjusted EBITDA, and organic growth rates should be considered in addition to,

but not as substitutes for, the information prepared in accordance with GAAP. For reconciliations of these non-GAAP

financial measures to the most comparable GAAP measures, please refer to the appendix to this presentation and the

earnings release associated with this quarterly period which can be found in the investor relations section of our corporate

website (investor.integer.net).

Statements made in this presentation whether written or oral may be “forward-looking statements” within the meaning of

Section 27A of the Securities Act of 1933, as amended, and Section 21E of Securities Exchange Act of 1934, as

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

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

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

the company’s current expectations and speak only as of August 2, 2018. The Company’s actual results could differ

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

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

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

investor.integer.net


Agenda

• Opening Comments

• Financial Results

• Product Line Review

• Post Divestiture Profile

• 2018 Outlook

• Question & Answer Period

Opening Comments


Continued Strong Growth… Completed Divestiture

“Integer delivered

another strong quarter

of sales and profit

growth”

Reduced leverage to

4x EBITDA

Completed AS&O

divestiture on July 2nd

Repaid $548 million of

debt on July 10th

Second Quarter Highlights

• Double digit sales and earnings growth

• Significantly reduced leverage to 4 times EBITDA (on July 10th)

Strategy

• Completed AS&O divestiture on July 2, 2018

• Paid down $548 million of debt on July 10, 2018

Full Year Outlook

• Increased guidance by $0.15 to $3.35 - $3.65

Financial Results


$20

$33

2Q17 2Q18

$70

$87

2Q17 2Q18

$363

$399

2Q17 2Q18

(1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and organic growth rates to the most directly comparable GAAP measure

(2) Organic growth for Sales excludes the impact of foreign currency exchange rates

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

2Q18 Adjusted Financial Results(1) – Pre-Divestiture($ in millions, except per share amounts)

Sales Adjusted EBITDA Adjusted Net Income

$403Reported $89

Reported

$35Reported

$76FX Adjusted

As reported GAAP and Non-GAAP numbers

Foreign currency impact on reported GAAP and Non-GAAP numbers

Reported

FX Adjusted

Reported

Reported

FX Adjusted

FX Adjusted$24

FX Adjusted

Reported 0.62$ 1.06$

FX

Adjusted0.76$ 1.01$

Adj.

EPS

10% organic(2) 15% organic(3) 37% organic(3)

11% reported 27% reported 76% reported% Growth


2%

3%

5%

6%

8%

2Q17 3Q17 4Q17 1Q18 2Q18

0%

4%

8%

12%

2Q17 3Q17 4Q17 1Q18 2Q18

0%

5%

10%

15%

(4)%

(2)%

0%

2%

4%

0%

20%

40%

YOY Sales Improvement ContinuesTrailing 4 Quarters – Pre-Divestiture

0%

Integer

Advanced Surgical, Orthopedics & Portable Medical

Cardiac & Neuromodulation

Non-Medical (Electrochem)

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

Quart

erly Y

OY

% C

hange –

Org

anic

Quart

erly Y

OY

% C

hange -

Org

anic

Cardio & Vascular

(1)


$20 ($3)

$12

$5 $1 $35

2Q17 IncentiveCompensation

OperationalImprovement

FX Tax Rate 2Q18

(1) Includes $0.02 unfavorable impact due to year-over-year share dilution

Note: Amounts may not sum due to rounding

Adjusted EBITDA

Adjusted EBITDA & Adjusted Net Income($ in millions except per share amounts)

Adjusted Net Income

Incentive

Compensation

FX• +$19M YOY

• $16M from

Operations

• $8M FX YoY

• ($5M) Incentive

Compensation

Operational

Improvement

Tax Rate

$70

$89

2Q17 2Q18

Adj.

EPS$0.62 ($0.09) $0.33 $0.17 $0.04 $1.06

(1)


$8 $5 $7 $7 $7

$31 $33

$15

$43

$18

$40 $38

$22

$50

$25

2Q17 3Q17 4Q17 1Q18 2Q18

$28 $27

$21

$36

$13

2Q17 3Q17 4Q17 1Q18 2Q18

$39 $38

$34

$46

$21

2Q17 3Q17 4Q17 1Q18 2Q18

Continued Deleveraging

Debt Payments($ in millions)

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

less Capital Expenditures, net

(2) Leverage calculated as Total Debt less Cash and Cash

Equivalents divided by Adjusted EBITDA

Cash Flow From Ops($ in millions)

Free Cash Flow (1)

($ in millions)

