Integer Holdings Corp: Form 10-Q for the period ended Mar 28, 2025

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; 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;
• 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.

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 first quarters of 2025 and 2024 ended on March 28, 2025 and March 29, 2024, respectively, and consisted of 87 days and 89 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 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 $976.3 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”).

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. We currently expect Portable Medical sales to begin to wind down with the final sales and market exit occurring in 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 first quarters 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.

Financial Overview

Income (loss) from continuing operations for the first quarter of 2025 was a loss of $22.5 million, or $0.66 per diluted share, compared to income of $20.6 million, or $0.59 per diluted share, for the first quarter of 2024. These variances are primarily the result of the following:

• Sales for the first quarter of 2025 increased $29.6 million when compared to the same period 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 first quarter of 2025 increased $12.0 million, primarily from higher sales volume leverage, efficiencies gained from the continued improvement in the supply chain and contributions from our recent acquisitions.
• Operating expenses for the first quarter of 2025 increased $1.2 million when compared to the same period in 2024, primarily due to higher SG&A, partially offset by lower RD&E costs and Restructuring and other charges. Operating expenses as a percentage of sales improved to 16.2% for the first quarter of 2025 compared to 17.1% or the first quarter of 2024.
• Interest expense for the first quarter of 2025 increased $0.8 million compared to the same period in 2024, primarily due to $0.7 million of losses from early extinguishment of debt.
• During the first quarters of 2025 and 2024, we recognized gains on equity investments of $0.2 million and $1.1 million, respectively. Gains and losses on equity investments are generally unpredictable in nature.
• Other loss, net for the first quarter of 2025 was $47.9 million compared to $1.0 million for the first quarter of 2024, primarily due to $46.7 million of debt conversion inducement expense related to the partial exchange of our outstanding 2028 Convertible Notes that was completed during the first quarter of 2025.
• We recorded provisions for income taxes for the first quarters of 2025 and 2024 of $9.5 million and $4.2 million, respectively. The change in income tax expense was primarily due to relative changes in pre-tax income and the impact of discrete tax items.

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).

NM - Calculated change not meaningful.

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Product Line Sales

For the first quarter of 2025, Cardio & Vascular (“C&V”) sales increased $37.0 million, or 17%, versus the comparable 2024 period. The increase in C&V sales was driven by new product ramps in electrophysiology and acquisitions, partially offset by the impact of fewer shipping days in the first quarter 2025 versus the first quarter 2024. C&V sales for the first quarter of 2025 included $13.3 million of aggregate sales from the recent Precision and VSi acquisitions. Foreign currency exchange rate fluctuations decreased C&V sales for the first quarter of 2025 by $0.4 million in comparison to the 2024 period, primarily due to U.S. dollar fluctuations relative to the Euro.

For the first quarter of 2025, Cardiac Rhythm Management & Neuromodulation (“CRM&N”) sales increased $3.4 million, or 2%, versus the comparable 2024 period, driven by strong growth in emerging neuromodulation customers with PMA (pre-market approval) products and normalized cardiac rhythm management growth, offset by the impact of fewer shipping days in the first quarter 2025 versus the first quarter 2024. Foreign currency exchange rate fluctuations did not have a material impact on CRM&N sales during the first quarter of 2025 in comparison to 2024.

Other Markets sales for the first quarter of 2025 decreased $10.8 million, or 37%, versus the comparable 2024 period, primarily driven by the planned multi-year Portable Medical Exit. Foreign currency exchange rate fluctuations did not have a material impact on Other Markets sales during the first quarter of 2025 in comparison to the 2024 period.

Gross Profit

Gross margin for the first quarter of 2025 increased 90 basis points compared to the comparable 2024 period, primarily driven by higher sales volume leverage and efficiencies realized through our manufacturing excellence initiatives.

SG&A Expenses

Changes to SG&A expenses from the prior year period were due to the following (in thousands):

(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 decreased primarily due to lower audit and tax expense.

(d) Contract services expense increased primarily due to higher software costs from information technology enhancements.

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RD&E

RD&E expense for the first quarter of 2025 was $14.2 million, compared to $15.3 million for the first quarter of 2024. The decrease in RD&E expense for 2025 compared to 2024 was primarily due to lower labor costs and 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.

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):

(a) Restructuring charges for the first quarters 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 quarter of 2025 primarily include acquisition expenses related to the Precision and VSi acquisitions. Amounts for the first quarter of 2024 primarily included acquisition expenses related to the InNeuroCo and Pulse acquisitions.

(c) Amounts 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.

