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ICU Medical Announces First Quarter 2023 Results

SAN CLEMENTE, Calif., May 08, 2023 (GLOBE NEWSWIRE) -- ICU Medical, Inc. (Nasdaq:ICUI), a leader in the development, manufacture and sale of innovative medical products, today announced financial results for the quarter ended March 31, 2023.

First Quarter 2023 Results

First quarter 2023 revenue was $568.6 million, compared to $543.1 million in the same period last year. GAAP gross profit for the first quarter of 2023 was $192.0 million, as compared to $168.8 million in the same period last year. GAAP gross margin for the first quarter of 2023 was 34%, as compared to 31% in the same period last year. GAAP net loss for the first quarter of 2023 was $(9.8) million, or $(0.41) per diluted share, as compared to GAAP net loss of $(38.1) million, or $(1.61) per diluted share, for the first quarter of 2022. Adjusted diluted earnings per share for the first quarter of 2023 was $1.74 as compared to $1.82 for the first quarter of 2022. Also, adjusted EBITDA was $102.0 million for the first quarter of 2023 as compared to $84.9 million for the first quarter of 2022.

Adjusted EBITDA and adjusted diluted earnings per share are measures calculated and presented on the basis of methodologies other than in accordance with GAAP. Please refer to the Use of Non-GAAP Financial Information following the financial statements herein for further discussion and reconciliations of these measures to GAAP measures.

Vivek Jain, ICU Medical’s Chief Executive Officer, said, “First quarter results were generally in line with our expectations."

Revenues by product line for the three months ended March 31, 2023 and 2022 were as follows (in millions):

  Three months ended
March 31,
  
Product Line  2023  2022 $ Change
Consumables $236.1 $240.2 $(4.1)
Infusion Systems  161.7  138.2  23.5 
Vital Care*  170.8  164.7  6.1 
  $568.6 $543.1 $25.5 

*Vital Care includes $12.7 million and $11.1 million of contract manufacturing to Pfizer for the three months ended March 31, 2023 and 2022, respectively.

Conference Call

The Company will host a conference call to discuss its first quarter 2023 financial results, today at 4:30 p.m. ET (1:30 p.m. PT). The call can be accessed at (877) 300-8521, conference ID 10177448. The conference call will be simultaneously available by webcast, which can be accessed by going to the Company's website at www.icumed.com, clicking on the Investors tab, clicking on Event Calendar and clicking on the Webcast icon and following the prompts. The webcast will also be available by replay.

About ICU Medical

ICU Medical (Nasdaq:ICUI) is a global leader in infusion systems, infusion consumables and high-value critical care products used in hospital, alternate site and home care settings. Our team is focused on providing quality, innovation and value to our clinical customers worldwide. ICU Medical is headquartered in San Clemente, California. More information about ICU Medical can be found at www.icumed.com

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements contain words such as ''will,'' ''expect,'' ''believe,'' ''could,'' ''would,'' ''estimate,'' ''continue,'' ''build,'' ''expand'' or the negative thereof or comparable terminology, and may include (without limitation) information regarding the Company's expectations, goals or intentions regarding the future. These forward-looking statements are based on management's current expectations, estimates, forecasts and projections about the Company and assumptions management believes are reasonable, all of which are subject to risks and uncertainties that could cause actual results and events to differ materially from those stated in the forward-looking statements. These risks and uncertainties include, but are not limited to, decreased demand for the Company's products, decreased free cash flow, changes in product mix, increased competition from competitors, lack of growth or improving efficiencies, unexpected changes in the Company's arrangements with its largest customers, the impact from fluctuations in foreign currency exchange rates, the impact of inflation on raw materials, freight charges and labor, rising interest rates, the impact of the ongoing COVID-19 pandemic on the Company and our financial results and the Company's ability to meet expectations regarding integration of the Smiths Medical business. Future results are subject to risks and uncertainties, including the risk factors, and other risks and uncertainties, described in the Company's filings with the Securities and Exchange Commission, which include those in the Company's most recent Annual Report on Form 10-K and our subsequent filings. Forward-looking statements contained in this press release are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
    
