ICU Medical, Inc.

Please stand by, your program is about to begin. If you need assistance during your conference today, please press star zero. Good afternoon, ladies and gentlemen, and welcome to the ICU Medical Incorporated Second 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. I would now like to turn the conference over to John Mills, ICR Managing Partner. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the second 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 as well. To view the presentation, please go to our investor page and click on events calendar, and it will be under the second 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 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 in the ICU medical's ongoing results of operations, particularly when comparing underlying results from period to period. We 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 walk through our summary Q2 revenue and earnings performance, provide some highlights for each segment, and then turn it over to Brian to recap the full Q2 results and outline our current thinking on the balance of the year. After that, I'll come back with updates on the various integration and consolidation efforts that will benefit our medium-term profit outlook and discuss the overall improving health of the company. Revenue for Q2 was $581 million for total company growth of 10% on a constant currency basis or 9% on a reported basis. Adjusted EBITDA was $91 million and EPS was $1.56 million. Gross margins were a little higher than expected, again, due to earlier capture of supply chain efficiencies and sales mix. We had a good quarter of cash generation with $63 million in free cash flow, of which $7 million was inventory drawdown, and our cash balance finished just over $300 million. The broader demand and utilization environment in Q2 was healthy across all geographies and has felt that way this year to date. But of course, we've all noticed the increasing volatility in the environment. The capital environment with status quo and investments that customers need to make are getting made. The macro headwind of a strong U.S. dollar has not broken everywhere yet and specifically is still strong in the areas where we have our largest international commercial footprints. And again, this impacts our IV system segment the most. Getting into our businesses more specifically, consumables grew 11% constant currency and 10% reported. All four lines in this unit grew well with vascular access and tracheostomy in the teens, and the legacy ICU product lines of IV therapy and oncology in the mid to high single digits. To mention a few highlights across the unit, and these types of examples thematically have helped our results to date, but I'll give a few more specific forward-looking ones. The first example is around our core focus of improving outcomes, patient safety, and improving workflows. In our IV therapy line, there was an important study published in the Journal of Vascular Access a few days ago which is a great example of the clinical and economic value of our clave family of connectors, as the study noted the improved safety with these products as measured by infection reduction. A second example is our continued efforts in new adjacent market creation, like we did in oncology closed systems a number of years ago. We've also been doing that in the renal markets since our acquisition of Pursuit Vascular and recently signed a multi-year committed agreement with a leading U.S. operator of dialysis clinics, and believe this will help us grow our evidence base to attract other operators. Lastly, we've been focused on getting our geographies right. For the most part, we have historically been a very small player in China. Shortly after rebaselining the acquired Smith Medical business in China, we've been working to register additional core infusion products to expand our sellable portfolio in the country and expect several approvals over the next years. We have nothing to lose here, as our business is currently limited in China, Our manufacturing costs are competitive, and we're now big enough to try to compete. And lastly, over the medium term, each of these lines has its innovation roadmap, as we mentioned previously. For the balance of 2024, nothing else is new here. We would expect results in line with our original targets and with legacy ICU consumable lines being at record levels. Our IV systems business unit grew 11% constant currency and 7% on a reported basis. Again, we had a wide range of performance across the product lines here, As we mentioned on the last call, we finally saw stabilization in our ambulatory line, and there were some tailwinds emerging with the macro trends of home care remaining solid. Those have started to generally come true, and we had a very strong quarter of ambulatory hardware sales, and those pumps will soon start using dedicated sets. We had a lighter quarter of LVP hardware installs just based on the calendar, and we expect both lines to perform well in Q3. Some key highlights here include, first, We now have multiple signed contracts for our Plum Duo system with a variety of customers, and in general, customer decisions are more active than they have been over the last couple of years. We're pleased with what we're seeing so far. Second, since the last call, we have filed 510K submissions for our Plum Solo Precision Infusion Pump and several enhancements to our LifeShield safety software and our already cleared Plum Duo device. After these products are cleared, the combination of the dual channel, Plum Duo, and the single-channel Plum Solo will provide customer flexibility across all clinical care areas. Third, as we wait for responses, much of our energy shifts towards the refreshed syringe platform of our MedFusion product with the goal of filing that 510K submission over the next several quarters and also having it connect to our LifeShield safety software. Our ambition is to have the most modern fleet of infusion devices that can anchor the portfolio for many years to come. Simplistically, we want customers to have the right tools for the right job, all connected with a common user interface and software solution that minimizes training, improves onboarding, and drives standardization. For the balance of 2024, nothing else is new here either. We would expect results in line with our original targets. Just wrapping up the business segments, our vital care segment grew 8% constant currency and 7% reported. The majority of the growth was driven by IV solutions, which did have an easier comp as it was at a low level last year, and by critical care. The rest of the segment was generally 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. There are, of course, many areas to still improve and some of the normal bumps and bruises in manufacturing, but customer back orders remain low, and hopefully our comments from the last time Hopefully, our comments from the last few calls and our efforts shifting to innovation and displaying our integrated value to customers has been noted. That's my brief recap of Q2 at a high level. I'll turn it over to Brian and then come back with some comments on our medium-term outlook and a few other thoughts.