Good day, and welcome to the ICU Medical, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded. I'd like to now turn the conference over to John Mills. Please go ahead, sir.

Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the fourth quarter and full year 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 and it will be under the fourth 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 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'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. We are glad the call is earlier after year-end as the systems and processes have become more integrated within the company. I'll walk through our high-level revenue and earnings performance, provide some important housekeeping and operational updates and comment a bit on our near-term outlook. Then I'll turn it over to Brian to recap the full Q4 results and provide our complete 2026 guidance. After that, I'll offer a few thoughts on our longer-term outlook, capital allocation strategy and where we are in our mission of creating a comprehensive infusion therapy company. Revenue for Q4 was $536 million for total company growth of 2% on an organic basis or minus 14% reported, and we finished with 5% organic growth for the company for full year 2025. Gross margins were again 40% -- above 40% and we delivered EBITDA of $98 million and EPS of $1.91. As a reminder, the reported results are impacted by the mid-2025 creation of the Otsuka ICU Medical JV and resulting deconsolidation of IV solutions from our income statement. Both our consumables and systems businesses delivered record revenue quarters operationally, and Brian will explain the year-over-year decrease in EBITDA due to the deconsolidation and tariffs. Cash generation was again strong as we repaid additional principal and net debt is currently just below $1 billion. The broader demand and utilization environment in Q4 continued to be attractive across almost every geography with the U.S. having a sharper and faster flu spike towards the end of the year, which has normalized now. The capital environment is status quo, and it does appear investments that customers need to get done are getting done. On currency, while the weaker dollar does help revenues in our selling geographies, we are monitoring the Mexican peso, which…

Thanks, Vivek, and good afternoon, everyone. Since Vivek covered the Q4 revenue for each of the businesses, I'll focus my remarks on recapping the Q4 performance for the remainder of the P&L, along with the Q4 balance sheet and cash flow and then provide guidance on our expectations for 2026. As you can see from the GAAP to non-GAAP reconciliation in the press release, adjusted gross margin for the fourth quarter was 40.5%, which was in line with the guidance we provided on the Q3 call of 40% to 41%. Unlike the third quarter, there were not any discrete items worth calling out in Q4 other than tariffs, where we recognized $11 million of expense, which represents a sequential increase of $2 million compared to Q3. And the Q4 gross margin rate continued to benefit from the deconsolidation of the IV Solutions business and the ongoing capture of integration synergies. Adjusted SG&A expense was $113 million in Q4 and adjusted R&D was $21 million. Total adjusted operating expenses were $134 million and represented 25% of revenue, which is 0.5 percentage point lower than the previously provided guidance of 25.5%, driven mostly by deferred spending and general cost controls. Similar to gross margin, Q4 was mostly a clean quarter for operating expenses, and we didn't have some of the unique items that we called out for Q3. Restructuring, integration and strategic transaction expenses were $20 million in the fourth quarter and related primarily to our IT systems integration and manufacturing plant consolidation projects where both the level of activity and the amount of spend peaked in Q4 as we approach completion of several of these projects in the early part of 2026. Adjusted EBITDA for Q4 was $98 million, a decrease of 7% from $106 million last year. The year-over-year decline…

Okay. Thanks, Brian. That was straightforward. And we hope it's obvious that this year's revenue guidance is the same as the last few years with a better track record in our ability to deliver more predictable revenues. And we hope the math on where we are relative to our original transaction targets is clear. While we have achieved healthy revenue growth in our differentiated core product lines for the last few years, sustained revenue growth is about consistent execution combined with consistent innovation to refresh the portfolio. Strategically, our goal has been to build the most comprehensive and innovative infusion therapy-focused company. Throughout the last few years, we did not skimp on R&D nor innovation nor capital investments into the manufacturing assets of our consumables and systems businesses. And we found a win-win with Otsuka in the JV that will modernize the IV Solutions business. As a result, we believe in IV systems, we have a complete platform solution that will anchor the segment for the next 10-plus years as the product life cycles are incredibly long. In infusion consumables, we have scale underpinned by leading brands with great clinical data that will be supported with more innovation in the core and adjacencies of this business. We believe these investments alongside good commercial execution will allow us to continue the revenue trends longer term. Specifically, over the long term, we expect our Infusion Systems business to have opportunities both in competitive situations and as we begin a long-term refresh of our own pump installed base in earnest in 2027. We expect our offerings at some point this year to include each device, Plum Duo, Plum Solo, Medfusion 5000 syringe and CADD ambulatory to be the most recently FDA-cleared pumps and the most modernized from a design perspective, each with their…

[Operator Instructions] And we'll take our first question from Jayson Bedford with Raymond James.

