ICU Medical, Inc. (NASDAQ:ICUI) Q3 2017 Earnings Conference Call Transcript

Nov 09, 2017 • 04:30 pm ET

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ICU Medical, Inc. (NASDAQ:ICUI) Q3 2017 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2017 ICU Medical, Incorporated Earnings Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce one of your hosts for today's conference, Mr. John Mills. You may begin.

Executive
John Mills

Thank you. Good afternoon, everyone, and thank you for joining us today to discuss the ICU Medical financial results for the third quarter ended September 30, 2017. On the call today representing ICU Medical is Vivek Jain, Chief Executive Officer and Chairman; and Scott Lamb, Chief Financial Officer.

(Forward-Looking Cautionary Statements)

And with that, I will now turn the call over to Vivek.

Executive
Vivek Jain

Thanks, John. Good afternoon, everybody. The third quarter of 2017 was our second full quarter of owning Hospira Infusion Systems, and we are balancing our time between active customer dialogues to improve our commercial execution and being deeply in the midst of integration to create a single unified company. We continue to execute well through a large volume of activity, and operationally, we made progress every day on integrating Hospira Infusion Systems.

On today's call, in addition to explaining the Q3 2017 results and the most recent business segment performance, we wanted to provide an update on the current status of integration and related activities, discuss our expectations for the balance of 2017, and lastly, provide a firmer view on how we're thinking about 2018 at a high level, both from an income statement and balance sheet perspective and on the drivers for value creation into the longer term.

Before getting into the financial results, we did want to comment on the natural disasters that occurred in the third quarter and had such a devastating effect on so many people as well as impacting various parts of the healthcare supply chain. ICU Medical was extremely lucky in that our Ensenada facility was not impacted by the earthquake in Mexico, our Austin facility was unscathed by Hurricane Harvey, our Dominican Republic facility was spared from Hurricane Maria and our distribution centers in Florida were only down for a day or two following Hurricane Irma. We're happy all of our teammates remained safe, and we continue to do everything possible to continue -- we continue to do everything possible to build redundancy into our manufacturing operations.

Moving on to the financials. Revenues in Q3 2017 were generally in line with our expectations, while adjusted EBITDA and adjusted EPS were slightly above our initial expectations. Like Q1 and Q2, we continued to have numerous transactional accounting impacts, particularly in gross margins, which makes the results a little bit hard to follow. The short story is this. Revenues continue to be slightly better than we thought due to hanging on to some business that we expect would go away, combined with some favorability from unique temporary market dislocation. And real cash