Accelerated Repayment

Required Repayment

• Reduced leverage to 5.1x

at end of Q2

• July 10 paid down

additional $548M from

divestiture proceeds

• $75M debt pay down in

1H18

• No significant maturities

until 2020; well within

covenants

Leverage (2)

5.9x 5.8x5.6x

5.4x

5.1x

4.0x

2Q17 3Q17 4Q17 1Q18 2Q18 July 10th

Post

Divestiture

Product Line Review


$512 $522 $537 $550 $568

2Q17 3Q17 4Q17 1Q18 2Q18

8%7%

11%

9%

13%

2Q17 3Q17 4Q17 1Q18 2Q18

Offering a full-range of services for the design, development, and manufacturing of diagnostic and interventional

cardiac and endovascular delivery and retrieval devices, along with comprehensive supply-chain solutions

Cardio & Vascular

Steerable Sheaths Catheters & Sheaths Guidewires, Stylets &

AccessoriesIntroducers

0%

%C

hange

Trailing 4-Quarter Sales($ in millions)

Organic Quarterly YOY Growth

7% 9% 9% 10% 11%

• Q2 YOY growth driven by increased sales of Catheter &

Guidewires due to market growth and new business wins

• Trailing 4-quarter sales driven by market penetration in the

high growth Peripheral Vascular, Neurovascular &

Structural Heart markets

• 2H17 comparables more difficult, expect lower year-over-

year growth rates


(1)%

(6)%

1%

5%

9%

2Q17 3Q17 4Q17 1Q18 2Q18

$434 $428 $428 $433 $443

2Q17 3Q17 4Q17 1Q18 2Q18

Providing technology solutions for the active implantable medical device industry

by partnering with customers to bring high-quality products to

established and emerging markets – from initial concept through to high-volume manufacturing

Cardiac & Neuromodulation

0%%C

hange



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

Pulse Generator

Components &

Assemblies

Leads & Lead Components,

Adaptors & Assemblies

Pulse Generators & External

Solutions (Programmers,

Chargers, Patient Devices)

• Neuromodulation increased from market demand for spinal

cord stimulation leads and battery sales to a new customer

• CRM grew low single digits due to new component

business and increased capacitor volume

• Trailing 4-quarter CRM and Neuro sales have returned to

growth driven by Neuromodulation

• 2H17 comparables more challenging as 4Q17 was ~13%

higher than prior quarters


0%

6%

9%

12%

10%

2Q17 3Q17 4Q17 1Q18 2Q18

$421 $428 $440 $456 $470

2Q17 3Q17 4Q17 1Q18 2Q18

Advanced Surgical, Orthopedics & Portable Medical

Providing a wide range of technologies and solutions to the

Advanced Surgical and Orthopedic markets

Orthopedic Implants &

Instruments

Biopsy & Drug

Delivery

Portable Medical

(Power Solutions)Laparoscopy &

General Surgery

Arthroscopy

Products

0%

%C

hange



(0)% 2% 6% 8% 12%

• 2Q18 sales increase driven by instrument product launch,

market demand for implants and new business wins

• Portable Medical continues to exhibit strong growth

• Trailing 4-quarter sales growth remains strong stemming

from increased market penetration and timing from

inventory builds

• AS&O Product line divested in the second half except

Power Solutions and remaining sales to Viant


$47 $54

$57 $58 $58

2Q17 3Q17 4Q17 1Q18 2Q18

60%

71%

30%

12%

(5)%

2Q17 3Q17 4Q17 1Q18 2Q18

Electrochem

Enhancing lives worldwide by providing superior power solutions that

enable the success and advancement of our customers’ critical applications

Battery Packs Battery ChargersBattery Cells

0%

%C

hange



1% 23% 37% 41% 22%

• 2Q18 sales slightly behind 2Q17 due to timing of

government funding for Military orders.

• Trailing 4-quarter softening as the Energy markets shifts

from recovery to stabilization.

• Positive outlook for the second half of the year from

execution of growth initiatives.

