Q2 2021 ICU Medical Inc Earnings Call
[music].
Good day and welcome to the ICU Medical Inc. Q2, 2021earnings call today's conference is being recorded.
This time I would like to turn the conference over to Mr. John Mills of ICR. Please go ahead Sir.
Thank you good afternoon, everyone. Thank you for joining us today to discuss ICU Medical's financial results for the second quarter of 2021 on.
On the call today, representing ICU is Vivek Jain Chief Executive Officer, and Chairman and Brian <unk> 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 events calendars and the presentation will be under the second quarter 2021 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 full 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 be discussing non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis.
And greater transparency into 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 Good afternoon, everybody and we hope you on your families are well with all the volatility in the broader environment over the last 18 months our businesses in 2021 had been more normal than in a while except for a few regions into the United States and abuse International geographies, our hospital customers are improving activity monthly as that.
The nations have progressed like everyone in our industry, we want to start first by thanking all of our customers and their frontline workers for trusting us to serve you. During these times and it's been great to finally see some of our teams face to face around the world.
Today, we hope for a shorter call as results were generally in line with our previous comments and not that much has changed but we did want to comment on the intra quarter trends of our business and the geographic flows of our business provide an update on our normal housekeeping items highlight our improving cash flow metrics outlined how we see the near term business.
<unk> articulate how we feel about our positioning in this environment comment on the criteria and comment on the criteria by which we are judging ourselves and talk a bit about capital deployment and how we think about that given the fluid environment.
The short story on Q2 is as follows as we described on the last call. We did see sequential revenue growth in our most differentiated business segments on a year over year basis. This resulted in a reported sales increase of 8% globally or 5% constant currency driven by market share gains in consumables stable IV solutions on.
Set by prior year Covid related surge purchases in IV systems.
We finished the quarter with 311 in adjusted revenue.
Adjusted EBITDA came in at $67 million and adjusted EPS was $1.88.
It was a clean quarter with no unusual production or any other items and it highlighted the power of mix in our operating improvements as gross margins moved upwards.
We had a strong quarter of free cash flow generation and added $38 million to our balance sheet as operational improvements have materialized and restructuring and integration costs have dramatically reduce.
When looking deeper at the results. It was really specific international markets, which had year over year declines in IV systems due to the surge pandemic ordering in Q2.2020 that impacted the results, but were offset by strong IV consumables globally vol.
Volumes at our customers were up everywhere around the planet the exception of some pockets in Asia.
At the current moment and updated from the last call Europe, and Latam are improving on both a sequential and year over year basis.
Canada was down in Q2 due to pandemic quarters last year and some pockets of Asia remained challenged as I mentioned before we.
We do expect Asia, and ANZ to improve on a year over year basis in Q3 and beyond.
We are most tilt into the U S market, where we're dependent on admissions in electives and we saw electives is pretty solid at admissions is okay.
No theres been a wide range of commentary here from all the companies, but the simple message from US is our U S customers were busy even within the quarter. There was month to month volatility and again, we did well in the U S market in the face of varying utilization on acuity rates now I'll describe some of that in the segment discussion.
So let's go through the businesses quickly and then come back to discuss the current environment, starting as usual with infusion consumables, which is our largest business infusion consumables had revenues of $136 million, which was a 23% increase year over year on a reported basis and 18% on a constant currency basis, we had 24% growth.
In the U S market and 10% international growth, even with some negative performance year over year in Asia.
Both core infusion therapy, and oncology growth were over 20% in the U S market, which is extremely important to us and we had stronger sequential growth in oncology.
We felt positive about our growth products and our performance in the market sets us up well for the balance of the year.
The rest of the world opening up could be additive to this but we are cautious on a few selected geographies that are delayed in opening.
As we highlighted on the last call Q2 of 2020 with severely impacted in the U S market downward. So the growth was a bit inflated, but we do believe going forward, we can be at or above these levels.
Moving to infusion systems, which is primarily our LDP pumps and associated dedicated sets. This segmented $85 million on adjusted revenue, which was a decline of 8% on a reported basis and 10% on a constant currency basis.
