We appreciate your patience. And as you continue to stand by. Please stand by. Your program is about to begin. Good day, and welcome to the ICU Medical, Inc. First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. There will be an opportunity to ask questions. Please note, today's event is being recorded. I'd like to now turn the conference over to John Mills. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the first quarter of 2025. On the call today representing ICU Medical is Vivek Jain, Chief Executive Officer and Chairman, and Brian Bonnell, 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 the events calendar; it will be under the first quarter 2025 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 full representation of future results and are subject to risks 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 risks 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 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. We know it's the end of a long and complicated earnings season, so we'll try to be as brief as possible. I'll walk through our Q1 revenue and earnings performance, provide some commentary on the businesses, and then turn it over to Brian to recap the full Q1 results and implications of the joint venture and our view on the impact of tariffs, at least as of this moment. After that, I'll come back with some color on some items at the intersection of innovation and quality, more detail on tariffs, and just make a few comments about the medium-term activities of the company. Revenue for Q1 was $599 million for total company growth of 10% on a constant currency basis, or 8% reported, and was aided far less than Q4 2024 from IV Solutions as the national shortage ended. All three reporting segments had good year-over-year growth. Adjusted EBITDA was $99 million, and adjusted EPS was $1.72. Gross margins were in line with our expectation, and cash generation was healthy. Between excess cash generated in Q1 and the net proceeds from the creation of the JV last week, we have repaid almost $250 million in principal year to date, and Brian will provide more detail on this. The broader demand and utilization environment in Q1 continued to be attractive across almost every geography, with the rate positive but not at the levels we saw last year. The capital environment is status quo, and it does appear investments that customers need to get done do get done. Currency has obviously flipped since the last call with the dollar weakening. Getting into our businesses more specifically, our consumables business grew in Q1 by 10% constant currency and 9% reported. All product lines contributed to this…

Thanks, Vivek, and good afternoon, everyone. Since Vivek covered the Q1 revenue for each of the businesses, I'll focus my remarks on recapping the Q1 performance for the remainder of the P&L along with the Q1 balance sheet and cash flow. Then provide commentary on the full year given the formation of the JV and the fluid tariff situation. As you can see from the GAAP to non-GAAP reconciliation in the press release, adjusted gross margin for the quarter was 37%, which was in line with our expectations. Adjusted SG&A expense was $116 million in Q1, and adjusted R&D was $23 million. Total adjusted operating expenses were $138 million and represented 23.1% of revenue. The total dollar amount of spend was the same as Q4, and the 23.1% of revenue is a bit below our original full-year guidance of 24%. As we have been measured in making some of the strategic R&D and commercial investments that we mentioned on the last earnings call, as well as exercising general cost controls across the company given the uncertain and changing environment. Restructuring, integration, and strategic transaction expenses were $17 million in the first quarter and related primarily to continued efforts to integrate our IT systems and consolidate our manufacturing network along with transaction expenses associated with the IV Solutions joint venture. Adjusted diluted earnings per share for the quarter was $1.72 compared to $0.96 last year. The current quarter results reflect net interest expense of $22 million and an adjusted effective tax rate of 25%. Diluted shares outstanding for the quarter were 24.7 million. And finally, adjusted EBITDA for Q1 increased by 26% to $99 million compared to $79 million last year. Of the year-over-year EBITDA improvement of $20 million, we estimate that the one-time higher demand from the IV Solutions shortage…

Okay. Thanks, Brian. It's great that we can add another quarter to the last five or six quarters of delivering more predictable revenues. While the footing feels better, sustained revenue growth is about consistent execution combined with meaningful innovation to refresh the portfolio. Our heaviest investments over the last few years have gone into our pump businesses, where we now have both PlumDuo and PlumSolo with LifeShield software cleared. These platforms have received five individual 510(k) with a first-pass review over the last eighteen months. PlumDuo and PlumSolo together allow us to participate in both competitive situations and upgrade our own installed base with state-of-the-art technology. We've said in these calls that we can expect to have the most modern fleet of infusion devices that can anchor the portfolio for years to come. The final pieces of that puzzle have always been new 510(k)s for our MedFusion and CAD pumps and integrating them into the common LifeShield software platform first for acute care, eventually home care. We want customers to have the right tool for the right job, all connected with a common user interface and software solution that minimizes training, speeds onboarding, supports interoperability, and enables standardization for our enterprise customers. We've been diligently working to close out the Smiths Medical warning letter from 2021 that was received just prior to closing our acquisition. While we did have a successful site inspection last summer in Minneapolis with zero observations, we have not received official closure. And last month, we received a warning letter from FDA to ICU Medical asking for new 510(k)s on the MedFusion and CAD product families. While this was not a specific observation in the original warning letter, we have been pursuing these clearances as fast as possible anyway. It has always been our view that…

Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, you may press 1. If you'd like to remove yourself from the queue, you may press 2. Again, that is 1 to ask a question. We'll take our first question from Jayson Bedford with Raymond James.

Good afternoon and thanks for taking the questions. Maybe just to start on the top line. Nice acceleration in consumables. You mentioned rapid growth in niche markets. Can you just kind of flesh out a little bit to where the reacceleration or the drivers are coming from in consumables?

No. I think the hi, Jayson. Thanks for the questions. In the investor chart, it lays out the different pieces, the main buckets of the consumables stack. And it's a little bit of a thing we've been talking about, don't know, two or three quarters now. Oncology growth is back in a very attractive way. That's been an important driver, and that maybe is, you know, about us, but I think it's also about what's happening in the underlying market. And then I think some of the products that support the renal markets, some of the products that support some of the home infusion or chronic care markets have been accelerating nicely. And obviously, in the big consumables business, this was the year where some of the GPO activity kicked in earlier in the year, the pricing changes that we were talking about last year.

And can we assume, though, you grew 10% in consumables? I assume price wasn't a huge factor in that growth.

No. No. I think a lot of that, Jayson, I think comes from if you go back to last year, we did have kind of a noticeable step up on the consumables business from Q1 to Q2. And so I think we're also seeing some of the benefit of a lower Q1 last year and just continued kind of strength that started in Q2 of last year.

Okay. Infusion systems, are you seeing more contribution from Duo? Is that starting to kind of layer into the revenue stream now?

I think there's been very, very few Duo installs to date, Jayson. So I think went back to the last call, we said we expected more back half of the year. We were contracting, but we haven't installed that many. Few places.

Okay. So it's still second half of the year where you see that flush? I'll take that as a yes. Just I'm sorry. I didn't really...

Yes, Jayson. Nothing's different. If no one wants to make a decision on that till the last possible day, they have to. Right?

Okay. And just lastly for me, and I'll let someone else in the queue. On the tariffs, just to be clear, the $25 to $30 million, that's a 2025 hit. That's not an annualized number. And then the second question on that is, is there any way you kind of walk through some of the geographies there, but is there a way to frame the geographic risk within that $25 to $30 million?

Again, I think we at least tried to put them in order of the first thing is please, please do not take that number and annualize it. Right? There are a bunch of things that are happening to improve our situation. We tried to lay them out in order of priority with the new tariff that was placed on Costa Rica is the single biggest item. We have that changed for us in early April. That is the item of most consequence and a very large proportion of the annual impact. And we, as we've all companies, have been going through every single thing they sell, few items have popped up that are sourced from China. Those we will address over time. That's the second biggest item, and then the third, as we early in kind of describing what our USMCA compliance was, our compliance continues to be at the levels we thought are better, and that becomes the smallest issue of the three.

Okay. Thank you.

Thank you. Our next question will come from Brett Fishbin with KeyBanc Capital Markets.

Hey, guys. Thank you very much for taking the questions. Just starting off maybe with a follow-up on the tariff point from just a second ago. So it sounds like the Mexico issue may actually be getting a little bit better. I think you might have framed like, the non-USMCA potential unmitigated impact at, like, less than $20 million. So maybe just, like, update us on what you're seeing there if there are certain products that have, like, become compliant, and then if there's, like, any other, I guess, like, pathways for products not currently compliant under USMCA to then become compliant, that could further reduce the impact in that bucket?

Yeah, Brett. I mean, I think when the tariffs, the Mexico tariffs in particular, were put into effect, there was no USMCA exemption. And so that resulted in a meaningful exposure to us. But with the USMCA exemption, obviously, that mitigates a significant percentage of the tariff exposure coming from Mexico. And I think as we are working through our mitigation actions, we've seen even a little bit of improvement in kind of that percentage. And in addition to that, there are some other things beyond just USMCA we can do to further mitigate it. And so, yes, I think now Mexico for us clearly falls into the third tier of areas of exposure with Costa Rica and then China being one of the talking over there, Brian. The actions are similar to the ones that were described in the original slide, right, focusing on logistics and where the product is consumed in the world, etcetera. I think the strategies have changed. That much, Brett. And that's, again, of that is the current there's obviously a rate differential. Right?

