Hey, welcome back. Good afternoon. I'm Larry Biegelsen, the Medical Device Analyst at Wells Fargo. It's my pleasure to host this fireside chat with the management from ICU Medical. With us, we have Vivek Jain, the Chairman and CEO, and Dan Woolson, the President. Vivek, thank you for being here. Let's jump right in. Vivek, you bought back stock personally for the first time in a long while. What, why, and what do you think the market is missing? Thanks, Larry. It's appreciated to be here. It's the first time we've been here in the presentation format. It's a great, great event. I don't know that it's just like so many deep thoughts around it. I have been there a long time, think very clearly about the earnings opportunity in front of us. I felt things were a bit out of balance, out of line, and I'd obviously sold shares, historically sold options. I've actually never sold any shares at higher levels. I thought it was a good opportunity to do the sensible thing. Okay, fair enough. You've always provided helpful color on the macro environment and utilization. What are you seeing now? It's pretty good out there. I don't think in all geographies, I don't think we have a lot to complain about from a utilization standpoint. I mean, our customers seem busy. Volumes, again, the rate of change isn't quite the same growth that we saw last year, 2024 over 2023, but everything's at par or better than it was. Okay, that's good to hear. All right, let's start with your business segments. Starting with consumables, you reported 4% organic growth in the second quarter and expect sequential sales growth to average, I think, mid-single digits for the year. Talk about the drivers of this business and how durable the growth is. The consumables business, of which 70% of it is the original products of little ICU when we started this journey, in IV therapy and oncology, and the other portions of it are our vascular access, which was a natural adjacency that came to us from the most recent acquisition and the trach business. I think there's four or five growth drivers there, and that business has compounded at 5%, 6%, 7% a year for more than half a decade now. I think those drivers are fundamentally good clinical outcomes as evidenced by some data, further evidenced by some data that was just published in the most recent approval we got. Two, just the power of brand inertia, scale in the market, production costs being extremely low, the way we've delivered those products to the customers in a very customized fashion that fits within their workflow. Innovation around kind of adjacencies in that billion dollars is lots of little markets. How do we develop and cultivate and grow whole cloth markets in there? To some degree, the rising tide of utilization has helped us. We don't see that slowing down. Maybe the final point, our own industry has had some acute events with shortages, et cetera, and those shortages helped us grab pieces of market share that'll be with us for the next number of years. We think there's five or six very powerful things there that aren't changing. That's helpful. On the Q2 call, you highlighted 510,000 clearances for some new connectors. Do you think they'll give you a competitive edge and help you take share? Yeah, to be clear, the label expansion that we referenced on the latest call was about our flagship product, the Clave family. It's not new. It's the same product we've been selling for a number of years. We never had an official study that cited infection reduction referenced in an approval. This was not only an approval that brought up to date several technical specs of the product, but it allows us to make some claims about the products that were already in the leading market share position that solidify that. Certainly we believe that'll help us get market share and defend what we have. Okay, that's helpful. Words we couldn't say before. Great. All right, so let's move on to IV systems. On the Q2 call, you talked about double-digit growth in your LVP revenue. What's driving that strength and how does that compare to overall market growth? I mean, I think for anybody in the room who's studied the infusion pump market, it's been anything but normal for a couple of years. I don't even know, if you ask me, who's been an industry participant for 15, 16 years, what normal market growth is. It's never been a normal market. At the moment, there's a lot of catch-up going on because of various actions other manufacturers have had to take. Our growth has really been driven by two or three reasons in our LVP business. The first is this census and utilization point we just made. Volume's been good. Second, we've been building our competitive pipeline and winning. Our company has a pump platform that's been new to market really effectively since 2016. We've never had a replacement cycle. Our growth has largely been driven by competitive wins. Third, in that market, we've been able to profitize other pieces of its software, service, and just doing a better job of little things. That's helpful. How do we think about demand for Plum Duo? When does the replacement upgrade cycle kick in versus competitive share gain? Yeah, I mean, to date, most of our efforts, as Larry's referring to, are two new products we've had approved in the infusion pump market. One is Plum Duo that was approved two years ago, and just to go, everything goes slow in the pump market. We had that approved two years ago, and we just started installing it at customers this year. That Plum Duo was intended to address some of the competitive limitations of the Plum 360 that we inherited when we bought Hospira. Those limitations were really about the ability to multiplex drugs and ensuring, and to combat what was perceived as valuable modularity of the drugs, being able to do different things with the device. The Duo is a flat panel display, kind of state-of-the-art cybersecurity. It is incredibly fast from a warm boot to delivering four medications. That Duo is very well competitively positioned