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ICU Medical Announces Third Quarter 2022 Results

SAN CLEMENTE, Calif., Nov. 07, 2022 (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 September 30, 2022.

Third Quarter 2022 Results

Third quarter 2022 revenue was $597.9 million, compared to $336.1 million in the same period last year. GAAP gross profit for the third quarter of 2022 was $186.4 million, as compared to $127.8 million in the same period last year. GAAP gross margin for the third quarter of 2022 was 31%, as compared to 38% in the same period last year. GAAP net loss for the third quarter of 2022 was $(13.2) million, or $(0.55) per diluted share, as compared to GAAP net income of $31.1 million, or $1.43 per diluted share, for the third quarter of 2021. Adjusted diluted earnings per share for the third quarter of 2022 was $1.75 as compared to $2.07 for the third quarter of 2021. Also, adjusted EBITDA was $92.6 million for the third quarter of 2022 as compared to $71.9 million for the third quarter of 2021.

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, “Legacy ICU Medical revenues were in line with expectations and results from the acquired Smiths Medical business reflect continued operational improvements."

Revenues by product line for the three and nine months ended September 30, 2022 and 2021 were as follows (in millions):

As a result of the acquisition of Smiths Medical on January 6, 2022, the following product lines are presented in addition to our legacy product lines: Infusion Systems-Smiths Medical, Vascular Access -Smiths Medical and Vital Care-Smiths Medical.

  Three months ended
September 30,
   Nine months ended
September 30,
  
Product Line 2022 2021 $ Change  2022  2021 $ Change
Infusion Consumables $141.1 $144.9 $(3.8) $426.1 $407.5 $18.6 
Infusion Systems  87.8  90.7  (2.9)  262.1  259.7  2.4 
IV Solutions*  96.4  89.2  7.2   279.0  271.8  7.2 
Critical Care  10.8  11.3  (0.5)  35.3  36.8  (1.5)
Infusion Systems-Smiths Medical  96.9    96.9   241.0    241.0 
Vascular Access-Smiths Medical  95.3    95.3   251.4    251.4 
Vital Care-Smiths Medical  69.6    69.6   207.1    207.1 
  $597.9 $336.1 $261.8  $1,702.0 $975.8 $726.2 

*IV Solutions includes $15.8 million and $40.9 million of contract manufacturing to Pfizer for the three and nine months ended September 30, 2022, respectively. IV Solutions includes $7.9 million and $32.2 million of contract manufacturing to Pfizer for the three and nine months ended September 30, 2021, respectively.

The Company Reaffirms Fiscal Year 2022 Guidance

The Company is reaffirming its full year 2022 guidance but due to the impact primarily from foreign currency exchange rates, expects to end the fiscal year towards the lower end of the guidance range. The Company’s full year 2022 GAAP net loss is estimated to be in the range of $(95) million to $(81) million and GAAP diluted loss per share estimated to be in the range of $(3.93) to $(3.35). The Company's previously provided adjusted EBITDA was in the range of $350 million to $370 million and adjusted diluted earnings per share was in the range of $6.20 to $6.80.

Conference Call

The Company will host a conference call to discuss its third quarter 2022 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 10171949. 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, as updated by the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022 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)
 
 September 30,
2022
 December 31,
2021
 (Unaudited) (1)
ASSETS   
CURRENT ASSETS:   
Cash and cash equivalents$243,879  $552,827 
Short-term investment securities 2,919   14,420 
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENT SECURITIES 246,798   567,247 
Accounts receivable, net of allowance for doubtful accounts 212,845   105,894 
Inventories 625,268   290,235 
Prepaid income taxes 20,170   19,586 
Prepaid expenses and other current assets 94,283   46,847 
TOTAL CURRENT ASSETS 1,199,364   1,029,809 
PROPERTY, PLANT AND EQUIPMENT, net 656,383   468,365 
OPERATING LEASE RIGHT-OF-USE ASSETS 76,438   39,847 
LONG-TERM INVESTMENT SECURITIES 1,831   4,620 
GOODWILL 1,369,717   43,439 
INTANGIBLE ASSETS, net 1,020,658   188,311 
DEFERRED INCOME TAXES 15,482   42,604 
OTHER ASSETS 110,604   63,743 
TOTAL ASSETS$4,450,477  $1,880,738 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
CURRENT LIABILITIES:   
Accounts payable$205,042  $81,128 
Accrued liabilities 244,303   118,195 
Current portion of long-term obligations 24,375    
Income tax payable 15,014   1,454 
Contingent earn-out liability 300    
TOTAL CURRENT LIABILITIES 489,034   200,777 
CONTINGENT EARN-OUT LIABILITY 25,942   2,589 
LONG-TERM OBLIGATIONS 1,629,849    
OTHER LONG-TERM LIABILITIES 119,251   41,830 
DEFERRED INCOME TAXES 153,599   1,490 
INCOME TAX LIABILITY 19,997   18,021 
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 —23,980 and 21,280 shares at September 30, 2022 and December 31, 2021, respectively, and outstanding — 23,979 and 21,280 shares at September 30, 2022 and December 31, 2021, respectively 2,398   2,128 
Additional paid-in capital 1,323,178   721,412 
Treasury stock, at cost (126)  (27)
Retained earnings 853,037   911,787 
Accumulated other comprehensive loss (165,682)  (19,269)
TOTAL STOCKHOLDERS' EQUITY 2,012,805   1,616,031 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$4,450,477  $1,880,738 
        