Interest Expense

Information relating to our interest expense is as follows (dollars in thousands):

During 2025, contractual interest expense has decreased due to a lower combined interest rate, partially offset by higher average debt balance outstanding. The higher average debt balance outstanding is primarily the result of borrowings on our Revolving Credit Facility 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 first quarter of 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 quarter of 2025 were related to prepayments of portions of the TLA Facility in connection with issuance by the Company of its 2030 Convertible Notes.

As of March 28, 2025 and December 31, 2024, approximately 89% 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.

Gain on Equity Investments

Gain on equity investments for each period were as follows (in thousands):

During the first quarters of 2025 and 2024, we recognized gains on equity investments of $0.2 million and $1.1 million, respectively. The amounts for both the first quarters of 2025 and 2024 relate to our share of equity method investee losses including unrealized depreciation of the underlying interests of the investee. As of March 28, 2025 and December 31, 2024, the carrying value of our equity investments was $7.6 million and $7.4 million, respectively.

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 first quarter of 2025 was $47.9 million compared to $1.0 million for the first quarter of 2024. Other loss, net for the first quarter of 2025 primarily includes debt conversion inducement expense of $46.7 million related to the partial exchange of $383.7 million in aggregate principal amount of the 2028 Convertible Notes. Other loss, net for the first quarter of 2024 primarily includes gains/losses from the impact of exchange rates on transactions denominated in foreign currencies.

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 first quarters of 2025 and 2024 were net losses of $1.1 million for both periods. 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.

Provision for Income Taxes

We recognized income tax expense of $9.5 million for the first quarter of 2025 on a loss before taxes of $13.0 million (effective tax rate of (72.8)%), compared to an income tax expense of $4.2 million on $24.8 million of income before taxes (effective tax rate of 17.1%) for the same period of 2024. Income tax expense for the first quarters of 2025 and 2024 included discrete tax benefits of $1.5 million and $0.8 million, respectively. The discrete tax benefits for the first quarter of 2025 and 2024 are predominately related to excess tax benefits, net of deductibility limitations, recognized upon vesting of RSUs.

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. A significant number of other countries are expected to also implement similar legislation with varying effective dates in the future. 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, we continue to explore tax planning opportunities that may have a material impact on our effective tax rate.

Liquidity and Capital Resources

Sources of Liquidity

(dollars in thousands)

Cash and cash equivalents at March 28, 2025 decreased by $14.8 million from December 31, 2024, primarily as a result of cash generated by operating activities of $31.3 million offset by purchases of property, plant and equipment of $25.2 million and tax withholding payments related to net share settlements of restricted stock unit awards of $14.1 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 $51.9 million from December 31, 2024, or $66.7 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 March 28, 2025, $21.0 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 March 28, 2025, our capital structure consisted of $1.235 billion of debt, net of deferred debt issuance costs and unamortized discounts and 35 million shares of common stock outstanding. As of March 28, 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 March 28, 2025, our contractual debt service obligations for the next twelve months, consisting of interest on our outstanding debt, are estimated to be approximately $32 million. As of March 28, 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 March 28, 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 $145 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.

The conditions allowing holders of the 2028 Convertible Notes to convert have been met such that holders have the right to exercise their conversion option through the close of business on June 30, 2025. Any determination regarding the convertibility of the 2028 Convertible Notes during future periods will be made in accordance with the terms of the indenture governing the 2028 Convertible Notes. If a conversion request occurs, we have the intent and ability to refinance the amounts that may become due with respect to the 2028 Convertible Notes using the available borrowing capacity under the Revolving Credit Facility. As such, these obligations with respect to the 2028 Convertible Notes continue to be classified as a long-term liability on the Condensed Consolidated Balance Sheet at March 28, 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 March 28, 2025, we were in compliance with these financial covenants. As of March 28, 2025, our Total Net Leverage Ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 2.8:1.0. For the twelve month period ended March 28, 2025, our interest coverage ratio, calculated in accordance with our Senior Secured Credit Facilities agreement, was approximately 8.6:1.0.

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 three months of 2025 and 2024, we sold, without recourse, $58.1 million and $57.6 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.

(in thousands)

Operating Activities – During the first three months of 2025, we generated cash from operations of $31.3 million, compared to $23.2 million for the first three months of 2024. The increase of $8.0 million was the result of a $14.4 million increase in net income (loss) adjusted for non-cash items such as depreciation and amortization, partially offset by a $6.4 million decrease in cash flow provided by changes in operating assets and liabilities.

The increase in net income (loss) 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 three months of 2025 as compared to the same prior year period.

