Integer Holdings Corp.

10/23/2025 | Press release | Distributed by Public on 10/23/2025 14:23

Quarterly Report for Quarter Ending September 26, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q should be read in conjunction with the disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2024. In addition, please read this section in conjunction with our Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contained herein.
Cautionary Note Regarding Forward-Looking Statements
Some statements contained in this report and other written and oral statements made from time to time by us and our representatives are not statements of historical or current fact. As such, they are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created thereby under the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations, and these statements are subject to known and unknown risks, uncertainties and assumptions. Forward-looking statements include, but are not limited to, statements relating to:
•our ability to execute our business model and our business strategy;
•the timing for final sales of our Portable Medical products;
•having available sufficient cash and borrowing capacity to meet working capital, debt service and capital expenditure requirements for the next twelve months; and
•projected contractual debt service obligations.
You can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "projects," "forecast," "outlook," "assume," "potential" or "continue" or variations or the negative counterparts of these terms or other comparable terminology. These statements are only predictions and are not guarantees of future performance, and investors should not place undue reliance on forward-looking statements as predictive of future results. 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. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary factors and to others contained throughout this report.
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 our dependence upon a limited number of customers; pricing pressures and contractual pricing restraints we face from customers; our reliance on third-party suppliers for raw materials, key products and subcomponents; interruptions in our manufacturing operations; uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally; our ability to attract, train and retain a sufficient number of qualified associates to maintain and grow our business; the potential for harm to our reputation and competitive advantage caused by quality problems related to our products; our dependence upon our information technology systems and our ability to prevent cyber-attacks and other failures; global climate change and the emphasis on Environmental, Social and Governance matters by various stakeholders; our dependence upon our senior management team and key technical personnel; and consolidation in the healthcare industry resulting in greater competition;
•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 ability to accurately forecast future performance based on operating results that often fluctuate; our significant amount of outstanding indebtedness and our ability to remain in compliance with financial and other covenants under the credit agreement governing our senior secured credit facilities ("Senior Secured Credit Facilities"); economic and credit market uncertainties that could interrupt our access to capital markets, borrowings or financial transactions; the conditional conversion feature of the 2028 Convertible Notes (as defined below) and the 2030 Convertible Notes (as defined below), adversely impacting our liquidity; the conversion of our 2028 Convertible Notes, diluting ownership interests of existing holders of our common stock; the counterparty risk associated with our capped call transactions; the financial and market risks related to our international sales and operations; our complex international tax profile; and our ability to realize the full value of our intangible assets;
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
•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 to comply with customer-driven policies and third-party standards or certification requirements; our ability to obtain and/or retain necessary licenses from third parties for new technologies; our ability and the cost to comply with environmental regulations; legal and regulatory risks from our international operations; the fact that the healthcare industry is highly regulated and subject to various regulatory changes; and our business being indirectly subject to healthcare industry cost containment measures that could result in reduced sales of our products; and
•other risks and uncertainties that arise from time to time.
Unless otherwise noted, any forward-looking statement made by us in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we disclaim any obligation to update forward-looking statements in this Form 10-Q whether to reflect changed assumptions, the occurrence of unanticipated events or changes in future operating results, financial conditions or prospects, or otherwise.
In this Form 10-Q, references to "Integer," "we," "us," "our" and the "Company" mean Integer Holdings Corporation and its subsidiaries, unless the context indicates otherwise.
Our Business
Integer Holdings Corporation is one of the largest medical device contract development and manufacturing organizations in the world, serving the cardiac rhythm management, neuromodulation, and cardio and vascular markets. As a strategic partner of choice to medical device companies and original equipment manufacturers ("OEMs"), we are committed to enhancing the lives of patients worldwide by providing innovative, high-quality products and solutions.
We operate our business in one segment and derive our revenues from three product lines: Cardio & Vascular, Cardiac Rhythm Management & Neuromodulation, and Other Markets.
The third quarter and first nine months of 2025 ended on September 26 and consisted of 91 days and 269 days, respectively. The third quarter and first nine months of 2024 ended on September 27 and consisted of 91 days and 271 days, respectively.
Impact of Global Events
Our future results of operations and liquidity could be materially adversely affected by uncertainty surrounding macroeconomic and geopolitical factors in the U.S. and globally characterized by the supply chain environment, inflationary pressure, elevated interest rates, disruptions in the commodities' markets as a result of the conflict between Russia and Ukraine and conflicts in the Middle East, including Israel and Iran, and the introduction of or changes in tariffs or trade barriers. The impact of these issues on our business will vary by geographic market and product line, but specific impacts to our business may include increased borrowing costs, labor shortages, disruptions in the supply chain, delayed or reduced customer orders and sales, delays in shipments to and from certain countries and potential increased expenses resulting from tariffs or other trade barriers. We monitor economic conditions closely. In response to reductions in revenue, we can take actions to align our cost structure with changes in demand and manage our working capital. However, there can be no assurance as to the effectiveness of our efforts to mitigate any impact of the current and future adverse economic conditions and other developments.
