All right. All right. We're gonna get started here with the next session. Good afternoon, everyone. I'm Jason Bednar. I cover MedT ech here at Piper. Next fireside chat is with ICU Medical. Very happy to have with us today ICU's chairman and CEO, Vivek Jain. Thanks a lot for being here, Vivek. Great to have you at the conference this year. Thanks, Jason. Thanks to Piper for having us. Yeah. We appreciate it. And, I've let the record reflect for us, with our current interaction, the FDA has always been very timely, so I don't know what that was. It's all good. We do have full time here, just so everyone knows. We'll, they're not gonna get cut short, but Vivek, I'll start with maybe some like a big picture questions. I know a lot of investors usually appreciate your candor and your visibility on the broad market environment. You know, we'd love to just hear what you're seeing with respect to the landscape out there, both as it relates to surgeries and hospital admissions. Sure. I think we try to stay close, like everybody. And we just had our mid-quarter check-in with our largest customers in the U.S., as a more U.S.-specific comment. And volumes seem pretty healthy to us, not really increasing at a substantial rate year- over- year, but still increasing. Yeah. No decrease in census anywhere. Flu season may be starting a tad later than historical periods. The usual kind of general generic concerns around capital, but not really evidence of capital being constrained. So I think it's a pretty, pretty healthy environment. Okay. On your flu point, is how much of your business would you say is tied into flu admissions or sensitivity to flu admissions? I mean, I think we're sensitive to census. Yeah. We don't really build in anything specific for that. We have a little bit of seasonality, so nothing major. Okay. So nothing that we need to be cognizant of or anything as okay. All right. So pretty good visibility on the market and things playing out about as expected, and then the capital budget side, kind of alluded to, like, you know, kind of the similar conversations. There are always gonna be tough conversations when it comes to capital, but any, I guess, any nuances that you'd call out in capital spending activity, whether it's U.S. or Europe? I mean, I think, again, in most geographies, people only purchase art. And the only capital we sell is an infusion pump. Of our $2 billion-ish in revenues, less than 10% is actually capital. 10%-ish is capital. And people only purchase that capital because you have to, 'cause you need a modern device to deliver medications to a patient. In certain international markets, you place the device, and where therefore, they don't have to put up the capital, right? You get paid a bit of layaway on a usage model. So far in the U.S., if people need it, the deals are getting done, and people are allocating capital. Okay. All right. Let's shift into some of the segments here. The growth in the consumables business has been really good for the past year and a half. You know, can you talk about the durability of this growth? This gets a bit into the first question you're referencing on the broader market volumes, but what's driving the performance of your consumables business, and can it sustainably outgrow that hospital census number? Yeah. I mean, I think if you look at our investor presentation, there's a slide we're proud of in there, which talks to the value of our billion-dollar consumable segment. Six or seven hundred million of it is our legacy products from legacy ICU, and that's been compounding at 5% or 6% a year for more than half a decade. We think that trend is gonna continue across the whole consumable segment. There's a couple reasons for that. The first reason is, volumes have been strong, and volumes continue to be strong. So it's no doing of our own. Census has been behind us. The second reason is there's been some unique events in our industry, like the shortage in IV fluids late last year, where we were able to gain some incremental market share to help drive consumables. The normal wins we have by innovating, being more responsive, etc., and creating really niche markets within that billion dollars of specialty markets in dialysis or oncology or different areas of it that are growing faster than the core continue, and to the extent we win on infusion pumps, more often than not, we get the open consumable that comes along with it, and so there's four or five different drivers, and I think the underpinning of all of those has helped us deliver the results for the last couple years and some more recent things that'll help us continue that into the future. Okay. The business you referenced having picked up last IV solutions, have you retained a lot of that business or all that business? Yeah. I'm saying not only did we retain every frankly, there was limited choice in the market, and so the business that was being renewed, we were a healthy supplier, stayed with us, and there was a bit of incremental that came up. Okay. Great. All right. So in maybe shifting over to infusion pumps, you know, I'll look from an outsider's perspective. It seems like this is such an easy business or an easy, you know, product to produce relative to some other complex products out there. But, you know, it's nothing like that 'cause you can see across the industry, nobody's immune. There's a lot of regulatory attention on this category. One of your peers right now is dealing with an open ship hold. I know you've been hesitant to talk publicly just about competitive share gain opportunities, but I'll put you on the spot. At this point, you