Integer Holdings Corporation (ITGR) Q3 2026 earnings review
Integer's heart catheter sales shrink, and factory costs cut profit
Integer Holdings, a contract manufacturer of medical devices, saw both sales and factory margins drop as customers ordered fewer heart components. Revenue fell 4% from a year ago to $450 million, while profit per share excluding one-offs dropped 25% because lower factory output left fixed plant costs unabsorbed. Because private equity firm KKR is buying the business, management gave no outlook and held no conference call.
| Sales from businesses owned a year ago | -2.2% from a year ago (-3.9% reported to $450M) |
|---|---|
| Profit per share, excluding one-offs | $1.34 -25% from a year ago |
| Operating margin, excluding one-offs | 14.7% -3.6 percentage points from a year ago |
| Full-year outlook | Withdrawn none provided due to pending KKR buyout |
⚖️ Verdict: 🔴 Bearish
The story got worse because the downturn in its largest division deepened instead of easing in the second half of the year. Cardio and Vascular sales shrank 5%, twice as fast as in the second quarter, and pulled operating margin down from the prior quarter. One bright spot: pacemaker and nerve-stimulation sales accelerated, and stockholders approved the KKR buyout on October 21.
The question now is whether KKR completes the buyout before year-end as planned, or if remaining foreign regulatory reviews push the close into 2027. Closing the deal ends public reporting, while any delay leaves the business exposed to weak catheter orders and rising debt leverage. Regulatory clearances in the fourth quarter will settle the timing.
🐂 Bull Case
Heart Rhythm and Brain Device Sales Accelerated
Integer's second-largest division makes components for pacemakers, defibrillators and nerve-stimulation devices, which it groups under Cardiac Rhythm Management and Neuromodulation. Revenue in this division rose 3.9% from a year ago to $175.8 million, speeding up from 1.0% growth in the second quarter.
The division grew even though it faced "the previously communicated impact from the one new Neuromodulation product" that customers ordered less of this year. Demand for its pacemaker and heart-rhythm parts outweighed that single product drag, making this division the only growing part of the business in the third quarter.
What to watch: fourth-quarter division sales in the year-end filing, if the buyout has not yet closed. Another quarter near 4% growth would show that heart-rhythm demand can offset slower brain-device orders.
Share Buybacks Cushioned the Per-Share Profit Drop
Integer spent $50 million earlier in 2026 to buy back its own stock. Those purchases lowered its diluted share count by 2.8% from a year ago to 34.6 million shares in the third quarter.
A smaller share count spreads profit across fewer shares, so profit per share excluding one-offs fell 25.1% to $1.34 while total net profit excluding one-offs dropped 26.9% to $46.1 million. The medical device manufacturer has not bought back more shares since the first quarter because of its pending sale.
What to watch: diluted share count at the close of the buyout. Any additional conversion of the 2028 or 2030 convertible notes would alter the final share count.
🐻 Bear Case
Heart Catheter Demand Pulled Total Sales Down
Cardio and Vascular is Integer's largest division, supplying catheters, guidewires and components used in heart and blood-vessel procedures. Division revenue fell 5.1% from a year ago to $263.1 million, a steeper drop than the 2.5% decline in the second quarter and the 0.4% dip in the first quarter.
The company said the decline reflected "the previously communicated impact from the two new Electrophysiology products", which are devices used to treat irregular heartbeats. On earlier calls, chief executive Payman Khales said customers slowed their orders for those products after building up stock during their initial launch.
Because this division brings in 58.5% of total revenue by our math, its 5.1% contraction pulled total underlying sales down 2.2%. The worsening drop across three straight quarters shows that customer order cuts hit harder in the third quarter than in the first half of the year.
What to watch: Cardio and Vascular sales in the fourth quarter. Earlier in the year, management said total company sales would return to market growth in the fourth quarter as these product comparisons eased.
