ICU Medical, Inc.

Good day, and welcome to the ICU Medical, Inc. Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist for pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To try your question, please press star, then two. Please note, today's event is being recorded. But now I'd like to turn the conference over to John Mills. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the fourth quarter and full year of 2023. On the call today representing ICU Medical is Vivek Jain, Chief Executive Officer and Chairman, and Brian Bunnell, Chief Financial Officer. We wanted to let everyone know that we have a presentation accompanying today's prepared remarks as well. To view the presentation, please go to our investor page, and click on Events Calendar, and it will be under the fourth quarter 2023 events. Before we start our prepared remarks, I want to touch upon any forward-looking statements made during the call, including beliefs and expectations about the company's future results. Please be aware they are based on the best available information to management and assumptions that are reasonable. Such statements are not intended to be a representation of future results and are subject to risk and uncertainties. Future results may differ materially from management's current expectations. We refer all of you to the company's SEC filings for more detailed information on the risk and uncertainties that have a direct bearing on operating results and financial position. Please note that during today's call, we will also discuss non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis, and greater transparency into ICU Medical's ongoing results of operations, particularly when comparing underlying results from period to period. We've also included a reconciliation of these non-GAAP measures in today's release and provided as much detail as possible on any addendums that are added back. And with that, it is my pleasure to turn the call over to Vivek.

Thanks, John, and good afternoon to everyone. I'll walk through our Q4 revenue and earnings performance, highlight and provide some commentary on the main topics of 2023, and then turn it over to Brian to recap the full Q4 and fiscal 2023 results and provide our 2024 guidance. After that, I'll come back with some brief comments on our medium-term outlook and the actions and opportunities in front of us to improve our performance. Revenue for Q4 was $576 million for total company growth of 2%. Adjusted EBITDA was $86 million and EPS was $1.57. We added 56 million of cash to our balance sheet as a result of the actions we've been taking on inventory combined with modest growth. As we had anticipated, we had sequential growth in all the segments and a larger inventory reduction in Q4 versus Q3. The broader demand and utilization environment in Q4 was the most positive since 2021 across almost every geography. The capital environment was status quo, and it does appear investments that customers need to get done do get done. There were no additional macro headwinds or tailwinds as compared to earlier in the year, but the inflationary labor environment in some of the larger production countries continued. Getting into our businesses more specifically, our consumable segment grew 4% in constant currency or 5% reported. The legacy ICU product families of IV therapy and oncology continued combined again hit a record level in absolute sales with 11% growth, which is probably a few points overstated due to the Italian tax accrual in Q4 of 22. But more importantly to us, all four product lines in the segment grew well sequentially with vascular access finally turning around and at least reaching Q4 2022 levels. The sequential growth was driven by new global customer implementations, improved census throughout the quarter, and increased capacity and ability to serve the market with focus on clinical differentiation and creation of niche markets. Our IV systems business was down 1% constant currency or down 2% reported and was the best quarter of the year in total. There was a wide range of performance across the product lines here. Our LVP pump business grew 11% with the best performance since 2021. This was due to strong census environment, larger install base, and the usually robust Q4 for capital. Syringe pumps sold near normal quarterly levels but were down year over year due to the higher shipments in Q4 of 2022 from the release of certain product holds. Ambulatory pumps and their dedicated consumables were down year over year and are still below historic levels but had a nice sequential improvement as did the segment. Since our last call, we've been putting our newly cleared Plum Duo infusion system and LifeShield IV safety software through real-world use cases in a large US IDN environment, and we're starting to be production-ready to make PlumDuo generally available. The early feedback is meeting our expectations, and we're incorporating super-user feedback into our roadmap and believe we have a hardware product and related safety software that can be the anchor of our offering for many years to come. Just wrapping up the business segments, our vital care seven grew 2%, with IV solutions being up 6% and flat sequentially. Temperature management and respiratory both had nice sequential improvements. From an operational perspective towards our customers, the company's running the best it has in the last two years. Customer backorders are at the lowest levels, and a quarters and fulfillment has been very stable because all of the efforts of our team, and finally, what appears to be a more predictable supply chain and logistics environment. The discussions have shifted far more to innovation and the integrated value of what we've amassed. Quality has been an area of heavy investment. We feel we're on solid footing. We have had and likely will have a few more important customer notifications, all as part of the overall remediation efforts previously discussed and enhancements we have made. We started 2023 with five goals that we reiterated on each call last year. Ultimately, we had revenue growth in most but not all of our differentiated product lines. We did progress our quality remediation and ensured quality for patients and high compliance for regulatory authorities, respectively. We finished the TSA separation and have the groundwork and operational stability in place to pursue remaining synergies. We finally improved cash flow towards the end of the year, but continued to be burdened by necessary investments in quality, and integration projects to unlock additional synergies, as well as certain underutilized production assets that we're working to address. And we're improving the portfolio from a revenue growth and quality perspective, which will increase any opportunities to rationalize the portfolio at sensible levels. That's my brief recap of Q4 and 2023 at a high level. I'll now turn over to Brian and then come back with a few comments on our medium-term outlook, some targets, and a few other thoughts.