Maybe a few questions. Just start with systems. Double-digit LVP growth, very strong for the year. Are customers -- can you talk about the environment out there today? Are customers -- it sounds like it, but are customers actively making decisions today? Or is there any pausing in the environment at all?

I think from a capital perspective, Jayson, the words have been the exact same, I think, the last 6 quarters, which is the capital environment has been very stable, nothing different than historical behavior. Deals are getting done. I think the industry challenges historically are well known, and there was some backup in refresh cycles. And I think it's coming to fruition. I'm not sure I'd call it accelerated. But again, we were starting from a place where our share base after Hospira had gone backwards, from here was very low. And so these improvements are very meaningful to our P&L.

Okay. And just the comment on second half, can we assume that the vast majority of pump business you're doing today on the LVP side is Duo and Solo?

Domestically, in the United States for the U.S. portion of our business, absolutely. Internationally, 60 continues to be placed.

Okay. Just on the syringe and ambulatory side, are the pending clearances having an impact on infusion system sales, meaning is there a pause there as folks may wait for the newer approved products?

No. I mean syringe of the 4 years that we've owned the syringe business last year was pretty close to the top. And any customer who is serious about the platform is very interested in what the future road map looks like and wants to engage on it and it hasn't been slowing anything down.

Okay. And just timing on the clearances, is it safe to assume 2Q midyear?

I mean I think we would leave it as, one, we are incredibly pleased that we have seen no change in the regulatory response in this time. Responses are just as prompt as ever, and the quality of the dialogue is just as good as ever. We received a first pass review on the Plum Duo. We felt these were high-quality filings. It's never over until it's over, and there's the normal back and forth going on. So we're doing our part, and I think they're doing their part the best they can.

Okay. Maybe just one last one for me, and then I'll let someone else jump in. But just congrats on closing out the warning letter. Just along that vein, you mentioned it would open up some strategic choices, I think was the word you used. Can you just comment on the appetite for these type of products out there?

I mean I think we all read the same newspapers and see the same things happening from a transactional perspective. I think there's capital we put to work in some situations. For us, some of the assets that we've beaten around the bushes that we'd love to figure out what to do with have been the exact assets that were either covered under the open warning letter or we're in the midst of being integrated via their manufacturing sites were moving or their IT systems that ran were moving. And a lot of that work is behind us now. So we just feel like we're in a better place to explore some of those opportunities.

We'll now move on to Brett Fishbin with KeyBanc Capital Markets.

Maybe just one on consumables since systems was just touched on. So I think for this year, you're pointing to mid-single-digit growth, which is pretty in line with what you've seen in the last couple of years, maybe 100 bps or so lower. But I'm just curious kind of like what you're seeing from an underlying volume standpoint across hospitals and your other end markets 6 weeks into the year. I think we've picked up on some signs that maybe baseline hospital utilization volumes might be decelerating a little bit. So just curious if you've seen anything like that and just like how you're thinking about that as it pertains to the guidance for '26.

It's a good question, Brett. I think just as the first point of clarification, our guidance for consumables independent of the results that were put up is exactly the same as the last 2 years, right? So our mid-single-digit sentence is the party line and what we certainly have been sticking to. In terms of what we are seeing out there, I think the comments we made in the back half of the year are the same to say, which is in the back half of the year, it was a very different -- it was a lower growth rate than we had seen the year before. I think that trends continue. For us, it still feels like it's positive, may not be at the same rates. But when we look at our underlying demand, we haven't seen any impact along the line of utilization on anything right now. There's a little bit of a seasonality point Brian was talking about in the script on the flu stuff and just the normal seasonality we have in the consumables business, but I don't think there's anything related to underlying demand. We were talking about or I wouldn't have made the normal comments in the third paragraph.