Alright. Yeah. For sure. And definitely appreciate the dynamic backdrop and, you know, changing exposures here. And just also for my follow-up, wanted to just clarify the comments around, like, guidance. You know, you've updated the slide, and most of the numbers are intact. It's the right way to think about it. Like, you still think that there's an opportunity to hold the low end of the ranges for items like gross margin, 39 to 40%, and adjusted EBITDA, $380 to $405 million. And the tariff plus currency plus mitigation just makes it, like, more challenging. Is that kind of, like, the message? Thank you very much.

Yeah. I think when you kind of net all that together, it is our goal to hold at least the low end of the range. And I think we did talk about sort of what's assumed as we think about the rest of the year, and there are some things that it would be difficult to predict, including the impact of tariffs on inflation. So we haven't tried to quantify some of that exposure. But, yeah, I think you've characterized it correctly.

I mean, it's not really fair, Brett, to talk just about the tariff exposure for the year and not talk about FX or what else the company is doing to offset that. Right? We get very transparent on what we are the knowns and what are the little bit of gaps we have that we still gonna flush out.

Thank you. Our next question will come from Larry Solow with CJS Securities.

Hi. Good afternoon. I guess first question, Vivek, I know you've spoken about the PlumDuo, PlumSolo, and the heavy investment you guys have done over the last several years on that. I mean, I'm just curious. Early anecdotally, just the reception from customers, just how people are viewing it. And do you, as you look out the next few years, do you expect an upgrade on the installed base? Is that something that you expect to happen over time? I suppose. But will customers eventually switch in some cases? I'm just kind of seeing how you view that versus the opportunity to grab new business.

It's a great question, Larry. I mean, I'll take them in reverse. You know, the nature of this pump business is a huge incumbency advantage, as we've talked about. Right? And that makes competitive situations very desirable, but it also accrues to the advantage of the incumbent. And we have hundreds of thousands of pumps in our own install base, which entered service in 2016 as Hospira was coming back onto the market. Hence, the average shelf life of those devices is normally eight, nine, ten years. And so most of our portfolio of those devices are reaching the right time where an upgrade discussion is sensible. And we have the opportunity with PlumSolo to have a very meaningful upgrade discussion with the features that that customer in the device. Have been enhanced to all the things that are today's conversations on cybersecurity, workflow, EHR integration, etcetera, etcetera. So, certainly, the upgrade cycle starts in a real it starts in earnest. End of this year, next year, and then continues for a while. So that's why Solo is so important to us. In addition to some competitive accounts prefer a mixed house. They want a higher complexity device in the critical care environments and a less complicated device in the normal med surg floors. And the combination of both products, we believe, positions us best for the competitive situations. I think it's not a device that people are rushing to change unless they really have a deep sincere interest in changing their clinical practice. And so when we've had situations where people are deeply interested in learning, the reaction to the product is phenomenal. If it's just a discussion and keep everything the same, people sometimes aren't willing to invest the time to understand the power of the new device. And so we need to find the situations where there's a real willingness to move. And, again, there's some portion of the market that certainly wants to do that, that will get over the incumbent advantage. That's what we've talked about these calls for a while now.

Got it. That's very helpful. And just in terms of, you know, pretty rapid strong growth in consumables, I know it's continuing for several quarters now. You spoke about some of the newer products. What about just on the price? I think you mentioned that as one of the higher on your list of growth drivers. I know if it was, you know, that was meant in order or priority amount. But...

It wasn't necessarily order of priority. I'm just saying, you know, we've been working on that as we got healthy the last couple of years.

Gotcha. But what just to price outlook, prices have been improving. I guess, you know, you had some a bunch of new contracts kind of reset in the last year. Right? So, some on the Vital Care and Infusion side, but I guess...

I think the words Brian used in the last call still apply, which was one hundred bps of price. For the year. Right? I mean, the statement we made last time, I wouldn't want to say something different than that.