 March 31,
2023
 December 31,
2022
 (Unaudited)  (1) 
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$220,947  $208,784 
Short-term investment securities 3,235   4,224 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES 224,182   213,008 
Accounts receivable, net of allowance for doubtful accounts 139,459   221,719 
Inventories 747,965   696,009 
Prepaid income taxes 14,294   15,528 
Prepaid expenses and other current assets 87,125   88,932 
TOTAL CURRENT ASSETS 1,213,025   1,235,196 
PROPERTY, PLANT AND EQUIPMENT, net 624,112   636,113 
OPERATING LEASE RIGHT-OF-USE ASSETS 79,736   74,864 
LONG-TERM INVESTMENT SECURITIES    516 
GOODWILL 1,462,726   1,449,258 
INTANGIBLE ASSETS, net 957,682   982,766 
DEFERRED INCOME TAXES 31,466   31,466 
OTHER ASSETS 101,885   105,462 
TOTAL ASSETS$4,470,632  $4,515,641 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
Accounts payable$186,420  $215,902 
Accrued liabilities 235,167   242,769 
Current portion of long-term obligations 35,063   29,688 
Income tax payable 5,527   6,200 
TOTAL CURRENT LIABILITIES 462,177   494,559 
CONTINGENT EARN-OUT LIABILITY 24,905   25,572 
LONG-TERM OBLIGATIONS 1,612,196   1,623,675 
OTHER LONG-TERM LIABILITIES 114,227   114,104 
DEFERRED INCOME TAXES 114,594   126,007 
INCOME TAX LIABILITY 42,134   41,796 
COMMITMENTS AND CONTINGENCIES     
STOCKHOLDERS’ EQUITY:   
Convertible preferred stock, $1.00 par value; Authorized — 500 shares; Issued and outstanding — none     
Common stock, $0.10 par value; Authorized — 80,000 shares; Issued —24,114 and 23,995 shares at March 31, 2023 and December 31, 2022, respectively, and outstanding — 24,064 and 23,993 shares at March 31, 2023 and December 31, 2022, respectively 2,411   2,399 
Additional paid-in capital 1,339,908   1,331,249 
Treasury stock, at cost (8,006)  (243)
Retained earnings 827,689   837,501 
Accumulated other comprehensive loss (61,603)  (80,978)
TOTAL STOCKHOLDERS' EQUITY 2,100,399   2,089,928 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$4,470,632  $4,515,641 

______________________________________________________
(1) December 31, 2022 balances were derived from audited consolidated financial statements.

ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
 
 Three months ended
March 31,
  2023   2022 
TOTAL REVENUES$568,649  $543,122 
COST OF GOODS SOLD 376,608   374,295 
GROSS PROFIT 192,041   168,827 
OPERATING EXPENSES:   
Selling, general and administrative 152,572   153,212 
Research and development 19,761   23,871 
Restructuring, strategic transaction and integration 11,013   33,905 
Change in fair value of contingent earn-out (700)   
TOTAL OPERATING EXPENSES 182,646   210,988 
INCOME (LOSS) FROM OPERATIONS 9,395   (42,161)
INTEREST EXPENSE, net (22,515)  (13,055)
OTHER (EXPENSE) INCOME, net (269)  415 
LOSS BEFORE INCOME TAXES (13,389)  (54,801)
BENEFIT FOR INCOME TAXES 3,577   16,733 
NET LOSS$(9,812) $(38,068)
NET LOSS PER SHARE   
Basic$(0.41) $(1.61)
Diluted$(0.41) $(1.61)
WEIGHTED AVERAGE NUMBER OF SHARES   
Basic 24,014   23,646 
Diluted         24,014           23,646 