On a year over year basis, the decline was essentially completely due to the pandemic ordering in Q2 of 2020 as we previewed on the last call.
So in the U S. Just like consumables, we held their own even with utilization declines that impacted the dedicated pump sets with some softness in may and with continued expected deterioration of the non <unk> products.
The math works, because we had more of our pumps active in the U S marketplace from last year. It's.
It's been hard to follow exactly what has been happening in pumps between the loss of our installed base in the first 2 years when we bought the business the decrease in non <unk> products and the growth in LBP products. Let me try to give a few facts that may help make that clearer.
First if you go back to our comments in the Middle of 2019, we were talking about our installed base of MVP pumps bottoming out in the middle of 2019 today as compared to that time, our U S. LDP install base is about 20% larger and LDP revenues are about 10% larger reflecting our 50.50 JV.
Traffic mix.
Second at a segment level, we have had a decline of about $35 million in the non <unk> products since we bought the business to this year.
The last point would be in Q2 of 2021, we had the best quarter of competitive installation since we've owned the business and have a strong backlog heading into Q3.
The obvious question is where does this show up on the P&L and it shows up overtime as we begin to get the dedicated disposables and software revenues associated with these items I'll come back to square this up against total company profits related to the historical periods.
Our installation calendar continues to be strong and we continue to not see customer capital is a constraint and we still believe relative to our size, they're solid competitive opportunity and we're focused on commercial execution here.
When we think in the near term of Q3, this business can be at or above current levels.
Finishing the segment discussion with infusion solutions, we had $78 million on adjusted revenue or an increase of 6% year over year on a reported basis and 5% on a constant currency basis, a little bit of the same bumping. This in may but we were more impacted by timing of some non hospital orders. We continue to believe the quality of our customer book has improved with.
Holding the best list of sustainable relationships versus the day, we bought the business and the entire industry has move forward into renewals of longer term contracts, we had a very normal quarter of production no unexpected interruptions or planned plant shutdowns and that consistency helped us underpinned our overall corporate gross margins no change here in 2021 as we can.
Continue to believe this is an $80 million average quarter lead business.
Moving on to some more general updates commercially relative to last quarter. The majority of U S. Customer calls are live now and Thats also become the case in Europe customers are interested in getting on with decisions that have been stagnant or stuck because of Covid, Canada in some spots in southeast Asia are still a bit challenged on quality.
Nothing new we had some successful notified body audits again that all went fine.
Operationally the manufacturing network logistics and systems of the company are all running well.
Then in Q2, we had solid global fulfillment rates to our customers with finally, no unusual challenges, we too have some labor and raw material inflation and higher than expected transportation and logistics costs. We view the labor inflation is permanent and we don't know whether the trans cost of permanent or not for the time being we have assume they continue on if they get.
Great.
On the Pfizer discussion related to the calculation of an earn out payment we have been engaged in an arbitration process pursuant to our agreement Pfizer has been a solid partner and we've worked with them to cooperate in all aspects of our relationship.
Pfizer was an equity participant here on on our board of directors and we've tried to treat them well at every step as we address the litany of issues that came with Hospira, we feel confident with our position, but do not control the decision and expect it will be resolved in the next few weeks.
Okay on the other items, we're pleased that we've gotten back to strong cash flow generation, we've had a solid focus on the high hanging fruits from our integration that we talked about on 2019, those had been about improving working capital efficiencies in how we run <unk>.
Q2 was really clean and as we previewed on the last call EBITDA margins did look different in Q2, even with the utilization slightly below historical levels.
For a few quarters now we've been in a place where free cash flow has been in excess of net income and what it really shows is the economics of more disposables in the mix with more IV consumables and dedicated pump sets.
The simplest metric on how we judge ourselves is our business is larger or smaller and more profitable.
That is the score regardless of how hard we've worked and it's also been hard to follow the growth and value creation within the segments as the hangover from the IV solutions challenges move right into the Covid environment combined with some unique interest segment issues like the shift from non LDP pumps or the contract manufacturing work for Pfizer being inconsistent, but we finally think we're getting to a more.
<unk> environment.