Investing Activities – The $29.0 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 three months of 2024 included net cash paid of $138.5 million for the Pulse acquisition.

Financing Activities – Net cash provided by financing activities for the first three months of 2025 was $151.6 million compared to $163.3 million provided by financing activities for the first three months of 2024. Cash provided by financing activities for the first three 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, $230.0 million of principal payments on our TLA Facility, $126.0 million net payments on our Revolving Credit Facility, and $14.1 million of tax withholdings related to net settlements of vested RSUs. Net cash provided by financing activities for the first three months of 2024 was primarily related to net borrowings on our Revolving Credit Facility of $180.0 million, offset by $9.3 million of tax withholdings related to net settlements of vested RSUs and $8.4 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.

Except as disclosed below, there have been no material changes to the Company’s exposure to market risk during the three months ended March 28, 2025. Refer to Part II, Item 7A, Quantitative and Qualitative Disclosure about Market Risk, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for further information about the Company’s exposure to market risk.

As of March 28, 2025, the Company reduced the aggregate principal amount outstanding of its floating-rate debt to $145 million from $501 million at December 31, 2024. A hypothetical one percentage point (100 basis points) change in SOFR on the $145 million of floating rate debt outstanding as of March 28, 2025 would increase our interest expense by approximately $1 million.

a. Evaluation of Disclosure Controls and Procedures

Our management, including the principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) related to the recording, processing, summarization and reporting of information in our reports that we file with the Securities and Exchange Commission as of March 28, 2025. These disclosure controls and procedures have been designed to provide reasonable assurance that material information relating to us, including our subsidiaries, is made known to our management, including these officers, by our employees, and that this information is recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on their evaluation, as of March 28, 2025, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective.

b. Changes in Internal Control Over Financial Reporting

During the Company’s most recent fiscal quarter, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as set forth below, there have been no material changes to the Company’s risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The conditional conversion features of the 2028 Convertible Notes and the 2030 Convertible Notes could adversely affect our financial condition and operating results.

The holders of our 2028 Convertible Notes have had the ability to, and may in the future continue to have the ability to, convert their notes at their option prior to the scheduled maturities and the holders of our 2030 Convertible Notes may in the future have the ability to convert their notes at their option prior the scheduled maturities. One of the conditional conversion features of the 2028 Convertible Notes has been triggered from time and time at the end of calendar quarters, including as of March 31, 2025, due to the trading price of our Common Stock exceeding 130% of the 2028 Convertible Notes conversion price on at least 20 out of the 30 consecutive trading days prior to such date. As a result, the 2028 Convertible Notes are convertible at the option of the holders, in whole or in part, until June 30, 2025. Whether the 2028 Convertible Notes or the 2030 Convertible Notes will be convertible in any future period will depend on the satisfaction, with respect to the 2028 Convertible Notes, of this condition or, with respect to the 2028 Convertible Notes or the 2030 Convertible Notes, another conversion condition at such time. If one or more noteholders elect to convert their 2028 Convertible Notes or, once eligible for conversion, the 2030 Convertible Notes, we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, holders of our 2028 Convertible Notes and our 2030 Convertible Notes will have the right to require us to repurchase their notes upon the occurrence of a fundamental change (as defined in the indenture governing the 2028 Convertible Notes or the indenture governing the 2030 Convertible Notes, as applicable), at a repurchase price equal to the principal amount of the 2028 Convertible Notes or the 2030 Convertible Notes, as applicable, to be repurchased, plus accrued and unpaid special interest, if any, to but not including, the fundamental change repurchase date. We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the 2028 Convertible Notes or the 2030 Convertible Notes or pay the cash amounts due upon conversion of such notes. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may restrict our ability to repurchase the 2028 Convertible Notes or the 2030 Convertible Notes or pay the cash amounts due upon conversion of such notes. Our failure to repurchase the 2028 Convertible Notes or the 2030 Convertible Notes or to pay the cash amounts due upon conversion of such notes when required will constitute a default under the indenture governing the 2028 Convertible Notes or the 2030 Convertible Notes, as applicable. A default under the indenture governing the 2028 Convertible Notes or the indenture governing the 2030 Convertible Notes or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, including the 2021 Credit Agreement governing the Senior Secured Credit Facilities, which may result in that other indebtedness becoming immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness, the 2028 Convertible Notes and the 2030 Convertible Notes.

