Q3 2023 ICU Medical Inc Earnings Call
Good afternoon, and welcome to the ICU Medical Inc. Third quarter 2023 earnings conference call.
All participants will be in a listen only mode.
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Good afternoon, everyone. Thank you for joining us to discuss ICU Medical's financial results for the third quarter of 2023 on.
On the call today, representing ICU medical is Vivek Jain Chief Executive Officer, and Chairman and Brian <unk> Chief Financial Officer.
I want 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 calendar and it will be under the third quarter 2023 events.
Let me 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.
Such statements are not intended to be a representation of future results and are subject to risks and uncertainties.
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 the call today, we will also 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.
It 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, everyone, we're hope you're well even with the volatility in the economic environment and some revenue variance in a few of our product lines ICU medical is operating very well for our customers in 2023, delivering high service levels, improving quality and relevant innovation.
We are also equally focused on ensuring we take the right short and long term steps to do the same for other stakeholders.
The global demand environment was generally consistent and healthy in Q3, and it continues to feel that way and the only macro items, where some uptick in fuel pricing and continued pressure from currencies and our production geographies like everyone. In our industry. We wanted to start first by thanking our customers and our frontline workers for trusting us to serve you during these times.
We'll use the time today to discuss the Q3 revenue performance of our business units and hopefully we've reached the point, where this is the last quarter with unusual year over year comparisons provide more.
Color on some of the product families that have been good and some of them have been challenged.
Go into a bit more detail on the actions we've been taking in lining our inventory with demand its impact on the P&L and explain why we're making this temporary choice.
Update on next steps towards integration and synergy capture as there are no other meaningful housekeeping updates.
Our progress against the short.
Check our progress against key short term priorities, we outlined to start the year and quickly frame up some of the items on the strategic agenda and make clear where we want to be.
We finished the quarter with $547 million and adjusted revenues adjusted EBITDA came in at $90 million and adjusted EPS was $1 57 revenue growth was minus 6% on a constant currency and reported basis with growth in the legacy ICU portfolio offset by year over year declines on the acquired products from Smiths group.
We finally had a sequential decrease in inventories and as we had previously described our efforts to adjust output to bring inventory more in line with historical levels and as a result did generate some cash flow from operations and expect this trend to continue.
The Mexican and Costa Rica in local currencies continue to pressure gross margins. In addition to the inventory correction.
Our results reflected what we stated in the last call good revenue growth in our differentiated historical portfolio and stability on the acquired product lines, but the large catch up in fulfillment. We started to make in Q3 of last year make the year over year results unattractive. So we'll have to go into that in more detail for.
For the balance of the year, we would expect continued sequential revenue growth improved cash flow from operations and to have earnings inside of our revised guidance from last quarter, but towards the lower end as we've prioritized inventory reduction.
So let me start with our consumables business, which is our largest and most profitable business unit.
We had $242 million in revenue, which was down 5% on a constant currency basis and down 4% reported again, we need to explain a bit more here the legacy ICU product lines, IV therapy, and oncology, which are the largest components of the business unit had a record quarter again in Q3 with 7% growth in those businesses.
And bind to be the largest they've ever been.
That growth was driven by new customer implementations consistent census throughout the quarter and increased capacity and ability to serve the market with a focus on clinical differentiation and the creation of niche markets. The Tracheostomy unit was also slightly positive for the quarter.
The balance was the same story as the first half of the year with large year over year negatives in vascular access which were accentuated by the strong backorder recovery in Covid syringe deliveries we had in this line in Q3 of 2022.
Of course, that's not desirable, but we've been focused on stability here and we've had stability sequentially for a few quarters now on the last two calls we said were at the bottom here as the losses occurred throughout last year and that it felt very similar to the IV consumables and pump losses, when we purchased Hospira when customer losses were still felt in the four to six quarters.
Post deal.
In Q3, we did see some sequential improvement in the U S. Vascular access lines, which is the largest portion of the product line and that was offset by some minor variations O U S. But again, we did not backtrack versus the previous few quarters for.
For the year nothing different than we said in the last call where relative to our own expectations. Our best estimate is that will be $20 to $25 million short here for the year relative to our plan.
And to be clear, our confidence and right to win here has not changed but just taken time.
Losses from 2021, and 2022 were predominantly due to supply issues and those have been dressed by our team as evidenced by our inventory overbuilt to be even more transparent our medium and longer term expectations are only to get back the minority of what was lost over the last two years.
We continue to believe our previous commentary of all four product families improving commercially and operationally with the losses predominantly out in improved capacities and believe we will see sequential improvement in the business unit for the balance of the year. We believe that this is the last time, we'll need to explain the historic historical Backorder catch up here COVID-19 adjustments et cetera.