2030 Convertible Notes Issuance and 2028 Convertible Notes Exchange Transactions
On March 18, 2025, we issued $1.0 billion in aggregate principal amount of 1.875% Convertible Senior Notes due in 2030 (the "2030 Convertible Notes"). The total net proceeds from the issuance of the 2030 Convertible Notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were $976.1 million. We used $71.0 million of the net proceeds from the offering to fund the cost of entering into capped call transactions relating to the 2030 Convertible Notes.
We used a portion of the remaining net proceeds from the issuance of the 2030 Convertible Notes to exchange $383.7 million in aggregate principal amount of our outstanding 2.125% Convertible Senior Notes due in 2028 (the "2028 Convertible Notes") for an aggregate cash exchange consideration of $384.4 million in cash and 1,553,806 shares of Common Stock (the "Note Exchange Transactions"). The Note Exchange Transactions were considered an induced conversion and, as a result, we recorded $46.7 million during the three months ended March 28, 2025 in induced conversion expense within Other loss, net in the Condensed Consolidated Statements of Operations and Comprehensive Income. Contemporaneously with the Note Exchange Transactions, we terminated a portion of the capped call transactions related to the 2028 Convertible Notes and received 436,963 shares of Common Stock. We allotted the remainder of the net proceeds to pay the down our revolving credit facility (the "Revolving Credit Facility") and five-year "term A" loan (the "TLA Facility").
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
See Note 7, "Debt," of the Notes to the Consolidated Financial Statements contained in Item 1 of this report for additional information about these transactions.
Business Acquisitions
We selectively evaluate acquisitions as a means to acquire additional technology or manufacturing capabilities to expand our product offering in our key existing growth markets.
On January 7, 2025, we acquired substantially all of the assets and assumed certain liabilities of certain subsidiaries of Katahdin Industries, Inc., including its main operating subsidiary, Precision Coating LLC (collectively "Precision"). Prior to the acquisition, Precision was a privately-held manufacturer specializing in high value surface coating technology platforms, including fluoropolymer, anodic coatings, ion treatment solutions and laser processing. Based in Massachusetts, Precision has additional locations in the New England area and an additional facility in Costa Rica.
On February 28, 2025, we acquired substantially all of the assets and assumed certain liabilities of Vertical Solutions, Inc., d/b/a VSi Parylene ("VSi"). Headquartered in Colorado, prior to the acquisition, VSi was a privately-held full-service provider of parylene coating solutions, primarily focused on complex medical device applications.
Consistent with our tuck-in acquisition strategy, the acquisitions of Precision and VSi further increase our service offerings to include differentiated and proprietary coatings capabilities that position us to better meet customers' evolving needs. Refer to Note 2, "Business Acquisitions" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information about these acquisitions.
Market Exit
During 2022, we announced plans to exit our portable medical market (the "Portable Medical Exit") to enhance profitability and reallocate manufacturing capacity to support growth. Since that time, we have been working closely with impacted customers to support the transition of these products to other suppliers. Due to quality and regulatory requirements, we expected it would take three to four years to complete this transition. The Portable Medical Exit will be completed with the final sales and market exit occurring during the fourth quarter of 2025. Portable Medical sales are included in our Other Markets product line sales.
Discontinued Operations
On October 31, 2024, we completed the sale of our wholly-owned subsidiary Electrochem Solutions, Inc. ("Electrochem"), which focused on nonmedical applications for the energy, military and environmental sectors. As a result of the Electrochem divestiture, the results of operations of the Electrochem business have been classified as discontinued operations for all periods presented. Loss from discontinued operations for the third quarters and first nine months of 2025 and 2024 were not material.
All results and information presented exclude discontinued operations unless otherwise noted. Refer to Note 3, "Discontinued Operations" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information on the divestiture of Electrochem and discontinued operations.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Overview
Income from continuing operations for the third quarter and first nine months of 2025 was $39.7 million, or $1.11 per diluted share, and $54.2 million, or $1.52 per diluted share, respectively, compared to $36.3 million, or $1.01 per diluted share, and $88.1 million, or $2.49 per diluted share for the third quarter and first nine months of 2024, respectively. These variances are primarily the result of the following:
•Sales for the third quarter and first nine months of 2025 increased $36.3 million and $114.5 million, respectively, when compared to the same periods in 2024, driven by strong demand, new product ramps, growth from emerging customers with PMA (premarket approval) products and contributions from our recent acquisitions.
•Gross profit for the third quarter and first nine months of 2025 increased $9.6 million and $33.4 million, respectively, primarily from higher sales volume, efficiencies gained from the continued improvement in the supply chain, and contributions from our recent acquisitions.