All right. Perfect. Perfect. And then just one follow-up. And I think I know we're all kind of ready to move past this tariff topic. But just to start the year, just thinking about the guidance, I think giving the 2% metric as a percent of sales makes a lot of sense. But just wanted to ask if there's any changes in how we should be thinking about exposures geographically? And then just what you can tell us about any mitigation efforts that you've undertaken since the last call in November.

Sure. Brian, do you want to grab that one?

Yes. I mean I don't know if there's really much in terms of changes in terms of exposure and things like that. We'll kind of see what happens here in the near future, if anything, and who knows what could result from that. But I think we have done some things structurally to try to mitigate the tariffs as much as we can. We saw a little bit of that favorability Brett, in Q4 coming in a little bit less than our previous guidance around some expense there. So I think that helps, and that kind of gets back to the point as to why Vivek was saying earlier in '25, don't annualize what we were seeing at that point in time. So yes, I think there's still a little bit more work to be done on tariffs, but maybe those benefits won't come until a little bit later in the year because some of those are, let's say, heavier in terms of lift.

We'll take our next question from Mike Matson with Needham & Company.

So when I look at your slide and kind of the bar chart in there for the Infusion System business. It looks like the syringe pumps are a pretty small slice of that business. So is that really just because the overall market is smaller. Or is it a sign that your share is maybe lower in that category? And does that mean there's maybe more opportunity to take some share when you launch the new syringe pump?

Yes. Mike, we'll start with the market sizing. It's a much, much smaller market than the LVP in terms of actually units pumping. Maybe 10% to 15% of the size of the overall LVP market, max 20, if we had a debate about it depending on whose system we were using. So first, the market size is much smaller. And it's the inverse of where we are in LVPs. Our share is actually higher on syringe, certainly very high and freestanding syringe than we have in LVP. So I think for us, it goes back to the roots of why we took on the pain of the last transaction was it was a gap that is -- even though it's only 10%, 15%, 20% of the market, it's still important to customers to have that integrated view. It drives more safety to have it in an integrated fashion, and we had to get a foothold there, which is why we did what we did. So there's -- syringe is a small portion of the segment, you're right, but it is important to customers.

Yes. Okay. That makes sense. And then just Vital Care, given the commentary around potential sale at some point of that business, and I can't remember if you disclosed this in your filings or not, but can you tell us what maybe the EBIT or EBITDA margins are in that business or kind of the portion of your corporate earnings that are coming from it, just so we can maybe start to do some math around like what the potential trade-off would be between loss of earnings versus share repurchases and things like that. I know it depends on the price, but -- and I know it may or may not actually happen.

Yes. I mean I think we're not quite -- if it was easy to do, all of this will be done already, right? We haven't -- the infrastructure is deeply co-mingled in spots, which is why this is tricky to work your way through. And until you really get it on its own organized IT, its own organized manufacturing, it's been hard to assess that with super precision. I think what we would say as it relates to the general direction of the question you're asking, one, it is likely that most of Vital Care is probably below the corporate gross margin. I think that's a safe assumption. And the second one is, I think if you look at our track record of most of the situations, right, we've tried to thread the needle in the right way in the solutions JV, we found a way to improve our revenue growth rate, improve our gross margins and do something that was EPS breakeven, so to speak, right? That would still be the target. I'm not saying that's achievable, but it's easy to give things away, but it's value destructive. So you have to be patient and get them in the right order in the right form to make sure you don't hurt yourself doing it.

Okay. All right. Got it. So you'd be aiming ideally for something that's at least kind of neutral to earnings?

I don't think we want to be that firm that, again, there's puts and not every business is created equal necessarily in there, but I think directionally, that would be the goal we'd aspire to, right?

We'll now move on to Jason Bednar with Piper Sandler.