______________________________________________________
(1) December 31, 2021 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
September 30,
 Nine months ended
September 30,
  2022   2021   2022   2021 
TOTAL REVENUES$597,857  $336,060  $1,701,983  $975,783 
COST OF GOODS SOLD 411,461   208,269   1,179,167   611,783 
GROSS PROFIT 186,396   127,791   522,816   364,000 
OPERATING EXPENSES:       
Selling, general and administrative 153,452   74,815   465,412   221,127 
Research and development 23,105   12,238   69,538   34,332 
Restructuring, strategic transaction and integration 14,365   2,358   61,795   8,994 
Change in fair value of contingent earn-out (4,059)     (31,253)   
Contract settlement          127 
TOTAL OPERATING EXPENSES 186,863   89,411   565,492   264,580 
(LOSS) INCOME FROM OPERATIONS (467)  38,380   (42,676)  99,420 
INTEREST EXPENSE (21,151)  (168)  (51,068)  (492)
OTHER INCOME (EXPENSE), net 311   (287)  782   921 
(LOSS) INCOME BEFORE INCOME TAXES (21,307)  37,925   (92,962)  99,849 
BENEFIT (PROVISION) FOR INCOME TAXES 8,099   (6,844)  34,212   (16,639)
NET (LOSS) INCOME$(13,208) $31,081  $(58,750) $83,210 
NET (LOSS) INCOME PER SHARE       
Basic$(0.55) $1.47  $(2.47) $3.93 
Diluted$(0.55) $1.43  $(2.47) $3.83 
WEIGHTED AVERAGE NUMBER OF SHARES       
Basic 23,908   21,214   23,828   21,189 
Diluted 23,908   21,730   23,828   21,735 
                


ICU MEDICAL, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
 Nine months ended
September 30,
  2022   2021 
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net (loss) income$(58,750) $83,210 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:   
Depreciation and amortization 178,338   66,564 
Amortization of inventory step-up 22,676    
Noncash lease expense 17,382   7,165 
Provision for doubtful accounts 214   342 
Provision for warranty and returns 3,439   752 
Stock compensation 28,597   19,236 
Loss on disposal of property, plant and equipment and other assets 2,391   1,083 
Bond premium amortization 254   514 
Debt issuance costs amortization 5,254   216 
Change in fair value of contingent earn-out (31,253)   
Product-related charges    3,380 
Usage of spare parts 7,915   9,831 
Other (2,855)  2,908 
Changes in operating assets and liabilities, net of amounts acquired:   
Accounts receivable (8,956)  3,807 
Inventories (151,840)  16,510 
Prepaid expenses and other current assets 20,074   3,557 
Other assets (22,594)  (13,593)
Accounts payable 30,413   (10,374)
Accrued liabilities (38,070)  (8,317)
Income taxes, including excess tax benefits and deferred income taxes (63,047)  (1,874)
Net cash (used in) provided by operating activities (60,418)  184,917 
CASH FLOWS FROM INVESTING ACTIVITIES:   
Purchases of property, plant and equipment (68,715)  (46,464)
Proceeds from sale of assets 933   218 
Business acquisitions, net of cash acquired (1,844,164)   
Intangible asset additions (6,560)  (10,216)
Investments in non-marketable equity investments    (3,250)
Purchases of investment securities (3,397)  (10,034)
Proceeds from sale and maturities of investment securities 36,433   12,000 
Net cash used in investing activities (1,885,470)  (57,746)
CASH FLOWS FROM FINANCING ACTIVITIES:   
Proceeds from issuance of long-term debt, net of lender debt issuance costs 1,672,631    
Principal repayments of long-term debt (20,250)   
Payment of third-party debt issuance costs (1,852)   
Proceeds from exercise of stock options 7,906   6,966 
Payments on finance leases (477)  (448)
Tax withholding payments related to net share settlement of equity awards (10,541)  (8,109)
Net cash provided by (used in) financing activities 1,647,417   (1,591)
Effect of exchange rate changes on cash (10,477)  (2,192)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (308,948)  123,388 
CASH AND CASH EQUIVALENTS, beginning of period 552,827   396,097 
CASH AND CASH EQUIVALENTS, end of period$243,879  $519,485 
        

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 (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 September 30, 2022 and 2021, 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.

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.

Contract settlement: Occasionally, we are involved in contract renegotiations that may result in one-time settlements. We exclude these settlements as they have no direct correlation to the operation of our ongoing business.

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.