•Operating expenses for the third quarter and first nine months of 2025 increased $11.2 million and $19.3 million, respectively, when compared to the same periods in 2024, primarily due to higher SG&A expenses. Operating expenses as a percentage of sales were 14.9% and 13.6% for the third quarters of 2025 and 2024, respectively, and 15.2% and 15.1% for the first nine months of 2025 and 2024, respectively.
•Interest expense for the third quarter and first nine months of 2025 decreased $5.2 million and $9.2 million, respectively, compared to the same periods in 2024, primarily due to lower interest rates on our outstanding borrowings, partially offset by higher average debt balance outstanding and higher losses from extinguishment of debt.
•During the third quarter and first nine months of 2025 we recognized net gains from our equity investments of $0.1 million and $0.2 million, respectively, compared to net gains of $0.9 million and $2.0 million, respectively, for the third quarter and first nine months of 2024. Gains and losses on equity investments are generally unpredictable in nature.
•Other loss, net for the third quarter and first nine months of 2025 were net losses of $1.1 million and $53.0 million, respectively, compared to net losses of $0.9 million and $1.8 million, respectively, for the third quarter and first nine months of 2024. Other loss, net for 2025 includes $46.7 million of debt conversion inducement expense, which was recognized in the first quarter of 2025, related to the partial exchange of our outstanding 2028 Convertible Notes.
•We recorded provisions for income taxes for the third quarter and first nine months of 2025 of $6.3 million and $24.4 million, respectively, compared with provisions for income taxes of $7.1 million and $20.2 million, respectively, for the third quarter and first nine months of 2024. The changes in income tax expense were primarily due to relative changes in pre-tax income and the impact of discrete tax items.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our Financial Results
The following table presents selected financial information derived from our Condensed Consolidated Financial Statements, contained in Item 1 of this report, for the periods presented (dollars in thousands, except per share).
Three Months Ended
September 26, September 27, Change
2025 2024 $ %
Product Line Sales:
Cardio & Vascular $ 277,149 $ 241,009 $ 36,140 15.0 %
Cardiac Rhythm Management & Neuromodulation
169,156 165,094 4,062 2.5 %
Other Markets 21,386 25,314 (3,928) (15.5) %
Total sales 467,691 431,417 36,274 8.4 %
Cost of sales 341,531 314,849 26,682 8.5 %
Gross profit 126,160 116,568 9,592 8.2 %
Gross profit as a % of sales 27.0 % 27.0 %
Operating expenses:
Selling, general and administrative ("SG&A") 50,451 44,820 5,631 12.6 %
SG&A as a % of sales 10.8 % 10.4 %
Research, development and engineering ("RD&E") 10,949 11,923 (974) (8.2) %
RD&E as a % of sales 2.3 % 2.8 %
Restructuring and other charges 8,321 1,814 6,507 NM
Total operating expenses 69,721 58,557 11,164 19.1 %
Operating income 56,439 58,011 (1,572) (2.7) %
Operating expense as a % of sales 14.9 % 13.6 %
Operating income as a % of sales 12.1 % 13.4 %
Interest expense 9,367 14,577 (5,210) (35.7) %
Gain on equity investments (50) (906) 856 (94.5) %
Other loss, net 1,130 916 214 NM
Income from continuing operations before taxes 45,992 43,424 2,568 5.9 %
Provision for income taxes 6,314 7,142 (828) (11.6) %
Effective tax rate 13.7 % 16.4 %
Income from continuing operations $ 39,678 $ 36,282 $ 3,396 9.4 %
Income from continuing operations as a % of sales 8.5 % 8.4 %
Diluted earnings per share from continuing operations $ 1.11 $ 1.01 $ 0.10 9.9 %
NM - Calculated change not meaningful.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Nine Months Ended
September 26, September 27, Change
2025 2024 $ %
Product Line Sales:
Cardio & Vascular $ 822,875 $ 694,278 $ 128,597 18.5 %
Cardiac Rhythm Management & Neuromodulation
501,499 490,086 11,413 2.3 %
Other Markets 57,203 82,735 (25,532) (30.9) %
Total Sales 1,381,577 1,267,099 114,478 9.0 %
Cost of sales 1,005,947 924,881 81,066 8.8 %
Gross profit 375,630 342,218 33,412 9.8 %
Gross profit as a % of sales 27.2 % 27.0 %
Operating expenses:
SG&A 154,534 137,734 16,800 12.2 %
SG&A as a % of sales 11.2 % 10.9 %
RD&E 39,390 42,811 (3,421) (8.0) %
RD&E as a % of sales 2.9 % 3.4 %
Restructuring and other charges 16,377 10,467 5,910 56.5 %
Total operating expenses 210,301 191,012 19,289 10.1 %
Operating income 165,329 151,206 14,123 9.3 %
Operating expense as a % of sales 15.2 % 15.1 %
Operating income as a % of sales 12.0 % 11.9 %
Interest expense 33,926 43,140 (9,214) (21.4) %
Gain on equity investments (223) (2,035) 1,812 (89.0) %
Other loss, net 53,037 1,796 51,241 NM
Income from continuing operations before taxes 78,589 108,305 (29,716) (27.4) %
Provision for income taxes 24,367 20,225 4,142 20.5 %
Effective tax rate 31.0 % 18.7 %
Income from continuing operations $ 54,222 $ 88,080 $ (33,858) (38.4) %
Income from continuing operations as a % of sales 3.9 % 7.0 %
Diluted earnings per share from continuing operations $ 1.52 $ 2.49 $ (0.97) (39.0) %
NM - Calculated change not meaningful.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Product Line Sales
For the third quarter and first nine months of 2025, Cardio & Vascular ("C&V") sales increased $36.1 million, or 15%, and $128.6 million, or 19%, respectively, versus the comparable 2024 periods. The increases in C&V sales for the third quarter and first nine months of 2025 were driven by new product ramps in electrophysiology, acquisitions, and strong customer demand in neurovascular. C&V sales for the third quarter and first nine months of 2025 included $14.9 million and $42.1 million, respectively, of aggregate sales from the recent Precision and VSi acquisitions. Foreign currency exchange rate fluctuations increased C&V sales for the third quarter and first nine months of 2025 by $0.8 million and $1.2 million, in comparison to the 2024 periods, primarily due to U.S. dollar fluctuations relative to the Euro.