ICU MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
 Three months ended
March 31,
  2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net loss$(9,812) $(38,068)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Depreciation and amortization 55,744   53,138 
Amortization of inventory step-up    14,370 
Noncash lease expense 5,656   5,286 
Provision for doubtful accounts 666   (548)
Provision for warranty, returns and field action 3,951   726 
Stock compensation 9,158   12,092 
Loss on disposal of property, plant and equipment and other assets 367   596 
Bond premium amortization 5   130 
Debt issuance costs amortization 1,701   1,643 
Change in fair value of contingent earn-out (700)   
Usage of spare parts 4,384   2,223 
Other (40)  (1,649)
Changes in operating assets and liabilities, net of amounts acquired:   
Accounts receivable 82,028   22,489 
Inventories (49,370)  (36,170)
Prepaid expenses and other current assets 1,907   2,607 
Other assets (6,448)  (14,371)
Accounts payable (27,525)  19,504 
Accrued liabilities (21,099)  (19,238)
Income taxes, including excess tax benefits and deferred income taxes (9,328)  (26,102)
Net cash provided by (used in) operating activities 41,245   (1,342)
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment (14,205)  (23,606)
Proceeds from sale of assets 54   900 
Business acquisitions, net of cash acquired    (1,844,164)
Intangible asset additions (2,532)  (2,387)
Purchases of investment securities    (1,993)
Proceeds from sale and maturities of investment securities 1,500   3,500 
Net cash used in investing activities (15,183)  (1,867,750)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from issuance of long-term debt, net of lender debt issuance costs    1,672,698 
Principal repayments of long-term debt (7,375)  (16,000)
Payment of third-party debt issuance costs    (1,852)
Proceeds from exercise of stock options 171   2,974 
Payments on finance leases (208)  (160)
Tax withholding payments related to net share settlement of equity awards (8,425)  (8,743)
Net cash (used in) provided by financing activities (15,837)  1,648,917 
Effect of exchange rate changes on cash 1,938   (3,224)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,163   (223,399)
CASH AND CASH EQUIVALENTS, beginning of period 208,784   552,827 
CASH AND CASH EQUIVALENTS, end of period$220,947  $329,428 

Use of Non-GAAP Financial Information

This press release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). The non-GAAP financial measures should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. There are material limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may not be comparable to similarly titled non-GAAP financial measures used by other companies, including peer companies. Our management believes that the non-GAAP data provides useful supplemental information to management and investors regarding our performance and facilitates a more meaningful comparison of results of operations between current and prior periods. We use non-GAAP financial measures in addition to and in conjunction with GAAP financial measures to analyze and assess the overall performance of our business, in making financial, operating and planning decisions, and in determining executive incentive compensation.

The non-GAAP financial measures include adjusted EBITDA, adjusted revenue, adjusted gross profit, adjusted selling, general and administrative, adjusted research and development, adjusted restructuring, strategic transaction and integration, adjusted change in fair value of contingent earn-out, adjusted income from operations, adjusted (loss) income before income taxes, adjusted benefit (provision) for income taxes, adjusted net (loss) income and adjusted diluted (loss) earnings per share, all of which exclude special items because they are highly variable or unusual and impact year-over-year comparisons.

For the three months ended March 31, 2023 and 2022, special items include the following:

Stock compensation expense: Stock-based compensation is generally fixed at the time the stock-based instrument is granted and amortized over a period of several years. The value of stock options is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. The value of our restricted stock awards is determined using the grant date stock price, which may not be indicative of our operational performance over the expense period. Additionally, in order to establish the fair value of performance-based stock awards, which are currently an element of our ongoing stock-based compensation, we are required to apply judgment to estimate the probability of the extent to which performance objectives will be achieved. Based on the above factors, we believe it is useful to exclude stock-based compensation in order to better understand our operating performance.