against the market share leader, where some of the features that used to be unique are now at parity with a bunch of things that we think are ahead. The Duo is just making its way to market. Almost all of our efforts that have been underpinning the pump business today have been on the competitive nature because we haven't had the need to refresh our own install base because our devices are only becoming, our Plum 360, which is the old device, is only becoming nine years old as of this year. The device typically lasts nine or 10 years. We haven't even got to the replacement cycle part of this discussion. I'm happy to keep going on that, or if you have the next one you want to go to. I mean, I was going to ask about the competitive environment, but if you want to keep going. There are two, just for an investor who's contemplating looking at ICU Medical, we talked about the drivers in the consumables business. In the pump business, half the pump business are LVP pumps for us. There are two important things there. One is competitive wins, which the Duo is slated to against one part of the market. The Solo, which is a single channel pump, is slated against another portion of the competitive market. We can create value by winning competitively in the pumps. The opportunity we have as a company that will start is the ability to replace or refresh our own install base, the tech refresh that we never got because Hospira only put the pumps we have into the market in 2016. The Plum Solo is largely geared to that. That hasn't even started. That'll start in earnest towards the end of next year. We start the commercial process right now, but by the time we're installing it will be the end of next year. That's helpful. Let's talk about the competitive environment for LVP. What are the implications for your Plum with the recent spate of recalls and sales pauses? You try to answer these questions delicately on the calls, right? With the infusion industry, everybody lives in a glass house. I don't think you can say that there's some, we worked at the company that has the market share leading position LVP pumps today, and we watched it be the beneficiary of other people potentially falling out of the market. Hospira that we bought had fallen out of the market. The competitive environment today and these recalls are not at that level of that situation. The market structure isn't that that would be viable. The competitive situation is very interesting that people, because of the need to remediate what's in the market and the age of a number of the devices that are in the market, a huge chunk of the U.S. market still over the next 18- 24 months has to decide on an infusion pump platform. That's why it was critical that we got these new technologies out into the market when we did. What is assumed in your mid single- digit growth for 2025 for competitive factors like Baxter positive sales if it's NovoMyQ? I mean, I think that's a very recent event, right? We issued our mid single- digit guidance for the pump segment at the beginning of the year, and it was, again, back to the point I made a couple of minutes ago, all of our pump business is essentially competitive. We don't have a lot of replacement cycles. The assumption this year was that that product was on the market and we would focus on our normal competitive wins. Even if there's a unique product situation there, nothing happens fast in infusion. Even if that alters the course of a customer's decision today, we wouldn't see the benefit of that until the middle of next year on our income statement, right? Even from when you make a decision to do something to when you're actually recognizing the revenue and installing it, it's nine months to a year. Any idea when they'll be back? Speculation? No, I don't think it's our place to say. I mean, we understand and respect how hard some are working through some of these infusion issues. We're still not out of the woods yet on some of the stuff we bought. The regulatory environment for pumps has obviously been a challenge. Does it get harder, you know, with the stream of recalls for new pumps? I think our view is for the last 15 years, it's been pretty appropriately invasive, whatever the right word is. This device is the last mile between a dangerous medication and a patient, and it does deserve a high degree of scrutiny. We like it because it keeps the riffraff out and the regulatory barriers high. I think right now we would say we have received, I don't know, half a dozen or more clearances of new software and pump hardware over the last number of years. We have another three important devices in for approval. The scrutiny is as hard as it's ever been, which is great as long as you can answer the question. Right. You talked about three devices in for approval: Medfusion syringe pump, update for the CADD ambulatory pump, and some software updates. How important are each of these filings as growth drivers for you? I mean, I think they're at the essence. These are important products. They're at the essence of why we've undertaken the brain damage of the last acquisition. Our vision was to have the highest quality and most accurate and best infusion device for a very specific clinical use at hand. Whether that was a pediatric infusion with a syringe pump, whether that was a postoperative pain or OB-GYN labor and delivery solution with a CADD or home or biologics at home with CADD, or mainstream med surge LVP. We wanted the right tool for the right job, most accurate, safest, easiest to use, best workflow pump. Ultimately, those pumps, while smart and most accurate, are dumb, and a layer of software on top of them that was smart that connected them so you could conserve training, run an enterprise, multi-state IDNs, et cetera. We didn't have that with just our legacy LVP platform. We did the acquisition and took on this last two and a half years of difficult work to get to this moment, to get these things approved. I think it's critical for us, on these approvals. I think it sets up a