To be clear on how we judge ourselves we've said for a while we can grow our valuable items of consumables and dedicated sets on a year over year basis from a revenue perspective, our IV consumables segment will be the largest largest it has ever been in 2021, and we feel good about that continuing into 2022.
Our infusion systems segment, clearly helped by a COVID-19 surge last year was the largest under our ownership in 2020, and we believe our U S and global installed base of Lv P infusion pumps and related disposables will be the largest under our ownership in 2021.
The bottoming out of the non <unk> products combined with the wins, we have in installs, we're doing sets up this business well for the future.
From a profitability perspective, we are approaching the run rate profitability. We had historically when we had $150 million more in <unk> high margin IV solution sales and almost $20 million more in non <unk> products.
That is a testament to how hard we've worked on <unk>, the rest of our business and the power of growth in mix in the high margin items.
And this is a case without all regions, having improving utilization dynamics or new products, which could be additive. The other criteria to evaluate ourselves is are we delivering innovation and we hope on the next earnings call or 2 that we'll be talking about important regulatory filings that are a culmination of a few years of work.
Okay.
Obviously, the capital deployment topic has been a real time discussion I think everyone knows the challenges in this market environment and our experience it's been very situational in.
In the case of pursuit vascular we allocated capital more aggressively to something that was a high growth new market creation situation.
In the case of Hospira, our Excelsior those are more turnaround or must do type of scenarios, but on each of those scenarios. We found ourselves in a situation, where we believe we could add value of the product company or circumstance and the counterparty felt the same way.
That's not always the case and that's the nature of business situations are competitive and we have to simultaneously manage the desire to allocate capital with growth in circumstance or on any given situation.
There is alignment we always remain open to win win situations.
With all of that said more bluntly, we are trying to do some things in a tough market.
Yes, we are probably hitting the sensible limit of cash on hand, and no leverage to adequately manage the risks of an infusion business along with appropriate strategic flexibility. So we know we should have a point of view on that heading into 2020 I believe many of our investors here know that we run ourselves lean with excess money go into quality regulatory and R&D, we don't want it.
Squander, our capital and we take the job seriously of allocating it as we have or will get all of our cash back on every transaction. We've done over the last few years and I know that kind of talk does not necessarily jive with the current market environment, but at some point, we hit a level, where we know we may have to do some traditional things.
While the pandemic introduced substantial volatility strategically we do think the weaknesses is exposed in the health care supply chain add to the argument for all participants to be healthy and stable, which has been our commentary since we became a full line supplier.
We make essential items that.
It requires significant clinical training capital expenditures and in general are items that customers do not want to switch unless they have to.
We're a U S manufacturer, that's deeply vertically integrated and as core redundancy on products that we do not produce domestically between ensenada in Costa Rica, we.
We do not believe the market broadly defined once a winner take all set up on these essential items categories and thats before each categories assessed on its own innovation clinical outcomes et cetera, and the new normal of COVID-19 world, where supply chain resiliency and diversity matters. We believe are essential items logically benefit in our most differentiated items are still differentiate it.
So we focus on what we can control.
The best list of supported healthy customers win important new customers, while waiting for volumes to get back to historical levels.
Keeping our employees safe, while delivering the best operational stability for customers, making sure we drive differentiation in the most valuable categories, having the best liquidity, we can for a company our size using all of the above to be prepared for whatever realignments or opportunities arise and focus on our own execution.
Our company has emerged stronger from all the events over the last few years. Thank you to all the employees customers suppliers and frontline health care workers, who have supported US our company appreciates the role each of you has had to play.
With that I'll turn it over to Brian. Thanks, Vivek and good afternoon, everyone to begin I'll first walk down the P&L and discuss our results for the second quarter, and then talk a little about cash flow and the balance sheet. So starting with the revenue line. Our second quarter 2021, GAAP revenue was $322 million compared to 300.
Third $303 million last year, which is up 6% or 4% on a constant currency basis for your reference the 2020 in 2021 adjusted revenue figures, which exclude contract manufacturing sales to Pfizer can be found on slide number 3 of the presentation.
