Integer (US:ITGR)2025-10-23 14:00Financial Data and Key Metrics Changes - Sales for Q3 2025 totaled $468 million, reflecting an 8% growth on a reported basis and 7% growth organically [12][8] - Adjusted operating income increased by 14% year over year, with adjusted EPS growing by 25% to $1.79 [13][8] - For the full year 2025, the company expects sales growth between 7% and 8%, with adjusted operating income growth between 12% and 14% and adjusted EPS growth between 19% and 21% [22][18] Business Line Data and Key Metrics Changes - Cardio and vascular sales increased by 15% in Q3 2025, driven by new product ramps in electrophysiology and strong demand in neurovascular [13] - Cardiac rhythm management solutions sales increased by 18% year over year, but growth is expected to decelerate in Q4 2025 and into 2026 due to lower demand from select emerging customers [14][15] - Neuromodulation sales increased by 2% in Q3 2025, with expectations for low single-digit growth for the full year 2025 [15] Market Data and Key Metrics Changes - The company anticipates a 3% to 4% headwind to total company sales in 2026 due to slower market adoption of three new products [10][25] - The portable medical exit is expected to contribute a 2% headwind to total sales in 2026 [10][24] - The overall market for the company's products is growing at a steady mid-single-digit rate [27] Company Strategy and Development Direction - The company remains confident in its long-term growth strategy, focusing on early design wins in high-growth markets [11][27] - A strong product development pipeline is expected to drive above-market growth in 2027 [11][27] - The company plans to continue its acquisition strategy while maintaining a leverage ratio within the targeted range of 2.5 to 3.5 times [27] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a reduction in the financial outlook due to unexpected changes in customer demand for new products [4][8] - Despite the challenges, management expressed confidence in the company's strategy and operational execution over the long term [5][11] - The company expects to return to growth in the second half of 2026 as new product headwinds moderate [10][68] Other Important Information - Adjusted net income for Q3 2025 was $63 million, up 27% year over year, driven by operational improvements and lower interest expenses [16][13] - The adjusted effective tax rate improved to 16.3% for Q3 2025, down from 17.2% in the prior year [16] - Free cash flow for Q3 2025 was $46 million, flat compared to the prior year [17] Q&A Session Summary Question: Early 2026 outlook and organic growth - Management explained that the rest of the portfolio is expected to grow at market rates without new product introductions, which are causing headwinds [32][33] Question: Nature of expected headwinds in cardio and vascular - The headwinds are related to two electrophysiology products with lower than anticipated market adoption [34][35] Question: Visibility into market growth recovery - Management indicated that the backlog remains steady, providing good visibility into future performance [36] Question: Specifics on electrophysiology products - Two electrophysiology products are experiencing lower market adoption than expected, impacting forecasts for 2026 [40][41] Question: Neuromodulation product dynamics - Similar dynamics are observed in neuromodulation, with some customers not seeing the anticipated market adoption [45][47] Question: Unusual nature of multiple customer forecast changes - Management confirmed that this situation is unusual and not expected to recur, as it involves multiple products and customers [49][77] Question: Potential for recapturing volume with other customers - Management expressed confidence in returning to growth due to new product launches scheduled for 2026 and 2027 [67][68]