Gotcha. Alright. Perfect. Last question. Just think you mentioned census. Hospital utilization volumes. Sounds like they're steady, still relatively strong. Anything noteworthy there?

I mean, increasing over the prior period felt okay, not as good as the step-ups were last year. Nothing to complain about.

Okay. Fair enough. Thanks. I appreciate it.

Thank you. Our next question will come from Michael Toomey with Jefferies.

Hey, guys. Congrats on the quarter. Thanks for taking my question. So a strong Q1 on the infusion systems. Do you think that was just market growth? Or any share gains there as well?

I think it was the hi, Michael. It was the points I tried to go from the script. It was a combination of both good utilization on dedicated sets and maybe a little bit on the LBP side that came in earlier in the year than we expected.

Okay.

Those are two main direct.

And then I guess following on from the prior question, just are you seeing from the tariffs any signs of CapEx slowing? I know you said it kind of status quo on the capital environment. Everything remains attractive, but any signs since the end of last quarter spending being delayed or any impact from tariffs?

I don't think we've again, I don't think we said the capital of reference. But things that need to get done get done. And so some of these choices are thrust upon the customer. I don't think we've seen a meaningful change if people are saying, don't have funding right now. A lot of this customer base always says they don't have funding. A lot of this customer base always looks to delay, etcetera, but in certain cases, no choice. And there are ways we can help on funding, there are intermediaries that make these things available. So don't think we've seen a big change in the capital environment for our size devices.

Yeah. Okay. Thanks very much.

Thank you. Again, as a quick reminder, if you like to ask a question, you may press 1. Our next question comes from Mike Matson with Needham.

Hey, guys. How's it going? This is Joseph on for Mike today. Maybe just to start off, PlumSolo, PlumDuo, I just want to note maybe if you guys can give a little bit more detail on how you guys are, you know, going about marketing this. What maybe contrast are you drawing from your competitors or maybe what advantages with the systems are kind of sticking the most with the customers that you guys are talking to? And then just maybe for the, you know, the pumps that need that refresh. Do you see customers opting for both, or do you think it's going to be an either or? Or more of a mix in terms of PlumSolo, PlumDuo? Just kind of want to get your thinking around there.

Nice to meet you. I think you should be more than welcome to take a look at some of the features that are outlined on the device on our website. I mean, the core value prop of Plum going way back in history has been conserved into this device. Those core value props were around safety. Fundamentally around safety in the airline management and cassette-based delivery in a volumetric pump, and a whole litany of things that go on beyond that. All of those things have been conserved both into Duo and Solo, and address some of the innovation shortfalls over the years, which were the ability to multiplex the display, etcetera. And so there's a lot of sort of bringing the device to a standard of what one should expect for any electronic device, certainly medical device, in 2025, but keeping the things not having differentiation on the things that made the product great originally. And so take a look at that, but I would say most of the conversation is around those features. In terms of what people will use, I think there are multiple scenarios where some folks may not need a multiplex device. Whole house, and some people may have a split house, and you know, again, we're happy we have both approvals, and we can offer either scenario to a customer.

Okay. Yeah. That's helpful. And then maybe in terms of the, I guess, timeline from submission to clearance, I was wondering if you guys could maybe tell us what you saw there. For Solo and Duo. Maybe if we could, you know, extrapolate that to, you know, a time to clearance for the CAD and MedFusion once those are submitted.

I think it's sometimes dangerous in the regulatory environment to extrapolate things, right? We don't want to get burned in that. We thought we've made progress on things, and we're still not out of the woods necessarily. So I wouldn't want to make any assumptions. Those products took, I don't know, Brian, plus or minus a year from filing to approval. However, that was a device we had a high degree of familiarity with that we developed from the ground up, and while we think we've done the same with these filings, these weren't devices that were originally ours. We feel very confident about them, but I wouldn't necessarily draw a conclusion from one device to the next.

Okay. Fair enough. Thanks for taking our questions. Appreciate it.

Thank you. There are no additional questions at this time. I'd like to now turn it back to our presenters for any closing remarks.

Thanks, everyone. We know we're late in the quarter. We know it's been a long season. I appreciate the interest. Look, and it's a challenging environment out there. Look forward to updating everybody in our Q2 results shortly in August. Thanks very much.

Thank you, ladies and gentlemen. This does conclude today's ICU Medical, Inc. First quarter 2025 earnings call. You may now disconnect.