For the third quarter and first nine months of 2025, Cardiac Rhythm Management & Neuromodulation ("CRM&N") sales increased $4.1 million, or 2%, and $11.4 million, or 2%, respectively, versus the comparable 2024 periods, driven by strong growth in emerging neuromodulation customers with PMA (pre-market approval) products, normalized cardiac rhythm management growth, and the final quarters of the planned decline of an early spinal cord stimulation neuromodulation finished implantable pulse generator (non-emerging) customer, announced in 2020. Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales during the third quarter and first nine months of 2025 in comparison to 2024.
Other Markets sales for the third quarter and first nine months of 2025 decreased $3.9 million, or 16%, and decreased $25.5 million or 31%, respectively, versus the comparable 2024 periods, driven by execution of the Portable Medical Exit. Foreign currency exchange rate fluctuations did not have a material impact on Other Markets sales during the third quarter and first nine months of 2025 in comparison to the 2024 periods.
Gross Profit
Three Months Ended Nine Months Ended
September 26,
2025 		September 27,
2024 		September 26,
2025 		September 27,
2024
Gross profit (in thousands) $ 126,160 $ 116,568 375,630 342,218
Gross margin 27.0 % 27.0 % 27.2 % 27.0 %
Gross margin, or gross profit as a percentage of sales, has been and will continue to be affected by a variety of factors, including the average sales price of our products and services and transaction volume growth. We expect our gross margin to fluctuate over time depending on the factors described above.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
SG&A Expenses
Changes to SG&A expenses from the prior year periods were due to the following (in thousands):
Three Months Ended
September 26,
2025 		September 27,
2024 		Change
Compensation and benefits(a)
$ 25,108 $ 23,379 $ 1,729
Depreciation and amortization expense(b)
12,831 10,061 2,770
Professional fees(c)
4,841 4,189 652
Contract services(d)
4,498 3,573 925
Travel and entertainment 573 486 87
Bank fees and charges 1,141 905 236
All other SG&A 1,459 2,227 (768)
Total SG&A expense $ 50,451 $ 44,820 $ 5,631
Nine Months Ended
September 26,
2025 		September 27,
2024 		Change
Compensation and benefits(a)
$ 80,522 $ 72,311 $ 8,211
Depreciation and amortization expense(b)
37,316 32,025 5,291
Professional fees(c)
12,641 11,694 947
Contract services(d)
12,565 10,464 2,101
Travel and entertainment 2,554 2,069 485
Bank fees and charges 2,886 2,594 292
All other SG&A 6,050 6,577 (527)
Total SG&A expense $ 154,534 $ 137,734 $ 16,800
__________
(a)Compensation and benefits increased primarily due to annual merit increases and an increase in headcount related to the recent Precision and VSi acquisitions.
(b)Depreciation and amortization expense increased due to amortization of customer list intangible assets related to recent acquisitions.
(c)Professional fees increased due to higher legal and consulting fees.
(d)Contract services expense increased primarily due to higher software costs from information technology enhancements.
