Joe Dziedzic: Certainly, on the stock price, I’ll let you figure that one out. We’re just going to keep executing our strategy and delivering on our financial objectives. In terms of growth, we have great visibility to 2024 because of the $900 million order book the success our customers are having with their novel therapies that they’re bringing to the marketplace. And so we always come out with what we think is a balanced view that has the ability to ensure that we can deliver on this growth. We have rolling 12-month forecast from our customers. And so as we look at 2024, we think this is higher than the market growth, which we think again will be 4% to 6%. So we think our organic growth is delivering on our at least 200 basis points above and we’re excited about the acquisitions and the additional commercial synergies that we can get when we get to later ’24 and ’25 and beyond.
So we feel like this is a really balanced view of 2024, and we’re excited to get into the year and execute on the first quarter.
Matthew O’Brien: Got it. And then from the acquisitions, are you able to get into new areas that you hadn’t been in before? Or are you just strengthening existing areas? And then specifically, tricuspids have been getting — there’s been some approvals there recently. Is this an area where you can participate if that were to expand over the next several years? And then I have one final question. Thanks.
Joe Dziedzic: Certainly. So one of the great synergies with these acquisitions is they’re serving the leading MedTech OEMs as well. So our customers know them and know them well and trust them for the design and development. The ability for them to ramp and scale is an area that they’re excited for Integer to own them. It has gotten this exposure to maybe a couple of areas, more so heart pumps being one example with Pulse Technologies where it deepens our position in that space. And the broader capabilities and capacity enables us to move faster with our customers. So we’re excited about having both the InNeuroCo and Pulse Technologies on the team.
Matthew O’Brien: Got it. And last question for Diron and congrats on the permanent title. Just the deleveraging that we’re seeing on the income statement from top to bottom line, especially the low end of the range. Can you just maybe just — I don’t know if that’s interest expense specifically, but just talk about that. And then it is a pretty broad range, which makes sense earlier in the year, but just what gets you to the low end, what gets you to the high end of that range? Thanks.
Diron Smith: Yes. Just to clarify, you’re referring to the adjusted net income…
Matthew O’Brien: That’s right. The EPS numbers.
Diron Smith: Okay. Yes, on EPS, I just wanted to confirm. Yes. So interest expense, we’re up about $9 million midpoint on interest expense, and that’s primarily related to the acquisitions of InNeuroCo and Pulse. So that drives about $13 million on the interest expense, and then the reduction is some additional pay down in debt. And then when you look at the tax rate, we’re up about two percentage points on our adjusted tax rate year-over-year. That’s primarily two points. One is the global Pillar 2 minimum tax rate impact. That’s about a point-ish of tax rate and then another just less than a point related to our Malaysian tax holiday expiration that expired in 2023. And so there’s some residual carryover impact of that. And then the other kind of other points would be a little bit of jurisdictional mix on the tax rate. So those two points are the primary drivers related to the EPS.
Matthew O’Brien: Got it, thank you.
Operator: Your next question comes from the line of Craig Bijou with Bank of America. Your line is open.
Craig Bijou: Good morning guys. Thanks for taking the questions. So I just want to start, we spent a lot of ’23 talking about customer inventory work down. So I do apologize for asking this question again, but maybe we can kind of put it to rest. But it sounds like inventory order patterns at your customers are getting to a more normal level. So just wanted to hear kind of your thoughts there and if that is, in fact, true, and ’24 is going to be a normal year from that perspective.
Joe Dziedzic: Yes, Craig, it wouldn’t be an earnings call without that question. So thank you. So maybe I’ll start with this. Our view of the end market is 2022 was a below average growth year because of hospital staffing shortages and 2023 was higher than average. And if you look at the two years, it looks to us like it kind of averages out to maybe more normal over the two years. And we work closely with customers back in 2022 and when orders were coming in, fast and furious and high, we work close with customers to allocate capacity where in order to support medical procedure volumes. And that was our first question to customers when we saw orders that look like they were meaningfully above any pattern or trend that we could observe in the end markets.
And the nice thing is we’re serving so many customers on so many different therapies and products. We can get a pretty good view of the overall market for different submarkets pretty comprehensively given our sole-source nature. And so we were able to talk to customers about what we were seeing more holistically. And we think for the most part that order patterns — maybe ordering was not normal, but what we shipped was maybe more aligned to end markets. I shared on the third quarter earnings call, we saw some of the supplier adjustments, with your supplier, we’re adjusting inventory letters that customers oftentimes send out when they do things in mass, we saw some of that last summer. I said on the third quarter earnings call that we were seeing what we would characterize as kind of typical year-end inventory management in some locations, and we had incorporated that both of those into our guidance.