different game versus the other competitors where we're saying, they would say, I have an all-in-one system. It does everything in this package, right? We're saying, no, we care about the very individual medication delivery event. We just want to make sure the training, the software, and the other things that drive it, make it seamless for your operators. Okay, what's your expectation for approval of each? The Plum Duo and Plum Solo both kind of received first pass approvals. First pass filing approvals, they were fast. They were nine months start to finish. We took longer to file them. We took longer to file the ones that are in right now than we had expected. We probably took 18 months longer on the previous one. We probably took 12 months longer on these than we'd expected. I think our best case assumption would be minimum nine months, like done on the other one. Got it. We filed in the first week of July. Okay, that's helpful. You highlighted the importance of having all your pumps on a single platform. Why is that important, and how big of a competitive advantage is that? I think any customer that wasn't using the market share leader's platform, which had all the software and the multi-modality delivery in a single box, was essentially using a Smiths product for syringe and ambulatory and either us or the other market share player for LVP. Having this all integrated in a common, and every one of those customers in that 40% there had to run two separate software systems, two separate drug libraries, two separate administrative systems, two separate billing connectivity engines. That can now all be integrated into a single software package. Again, back to saying we have the right tool for the right job, the most accurate motors, but from an ownership, governance, seamless pharmacy, billing, drug library perspective, it's seamless across all the pump types. We think that is a big differentiation of what 40% of the country was having to do before. That's helpful. Talk about CADD Connect and Home Care. This seems to be a differentiated offering from your competitors in the pump space. Who are the competitors in this area? I mean, CADD Connect is the final frontier, right? For us, it was about, we've developed a single software instance with LifeShield with a bunch of interesting sub-applications that connects everything that's in the hospital: ambulatory, syringe, LVP. That same CADD pump that's doing PCA and pain management in the hospital is the market share leader in home infusion. Think about every anti-infective, every biologic, all the operators that are running home care services by that pump use them to deliver medication, bring the medication, the care, the nursing all together in that site. That information is not passed back to the same EMR. No one actually knows really what happens there, right? I think there's a lot of stakeholders that would be very curious. First and foremost, did the medication get delivered? When was it delivered? How fast was it delivered? Et cetera, et cetera. Connecting that basic information of a home care environment. Ultimately, like, where's my pump and other boring stuff? Care about that. Is there a chance one day that same pump can be the radio itself or a backbone that says, I'll bring together other information around vital signs monitoring or any other clinical data that can be measured during that infusion event? For us right now, we just want to get the basic architecture nailed to get to the pump to connect back to the home, back to the same EHR that the hospital is running on the patient. Got it. Okay. Let's wrap up the businesses with the vital care. Revenue was - 4% organic in the second quarter, and you expect full year sales to be flattish in 2025. How are you thinking about the second half of the year? I mean, I think from a guidance perspective, we were not trying to be very precise. We said roughly flat, up or down a little. I don't think anything has changed in that. I think Q2, it was maybe down, you could say - 4% is a little bit more than a little. I don't think anything's different about the balance of our guidance. I think the more, I'm assuming you're going to get there, you're saying you now have a very coherent portfolio in the consumables and the pumps, and some of this vital care stuff looks like its growth rates are different than the rest. What are you going to do about that? That's, we didn't beat around the bush in the call. We said we're trying to figure out the right solution for each of the businesses. It suggests a possible sale of the business would be my interpretation. Is that fair? What can you say about buyer's appetites? I think it takes two to tango on some things, right? Some things are easier said than done. It's not necessarily the most coherent set of assets itself. Not only putting even value aside, just to do something logical, we may have to cut it up a little bit. We'll do that. We're the same people who did transactions with Pfizer and Otsuka and Smiths and lots of people. We know how to do that. It's also about trying not, I don't think we, for our shareholders, I don't think we can do something in a value-destructive way, right? The Otsuka transaction was amazing to me that we did for IV Solutions. It was accretive to our growth rate. It was accretive to gross margins. It was accretive to EBITDA margins. It was EPS neutral, whatever that means going forward because no one's seen a forward number. It improved our leverage ratios, right? I don't think just in the name of improving growth rate and gross margin percentage, you can do something value-destructive by giving up absolute dollars. To do that, you may have to pick it apart a little bit, which we have to figure out how to do. We have time to do that. The most important thing was getting IV Solutions done. We did that. We can take our time and be a little bit. That's a good segue into the questions on IV Solutions. The JV with Otsuka. Remind us why you did that and the strategic and financial benefit. You