Congrats on the quarter here and on the Smiths warning letter being lifted. Vivek, I wanted to go back to the systems business where the other Jason started. I'll ask a few here. So you did mid-singles for the full year of '25. You're guiding to something similar for '26. I guess I wanted to ask, maybe it's just being prudent to start the year, but you do have a competitor deal with challenges with their pump system. You have a new product cycle you can take advantage of maybe some early contribution from the replacement cycle opportunity with those old Hospira pumps. So I know you're saying that's maybe more of a '27 event. What's the good case scenario here for this year? If '25 was a normal year at mid-singles, couldn't '26 be a bit stronger just given some of those factors I mentioned. And then maybe just in the response, if you could help us quantify the impact of that OEM wind down that was referenced in the prepared remarks.

Sure. There was a lot in there. I guess I'd start by saying right now, starting this year, we feel good about what we think of almost as our backlog, our transactions that we've contracted for and a large portion of our revenue growth assumptions here is just making sure the installations happen. And so upside to that was if we actually could sign more and install more in the same year. So I think from a place of safety, I think we feel we're starting in a better spot. As it relates to competitive stuff, the second part of your question, as I've said before, we all live in a glass house. This whole industry has been ripe for challenges. We've essentially worked at 2 out of 3 players. I think we'd be cautious on making assumptions about how other people get their house in order. We've all been through it. And then on the OEM piece, that is a piece of business that has been declining for the last 2 years. So the good growth of 7 and 5 in LVPs has been jumping over that anyway, right? We never really wanted to speak about it so transparently because we didn't want anybody to feel that bump. I don't think they really felt it in '25, and we think we have the ability to grow through it again in '26. I don't think we want to be precise on exactly how many points of headwind, but it was certainly a headwind to the business in the last 2 years, and the business still did well.

Okay. That's helpful. I appreciate that. And then I know you highlighted the stronger ASPs on Solo and Duo. I think that's helping the growth rate or should help the growth rate here in systems, maybe more in the second half of the year. What kind of ASP contribution or uplift should we be thinking about from those? Is it material?

I think the challenge and the opportunity for this industry, right, a lot of value is created if you can -- there's 3 components of value in the pump business, maybe there's 4 components of value, right? The first is obviously the razor and razor blade, the dedicated sets. The second is software and service. The third is if you can drag adjacencies like we do with regular consumables. And the fourth is the hardware itself. And we thought we were pretty well positioned on the first, second and third, certainly, the new products position us better in software than the historical products. But I think the challenge for our pump business historically is that we weren't generating enough margin on the hardware. We believe this piece of technology has enough -- the new pumps have enough technology embedded in them and enough features that we can begin to have a more interesting positive gross margin on the hardware makes a big difference for us. It will make a big difference for us over time.

Okay. So safe to assume that it's improving gross margin and it's material enough on the revenue line, too.

Correct.

Okay. Perfect. Last one for me. Just I thought it was pretty clear just from a lot of comments, even how you started the call that operations for the business are just in a much better state today than where we've been in the last few years. A lot of confidence around cash flow, seeing benefits from some of the common systems, facility consolidations, et cetera, that you've been going down. Maybe if you could or Brian, to jump in, if you can unpack that a bit more. Does that show up? Do we see that across gross margin and SG&A lines. Is that a dynamic that just builds throughout the year? Just any more color there would be helpful.

Yes. I mean I think I think we talked about kind of those areas of improvement, whether it's gross margin or free cash flow that those were opportunities that would probably take a few years to fully capture the full value of the opportunity where -- whether it's gross margin or free cash flow, those benefit from the projects that are underway, whether it's the IT system integration or the manufacturing plant and supply chain network consolidation. A lot of that work is wrapping up this year and projects are being completed and we'll continue to realize benefits. And I think our goal is to really exit next year. So by the time we get to the end of '27, we're kind of more at a steady run rate where whether it's gross margin or free cash flow, it's kind of closer to those targets that we've been talking about.

