Integer (NYSE:ITGR) announced yesterday that it is revising its 2022 financial outlook due to the negative impact of the supply chain environment.
Shares of ITGR took a massive hit today after yesterday’s post-market close announcement. They slid down 12.1% at $58.27 apiece in midday trading.
Plano, Texas-based Integer said in a news release that its customer demand remains strong. However, the “challenging” supply chain situation caused a sales slide.
The company said the issues caused about a $15 million hit on its third-quarter revenues. The primary reason is “deteriorating delivery performance” and missed commitments from three suppliers. The lower sales volume and higher manufacturing costs caused about a $12 million total negative impact on the company’s third-quarter preliminary operating income.
Integer attributed heightened manufacturing costs to increased wages, freight and the addition of 5% more labor. The company added labor to deliver the high end of its July sales guidance ($1.37 billion to $1.395 billion).
“We are further intensifying our focus on supplier management and, to address the impact of higher manufacturing and direct labor costs, we recently reduced SG&A costs by approximately $8 million on an annualized basis,” said Joseph Dziedzic, Integer’s president and CEO. “Also, we continue to raise prices with customers to pass through inflationary costs and expect year-over-year price to be flat or slightly positive in 2023, versus a typical 1% to 2% reduction.”
Integer’s projections take a hit
Integer slashed its full-year guidance by approximately $35 million related to its sales. Those revenues include neuromodulation devices, complex catheters, and non-medical batteries. The company attributed the dip to the delivery challenges for the three aforementioned suppliers.
Full-year operating income is expected to come in about $25 million down. This is due to lower sales volume ($17 million) and higher costs ($8 million).
Integer now projects third-quarter revenues between $342 million and $344 million. Analysts expected approximately $353 million for the three-month period. Meanwhile, the company set its adjusted EPS guidance for between 86¢ and 99¢. Wall Street projected adjusted EPS of $1.08.
The company expects full-year revenues between $1.35 billion and $1.38 billion. The high end of that falls in line with Wall Street’s expectations. Still, it’s a slight reduction from the previous range. Meanwhile, full-year adjusted EPS of between $3.57 and $3.97 would fall short of analysts’ estimates of $4.33. Integer set its previous range between $4.20 and $4.50.
“The fundamentals of our growth strategy remain strong, and we are confident that we are well positioned to capitalize on an environment where customers are focused on consolidating their supplier base with trusted partner,” Dziedzic said. “Looking forward to 2023, our preliminary sales outlook is 7% to 9% growth, supported by end-market demand, a strong backlog and continued new product introductions.
“We remain focused on executing our operational excellence and product line growth strategies and are confident we will address these short-term challenges to deliver for our customers and the patients they serve.”