have to at least be seeing an uptick in RFPs tied into that situation. Yeah. Again, I think this industry lives in a glass house. To your first point. Yes. Most of our team worked at the company that is now the current market share leader in LVP pumps, which is a portion of the. Mm-hmm. market. Certainly, given the situational items in the market where one player had to refresh or remediate their install base and other players having some challenges at the moment, of course, there's more activity in the market. And we've lived through it. Our, the business we bought, Hospira, went through a number of its own FDA challenges, into the 2012- 2016 timeframe. And we've taken the share from that business, been able to grow it, and now brought new technology, both of that products and the other pump, the other types of pumps that we bought from Smiths. And the fact that we can deliver all of them in a single solution to customers now is the best place we could be for these increasing amount of RFPs. Okay. All right. And then on the competitive dynamics here, the first competitor you referenced, the LVP leader, they're working through, as you mentioned, their own remediation requirements. Do you see them getting more aggressive after the fact? It's kind of hard to put yourself in their shoes, not being in that company, but, you know, if you were in their shoes, you know, and you're working through that remediation where 2026 is going to be effectively the end of that remediation, what do you see them doing after the fact? Sure. I mean, look, I think this meeting is about ICU, right? I only think about that through the ICU lens. At some point, everybody stops looking inward and has to look outward, right? Yeah. That will happen there too. I think the practical reality of the business we hold in LVP pumps, but, you know, the previous question was about how do we grow on top of it, how do we defend what we have today. The customers using our pump, fundamentally, were long-term believers in the cassette technology that was offered to them by Abbott, Hospira, then us, and are very committed to that as a safety solution. Some portion of that is intertwined with software, and interoperability, which makes it stickier. And some portion of that is intertwined with the economics of providing both the IV consumables, the IV solutions, the water. And so there's a couple of degrees of defense for us on the install base, regardless of who's turned toward us. In the midst of that, we're delivering new technology across all the pump modalities to improve their workflow, their efficiency, etc., and make it more compelling to not only stay but grow with us. Yeah. No, you anticipated my follow-up question. It wasn't meant to be taking us off the ICU discussion, but, yeah, how do you defend against it? And, yeah, you absolutely answered there. So on the shifting to the pump replacement cycle, I think this is one of the more interesting opportunities for your business and your stock, again, my opinion. So is the pump replacement, you know, that when you look at that cycle, when does it build? When does it peak? And it's hard. I know it's hard to say, but how would you answer that question knowing that you have a lot of pumps out there to go through this replacement cycle? Sure. I think what Jason's referring to is the refresh of our own existing install base. Yeah. It's important for investors to remember how to create value, how companies create value in the pump market. Real value is created by market share gains, all right, or figuring out how to deeply profitize your install base. Simply holding the install base you have, we are already clipping the dedicated set coupons that come with the razor blade that comes with being in that business. For us, the opportunity to grow our own revenues is first and foremost about competitive wins. Before I get to your replacement question, right? Sure. Sure. The competitive opportunity truly creates NPV 'cause that's customers you did not have before. And if you gain a point of market share in the LVP business, it's worth $8 million-$10 million a year in revenue for a decade, right? So every point of market share is very valuable. We're first and foremost focused on that. The second point is we have 20% of U.S. LVP install base already. The majority of our business has always been competitive wins 'cause our product was new on the market in 2016 and 2017. We haven't had the opportunity to refresh our business. And even if you refresh, it counts period-to-period revenues, even if it doesn't necessarily create NPV 'cause you already had the disposables. We now have a better technology solution to begin the refreshment process of our own install base, which in earnest will really only start towards the end of next year or early 2027 and carry on for a few years beyond that. It's a multi-year roadmap for us. And then that's kind of the second piece of value creation for us in the pumps. And then the third is the newer pumps to our family that we also have new innovation on, the ambulatory infusion pump and the syringe pump, which are known as CADD and Medfusion. They also have very, very large install bases that ultimately will, will need replacement and refresh cycles. And so there's three very distinct shots for the and that's really a North America-specific discussion on creating value in the pump business. Okay. As this conversation starts to build next year on the replacement cycle, just double-clicking on this piece, are there prerequisites that we should be thinking about or, how does that conversation go, if you will, with the