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
September 30,
  2022   2021 
GAAP net (loss) income$(13,208) $31,081 
    
Non-GAAP adjustments:   
Interest, net 17,807   (559)
Stock compensation expense 8,743   6,533 
Depreciation and amortization expense 58,641   22,245 
Restructuring, strategic transaction and integration 14,365   2,358 
Change in fair value of contingent earn-out (4,059)   
Product-related charges 18,395   3,380 
(Benefit) provision for income taxes (8,099)  6,844 
Total non-GAAP adjustments 105,793   40,801 
    
Adjusted EBITDA$92,585  $71,882 
        


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 September 30, 2022 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
(Loss)
income
from
operations
(Loss)
income
before
income
taxes
Benefit
(provision)
for income
taxes
Net (loss)
income
Diluted
(loss)
earnings per
share
Reported (GAAP)$597,857 $186,396 $153,452 $23,105 $14,365 $(4,059)$(467)$(21,307)$8,099 $(13,208)$(0.55)
Reported percent of total revenues (or percent of (loss) income before income taxes for benefit (provision) for income taxes)  31% 26% 4% 2%(1)        % %(4)        % 38.0%(2)        % 
Contract manufacturing (15,780)                   
Stock compensation expense   1,355  (6,980) (408)     8,743  8,743  (2,098) 6,645  0.28 
Amortization expense   (3,391) (39,000)       35,609  35,609  (8,474) 27,135  1.14 
Restructuring, strategic transaction and integration         (14,365)   14,365  14,365  (2,870) 11,495  0.48 
Change in fair value of contingent earn-out           4,059  (4,059) (4,059)   (4,059) (0.17)
Quality system and product-related remediation   18,395          18,395  18,395  (4,218) 14,177  0.59 
Earnings per share impact on net loss due to basic versus diluted weighted average shares                     (0.02)
Adjusted (Non-GAAP)$582,077 $202,755 $107,472 $22,697 $ $ $72,586 $51,746 $(9,561)$42,185 $1.75 
Adjusted percent of total revenues (or percent of (loss) income before income taxes for benefit (provision) for income taxes)  35% 18% 4% % % 12% 9% 18.5% 7% 
                              


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 September 30, 2021 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
Income
from
operations
Income
before
income
taxes
Provision
for
income
taxes
Net
income
Diluted
earnings per
share
Reported (GAAP)$336,060 $127,791 $74,815 $12,238 $2,358 $38,380 $37,925 $(6,844)$31,081 $1.43
Reported percent of total revenues (or percent of income before income taxes for benefit provision for income taxes)  38% 22% 4% 1% 11% 11% 18.0% 9% 
Contract manufacturing (7,919)                 
Stock compensation expense   988  (5,240) (305)   6,533  6,533  (1,568) 4,965  0.23
Amortization expense   45  (5,768)     5,813  5,813  (1,371) 4,442  0.21
Restructuring, strategic transaction and integration         (2,358) 2,358  2,358  (566) 1,792  0.08
Product-related charges   3,380          3,380  (811) 2,569  0.12
Adjusted (Non-GAAP)$328,141 $132,204 $63,807 $11,933 $ $53,084 $56,009 $(11,160)$44,849 $2.07
Adjusted percent of total revenues (or percent of income before income taxes for provision for income taxes)  40% 19% 4% % 16% 17% 19.9% 14% 
                           


ICU MEDICAL, INC. AND SUBSIDIARIES
Reconciliation of Net Cash (Used in) Provided by Operating Activities to Free Cash Flow (Unaudited)
(In thousands)
 
 Three months ended
September 30
 Nine months ended
September 30
  2022   2021   2022   2021 
Net cash (used in) provided by operating activities$2,309  $78,835  $(60,418) $184,917 
Purchase of property, plant and equipment (20,676)  (16,771)  (68,715)  (46,464)
Proceeds from sale of assets 33   15   933   218 
Free cash flow$(18,334) $62,079  $(128,200) $138,671 
                


ICU MEDICAL, INC. AND SUBSIDIARIES
Fiscal Year 2022 Outlook (Unaudited)
(In millions, except per share data)
    
 Low End of Guidance High End of Guidance
GAAP net loss$(95) $(81)
    
Non-GAAP adjustments:   
Interest, net 67   67 
Stock compensation expense 37   37 
Depreciation and amortization expense 238   238 
Restructuring, strategic transaction and integration 79   79 
Quality and regulatory initiatives and remediation 69   69 
Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value 23   23 
Change in fair value of contingent earn-out (31)  (31)
Provision for income taxes (37)  (31)
Total non-GAAP adjustments$445  $451 
    
Adjusted EBITDA$350  $370 
    
    
    
GAAP diluted loss per share$(3.93) $(3.35)
    
Non-GAAP adjustments:   
Stock compensation expense 1.53   1.53 
Amortization expense 5.95   5.95 
Restructuring, strategic transaction and integration 3.26   3.26 
Quality and regulatory initiatives and remediation 2.85   2.85 
Adjustment to reverse the cost recognition related to the purchase accounting write-up of inventory to fair market value 0.95   0.95 
Change in fair value of contingent earn-out (1.28)  (1.28)
Estimated income tax impact from adjustments (3.13)  (3.11)
Adjusted diluted earnings per share$6.20  $6.80 
        

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


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