So it was in our third quarter, those adjustments were in our fourth quarter. And I think given our order book, we’ve got really good visibility to the next at least six months and even beyond with some of the longer-term orders we have. So we baked all that in. We’ve got all that factored into our guidance, and we’re confident in the guidance that we provided both for the full-year and the qualitative color that we provided on the first quarter.
Craig Bijou: Got it. Thanks for the thorough answer. I wanted to follow-up on the higher guidance for emerging customers. And sorry if I missed this, the specifics, but what’s driving that raise to the $20 million. So was that outperformance versus what you were expecting through ’23? Or is it a better — higher expectations for ’24 for those products?
Joe Dziedzic: Yes. It’s a great question. I mean the very nature of these customers are the success or failure in the marketplace will determine the success or failure on the Slide 17 in our presentation that shows those — the growth in those sales. And so look, we risk adjust the forecast from our customers because we know that they’re going to plan for the best they can do to make sure that they’ve got product to hit the most aggressive sales forecast that they have. Well, we risk adjust that because we’ve got 40-plus years of doing this kind of IPG and lead development for neuromodulation customers. And so what you’re seeing is you’re seeing stronger success in the marketplace than what we risk-adjusted the growth pattern here.
And quite frankly, you can look at it and see in fourth quarter of ’21, we were saying 2024 was going to be $60 million to $80 million because when we did that, we were still two years away. We got one more year of knowledge and the end of fourth — end of 2022, we said $80 million to $100 million. And that risk adjustment proved to be overly conservative. And so now we’re seeing those customers’ success in the marketplace. We said — I commented earlier that our ’23 versus ’22 growth for Integer was about 250 basis points from these customers. So you can do the math and extrapolate. We’re ahead of the midpoint of $50 million to $100 million, which gave us confidence to raise the $100 million to $120 million. But ultimately, it’s the success of the products in the marketplace and our risk adjustment proved conservative.
Craig Bijou: Got it. That’s helpful. And last one for me. It sounds like you guys are modeling in a decent amount of contribution from new acquisitions. So I wanted to get your sense for the end market acquisitions for you guys, I guess. Are there that many smaller deals to be done? And how is the pricing or valuation expectations on some of those deals?
Joe Dziedzic: So there is a very robust pipeline of acquisition — tuck-in acquisitions for us. The team continues to do a phenomenal job of identifying opportunities. We think we’re in a very unique position in the marketplace to be able to identify these tuck-in acquisitions. We are oftentimes a supplier to these targets or we might actually be partnering or working on a product that they’re working on as well. Customers come to us and suggest to us acquisition opportunities where they may love the technology and the design development capability, but they look at them and say they’re not big enough to scale or they don’t want to take too much risk in some of the smaller customers on their most important high-growth programs.
Sometimes we actually get costs from targets themselves who’ve seen what we’ve done with other acquisitions because they’ve heard and they know from that network of other entrepreneurs, founder-led companies that we invest and grow the business. We bring commercial synergies. So we accelerate the growth of their business. We invest in their business and the vertical integration just helps them accelerate the impact they’re having in the marketplace and with patients. So they’re excited about that. So we think we’re in a unique position to be able to identify these tuck-in acquisitions relative to others in the market who are pursuing them. And your question on pricing, well, of course, everybody wants the highest possible price, but these entrepreneurs and founder-led companies care about lots of things when they make those decisions.
And we think we get to a fair price for them. And oftentimes, we’ll put an earnout in there if they outperform over the first couple of years of ownership, they can get more, but we’ve been able to get these acquisitions, we think at a fair price, a price that lets us then bring commercial and operational synergies and get a great return. And we’ve built that muscle of diligencing and integrating. We’re excited about the progress that we’ve already made with the InNeuroCo and Pulse. We’ve already got commercial opportunities that are in process and the operational synergies also, they start day 1 because they’re doing a lot of the same work, serving the same customers and so it’s pretty quick and pretty easy. And so then also to maybe your question, they’re serving the same end markets.
They’re targeting the same higher growth markets as us. So they’re great strategic fits, which is the discipline following our criteria for acquisitions.
Craig Bijou: Great, thanks guys.
Joe Dziedzic: Thank you.