hospitals, per the purchase decision maker, if you will? You know, do you expect this to be a long-cycle process? Yeah. I'll let you go. Yeah. I mean, I, I think the lifecycle of our devices is often 9 or 10 years. We've built the thing like tanks. They last a long time. And so a little bit like the IT vendor, you have to sometimes offer a little bit of a encouragement. You try to not have that encouragement be non-economic. It's, it's more about what's good for the market in terms of end of sale, end of support, how long those spare parts are available, kinda the things that happen in other industries to encourage customers to move to the most modern architecture, most modern device, easiest to support, easiest to maintain, etc. And as we are certain that the new products are on solid footing, that we've covered all the competitive opportunities, we'll, we'll entertain some of those discussions. We don't wanna rush or force them on customers, but like any industry, you try to make sure your customer's on the latest platform. It's in everybody's interest. Okay. So, can maybe level set everyone to make sure we're not, no one gets ahead of themselves. This is probably more of a 2027. Yeah. I think. Kind of view for the P&L, just given the timing you referenced. Okay. And then one other question on this topic, and you referenced the point of share being worth $8-$10 million in consumables and software. You know, and maybe help unpack, you know, what does that mean for consumables? What does it mean for software? And does that hit immediately, or is there, you know, maybe you call it a warranty period on that software side where you have to wait a year or two before you start realizing that? No. I think I was just giving the example of, you know, ballpark, there's 1.7 million-1.8 million. Yeah. Pumps in this country, in the United States. And so one point of share is 17-18 thousand pumps, and each of those pumps drives $500 a year of dedicated set. You'll say, "So that's the razor blade. That's a captive consumable to that pump." So that's 8 or 9 million of revenue. And usually, that point of share gets some software fees, spare parts, service contracts, etc. That generally starts on implementation. Okay. So now, from when you sign a device with a customer to when you implement it for a competitive conversion, whether it's coming to us or leaving us to somebody else, which, really doesn't happen that often, it's at least nine months, maybe a year, till you can cut into the hospital workflow, IT, etc., to get the pump installed. Okay. All right. On the, you know, maybe new product cycle, looking beyond LVP, you have a multi-year refresh opportunity here as well on the syringe and the CADD pumps, as well as the LifeShield software that's out there that kinda connects everything together. Assuming those new pumps that you have currently pending with the FDA, assuming those secure approval during their normal review time period, you know, similar question as the last one is we start thinking about what's the right timeline to have in mind to start seeing these contributions show up in the financials? Like, how long does that sales process take and everything? Again, the core reason we undertook the difficulties of the Smiths transaction, the number one strategic reason, was to make sure we had all relevant pump modalities in-house. We had the LVP, but it was also to get the second most important piece for hospitals, which was the pain pump, the ambulatory pump, that's the CADD, and the syringe pump, which is more pediatric. And the deficiency we had was that we didn't have all those modalities, and we didn't have all of them on a single software solution. And so any customer that was using our pump or the other player that only provided LVP pumps was they were essentially running two separate pharmacy information systems, two drug libraries, two control modules for their infusion. We've now re-architected all of those devices to make sure that the best piece of hardware as it relates to accuracy, cybersecurity, safety, etc., and connected them with a single software solution so it's more convenient for that customer to not have to run two different pieces of software architecture, to have training workflow on the physical device itself look incredibly similar from device modality to device modality, and to have the ability to control all those on an enterprise basis for the largest IDNs in the country that are, you know, 150-hospital multi-state systems. That is different than just selling an individual LVP like we used to. Yeah. I think the LifeShield piece and it makes sense. LifeShield is a software suite. Yeah. Yeah. Yeah. Yeah. That's the piece that connects them. Yeah. And I wanted to dig in on that 'cause it feels like yeah, I'm newer to covering your stock, so maybe I'm, you know, out of bounds here, but it feels like a very underappreciated part of the story, and maybe under-discussed, at least amongst the investment community. So correct me if you think I'm wrong there, but how is this more just about ease of use, or do you think this is truly helpful in terms of, like, you know, any P&L implications? I guess is the right way to ask it. I mean, I think there is absolutely long-term P&L implication from this. Today, the way infusion grew up, if you went back in history, infusion grew up in sort of this bundled model where IV solutions were sold at a low price to subsidize getting the pump. And what was the juiciest thing to consumable? The razor blade, the dedicated piece of plastic. Over time, the water is a little less correlated to the pump, and the real