touched upon it a little bit. Yeah, I mean, I think if you just think about everything that we've been talking about the last four or five years, we've been very EBITDA focused, et cetera. At our core, we did have a very low ROIC, high capital intensity traditional manufacturing business in our portfolio with IV Solutions. I guess we felt there, aside from being the number two player in the market, we didn't necessarily have the right to win with innovation. We felt like we had this conversation started with what's your innovation in consumables? Why has it been growing at that rate? What do you have in pumps? The solutions business was very much about packaging. It was about nutrition. It was about pre-mixed ready-to-use drugs. A lot of things we didn't have. We felt like making a partnership with Otsuka allowed us to become aligned with what we believe is the world's best technology innovator, who has access to the best cost of capital, and who covets the United States geography versus the place they do a lot of business today. We thought that was a very powerful mix because these product categories are important to our customers. Our customers, we're still the distribution phase. We're still the fulfiller. We're still the biller, but we don't have to make. That was an important distinction. I think we got somebody who's a manufacturer who brought more to the party, beyond just money to us. If we could figure out a way to minimize the dilutive impact of that business because it's capital intensive and because it's lower margin or income statement, that was a good thing to do. We did. Some of your competitors have both IV Solutions and pumps. Is it a competitive disadvantage not to have IV Solutions in-house? No one should make a pump decision based on IV Solutions. People should make a pump decision, right? We are, even though we've worked at ICU for a long time, we grew up at a dry company, right? We grew up where we only sold devices and tubing. I think our view is that's where the technology was deeply differentiated. We don't think just because an item may be short, from a supply perspective, you should make a long-term technology decision on that. I certainly don't think it's a competitive disadvantage. I could argue, hey, if you have everything and the best technology on solutions, which we believe we will have long-term with Otsuka, that's a competitive advantage. I'll take that. I think the technology decision could be made on its own. Okay. Let's move on to the financials, starting with 2025. You updated your guidance with the Q2 report. There are a lot of moving parts due to tariffs and, you know, the JV. Could you highlight the key changes to the guidance and what you've said about the high and low end of the ranges, please? Sure. I think we added a little bit of, we added our own complexity to it because relative to our initial guidance, we divested solutions at the end of May. So five-twelfths of the year got a little carved out, from a solutions, or seven-twelfths needs to be carved out from a solutions perspective. I think we said if we take solutions out of the mix, our guidance went from the high end of the range at $425 million- $408 million or something like that, a little bit lower in the middle end. We said we had $30 million of tariffs that we didn't foresee on January 1st of this year, impacted to that. We said even with that $30 million of tariffs, we can be a little bit better than what that would imply from the low end of the range. That's really been the big change of the year. Tariffs and the solutions JV are the only impacts. If tariffs hadn't happened, we would have been raising. If you just look at the numbers at face value, we would have been raising guidance, but they are here and they are real. We have to spend our time and attention on them. Tariffs are expected to be $30 million, you said, but the net impact is $10 million. That's the benefit of positive effects. We're getting that to offset some of that, as well as other cost savings activities that are going on at the company. Okay, so it's not mitigating the tariffs. It's just other offsets. Okay. And then let's move on to 2026, the standard headwind, tailwind question to sales and gross margin. I think on the sales side, I think we feel very confident in what's going on with our consumables business, as we've talked about. On the infusion systems side of the business, we continue to believe in the competitive opportunity of the hardware set we have. At some point in the year, towards the end, we believe the replacement cycle will kick in. At least on those two parts of the business, we don't feel any revenue headwinds there that are on the board today that are different than anything. There's a little bit of B2B business and other stuff coming up. That's been happening for a couple of years. I think we feel pretty good on that. On gross margins, and I'm just going to walk down those. On gross margins, we had said on the Q2 call, gross margins in the back half of the year should be 40%- 41% after absorbing 200- 300 basis points of tariffs. That's sort of our jumping-off point and say, what do we have in addition to that? The drivers really, they are the good things. Let me get the good things and the bad things. The good things are economies of scale as your consumables business gets bigger and bigger. If the new devices we're selling carry better gross margins than the devices we're selling today, and then the synergies that are still being realized in factory consolidations, logistics, et cetera, kind of the stuff we've been talking about finally reaching, materializing. They'll get done, they'll operationally get done towards the end of this year. You don't see them on the P&L for another two quarters. Those are all big good things. Subtracted from that is going to be what is any knock on inflation. We're anxious about that, right? These tariffs do have, somebody will come to us and say, I need a price increase, and then what other kind of labor, Mexican labor