Integer signals 2026 sales headwinds of 3%-4% amid reduced new product adoption, targets above-market growth in 2027

Earnings Call Insights: Integer Holdings Corporation (ITGR) Q3 2025

MANAGEMENT VIEW

* Joseph Dziedzic, President, CEO & Director, opened with a reflection on his tenure and the recent outlook revision, stating, "When the CEO transition process began, I did not envision my last earnings call would include a reduction in our financial outlook. The recent customer forecast changes reflect the reality that not all new products achieve the level of success we expect or want. We expect this dynamic to be short-lived." He noted strong results over the last three years, with sales up 39%, adjusted operating income up 77%, and adjusted EPS up 73% from 2022 to 2025 at the midpoint of outlook.
* Payman Khales, Chief Operating Officer and CEO-elect, highlighted, "We delivered a strong third quarter in line with our expectations. Sales grew 8% on a reported basis and 7% organically, reflecting solid demand and execution. Our adjusted operating income increased 14%, driven by continued focus on operational excellence and expanding margins. Our adjusted earnings per share grew 25% year-over-year to $1.79." Khales acknowledged short-term headwinds in customer demand and a $16 million reduction in 2025 sales outlook, but emphasized ongoing cost management to limit profit impact.
* Diron Smith, Executive VP & CFO, stated, "Sales totaled $468 million, reflecting 8% growth on a reported basis and 7% growth on an organic basis. We delivered $106 million of adjusted EBITDA, up $10 million compared to the prior year or an increase of 11%. Adjusted operating income grew 14% versus last year as we continue to make progress on our year-over-year margin expansion."

OUTLOOK

* The company reduced its 2025 sales outlook midpoint by $16 million, now expecting reported sales between $1.840 billion and $1.854 billion, or 7% to 8% growth. Adjusted operating income is forecasted at $319 million to $325 million, and adjusted EPS in the range of $6.29 to $6.43, representing 19% to 21% year-over-year growth.
* For 2026, Khales shared, "Based on the recent customer updates, we expect sales of 3 new products to decline in 2026, 2 electrophysiology products and 1 neuromodulation product for an emerging customer. The market adoption of these products has been slower than forecasted. We anticipate this will represent a 3% to 4% headwind to our total company sales for the next year." Reported 2026 sales are expected to be down 2% to up 2%, with organic sales flat to up 4%, and adjusted operating income ranging from a decline of 5% to an increase of 4%.
* The company expects to return to above-market organic sales growth in 2027, stating, "Given the strength of this pipeline and our strategic positioning, we expect to return to above-market organic sales growth in 2027, which is consistent with our long-term financial strategic objective."

FINANCIAL RESULTS

* Third quarter 2025 sales reached $468 million, with organic growth of 7%. Adjusted EBITDA was $106 million, adjusted net income $63 million, and adjusted earnings per share $1.79. Adjusted operating income as a percentage of sales expanded to 18.4%.
* Cardio & Vascular sales increased 15% in Q3, driven by new product ramps in electrophysiology and acquisitions. CRM&N sales increased 2% year-over-year, with full-year CRM&N sales now expected to grow low single digit versus 2024, revised down from prior mid-single digit guidance.
* The company generated $66 million of cash flow from operations in Q3 and reported net total debt of $1.158 billion at quarter end.

Q&A

* Brett Fishbin, KeyBanc Capital Markets: Asked about 2026 growth headwinds and portfolio growth excluding new products. Khales responded that, "Without new product introductions, the rest of our portfolio will grow at the rate of market."
* Fishbin followed up on Cardio & Vascular headwinds. Khales explained, "The headwinds that we are seeing is related to 2 electrophysiology products...the market adoption of these products has been less than what we had anticipated. This is new news."
* Travis Steed, BofA Securities: Asked for clarification on product types and timing of customer forecast changes. Khales confirmed, "We did not know about it until the third quarter."
* Joanne Wuensch, Citi: Inquired about neuromodulation headwinds. Khales stated, "We believe that it has to do with the rate of market adoption of select products in this space...it's a similar dynamic" to EP headwinds.
* Multiple analysts probed whether experiencing simultaneous demand reductions from three products was unusual. Khales responded, "This is an aberration and is highly unusual."
* Andrew Cooper, Raymond James: Asked about recapturing EP volume and margin trajectory. Khales reinforced confidence in recovery, citing new launches in late 2026 and 2027.

SENTIMENT ANALYSIS

* Analysts expressed concern and skepticism about the magnitude and suddenness of the 2026 guidance cut, repeatedly questioning the nature and permanence of the product headwinds. The tone was slightly negative, with probing for risk of recurrence and surprise around the number of affected products.
* Management maintained a confident, yet slightly defensive tone, repeatedly describing the situation as "highly unusual" and emphasizing strong underlying performance and visibility. Khales stated, "We are confident that we're going to get to growth in the second half of 2026 and to above market growth in 2027."
* Compared to the previous quarter, both analysts' and management's tone shifted from steady confidence to concern and defensiveness, reflecting the unexpected near-term downturn.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for 2025 was revised downward for sales (reduced by $16 million at midpoint), adjusted operating income (down $3 million at midpoint), and adjusted EPS (down $0.02). In Q2, management had raised midpoints for profit outlook while holding sales steady.
* Strategic focus shifted from highlighting strong new product-driven growth to managing through unexpected simultaneous adoption headwinds in three products.
* Analysts shifted focus from revenue trajectory and margin expansion to questioning the causes, implications, and recurrence risk of product-specific sales declines.
* Management's tone in Q2 was optimistic and proactive; in Q3, it was more defensive and focused on risk containment and cost management.
* Key metrics, such as Cardio & Vascular growth, decelerated from prior quarters, and CRM&N growth was guided lower.

RISKS AND CONCERNS

* Management cited market adoption delays for specific new products as a source of near-term sales headwinds, describing the situation as "highly unusual."
* There is risk of further forecast volatility tied to customer demand for emerging products.
* Management is mitigating the impact through cost controls, operating expense leverage, and manufacturing efficiencies.
* Analysts raised concerns about forecasting visibility and the potential for similar events in the future, which management addressed by emphasizing the aberrational nature of the current situation.

FINAL TAKEAWAY

Integer's third quarter of 2025 delivered solid operational results but was overshadowed by an unprecedented and simultaneous reduction in demand for three new products, prompting a trim in full-year outlook and a flat-to-slightly-up sales forecast for 2026. Management emphasized this as a rare occurrence, maintained confidence in the company's long-term growth strategy, and projected a return to above-market growth in 2027 as the product development pipeline matures and recent headwinds moderate.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/itgr/earnings/transcripts]

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