value is not only the piece of plastic but in software. Mm-hmm. And originally, that software's value was largely embedded in the cost of the device or a very per device a fee per device that was very low. We believe the new software that adds connectivity across the devices and better workflow with the EMR, etc., better, bidirectional connectivity, ease of use, justifies more value. And just like you pay one price for the ticket, you have a different price for the baggage fee, a different price for the seat. We have to break down the value chain and say, "How do we separate the value around IT and get that to apply not only what we're winning competitively but our own install base?" And there has to be enough value in the software to do that. And we believe that to be the case. Delivering that software is incredibly important because once you're connected to the EMR and deeply integrated, of which only 15% of hospitals in this country are still connected bidirectionally with infusion, that is truly the ultimate sticky stuff, right, to keep the market share in place. Okay. And one more question on LifeShield and the software. How far do you intend to push ICU into call it data analytics and when we think about infusion management and connecting everything together? I mean, there's certainly fun words to say out loud that lots of public companies say out loud, whether they have something or not. I think over time, there are some smarts in the software to talk about drug optimization or kind of, outcomes where you're seeing in different parts of the country, etc. I don't think you're gonna hear us talk about them a lot until we have the market share with software to say, "Now we can justify these other features we're adding to it. Okay. Makes sense. Moving over to some P&L items, on tariffs. I'm really glad we're actually talking less about tariffs than maybe we were six months ago. We made it 22 minutes on tariffs. Yeah. Yeah. I know, right? Well, I promise. Just one question on tariffs. When we think about numbers for 2026, I think you've been clear about saying, "Look, do not annualize. We have some other things that we think we can do either to offset or we don't yet know how everything's going to play out." Yes. Are there offsets that we should be thinking about for next year? I don't wanna. I know I don't wanna preempt you and because we haven't given guidance, but just in general, there are savings out there beyond what you've got so far. There are, but there are also headwinds too. Okay. Right? And so we haven't given a very precise answer on the impact of tariffs next year. We've said it's $25 million this year, and we said, "Please don't annualize," and the reason we said that is probably three or four different things in play. The first is on certain items. Our biggest tariff burden is from Costa Rica, where we make the majority of our hardware. And we just talked about our hardware doing better, so the more products are coming, more tariff that we have the ability to adjust price on. But the pumps we're installing, we recognize revenue. We install the pumps. For the next six months or so, we're sold at the pre-tariff price. And so the kind of exact calendarization of that, we don't know in terms of impact. If it goes faster, that'd be great. It could go slower. There's some volatility in that. The second piece is we are undertaking some operational activities about what gets made where, how the logistics work to optimize under the constraints, and those are things we didn't really wanna do until we were certain this is going to be here for a while because it's work. Mm-hmm. It's a negative variance to our actual cost, right? But it's worth the economics payback as long as this stays. Yeah. Right? And so that those require some validation and some time. We don't have that exact lockdown to the day, so there's a little bit of volatility on it. Those are both good things, right? And then the negative is we are holding a little bit for inflation. We buy raw materials, components, resins from international suppliers that one day our contracts are gonna roll off on, and they're absorbing tariff themselves. They're gonna come to us for price. It's naive to think that's not gonna happen. And we'd rather be transparent about that on the front end. If it breaks our way, great, but we're holding something there. So that's why we haven't given an exact, precise answer. But the net of that is somewhere between this year and doubling next year. Okay. Okay. Longer-term margin opportunities here. I think you've been executing pretty well here of late on the margin side. It was one of our thesis or part of our thesis when we initiated. There's still a lot of room to run. I think you feel pretty confident on the gross margin side. And what is that longer-term? How are you characterizing that longer-term gross margin opportunity? And maybe within that same answer, same question on EBITDA margin opportunity. I mean, for ICU Medical, it is very much about the gross margins. And in the darkest days that we bought this company, Smiths, and it was a difficult, you know, 18-24 months that followed. In the darkest days, gross margins got as low as 35%, which is ridiculous for a technology-oriented device manufacturer. And we said at that moment, which was kinda early 2024, we are under-earning by 500 basis points. And 80% or more of that was in the gross margin line itself. Six quarters later, wherever we are now, we did a couple of things. One, we divested via a creation of a joint venture our lowest IV solutions, and that's added almost 500 basis points to gross