Our adjusted revenue for the quarter was $311 million compared to $289 million last year, which is up 8% or 5% on a constant currency basis infusion consumables was up 23% or 18% on a constant currency basis infusion systems was down 8.
<unk> or 10% on a constant currency basis, IV solutions was up 6% or 5% on a constant currency basis, and critical care was up 2% or flat on a constant currency basis.
As you can see from slide number 4 of the presentation for the second quarter. Our adjusted gross margin was 40%. This was in line with our expectations and represents an improvement of 2 percentage points to last year's second quarter gross margin.
And 3 percentage points compared to this year's first quarter.
The higher gross margin reflects the benefits of favorable product mix from faster growth in our consumables business, along with higher volumes in our plants offset somewhat by inflationary cost increases sequentially.
Sequentially 2 negative items from the last quarter did not repeat the first is the impact from the annual scheduled maintenance shutdown of our Austin manufacturing facility and the second is the additional manufacturing and distribution costs related to the February weather events in the south.
During our last call. We said we expected adjusted gross margin for the full year 2021 to be in the range of 38% to 39% and that remains the case, but it's worth noting that the specific adjusted gross margin rate for any given quarter will fluctuate based on the level and mix of infusion systems.
<unk> installations, and the timing of our annual plant shutdowns.
Moving further down the P&L SG&A expense of $74 million in Q2 was in line with our expectations and represents a year over year increase of 10% as last year's second quarter spending was muted given it was the peak of Covid restrictions.
The year over year increase reflects higher selling expenses from increased sales higher travel and entertainment expense and the impact of foreign exchange.
R&D expense was $11 million for the quarter up 10% year over year and up slightly relative to the first quarter of this year, we expect the level of R&D spend to increase a bit in the back half of this year as we get closer to regulatory submissions on a few larger projects.
Restructuring integration and strategic transaction expenses were $4 million in the second quarter versus $6 million last year. The second quarter 2021 spending with spread across a number of smaller projects related to acquisition integration and 1 time regulatory initiatives. We continue to expect full year spend to be in the range of <unk>.
$15 million to $20 million.
Adjusted diluted earnings per share for the second quarter of 2021 were $1.88, compared to $1.65 last year, an increase of 14% day.
Diluted shares outstanding for the quarter were $21.7 million and finally, adjusted EBITDA for Q2 increased 15% to $67 million compared to $58 million last year.
Now moving on to cash flow and the balance sheet for the quarter free cash flow was $39 million in Q2 was another strong quarter of cash flow generation driven by a combination of solid earnings declining restructuring and integration spending and disciplined working capital management.
With both accounts receivable and inventory at the same levels as Q1 of this year going forward for <unk>, we expect DSO to generally remain around current levels, but we may see a slight ramp in inventory over the remainder of this year to ensure that we can successfully onboard and support new business.
The strong Q2 cash flow allowed us to end the quarter with $492 million in cash and investments on the balance sheet and just as a reminder, we do expect to make the $26 million earn out payment for pursuit vascular during the third quarter.
In the second quarter, we spent $16 million on Capex for general maintenance.
On capacity expansion at our facilities as well as placement of revenue generating infusion pumps with customers outside of the U S.
Our capex spending in Q2 was a bit light due mostly to timing and we expect the level of capex to pick up a bit over the remainder of the year, we plan to spend around $75 million for the full year.
Now onto guidance.
The solid performance in the second quarter provides us enough confidence to narrow our adjusted EBITDA and adjusted EPS guidance for the full year, even in light of current inflation pressures and a less than certain COVID-19 environment.
For the full year adjusted EBITDA.
Narrowing our previous guidance range of $245 million to $265 million to a range of $250 million to $260 million.
For full year adjusted EPS, we are raising the bottom end of our guidance range of.
$6.50 to $7.20 per share to $6.80.
$207.20 per share.
For modeling purposes, the adjusted EPS guidance assumes a tax rate of 21% in the third and fourth quarters.
To summarize our results for the second quarter were very much in line with the expectations. We had set for ourselves at the beginning of the year.