RD&E
RD&E expense for the third quarter and first nine months of 2025 was $10.9 million and $39.4 million, respectively, compared to $11.9 million and $42.8 million, respectively, for the third quarter and first nine months of 2024. The decrease in RD&E expense during the third quarter and first nine months of 2025 compared to the same periods in 2024 is primarily due to the timing of program milestone achievements for customer funded programs. RD&E expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects. Our research and development initiatives continue to emphasize new product development, product improvements, and the development of new technological platform innovations.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Restructuring and Other Charges
We continuously evaluate our business and identify opportunities to realign resources to better serve our customers and markets, improve operational efficiency and capabilities, and lower operating costs. To realize the benefits associated with these opportunities, we undertake restructuring-type activities to transform our business. We incur costs associated with these activities, which primarily include exit and disposal costs and other costs directly related to the restructuring initiative. Restructuring charges include exit and disposal costs from these activities. In addition, from time to time, we incur costs associated with acquiring and integrating businesses, and certain other general expenses, including asset impairments.
Restructuring and other charges comprise the following (in thousands):
Three Months Ended Nine Months Ended
September 26,
2025 		September 27,
2024 		September 26,
2025 		September 27,
2024
Restructuring charges(a)
$ 702 $ 714 $ 2,003 $ 3,031
Acquisition and integration costs(b)
1,372 1,017 8,121 8,408
Other general expenses(c)
6,247 83 6,253 (972)
Total restructuring and other charges $ 8,321 $ 1,814 $ 16,377 $ 10,467
__________
(a)Restructuring charges for the first nine months of 2025 and 2024 primarily consist of costs associated with our strategic reorganization and alignment and manufacturing alignment to support growth initiatives.
(b)Amounts for the first nine months of 2025 primarily include acquisition expenses related to the Precision and VSi acquisitions. In addition, acquisition and integration costs for the first nine months of 2025 included a benefit of $0.7 million to adjust the fair value of acquisition-related contingent consideration liabilities. Amounts for the first nine months of 2024 primarily included acquisition expenses related to the InNeuroCo and Pulse acquisitions.
(c)Amounts for 2025 include $6.2 million primarily related to termination benefits from actions to align labor with manufacturing volumes. Amount for the first nine months of 2024 includes loss recoveries of $1.2 million recorded during the second quarter of 2024 relating to property damage which occurred in the fourth quarter of 2023 at one of our manufacturing facilities. Amounts for both years also include gains and losses in connection with the disposal of property, plant and equipment.
Refer to Note 9, "Restructuring and Other Charges" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information regarding these initiatives.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Interest Expense
Information relating to our interest expense is as follows (dollars in thousands):
Three Months Ended
September 26, 2025 September 27, 2024 Change
Amount Rate Amount Rate Amount Rate (bp)
Contractual interest expense $ 7,390 2.39 % $ 13,276 4.94 % $ (5,886) (255)
Amortization of deferred debt issuance
costs and original issue discount 		1,612 0.58 1,093 0.45 519 13
Losses from extinguishment of debt
- - - - - -
Interest expense on borrowings 9,002 2.97 % 14,369 5.39 % (5,367) (242)
Other interest expense 365 208 157
Total interest expense $ 9,367 $ 14,577 $ (5,210)
Nine Months Ended
September 26, 2025 September 27, 2024 Change
Amount Rate Amount Rate Amount Rate (bp)
Contractual interest expense $ 27,507 2.95 % $ 39,672 4.89 % $ (12,165) (194)
Amortization of deferred debt issuance
costs and original issue discount 		4,372 0.52 2,962 0.41 1,410 11
Losses from extinguishment of debt
867 0.09 - - 867 9
Interest expense on borrowings 32,746 3.56 % 42,634 5.30 % (9,888) (174)
Other interest expense 1,180 506 674
Total interest expense $ 33,926 $ 43,140 $ (9,214)
During 2025, contractual interest expense has decreased due to a lower weighted average interest rate, partially offset by a higher average debt balance outstanding and, on a year-to-date basis, higher losses from extinguishment of debt. The favorable weighted average interest rate is due to the replacement of some of our higher variable rate debt with lower fixed rate debt through issuance of the 2030 Convertible Notes. The higher average debt balance outstanding is primarily the result of borrowings to fund the Precision and VSi acquisitions.
Other components of interest expense on borrowings include non-cash amortization and write-off (losses from extinguishment of debt) of deferred debt issuance costs and original issue discount. Amortization of deferred debt issuance costs and original issue discount increased during the third quarter and first nine months 2025 compared to the same periods in 2024 as a result of higher unamortized balances related to new debt. The losses from extinguishment of debt during the first nine months of 2025 were related to prepayments of portions of the TLA Facility, primarily in connection with issuance of our 2030 Convertible Notes.
As of September 26, 2025 and December 31, 2024, approximately 92% and 50%, respectively, of our principal amount of debt are fixed rate borrowings.