Post Divestiture Profile


Strategic Rationale for Divestiture

• 2H17 Integer strategic review

identified opportunity to unlock value

in AS&O

• Highly fragmented AS&O CMO market

poised for consolidation

• AS&O and MedPlast, LLC

combination creates market leader

and one of largest MDO’s serving

AS&O market

• AS&O valuation multiple slightly above

both Integer’s and the Lake Region

acquisition multiple (4Q15)

Transaction Rationale

• Clear leader in remaining product

lines with differentiated technology

• Cardio & Vascular, Cardiac &

Neuromodulation, Electrochem

• Creates financial flexibility to invest

more aggressively in faster growing

markets where Integer is

differentiated

• Post divestiture customer overlap

limited to a few major customers

• Integer valuation metrics improved

Strategic

Positioning Integer to Earn a Valuation Premium


Sales: ↓ $331M ↓ $180M ↓ $345M

Operating Profit:(adjusted)

↓ $31M ↓ $23M ↓ $38M

Interest Expense: ↓ $42M ↓ $22M ↓ $44M

2017 1H18 Actual 2018 Full Year Estimate

($1M)

Reduced

Income

$0.02 EPS

$6M

Increased

Income

$0.15 EPS

$11M

Increased

Income

$0.27 EPS

Financials

Better positioned to execute our strategy

Impact of Advanced Surgical & Orthopedic Divestiture

Non-GAAP Financials(excluding Divested AS&O Product Lines)


$280

$312

2Q17 PF 2Q18 PF

$57

$69

2Q17 PF 2Q18 PF

$24

$33

2Q17 PF 2Q18 PF

(1) Refer to the appendix of this presentation for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and organic growth rates to the most directly comparable GAAP measure

(2) Organic growth for Sales excludes the impact of foreign currency exchange rates

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

PF = Proforma basis (excluding divested AS&O Product lines)

2Q18 Non-GAAP Financial Results – Post Divestiture(1)

($ in millions, except per share amounts)

Adjusted Sales Adjusted EBITDA Adjusted Net Income

As reported GAAP and Non-GAAP numbers

Foreign currency impact on reported GAAP and Non-GAAP numbers

Reported 0.74$ 1.06$

FX

Adjusted0.91$ 1.01$

Adj.

EPS

11% organic(2) 9% organic(3) 14% organic(3)

12% reported 26% reported 47% reported% Growth

$71Reported

$63FX Adjusted

Reported

FX Adjusted

$35Reported

$29FX Adjusted

Reported

Reported

FX Adjusted

FX Adjusted

$313Reported

2018 Revised Outlook


2017 2018Outlook

2017 2018Outlook

2017 2018Outlook

2018 Outlook – Post-Divestiture

Adjusted EPS

$1,131 $3.09

$1,175 - $1,200 $3.35 - $3.65

($ in millions except per share amounts)

Growth % 4% - 6% 9% - 19%

Adjusted Sales

$234

$255 - $265

9% - 13%

Adjusted EBITDA

$1,510 - $1,550 $310 - $320 $3.20 - $3.50Prior Outlook

Pre-Divestiture


$106

$149 $160

FY16 FY17 FY18

Increased Cash Flow Outlook

Debt Payments($ in millions)

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

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

(3) 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.

Cash Flow From Ops($ in millions)

Free Cash Flow(1)

($ in millions)

+

Leverage(2)

$160+ $110+ $115+Prior

Outlook

$29 $31 $30

$15

$98$44

$129$115

2016 2017 2018

$665+

Outlook

Accelerated Repayment

Required Repayment

$47

$103 $110

FY16 FY17 FY18

6.1x5.6x

3.6x

YE16 YE17 YE18

+

Outlook Outlook Outlook

(3)

~$115+


Cardio & Vascular

Neuromodulation

Electrochem

Strategy to Drive Long-Term Growth

Invest to Grow

Protect & Preserve

Improve Profitability

Cardiac Rhythm Management

Portable Medical

Portfolio Strategy

• Sales Force Excellence

• Market Focused Innovation

Customers“earn business

daily”

Costs“fuel for

growth”

Culture“how we act,

every

interaction”

• Manufacturing Excellence

• Business Process Excellence

• Performance Excellence

• Leadership Capability

Operational Strategy –Strategic Imperatives


Summary

Second Quarter 2018

• Strong growth continues

• Full year EPS guidance increased $0.15 on

AS&O divestiture

Strategy

• AS&O divestiture complete

• Significant debt pay down and deleveraging

• Executing strategy to win in the markets we serve

and achieve excellence in everything we do

Vision

Enhance patient’s lives by being our

customers partner of choice

Strategic Imperatives

- Sales Force Excellence

- Market Focused Innovation

- Manufacturing Excellence

- Business Process Excellence

- Performance Excellence

- Leadership Capability

Clear Goals

- Sales Growth Above Market

- Profit Growth 2x Sales Growth

- Earn a Valuation Premium

APPENDIX


$0.62

$0.82

$0.96

$0.61

$1.06

$0.14

$0.05

$0.02

$0.03

$0.04

2Q17 3Q17 4Q17 1Q18 2Q18

Historical Financial Results – Pre-Divestiture

Sales Adjusted EPS

Non-Medical

Cardiac & Neuro

Cardio & Vascular

Adv. Surgical, Ortho &

Portable Medical

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

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

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


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

Adjusted EPS, as reported

Organic

Adjusted

EPS(3)