Higher Factory and Overhead Costs Squeezed Margins
On the first-quarter call in May, finance chief Diron Smith said operating margin would improve each quarter as sales rose through the year. Instead, third-quarter sales fell 3.1% from the second quarter by our math, and profitability dropped with them.
- Cost of making products: 77.4% of revenue, up 4.4 percentage points from a year ago by our math
- Selling and administrative overhead: 12.0% of revenue, up 1.3 percentage points by our math
- Operating margin excluding one-offs: 14.7%, down 3.6 percentage points from a year ago by our math
- Reported operating margin: 6.3%, down 5.8 percentage points from a year ago by our math
When factory output drops, fixed plant costs take up a larger share of each dollar of sales. Integer booked $2.9 million in severance costs from "actions to align labor with manufacturing volumes" and $1.2 million in equipment write-downs from "revised expectations regarding the future use of certain fixed assets". It also spent $6.9 million on its strategic review and buyout.
What to watch: fourth-quarter cost of sales as a share of revenue. A reading above 77% would show that factory layoffs have not yet matched the drop in customer orders.
Unsold Inventory Built Up and Cut Cash Flow
Integer generated $121.1 million of operating cash flow in the first nine months of 2026, down 14.0% from $140.7 million a year earlier by our math. After subtracting $67.2 million of factory equipment spending, nine-month free cash flow fell 30.2% to $53.9 million by our math.
In the third quarter alone, free cash flow fell 65.2% from a year ago to $16.1 million by our math. Cash stayed tied up in the factories because inventories rose 9.8% from the end of 2025 to $278.6 million, taking $28.5 million of cash over the nine months as customer orders slowed.
What to watch: inventory levels at year-end. A drop from $278.6 million would show that the manufacturer is clearing out stocked components rather than building parts for delayed orders.
👓 Other Themes
KKR Buyout Nears Completion After Stockholder Vote
In August 2026, private equity firm KKR agreed to buy Integer. The medical device supplier cleared two hurdles recently: antitrust regulators ended their waiting period early on September 29, and stockholders approved the deal on October 21. Because of the deal, Integer "is not providing a financial outlook and will not host a conference call", and said the buyout is "anticipated to close by the end of 2026".
Planned Exit From Portable Medical Halved Other Sales
Sales in Integer's smallest division, Other Markets, fell 49.7% from a year ago to $10.8 million. The company said the drop was "primarily due to the Portable Medical exit", a multi-year plan to leave that business announced in 2022. Stripping out that exit, division sales fell 21.4%, and the exit took 1.7 percentage points off total company revenue growth in the quarter.
💲 Other KPIs
Net total debt — total debt principal minus cash — rose $33 million from the end of 2025 to $1.223 billion. Because full-year cash earnings shrank while debt grew, debt rose to 3.3 times trailing four-quarter EBITDA excluding one-offs, up from 3.0 times at the end of 2025 and 3.2 times in the second quarter.
Spending on research, development and engineering rose 23.6% from a year ago to $13.5 million, rebounding from $11.3 million in the second quarter. As a share of revenue, engineering costs rose by 0.7 percentage points from a year ago to 3.0% by our math, as the contract manufacturer kept funding product development despite lower factory volumes.
❓ Key Questions
Have customer order cuts spread beyond heart rhythm catheters?
Cardio and Vascular sales fell 5.1% in the third quarter after falling 2.5% in the second. Because the company held no conference call, investors cannot tell if the deeper drop came only from the two flagged heart-rhythm products or from wider customer inventory cuts.
Why did factory layoffs slow while gross margin dropped?
Gross margin fell to 22.6% in the third quarter from 24.3% in the second, yet severance costs to align factory labor with lower volume were $2.9 million, after $1.5 million across the first half. Did production volumes drop again late in the quarter?
Which regulatory approvals remain before KKR closes the buyout?
United States antitrust waiting periods ended on September 29 and stockholders approved the merger on October 21. Management still lists regulatory approvals among the remaining conditions before closing by the end of 2026, without naming which foreign jurisdictions are still reviewing the deal.