See Note 7, "Debt," of the Notes to the Consolidated Financial Statements contained in Item 1 of this report for additional information pertaining to our debt.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Gain on Equity Investments
Gain on equity investments for each period were as follows (in thousands):
Three Months Ended Nine Months Ended
September 26,
2025 		September 27,
2024 		September 26,
2025 		September 27,
2024
Equity method investment gain $ (50) $ (1,153) $ (223) $ (2,282)
Impairment charges on non-marketable equity securities - 247 - 247
Gain on equity investments
$ (50) $ (906) $ (223) $ (2,035)
Equity method investment gain for both periods in 2025 and 2024 relates to our share of equity method investee gains including unrealized appreciation/depreciation of the underlying interests of the investee. As of September 26, 2025 and December 31, 2024, the carrying value of our equity investments was $7.6 million and $7.4 million, respectively.
During the third quarter of 2024, we determined that one of our investments in non-marketable equity securities was impaired and recorded an impairment charge of $0.3 million. As of September 26, 2025 and December 31, 2024, the carrying value of our non-marketable equity securities was $0.2 million.
See Note 14, "Financial Instruments and Fair Value Measurements" of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further details regarding these investments.
Other Loss, Net
Other loss, net for the third quarter and first nine months of 2025 were net losses of $1.1 million and $53.0 million, respectively, compared to net losses of $0.9 million and $1.8 million, respectively, for the third quarter and first nine months of 2024. Other loss, net generally includes gains/losses from the impact of exchange rates on transactions denominated in foreign currencies. In addition, Other loss, net includes $46.7 million of debt conversion inducement expense, which was recognized in the first quarter of 2025, related to the partial exchange of our outstanding 2028 Convertible Notes.
Our foreign currency transaction gains/losses are based primarily on fluctuations of the U.S. dollar relative to the Euro, Mexican peso, Uruguayan peso, Malaysian ringgits, or Dominican peso. The impact of exchange rates on transactions denominated in foreign currencies included in Other loss, net for the third quarter and first nine months of 2025 were net losses of $1.0 million and $6.0 million, respectively, compared to net losses of $0.8 million and $1.7 million for the third quarter and first nine months of 2024, respectively. We continually monitor our foreign currency exposures and seek to take steps to mitigate these risks. However, fluctuations in exchange rates could have a significant impact, positive or negative, on our financial results in the future.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Provision for Income Taxes
We recognized income tax expense of $6.3 million for the third quarter of 2025 on $46.0 million of income before taxes (effective tax rate of 13.7%), compared to an income tax expense of $7.1 million on $43.4 million of income before taxes (effective tax rate of 16.4%) for the same period of 2024. The income tax expense for the first nine months of 2025 was $24.4 million on $78.6 million of income before taxes (effective tax rate of 31.0%), compared to income tax expense of $20.2 million on income before taxes of $108.3 million (effective tax rate of 18.7%) for the same period of 2024. Income tax expense for the third quarter and first nine months of 2025 included discrete tax benefits of $2.3 million and $4.5 million, respectively. The net discrete tax benefits for the third quarter and first nine months of 2025 relate predominately to favorable return to provision adjustments attributable to the 2024 U.S. tax return. The remainder of the discrete tax benefits relate predominately to excess tax benefits from stock-based compensation, net of deductibility limitations. Income tax expense for the third quarter and first nine months of 2024 included discrete tax benefits of $1.6 million and $1.9 million, respectively.
Our effective tax rate for 2025 differs from the U.S. federal statutory tax rate of 21% due principally to the impact of the 2028 Convertible Notes Exchange Transactions, including the nondeductible induced conversion expense and reduction of future original issue discount amortization for U.S. income tax. Other items impacting the rate include the estimated impact of Federal Tax Credits (including R&D credits and foreign tax credits), stock-based compensation windfalls, and the impact of U.S taxes on foreign earnings, including the GILTI provision which requires us to include foreign subsidiary earnings in excess of a deemed return on a foreign subsidiary's tangible assets in our U.S. income tax return. The U.S. tax on foreign earnings is reflected net of a statutory deduction of 50% of the GILTI inclusion (subject to limitations based on U.S. taxable income, if any) and net of FDII that provides a 37.5% deduction to domestic companies for certain foreign sales and services income. In addition, our rate is impacted by earnings realized in foreign jurisdictions with statutory rates that are different than the U.S. federal statutory rate. The primary foreign jurisdictions in which we operate and the statutory tax rate for each respective jurisdiction include Switzerland (22%), Mexico (30%), Uruguay (25%), Ireland (12.5%) and Malaysia (24%). Our manufacturing operations in the Dominican Republic operate under a free trade zone agreement through March 2034. In addition, we acquired manufacturing operations in Costa Rica as part of the acquisition of Precision Coating, and are operating under a free trade zone agreement with respect thereto in Costa Rica through April 2031.
On December 15, 2022, the European Union (EU) Member States formally adopted the EU's Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organization for Economic Co-operation and Development (OECD) Pillar Two Framework. The effective dates are January 1, 2024 and January 1, 2025, for different aspects of the directive. We continue to evaluate the potential impact on future periods of the Pillar Two Framework, pending legislative adoption by additional individual countries. Our 2025 provision for income taxes includes the impact of the Pillar Two 15% Global Minimum Tax.