margin. It didn't necessarily create new cash. It removed a low-margin business. What it does lead to capital avoidance in terms of CapEx and free cash flow yield, improved free cash flow yield, etc. Of course. But the other activities related to our integration, pricing, market share gains continued, and we've clawed back about 300 basis points of the 500 gap. So we would've been at 43 in the most recent quarter, minus tariffs, became 41. And on the call, we provided a pretty good line of sight to the remaining two to get us at 40, back to 45 pre-tariff. And there's three or four important shots on goal that I'm happy to go through, but I think we have a high degree of confidence over the next two years of getting there. Okay. All right. Great. I wanna touch real quick on the warning letters, even though I don't think there's really probably much you can update us on, but I'll ask it. I mean, have you had any dialogues here with the FDA, just on those letters, or are you just in a waiting game with the agency? And the follow-up, even I'll just ask it right now. I mean, are there any business consequences that you see with just having those warning letters sitting out there? I mean, there were economic consequences the first year or two to do the activities that were required to remediate the deficiencies. Right. To address those Warning Letters. So there were real cash needs. Those are gone now. We've done most of the work. You know, to the bad joke I made to start, yeah, we are in regular dialogue with the agency. Yeah. They are responsive. They are on time, but it's been much more about the back and forth on getting the new products approved because our view is the warning letters are not gonna get lifted till the new product is getting approved, and so we're first focused on that. Sure. There were really three major deficiencies in the original warning letter from Smiths. Two of those we had an inspection on a year ago, got a clean bill of health. The new warning we received for the third item, which is where the 510(k)s for those products were obviously a little bit late in filing those, when we got it earlier this year. Subsequent to that, they got filed in July, and I think that the next card to be seen on the warning letters is when do these products get approved, and then we'll figure out where the conversation takes us, and there's dialogue. Okay. All right. Great. On the cash comment, I mean, yes, a lot of cash going towards remediation, other cash going elsewhere too. But a lot of the cash has been going as far as, like, what's under your control has been going to debt paydown. I think you've been, you know, the message has been, "Hey, let's get down to two times, and then we'll have a conversation." Can this be a, like, a two-pronged approach where, as you're, you know, delevering, you're paying down debt, you also start shifting a little bit of cash elsewhere, whether it be, you know, M&A or buying back a little stock, whatever it might be? Or is this. I mean, I think it. Let's get that threshold to two times, and then we'll fix it? You never wanna, you know, decrease something, but I, you know, it's been a rough journey going through this for three years on the most recent acquisition after a number of very successful deals many years in a row. Yeah. And innovation. And I think, through all of that, we didn't skimp on innovation. We didn't skimp on R&D. And we have enough new product development between the pumps, we glossed over the consumables, which is where the majority of our cash comes from at the moment. Mm-hmm. Right? A ton of innovation going on in both of those areas that can keep us busy. We'd much rather be AutoZoned and figure out how to be a consistent grower, eke out a little bit of price, have incremental innovation, and return all capital to shareholders. Mm-hmm. That was the original premise of the transaction. I wouldn't wanna say never on the other things, but I think we have enough to keep ourselves busy for a while. Okay. All right. So, what do you do when you do have that debt in a good spot? Close. Yeah. It is close. Close. Do you start buying back stock, or? Yes. Okay. That's the angle rather than anything else or the preferred angle? Yes. Okay. Maybe in the last minute here, you and I have talked a lot about the Vital Care portfolio strategy. I guess how do you contemplate maximizing value for those assets? Is it? I mean, you use the line it takes two to tango often. You know, is that something where you're having those active conversations? And how do you balance maximizing value for, you know, for shareholders knowing that you also, you know, still have to run the business? Yeah. I think it's a great question. I mean, if it was easy to get done, it would've been done already, right? If you look at our team's track record, we've done a lot of things. I think it's actionability. Is there a counterparty? It's how much headache does that bring? If you're gonna get a bad price, still have to run the business, still do all the work and take the risk, you might as well just keep it running yourself. Mm-hmm. Right? And so I think we're trying to be judicious about that. And there's some point where value, headache, actionability will intersect, and it will clear that day. We haven't found ourselves there yet, but we're trying more. We have more time to try today. Yeah. Absolutely. Well, with that, we are out of time. With that, great discussion as always. Thanks so much for joining us. And please join me, everyone in the room, thanking Vivek for his time today. Thanks. Thanks, everyone, for your interest. I appreciate it.