If a conversion request occurs with respect to the 2028 Convertible Notes, we have the intent and ability to refinance the amounts that may become due with respect to the 2028 Convertible Notes using available borrowing capacity under the Revolving Credit Facility. As such, the obligations associated with the 2028 Convertible Notes were classified as a long-term liability on the Consolidated Balance Sheets as of March 28, 2025. As of March 28, 2025, the borrowing capacity under our Revolving Credit Facility was $794.7 million, which substantially exceeded the remaining outstanding principal amount of the 2028 Convertible Notes after the completion of the Note Exchange Transactions. Even if holders of the 2028 Convertible Notes do not elect to convert their notes, or if our available borrowing capacity under our Revolving Credit Facility were to fall below the outstanding principal amount of the 2028 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the 2028 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

Certain provisions in the 2028 Convertible Notes, the 2030 Convertible Notes, the indenture governing the 2028 Convertible Notes and indenture governing the 2030 Convertible Notes could delay or prevent an otherwise beneficial takeover or takeover attempt of us.

Certain provisions in the 2028 Convertible Notes, the 2030 Convertible Notes, the indenture governing the 2028 Convertible Notes and the indenture governing the 2030 Convertible Notes could make it more difficult or more expensive for a third party to acquire us. For example, if a takeover constitutes a fundamental change, holders of the 2028 Convertible Notes and the 2030 Convertible Notes will have the right to require us to repurchase their notes in cash. In addition, if a takeover constitutes a make-whole fundamental change (as defined in the indenture governing the 2028 Convertible Notes or the indenture governing the 2030 Convertible Notes), we may be required to increase the conversion rate for holders of the 2028 Convertible Notes or the 2030 Convertible Notes, as applicable, who convert their notes in connection with such takeover. In either case, and in other cases, our obligations under the 2028 Convertible Notes, the 2030 Convertible Notes, the indenture governing the 2028 Convertible Notes or indenture governing the 2030 Convertible Notes could increase the cost of acquiring us or otherwise discourage a third party from acquiring us or removing incumbent management, including in a transaction that holders of our Common Stock may view as favorable.

Transactions relating to our 2028 Convertible Notes or our 2030 Convertible Notes may affect the market price of our Common Stock.

The conversion of some or all of our 2028 Convertible Notes or our 2030 Convertible Notes would dilute the ownership interests of existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our Common Stock upon any conversion of such 2028 Convertible Notes or 2030 Convertible Notes, as applicable. Our 2028 Convertible Notes have in the past been and currently are through June 30, 2025, and may in the future continue to be, convertible at the option of their holders under certain circumstances. In addition, our 2030 Convertible Notes, once eligible for conversion, will become convertible at the option of their holders under certain circumstances. If holders of our 2028 Convertible Notes or, once eligible for conversion, the 2030 Convertible Notes, elect to convert their notes, we may settle our conversion obligation by delivering to them a significant number of shares of our Common Stock, which would cause dilution to our existing stockholders.

In connection with the pricing of the 2028 Convertible Notes and the 2030 Convertible Notes, we entered into capped call transactions with the option counterparties. The capped call transactions are expected generally to reduce potential dilution to our Common Stock upon conversion of any 2028 Convertible Notes or any 2030 Convertible Notes and/or offset or substantially offset any cash payments we are required to make in excess of the principal amount of converted 2028 Convertible Notes or 2030 Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap.

In addition, the option counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our Common Stock and/or purchasing or selling our Common Stock or other securities of ours in secondary market transactions prior to the maturity of the 2028 Convertible Notes or the 2030 Convertible Notes (and are likely to do so on each exercise date for the capped call transactions or following any termination of any portion of the capped call transactions in connection with any repurchase, redemption or early conversion of the 2028 Convertible Notes or the 2030 Convertible Notes). This activity could cause or avoid an increase or decrease in the market price of our Common Stock.

In addition, if any such capped call transactions fail to become effective, the option counterparties or their respective affiliates may unwind their hedge positions with respect to our Common Stock, which could adversely affect the trading price of our Common Stock.

We are subject to counterparty risk with respect to the capped call transactions for the 2028 Convertible Notes and the 2030 Convertible Notes.

The option counterparties for the capped call transactions for the 2028 Convertible Notes and the 2030 Convertible Notes are financial institutions, and we will be subject to the risk that any or all of them might default with respect to any such capped call transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Past global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the capped call transactions with such option counterparty. Our exposure will depend on many factors but, generally, an increase in our exposure will be correlated to an increase in the market price and in the volatility of our Common Stock. In addition, upon a default by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our Common Stock. We can provide no assurance as to the financial stability or viability of the option counterparties.