There is a potential for volatility of our effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities, changes in tax rates, and foreign currency exchange rate fluctuations. In addition, on July 4, 2025, President Trump signed the One Big Beautiful Bill Act ("OBBBA") enacting a broad range of tax reform provisions, including extending and modifying certain key domestic and international Tax Cuts & Jobs Act provisions. Only certain provisions will have current-year financial reporting implications due to varying effective dates and discretionary elections. We are currently evaluating the OBBBA and do not anticipate a material impact to the condensed consolidated financial statements. We also continue to explore tax planning opportunities that may have a material impact on our effective tax rate.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
Sources of Liquidity
(dollars in thousands) September 26,
2025 		December 31,
2024
Cash and cash equivalents $ 58,944 $ 46,543
Working capital from continuing operations $ 568,301 $ 443,946
Current ratio from continuing operations 3.71 2.95
Cash and cash equivalents at September 26, 2025 increased by $12.4 million from December 31, 2024, primarily as a result of cash generated by operating activities of $140.7 million, partially offset by purchases of property, plant and equipment of $63.6 million, additional net principal payments of $51.1 million on our Senior Secured Credit Facility and tax withholding payments related to net share settlements of restricted stock unit awards of $16.8 million. The payment of the cash portion of the purchase price payable at closing for acquisitions of each of Precision and VSi were fully funded by borrowings on our Revolving Credit Facility. Net proceeds from the issuance of our 2030 Convertible Notes were utilized to purchase capped call options relating to the 2030 Convertible Notes, exchange of a portion of our 2028 Convertible Notes, and pay down our Revolving Credit Facility and TLA Facility.
Working capital from continuing operations increased by $124.4 million from December 31, 2024, or $112.0 million excluding the increase in cash and cash equivalents. The increase in working capital, exclusive of cash and cash equivalents, primarily relates to positive fluctuations in accounts receivable, inventory, and accrued expenses. Inventory increased from higher sales volume and product demand which also contributed to the increase in accounts receivable. Accrued expenses primarily decreased from the payment of our calendar 2024 short-term incentive plan pay-out.
At September 26, 2025, $24.8 million of our cash and cash equivalents were held by foreign subsidiaries. We intend to limit our distributions from foreign subsidiaries to previously taxed income or current period earnings. If distributions are made utilizing current period earnings, we will record foreign withholding taxes in the period of the distribution.
As of September 26, 2025, our capital structure consisted of $1.194 billion of debt, net of deferred debt issuance costs and unamortized discounts and 35 million shares of common stock outstanding. As of September 26, 2025, we had access to $794.7 million of borrowing capacity under our Revolving Credit Facility, available for normal course of business and letters of credit, and are authorized to issue up to 100 million shares of common stock and 100 million shares of preferred stock. As of September 26, 2025, our contractual debt service obligations for the next twelve months, consisting of interest on our outstanding debt, are estimated to be approximately $28 million. As of September 26, 2025, we have prepaid all contractual principal payments on our outstanding indebtedness required in the next twelve months. Actual principal and interest payments may be higher if, for instance, the applicable interest rates on our Senior Secured Credit Facilities increase, we borrow additional amounts on our Revolving Credit Facility, or we pay principal amounts in excess of the required minimums reflected in the contractual debt service obligations above.
Based on current expectations, we believe that our projected cash flows provided by operations, available cash and cash equivalents and borrowings under our Revolving Credit Facility are sufficient to meet our working capital, debt service and capital expenditure requirements for the next twelve months. If our future financing needs increase, we may need to arrange additional debt or equity financing. We continually evaluate and consider various financing alternatives to enhance or supplement our existing financial resources. However, we cannot be assured that we will be able to enter into any such arrangements on acceptable terms or at all.
Credit Facilities and 2028 Convertible Notes
As of September 26, 2025, we had Senior Secured Credit Facilities that consist of an $800 million Revolving Credit Facility, with no outstanding principal balance, and a TLA Facility with an outstanding principal balance of $101 million. The Revolving Credit Facility and TLA Facility mature on February 15, 2028. The Senior Secured Credit Facilities include a mandatory prepayment provision customary for similar credit facilities.
During the first quarter of 2025, we issued $1.0 billion aggregate principal amount of 2030 Convertible Notes, which mature on March 15, 2030 and bear interest at a fixed rate of 1.875% per annum. The total net proceeds from the issuance of the 2030 Convertible Notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were approximately $976 million. We used the net proceeds from the issuance of the 2030 Convertible Notes to pay down our Revolving Credit Facility and TLA Facility, exchange a portion of our 2028 Convertible Notes, and to pay the cost of the capped calls related to the issuance of our 2030 Convertible Notes.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
The conditions allowing holders of the 2028 Convertible Notes to convert had been met such that holders had the right to exercise their conversion option through the close of business on September 30, 2025. Subsequent to the end of our third fiscal quarter, the conditions allowing holders of the 2028 Convertible Notes and 2030 Convertible Notes (collectively, the "Convertible Notes") to convert were not met as of September 30, 2025, and therefore, the Convertible Notes will not be eligible for early conversion during the fourth quarter ended December 31, 2025. Any determination regarding the convertibility of the Convertible Notes during future periods will be made in accordance with the terms of the indenture governing the Convertible Notes. These obligations are classified as a long-term liability on the Condensed Consolidated Balance Sheet at September 26, 2025.