And reflected continued recovery of non Covid volumes within U S Hospital systems. We also saw continued sequential top line growth and our most value business most valuable business unit of consumables.
Implemented a record number of competitive pumps.
According the highest adjusted gross margin since Q3 of 2019 and generated strong free cash flow.
Overall, we're pleased with the business performance in the second quarter and feel good about our opportunity to drive growth in our most differentiated businesses going forward and with that I'd like to turn the call over for any questions.
Thank you I'd like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure youre on mute function is turned off to allow your site.
No question.
Once again, the non star 1 if you would like to ask a question.
And we will now take our first question from Larry Solow with CJS Securities.
Great Good afternoon guys.
Maybe you can just discuss real quick from a high level, you mentioned sort of elective surgeries and whatnot, certainly coming back, but overall utilization it sounds like it's still a little book.
A little volatile.
More.
More than you'd like to see obviously or are you pretty much back to normal with exceptions on some pockets here and there.
Yes.
Different answer depending on where in the world. So Asia for Us where we have high pump share in a few specific geographies I will give 1 example, Philippines right has been very volatile where it's just literally shut down quickly.
A few spots like that if that's really a U S oriented question.
I think probably you.
Hello.
We offer us on the systems business half the business is outside the U S.
As it relates to the U S.
Business.
I think we are probably a bit more optimistic than some of the broader commentary we heard out there. We think it is closer to normal it's not all the way back but it may just be a percent or 2 down from normal there are different mixes of acuity et cetera around but if you read the public hospital companies that have reported clearly.
Most of them are stepping on the gas a bit right and thats. It has felt to US there has been a little bit of a disconnect from what we've heard from all the suppliers on that so I think we are probably more in line with what the at least the public folks on a small set of reporting.
Right.
Consumables growth obviously off.
True.
<unk> last year.
That's 10% higher on I think on your highest quarter.
I think post hospira so.
It sounds like it's mostly sustainable and maybe we could basically flat line level from this level or.
There's some catch up in there.
Anything doesn't selling anything unusual relative.
A more normalized demand.
Yes, I mean, I think the prepared remarks, the last sentence was I think we feel like we can stay at or above this level heading into Q3.
There were competitive wins in there so it wasn't all just.
It wasn't all just.
Catch up and.
It obviously makes a big difference in margins et cetera, right. So.
And how about in terms of the competitive implementations installations.
Is there some catch up there or.
Or is that sort of correlate well with the pace of new business wins.
<unk>.
And is there any day.
We got a little bit more choppy also.
I think a different answer by business unit, there and so if you think about the consumables business by and large I think we've gotten pretty good at installing with us as efficient.
Means as possible, whether that's video online et cetera.
Limited disruption at the customer site only when they really need it and requested still have to do some of it much more invasive on the hardware side as we talked about on the last call in March we had a really good calendar set up for Q2, it mostly stuck together that said with what's going on right now again disruptions or <unk>.
<unk> a bit I think we still feel good relative to the size of our backlog.
But that does have a little bit of volatility in the spots in the country, where things are not moving in the right direction and some of those schedules are getting pushed to Ted.
Okay, and then just on gross margin it sounds like maybe a little bit ahead of itself this quarter or things sort of aligned and there were no shutdowns.
Longer term.
Do you think we can get back into at least the low 40%.
Your mix continues to improve.
And I think on I'll, let Brian Brian.
His thoughts on this too I mean, I think we've said on these calls we'll never it's.
We're never going to get back to that kind of $43.44, where we were when we add a lot of high margin solutions flying through.
But we said the low 40, <unk> certainly was our goal, but it dependent on what we're installing on the hardware side to the extent, we're gaining share in the air and driving more consumables in the regular consumables business is growing it certainly puts us in the best position to do that we had we had a lot of hits in the last few quarters in terms of the weather events and volatility in production. So that on 1 way we sell at the plant.
Shutdown on other things Thats why Brian was reiterating.
On the annual number there, but on a Brian what else you would add to that.
Just reiterate for US Q2 was fair.
Fairly clean.
From a gross margin standpoint, and we've said that longer term 1 of the drivers of improving our current consolidated gross margin rate is going to be mix and I think Q2.