inflation, other things that are out there. Any other, any other headwinds? That's the concept of the gross margin line. Not a lot of change in OpEx. We've been pretty measured on that. Maybe even, maybe even like just asking some questions about now that some of the technical stuff is reaching fruition, do we need to spend the same amount? Don't have an answer on that yet. I think those are the big, the big drivers for next year. Just a couple of follow-up questions. Any reason the mid single- digit growth for consumables and IV systems can't continue? I think from where we sit today, that's certainly our goal. On gross margins, can you continue to get 100 basis points+ of underlying gross margin expansion? I mean, this tariff, the ability to, you know, we said a sentence, which is, hey, it's $30 million for this year, please don't annualize it. Some of the net gross margin impact comes down to what our ability is, affordabilities are there to mitigate, because our mitigation is continuing. Certainly no concern on that kind of number. At some point in the year, I don't think we'd sit here and say that's absolutely going to happen in Q1, right? We have to finish these plan integrations and have that stuff flow to the income statement over the course of the year. What did you mean by don't annualize it? Because. There are certain products we make today that are non, for example, old news. We have certain products that are not USMCA compliant because some of the key components are manufactured elsewhere. We've been avoiding making a decision to bring those in-house. We can make a decision to affirmatively bring those in-house. It could be better than if you wanted to analyze it. Yeah, I'm saying please don't annualize anything. There are things we're going to do, right? The pump pricing, at least through the middle of next year, the pumps we've sold to date were essentially sold at a pre-tariff ASP. Post these things happening over the last number of months, we've adjusted the pump price. Even if that's been accepted by customers, we're not implementing those pumps until the back half of next year now, given the install calendar. For that example, it means it wouldn't annualize at the exact same. Any other color on price for 2026? No, I mean, I think this is not a category people necessarily are leaning into voluntarily. They do it because they have to do it on the pumps. I think for us, it's important for manufacturers to get recognition of the technology that they're delivering. Being able to capture margin on the hardware is a very different situation that we've been in historically. How that plays into our replacement cycle over the next five to seven years is very powerful. Got it. Anything else on 2026 in terms of where consensus is that you want to highlight? Anything the street's missing? I don't think there's a lot. I mean, I haven't spent that much time on it yet given the unique things this year, the tariffs, et cetera, that have happened. As of right now, I don't think there's anything on our radar screen. Okay. When do you envision getting to two times leverage? Once that happens, what's the capital deployment strategy? Yeah. We've consumed a lot of cash and capital below the line in two buckets of restructuring integration, which has been the cost of all the factory consolidation and logistics consolidation we've been doing. That work is nearing completion, IT systems, et cetera, and so a large chunk of that should be done by next April. The other portion has been the quality remediation, EU MDR. A lot of that work with these filings gone in has also, and the recalls, the field actions being finished, a lot of that work is reaching a different level too. If we're able to control our below-the-line cash spend on those items, I mean, it was in $100 million, $100+ million. If those can change significantly, and we have earnings growth and free cash flow growth, right? Pretty close. There'll be some point in that next year. It won't get, and you measure leverage ratios historically, but if you just did a spot measurement, yeah, at some point next year in that spot measurement, we'd be there. I think it's an open discussion. I feel there's nothing to be ashamed about. A lot of people in your meetings talk about what am I doing to get to six or seven or eight or nine or some number. I think there's nothing to be ashamed about for our industry. You know what the fundamental underlying growth is. If we said, hey, we're a mid single- digit 5% grower, returning capital to shareholders, and we don't need to do any M&A because we believe we've, for all the pain we've been through the last two years, we didn't skimp on R&D at all. We have enough new product stuff to keep us busy for the next four or five years. We don't need to do a lot of external stuff. I don't feel any negative sentiment relative to our current valuation, back to the question, the first question of why did I start here. What's actually going on in the competitive setting environment? I think that's a perfectly good investment opportunity. All right. Anything else that you want to highlight? Anything that people are missing about the ICU Medical story? I mean, I feel like the only thing that's maybe a little bit, and it's about relative to where we are in the environment, how far people can look out. This joint venture with Otsuka, we still own, even if solutions were as difficult from a capital consumption, we still own 40% of this asset, right? That will inherently become more valuable over time. That is cash that we can call and look, and that has real NPV. I feel like no one dwells on the fact that, hey, there's more cash to come from that. Again, it's a ways out, I get it, but it's the bond, right? We're holding, we know we're going to get repaid in. That might be the only thing. All right. Thank you very much for being here. Appreciate it. Thank you for having us. Appreciate it. Yeah, I'll see you on the bus tour next time. Absolutely. Absolutely. Have a great evening, folks. Thank you.