So to be specific, Jason, there was a slide in the IR deck, which showed the target gross margin level and then the adjustment for tariffs, right? That's what we're talking about to where we get to. And basically, what happened, it was a spiral downwards in the first year or 2 as results weren't coming through and the business wasn't as healthy as we thought. We just get more value, we had to consolidate more, integrate harder that consumed capital. And those projects became big projects. We're finally coming out of them. Therefore, capital isn't consumed and things get back to normal. So it's kind of a spiral down and then the spiral back up, and we're at least on the better side of it now.

Right. Very clear. Congrats again.

[Operator Instructions] We'll move now to Larry Solow with CJS Securities.

Just a couple of follow-ups. Most of my questions have been answered, actually. So on the margin improvement question, so the consolidation initiatives themselves, which I guess is just part of that 200 bps or so of opportunity and probably maybe the biggest part by itself. But it sounds like that activity is done and we'll at least get that benefit, not the full year's worth, but maybe by the end of this year, that run rate will be in the numbers already on the consolidation piece or most of it. Is that fair to say?

I think, Larry, thanks for the question. I think what we were trying to say, again, it can drift month-to-month. But in general, once the inventory that was made at the old factory leaves, we get the benefit of the manufacturing synergization. And we have a number of logistics consolidations also rolling in. We expect a lot of that to be in the run rate by the end of this year, and then that will annualize into next year, which is another benefit. And the components of the 2 points of margin, the missing still 2 points relative to our new targets are really those activities being fully implemented. The previous question, the benefit of better margin on hardware sales, overall pricing, et cetera, those all go into components of margin. And as the consumable business grows, that helps margins too. So there's a lot of things in the mix for both this year and next year that are all good.

And when does the cash outlay, right? So you've been -- I think it feels like you spent more than $100 million this year. But on the remediation, integration, restructuring combined, it sounds like you spent $37 million this quarter. So I think it was over $100 million again for the full year, and it's averaged over $100 million for 3 years. So -- and you've been averaging or at least run rate close to $100 million free cash flow. So fair to say that in 18 months, even if the business just improves a little bit at the core, by just getting rid of all these excess expenses, you should be doing well north of $200 million in free cash flow, right, unless my math is...

Thank you for the vivid recollection of our shared experience. Yes, it was painful. That is the exact amounts that we've been putting at it. I think we were trying to say in the call, it's this year, it needs to end and hopefully by the middle of this year. There will always be some stuff on regular remediations that are happening, et cetera, but a materially different number in the back half. So that's the way free cash flow moves around and then growth long term on top of that.

Got it. If I could just sneak one more, just more just systems, a lot of questions on this one. But there's still, I guess, a lot of business up for grabs, right? I don't know if you can just kind of characterize where we stand without mentioning the competitors' name, but I know there was a lot of business up for grabs there. How are you doing in that? And just your comfort level on the refresh cycle because to me, that feels like competitive new business wins are great, but when you have all these in-house installed base that can just flip over to the new line, that should be a much greater opportunity for you. So just your confidence level that we could start to see your customers will want to switch or would be anxious to switch as we look out? I know it's still a little bit of ways, but any color on that would be great.

Sure. I mean, first, on the competitive piece, again, from a safety perspective, we feel like we have enough contracts in hand. As long as we can manage the installation schedule, we feel like what we see in the near term is pretty good. And there's plenty of competitive activity, just in normal course competitive activity that can keep us busy. In terms of the refresh of our own installed base, I mean, our journey here we went through some dark days where people had left the infusion hardware category, Abbott, Hospira, what we became at very different market shares historically. We stabilized that, clawed some back. And truthfully, that many of the customers that stayed, stayed because they believed in the core technology. And the pieces of that core technology have been conserved into this modern package of Plum Duo, Plum Solo and now enhanced with a syringe and CADD, all in the same software. And so I would argue that these customers went through some tough times, still were committed to the technology, and we believe we have a better offering for them today, and that's independent from the economic wrapper around the other accessories and solutions and other things that may or may not be part of any given conversation. So we think we're well positioned for that conversation, too.

At this time, there are no further questions in queue. I will now turn the meeting back to our presenters for any additional or closing remarks.

Thanks again for your interest in ICU Medical. We're glad a number of our projects are reaching completion, and we look forward to updating everybody on our Q1 call later this year. Thanks.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.