Kind of showed just what impact having faster growth in consumables can have on our gross margins.
Got it great guys I appreciate the color. Thanks.
Thanks, Mike.
Yes.
We'll take our next question from Matt Mccall with.
Keybanc.
Great. Thank you for taking the questions.
Okay.
It seems like you've hit a point, where we are.
Are you fixed mostly everything you really wanted to.
Fix with this business and you've gotten through some kind of major events over like the last couple of years.
Just curious where where is your primary focus.
From here what is it.
Optimization of margin revenue growth.
Okay.
Balance sheet capital allocation it looks like what is your primary focus.
Okay.
Thank you Matt.
<unk>.
1 I mean, I think we the team made a lot of people have.
<unk> worked hard to almost get back to that level of profitability. We had with a very different looking income statement with a very different looking revenue number from a few years ago.
I think our priorities are equal we still have you create value by by creating new markets are the most valuable thing we do on the spots like on.
On some of the dialysis spots are on oncology or some of the custom products.
On creating new markets is the most valuable thing we do so that's our that's our biggest priority. The second thing is the.
Share gains.
Across the different parts of businesses. It is a competitive market I mean, we could see it in the in the tension of all suppliers and we have to execute well.
To create value there third thing is got to get new products on the market, we recognize you've been a little bit quiet on that that's intentional on I think that will start to.
Become more visible and then lastly, it is capital allocation because we are not.
We're in a capital rich so to speak relative our market cap environment.
We come from that background and so we do spend time thinking about.
It's just a very unique time in the market as you certainly can appreciate right I think it's evenly amongst those 4 and my colleagues.
Across the company they have another 1 right, which is always ever price and what you just serving the customer well that is really why we've been able to call out of this thing back on the quality in the book, we have we're very very focused on growing and protecting it.
Okay.
My next question I think what.
We're likely to get in.
On your team as they.
They get a lot of questions around what happens.
Our competitors launch new pumps.
And another 1 gets back on the market.
More effectively versus medical necessity.
Just first.
Explain what percentage of your sales were actually positive by capital purchase.
Secondly, do you feel like you can defend.
Physician again gained share in a more competitive market.
Yeah sure. It's a great. It's a great question and 1 that we think about when we got into this.
4 years ago.
We bought a business that had lost half of its market share in IV pumps, maybe a bit more.
And we also entered a moment, where a lot of the technology that they had out there that ultimately we have out there was not new it was old technology that was easy to pick off. The first act was sort of refreshing the installed base with the latest technology. We have so we did that virtually all of our customers. In this is that this is more of a.
U S answer globally, the business kind of sets up a different way.
Sure.
Virtually all of our U S customers for the most part are holding newer technology. So in terms of going backwards in taking our install base from US which is what was happening I think we believe that's a harder thing to do and we've gone deeper with those customers across the broader categories.
Going forward.
We need to continue to articulate our value proposition on the quality of the technology on the economics around the product to keep taking share again, we are pretty small.
<unk>.
To get to the second part of your question on the numbers, our IV systems business is 50% ish or so O U S and 50% U S and so we don't need a lot to keep us moving in the U S market. If we are holding on to our base reasonably well and so we think there is a case to.
Find those customers, who do want to make a change and we at some point, we will get out of here and talk openly about numbers and install base and stuff.
And I think that will show that there is there is market to take its obviously going to be more confusing for our customer, but it's also a good time for a customer we have 3 or 4 choices and we have a lot of products around this.
Area that drive clinical value and we just need to market and execute commercially.
Yes.
And when you think about and I guess, the last point the last point.
The last point I'd make there sorry, you just having been around this stuff for a long time.
Infusion moves pretty slowly.
Right.
It takes a long time to have market share changes or new entrants come into new product introductions.
Its great that Theres innovation, I think it's great for patients great for providers, but things don't move that fast.
Okay, and then just when you think about the portfolio cleanup.
Inventory.
But the decline in the PCA how much further does that have to go and I guess, how much opportunity is it for you guys when you're starting from a very low base to go after those complementary markets.