The Revolving Credit Facility and TLA Facility contain covenants requiring that we maintain (i) a Total Net Leverage Ratio not to exceed 5.00:1.00, subject to increase in certain circumstances following certain qualified acquisitions and (ii) an interest coverage ratio of at least 2.50:1.00. As of September 26, 2025, we were in compliance with these financial covenants. As of September 26, 2025, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.6:1.0. For the twelve month period ended September 26, 2025, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 11.2:1.0.
Failure to comply with these financial covenants would result in an event of default as defined under the Revolving Credit Facility and TLA Facility unless waived by the lenders. An event of default may result in the acceleration of our indebtedness. As a result, management believes that compliance with these covenants is material to us.
See Note 7, "Debt" of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for a further information on the Company's outstanding debt.
Factoring Arrangements
We utilize accounts receivable factoring arrangements with financial institutions to accelerate the timing of cash receipts and enhance our cash position. These arrangements, in all cases, do not contain recourse provisions, which would obligate us in the event of our customers' failure to pay. During the first nine months of 2025 and 2024, we sold, without recourse, $201.8 million and $162.6 million of accounts receivable, respectively. See Note 1, "Basis of Presentation" of the Notes to the Condensed Consolidated Financial Statements contained in Item 1 of this report for further information regarding our factoring arrangements.
Summary of Cash Flow
The following cash flow summary information includes cash flows related to discontinued operations.
Nine Months Ended
(in thousands) September 26,
2025 		September 27,
2024
Cash provided by (used in):
Operating activities $ 140,733 $ 141,974
Investing activities (235,262) (225,031)
Financing activities 105,278 95,625
Effect of foreign currency exchange rates on cash and cash equivalents 1,652 (668)
Net change in cash and cash equivalents $ 12,401 $ 11,900
Operating Activities -During the first nine months of 2025, we generated cash from operations of $140.7 million, compared to $142.0 million for the first nine months of 2024, as a $28.9 million increase in net income adjusted for non-cash items such as depreciation and amortization was offset by a $30.2 million decrease in cash flow provided by changes in operating assets and liabilities.
The increase in net income adjusted for non-cash items such as depreciation and amortization was primarily from higher sales volume and margin. The decrease associated with changes in operating assets and liabilities is primarily related to an increase in working capital from higher sales volume in the first nine months of 2025 as compared to the same period in 2024.
Investing Activities -The $10.2 million increase in net cash used in investing activities was primarily attributable to greater cash paid for acquisitions offset by a decrease in purchases of property, plant and equipment. Investing activities for the first nine months of 2025 included net cash paid of $171.8 million for the Precision and VSi acquisitions, compared to net cash paid of $138.5 million during the first nine months of 2024 for the Pulse acquisition.
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INTEGER HOLDINGS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financing Activities -Net cash provided by financing activities for the first nine months of 2025 was $105.3 million compared to $95.6 million provided by financing activities for the first nine months of 2024. Cash provided by financing activities for the first nine months of 2025 was primarily the net proceeds from the issuance of our 2030 Convertible Notes of $977.5 million, which was partially offset by a $71.0 million purchase of capped call options associated with the 2030 Convertible Notes, $383.7 million in aggregate principal amount of exchanged 2028 Convertible Notes, $274.0 million of principal payments on our TLA Facility, $126.0 million net payments on our Revolving Credit Facility, and $13.2 million related to stock-based compensation activity. Net cash provided by financing activities for the first nine months of 2024 was primarily related to net borrowings on our Revolving Credit Facility of $117.0 million, primarily to fund the Pulse acquisition, partially offset by $10.0 million related to stock-based compensation activity and $9.8 million of principal payments on financing leases.
Off-Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our Condensed Consolidated Financial Statements.
Impact of Recently Issued Accounting Standards
In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Condensed Consolidated Financial Statements. See Note 1, "Basis of Presentation" of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Our estimates, assumptions and judgments are based on historical experience and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Making estimates, assumptions and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Management believes the estimates, assumptions and judgments employed and resulting balances reported in the Condensed Consolidated Financial Statements are reasonable; however, actual results could differ materially.
There have been no significant changes to the critical accounting policies and estimates as compared to those disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024.
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Integer Holdings Corp. published this content on October 23, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 23, 2025 at 20:24 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]