ICU Medical, Inc.

Good afternoon, ladies and gentlemen, and welcome to the ICU Medical Incorporated First Quarter 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, May 7, 2024. I would now like to turn the conference over to John Mills, ICR Managing Partner. Please go ahead.

Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the first quarter of 2024. 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. To view the presentation, please go to our investor page and click on events calendar, and it'll be under the first quarter 2024 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're 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 the 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, everyone. I'll quickly walk through our summary Q1 revenue and earnings performance, provide some commentary on the overall health of the company, and then turn it over to Brian to recap the full Q1 results. After that, I'll come back with updates on the various integration and consolidation efforts that will improve our medium-term profit outlook. Revenue for Q1 was $553 million for total company growth of 1% on a constant currency basis or minus 1% on a reported basis. Adjusted EBITDA was $79 million, and adjusted EPS was $0.96. Gross margins were a little higher than expected due to supply chain efficiencies and mix. Our cash balance was near flat sequentially as we continued to reduce inventory and had our typical higher Q1 cash outflows. The broader demand and utilization environment in Q1 was healthy across all geographies with March seeing some reduction in census, and it appears to be fine in Q2 at the moment. The capital environment was status quo, and investments that customers need to make are getting made. The only additional macro headwind is the strong U.S. dollar in certain commercial geographies, which impacts our IB system segment the most, as it's our largest OUS business. Getting into our businesses more specifically, our consumable segment grew 3% constant currency and reported. Growth was driven by our oncology and vascular access lines, which were both at or above 6%. IV therapy was low single digits and trachs was closer to flat. We did expect some sequential declines given the very robust volumes we saw in Q4. Nothing else is new here. We would expect sequential improvements in this segment as we wrap up Q2. Our IV systems business was flat on a constant currency basis or down 3% reported due to the currency impact I just mentioned. Again, we had a wide range of performance across the product lines. Our LVP pump business grew 8% with good dedicated set utilization due to census and a larger install base. Syringe pumps sold slightly above normal quarterly levels and grew 5%. Ambulatory pumps were down 10% as Q123 was the last quarter of the catch-up we were dealing with at the time, which will finally get lapped now. More importantly, ambulatory was sequentially flat as the line is stable and the macro trends of home care remain solid. We have some specific opportunities that are additive to getting the business back to historical levels, which are first, the replacement of our own Life Care PCA products in the market, and second, a market event with a smaller player, which is relevant to us. Our new Plum Duo device and LifeShield IV safety software have been fully available for the last few weeks, and we've had our first customer signing. The early feedback is meeting our expectations, and we are 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 segment was down 4%, both on a constant currency and reported basis. IV Solutions, the largest component of the segment, was flat, and the entire decline was essentially due to critical care, where we had a reduction in non-hospital OEM sales due to a large order we had in Q1 of last year. The rest of the segment was flat. From an operational perspective towards our customers, like the comments on the last call, the company is running the best it has in the last few years. Customer back orders are at the lowest level in nine quarters and fulfillment has been very stable because of all of the efforts of our team. 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. Our goals in 2024 are not so different from our historical goals as we lost time in the first six to seven quarters following the acquisition. We expect revenue growth in all of our differentiated product lines. We have substantially progressed our quality remediation and ensured quality for patients and high compliance for regulatory authorities and desire to bring our open warning letter to a close. We intend to execute the substantial integration work as we have operational stability in place to pursue remaining synergies. And ultimately and obviously, these actions are intended to improve our profit levels and cash flow over the medium term. And we're focused on optimizing 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 Q1 at a high level. I'll turn it over to Brian, and then I'll come back with a few thoughts and comments on our immediate-term outlook, some targets, and a few other thoughts.