Sure.
I mean, the money in the in the infusion hardware business right. The money is in the <unk> business largely ambulatory has some economic value around at the other pieces don't have that much economics associated with them. So it's really what do you need to deliver it to the customer win.
There are ways to participate in those markets and as you can imagine we've been thinking about those questions from many many years.
And if there is.
Economically sensible way to participate and then we will.
Alright, Thank you very much.
Thank you Matt.
And our last question will come from Jayson Bedford with Raymond James.
Hi, Good afternoon, a few a few questions on different topics just on the capital deployment Vivek.
I think you mentioned, you're trying to do some things in a tough market.
<unk> mentioned you may have to do some traditional things can you just.
Expand on those comments.
Maybe kind of define traditional.
Yes.
It's not lost on us Jason relative to our market cap we are.
At some point I'm, not saying, it's today, but at some point, we're probably carrying a bit more cash than we would responsibly need between leverage any equity we can issue in cash to meet our strategic objective. So the natural thing would be to think about could you put that money first back into your business I mean, we put a ton of capex in the last.
For years, we've really sharpened and solidified the production network.
The first question is can we put that capital back into the business second we deployed towards customers to grow the business Thats. The most interesting.
And then can we put it to help grow the company and Adjacencies and if you can still do all of those things on the obvious question is how do you think about returning some capital we're not there yet frankly very few almost none really 1 person only ask us about it.
But it's not lost on us I'm, just saying we.
No what we're supposed to do.
Okay, and the expectation should be that we should start to see some more active capital deployment.
By year end is that a fair expectation.
No I was trying to say as we roll into next fiscal year.
We will have probably a more formal capital allocation.
Strategy than we have today.
Because people are going to be wondering if given the cash balance on where it sits.
Okay.
Okay, just a couple product category related questions just on oncology. It seems like it's back up and running as a growth category can you just remind us where you think.
Adoption is both in the U S.
Yes.
Okay.
Ballpark.
It's probably 65% or so converted globally.
So there is still a decent sized market to go out there and get and then Theres also.
Trading in existing accounts between the various suppliers so.
That there is room there is headroom there is headroom left and.
And the way we are delivering the products.
We tried to keep expanding the skus and the use cases, so we're trying to grow the market.
Just found the needs of the customer.
Okay.
The U S relative to that 65% kind of worldwide conversion is it higher lower.
I think they're both bolt on line.
Please go ahead.
I mean, if you look at our estimate of the market size. If you look at some of the other market participants the other market participants probably have a larger estimate of the overall market size and we do we'd be delighted if thats the case that would be implying less than 65% converted but that's true.
On our speech.
Right, Okay, and just on the on the pump side of things.
I think you entered the year with I think your words were over 100 basis points of committed share gain how much of that.
Been able to deploy a recognized here in the first half of 'twenty 1.
Yes, I guess.
It's a little bit of an easier answer just to kind of go back to go back to the math in the script that we're illustrating there which is.
We've had $35 million of non ambulatory products go.
Go away in the segment the segment is.
Maybe $10 million less this year or so ballpark.
Then the originator we bought the business so that would imply a couple of points of market share have been clawed back through today.
Sort of how the math works.
I don't I don't want to get into exactly what was installed in any given quarter. We were just trying to say.
We are holding as much backlog starting in Q3 as we are holding is starting Q2, which we have continued to refresh that pipeline, which is good.
Okay and do you still do you feel like Youre still gaining additional share with I don't know how to get into every month here, but you feel like you captured some additional share here in <unk>.
Yes, I think we had some we had some good competitive signings, we'd like yes.
And so that's why we can say we feel like the backlog was okay theyre going into Q3, I mean to the question that was just asked of course, it will be more competitive and more people have new things that you've got you have to fight through that business.
Right.
Okay. That's it from me thank you.
Good to talk to Jason Thanks.
That will conclude our question and answer session for today I'd like to turn the conference back over to Mr. Jain for any additional or closing remarks.
Hope everybody is having a good summer bulks going to open a time off thanks for your support and we will talk to.
Take care.
And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.
Okay.
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Yes.
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