(1)(2)

$363$345 $390$363 $382 $0.87$0.76 $0.98 $0.64 $1.01

$132 $139 $140 $138 $150

$106 $102 $117 $109

$116

$109 $108

$119 $122

$122

$16 $15

$15 $13

$15 $363 $363

$390 $382

$403

2Q17 3Q17 4Q17 1Q18 2Q18

($0.04)


(1) $400M of sales included in divestiture, includes Integer sales to Medplast/Viant post divestiture.

Financials “Before” and “After” Divestiture($ in millions, except per share amounts)

BeforeRemove

AS&O (1)

Reduce

Interest

Expense

After BeforeRemove

AS&O

Reduce

Interest

Expense

After

Sales $1,462 ($331) $1,131 $785 ($180) $605

Operating Profit $225 ($31) $194 $121 ($23) $99

Interest Expense $103 ($42) $60 $51 ($22) $29

Net Income $90 ($19) $28 $99 $54 ($17) $17 $55

EPS $2.81 ($0.60) $0.87 $3.09 $1.67 ($0.50) $0.53 $1.69

EBITDA ($) $286 ($52) $234 $158 ($32) $125

EBITDA (%) 19.5% 20.7% 20.1% 20.7%

2017 1H 2018


2018 Full-Year Outlook($ in millions except per share amounts)

Proforma

Post Divestiture

2018 OutlookPrior Guidance

(Non-GAAP)+

Divestiture

Adjustments=

Updated Guidance(Non-GAAP)

Pre-Divestiture 1H

Post-Divestiture 2H

Revenue $1,510 - $1,550 ($335) - ($355) $1,175 - $1,200 $1,350 - $1,390

Adjusted Net Income $103 - $113 $7 $110 - $120 $110 - $120

Adjusted EBITDA $310 - $320 ($55) $255 - $265 $285 - $295

Adjusted Earnings per Diluted Share $3.20 - $3.50 $0.15 $3.35 - $3.65 $3.33 - $3.63


2018 Full-Year Outlook – Supplemental Items Affecting Cash Flow($ in millions, except per share amounts)


Non-GAAP ReconciliationNet Income and Diluted EPS Reconciliation – QTD

See the Footnotes to this table on Slide 32 of this presentation

($ in thousands, except per share amounts)


Footnotes to Non-GAAP Reconciliation


Non-GAAP Reconciliation2Q18 Net Income and Diluted EPS Reconciliation – Detailed View ($ in thousands, except per share amounts)


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


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

(a) Second quarter 2018 sales were positively impacted by $0.9 million due to foreign currency exchange rate fluctuations, primarily in our Cardio & Vascular product lines.


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

NM calculated change not meaningful

(a) Represents the impact to our growth rate from our Non-GAAP adjustments.

(b) Represents the impact to our growth rate due to changes in foreign currency exchange rates


Non-GAAP Reconciliation2018 Full-Year Outlook(a)



Capitalization

($ in millions) As Reported Pro Forma Original Previous

6/30/18 6/30/18 Rate Rate

Cash and Cash Equivalents $20 $19

$200m Revolver due 2020 74 -- L + 325 L + 325 L + 250

Term Loan A due 2021 321 321 L + 325 L + 325 L + 250

Term Loan B due 2022 812 698 L + 425 L + 325 L + 300

Total Secured Debt $1,207 $1,019

Senior Unsecured Notes due 2023 360 -- 9.125% 9.125% --

Total Debt $1,567 $1,019

Net Debt $1,547 $1,000

Operating statistics

LTM Adjusted EBITDA $309 $250

LTM Cash Interest Expense 95 53

LTM Capital Expenditures 43 31

Credit statistics

Net Total Debt / LTM Adjusted EBITDA 5.0x 4.0x

LTM Adjusted EBITDA / Cash Interest Expense 3.3x 4.7x

Pro Forma

Rate

Contact Information

Tony BorowiczVP, Investor Relations

[email protected]

www.integer.net

(O) 716.759.5809

mailto:[email protected]

http://www.integer.net/

Documents

2Q18 Earnings Conference Call - s21.q4cdn.com · ITGR: 2Q18 Earnings Conference Call / August 2, 2018 / Page 20 $280 $312 2Q17 PF 2Q18 PF $57 $69 2Q17 PF 2Q18 PF $24 $33 2Q17 PF 2Q18