Intangible asset amortization expense: We do not acquire businesses or capitalize certain patent costs on a predictable cycle. The amount of purchase price allocated to intangible assets and the term of amortization can vary significantly and are unique to each acquisition. Capitalized patent costs can vary significantly based on our current level of development activities. We believe that excluding amortization of intangible assets provides the users of our financial statements with a consistent basis for comparison across accounting periods.

Restructuring, strategic transaction and integration: We incur restructuring and strategic transaction charges that result from events, which arise from unforeseen circumstances and/or often occur outside of the ordinary course of our ongoing business. Although these events are reflected in our GAAP financial statements, these unique transactions may limit the comparability of our ongoing operations with prior and future periods.

Change in fair value of contingent earn-out: We exclude the impact of certain amounts recorded in connection with business combinations. We exclude items that are either non-cash or not normal, recurring operating expenses due to their nature, variability of amounts, and lack of predictability as to occurrence and/or timing.

Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value: The inventory step-up represents the expense recognition of fair value adjustments in excess of the historical cost basis of inventory obtained through acquisition, these charges are outside of our normal operations and are excluded.

Quality system and product-related remediation: We exclude certain quality system product-related remediation charges in determining our non-GAAP financial measures as they may limit the comparability of our ongoing operations with prior and future periods and distort the evaluation of our normal operating performance.

Disposition/write-off of certain assets: Occasionally, we may sell/write-off certain assets. We exclude the non-cash gain/loss on the disposition/write-off of these assets in determining our non-GAAP financial measures as they may limit the comparability of our ongoing operations with prior and future periods and distort the evaluation of our normal operating performance.

From time to time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful information to investors and management.

In addition to the above special items, Adjusted EBITDA additionally excludes the following items from net income:

Depreciation expense: We exclude depreciation expense in deriving adjusted EBITDA because companies utilize productive assets of different ages and the depreciable lives can vary significantly resulting in considerable variability in depreciation expense among companies.

Interest, net: We exclude interest in deriving adjusted EBITDA as interest can vary significantly among companies depending on a company's level of income generating instruments and/or level of debt.

Taxes: We exclude taxes in deriving adjusted EBITDA as taxes are deemed to be non-core to the business and may limit the comparability of our ongoing operations with prior and future periods and distort the evaluation of our normal operating performance.

We also present Free cash flow as a non-GAAP financial measure as management believes that this is an important measure for use in evaluating overall company financial performance as it measures our ability to generate additional cash flow from business operations. Free cash flow should be considered in addition to, rather than as a substitute for, net income as a measure of our performance or net cash (used in) provided by operating activities as a measure of our liquidity. Additionally, our definition of free cash flow is limited and does not represent residual cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt service and other obligations or payments made for business acquisitions. Therefore, we believe it is important to view free cash flow as supplemental to our entire statement of cash flows.

The following tables reconcile our GAAP and non-GAAP financial measures:

ICU MEDICAL, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
(In thousands, except per share data)
  Adjusted EBITDA
 Three months ended
March 31,
  2023   2022 
GAAP net loss$        (9,812) $        (38,068)
    
Non-GAAP adjustments:   
Interest, net         22,515           13,055 
Stock compensation expense         9,158           12,092 
Depreciation and amortization expense         55,744           53,138 
Restructuring, strategic transaction and integration         11,013           33,905 
Change in fair value of contingent earn-out         (700)          — 
Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair value         —           14,370 
Quality system and product-related charges         17,090           13,184 
Loss on write-off of assets         550           — 
Benefit for income taxes         (3,577)          (16,733)
Total non-GAAP adjustments         111,793           123,011 
    
Adjusted EBITDA$        101,981  $        84,943 

ICU MEDICAL, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
(In thousands, except percentages and per share)

The company’s U.S. GAAP results for the three months ended March 31, 2023 included special items which impacted the U.S. GAAP measures as follows:

 Total
revenues
Gross
profit
Selling,
general and administrative
Research
and development
Restructuring,
strategic
transaction
and
integration
Change in
fair value of contingent
earn-out
Income from operations(Loss)
income
before
income
taxes
Benefit
(provision)
for income
taxes
Net (loss) incomeDiluted
(loss)
earnings per
share
Reported (GAAP)$568,649 $192,041 $152,572 $19,761 $11,013 $(700)$9,395 $(13,389)$3,577 $(9,812)$(0.41)
Reported percent of total revenues (or percent of (loss) income before income taxes for benefit (provision) for income taxes)  34% 27% 3% 2% % 2%(2)% 26.7%(2)% 
Contract manufacturing (12,703)                   
Stock compensation expense   1,444  (7,362) (352)     9,158  9,158  (2,198) 6,960  0.29 
Amortization expense     (32,299)       32,299  32,299  (7,913) 24,386  1.01 
Restructuring, strategic transaction and integration         (11,013)   11,013  11,013  (2,654) 8,359  0.34 
Change in fair value of contingent earn-out           700  (700) (700)   (700) (0.03)
Quality system and product-related remediation   17,090          17,090  17,090  (4,204) 12,886  0.53 
Loss on write-off of assets   550          550  550  (136) 414  0.01 
Adjusted (Non-GAAP)$555,946 $211,125 $112,911 $19,409 $ $ $78,805 $56,021 $(13,528)$42,493 $1.74 
Adjusted percent of total revenues (or percent of (loss) income before income taxes for benefit (provision) for income taxes)  38% 20% 3% % % 14% 10% 24.1% 8% 

ICU MEDICAL, INC. AND SUBSIDIARIES
Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)(continued)
(In thousands, except percentages and per share)

The company’s U.S. GAAP results for the three months ended March 31, 2022 included special items which impacted the U.S. GAAP measures as follows:

 Total
revenues
Gross
profit
Selling, general
and administrative
Research and developmentRestructuring,
strategic
transaction
and
integration
(Loss) income
from
operations
(Loss)
income
before
income
taxes
Benefit
(provision)
for income
taxes
Net (loss) incomeDiluted
earnings
per share
Reported (GAAP)$543,122 $168,827 $153,212 $23,871 $33,905 $(42,161)$(54,801)$16,733 $(38,068)$(1.61)
Reported percent of total revenues (or percent of income before income taxes for benefit provision for income taxes)  31% 28% 4% 6%(8)%(10)% 30.5%(7)% 
Contract manufacturing (11,067)                 
Stock compensation expense   1,040  (10,733) (319)   12,092  12,092  (2,902) 9,190  0.38 
Amortization expense   724  (30,967)     31,691  31,691  (7,193) 24,498  1.01 
Restructuring, strategic transaction and integration         (33,905) 33,905  33,905  (6,678) 27,227  1.13 
Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair value   14,370        14,370  14,370  (3,420) 10,950  0.46 
Quality system and product-related remediation   13,184        13,184  13,184  (3,255) 9,929  0.42 
Earnings per share impact on net loss due to basic versus diluted weighted average shares                   0.03 
Adjusted (Non-GAAP)$532,055 $198,145 $111,512 $23,552 $ $63,081 $50,441 $(6,715)$43,726 $1.82 
Adjusted percent of total revenues (or percent of income before income taxes for provision for income taxes)  37% 21% 4% % 12% 9% 13.3% 8% 


ICU MEDICAL, INC. AND SUBSIDIARIES
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow (Unaudited)
(In thousands)
 
 Three months ended
March 31
  2023   2022 
Net cash provided by (used in) operating activities$41,245   (1,342)
Purchase of property, plant and equipment (14,205)  (23,606)
Proceeds from sale of assets 54   900 
Free cash flow$27,094  $(24,048)

CONTACT:
ICU Medical, Inc.                                        
Brian Bonnell, Chief Financial Officer
(949) 366-2183
     
ICR, Inc.
John Mills, Partner
(646) 277-1254 


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