Okay.
Moving to infusion systems, which is a combination of the legacy ICU LBP pump business and the syringe in ambulatory pump business and the acquired store engine inventory pump business. This business unit reported 149 million in revenues, which equated to a decline of 7% constant currency decline of 8% reported a similar story to the consumables business.
With a wide year over year with a wide year over year range across the sub product families. The LBP in syringe product lines, both grew at 6% constant currency or better and those were offset by a sharp year over year and minor minor sequential reduction in the ambulatory pump product lines were clear on the last call that Q3 would be a tough call.
But regardless, we feel okay in our commentary on the business unit for the year and would expect good sequential growth in <unk>.
This unit.
After our Q2 call we did announce that ICU medical received five 10-K clearances for the new IV performance platform, including the plum duo precision infusion pump and life Shield enterprise safety software.
Of which we had obviously tried to develop as quietly as possible that.
That pump has now been on patients outside the U S for a few weeks in a limited market release and performing very well by the end of the year, we expect to be doing similar limited market release in a major U S health system.
But we're glad to see the clearances given the heavy investments that were made into R&D. Since we brought all the programs in house and realize it was hard to give appropriate color on where the majority of spend was being invested.
But it's all public.
With more transparency that spend will continue developing the new family of products with aplomb solo single cassette lower priced version of a club deal and a refresh syringe pump, which will all connected lifestyle enterprise safety software.
On the broader market for pumps, which really starts with the L. B pieces, we've talked about it.
As we've talked about how it was a bumpier time for decision, making over the last two years.
We do think customers are now moving forward with evaluations and akin to some of the large non infusion capital vendors, we don't see capital availability as a massive impediments to our types of products.
We're starting to see some commercial benefits of having a full infusion device portfolio with our combined portfolio with innovation positioned differently versus other participants.
Again, we believe over the medium term relative to our size our competitive opportunity is solid and we are focused on commercial execution here in a more action oriented market.
Finishing the business unit discussion with vital care, which had $156 million in revenue or a decline of 8% on a constant currency and reported basis.
IV solutions is about half the business unit and IV solutions was down $5 million year over year, but up $9 million to $76 million sequentially as demand was normal and consistent again with the only meaningful barents from our $80 million a quarter goal being the products that were impacted from Pfizer.
The various contract renewals for 2025 are making progress as we need to recoup the substantial inflation that we've absorbed in IV solutions.
The remainder of the business unit, which is mostly acquired products was sequentially flat, but also down year over year due to the 2020 to catch up.
For the year, both the critical care and temperature management product families should have a good year, a good full year over year growth rate.
The short story message has not changed for us our differentiated legacy ICU businesses are doing well and we're focused on regaining a portion of the lost revenues in the acquired categories that are outlined in our investor presentations.
As the products have always been well liked and any improvement in underlying demand due to improving census works in our favor.
But improving that service to the customer or ensuring it for the legacy ICU product lines, which was exacerbated in the broader supply chain environment last year and the situational issues around the acquisition.
<unk> at a cost reflected in cash consumption.
The inventory levels on the balance sheet are more than what is required to run the business and we also have had substantial investments into quality remediation to ensure that we have a continued right to participate.
We have been very focused on both of those areas quality is reasonably self evident as we've been methodically cleaning up history neglect with the acquired portfolio.
That will get measured ultimately with a clean bill of health, which we hope we can get assessed sooner than later.
But the correction of the investment into inventory is a little harder to forecast to perfection as it is a function of service under the customers' growth and the overall supply chain health.
We are glad we finally seen reductions, but we had five quarters of $50 million ish increases without the underlying business being the size we wanted.
It does not all come off immediately but the slowdowns, we are taking which impact the P&L are temporary how long. It takes is a function of growth, but it does take some time.
Brian will try to quantify the impact of the production slowdown to date, we've tried to do this the right way without disrupting the supply chain without significant capital to restructuring here.
Okay.
<unk>, we're planning for next lot of activities around the ERP systems logistics networks functional support and locations as mentioned on the previous call. We've taken the first step toward certain manufacturing consolidations and real estate adjustments and we expect to be undertaking more of these integration activities next year with the goal of having as many of them as possible.
Positively impact 2025.
Our platforms have been stable since separation these items make a longer term difference in gross margins and have our full attention. Our goal is to give more specifics here on the next call. When we can at least size surprise and timing for our stakeholders. As this is a meaningful amount there are no other updates on quality manufacturing or any other.
Areas.
To check our progress against the key short term priorities, we outlined at the beginning of the year, we've resolved production logistics operational stability have growth in some but not all of our businesses and are working hard to ensure a clean bill of health on quality our priorities for 2023 remain unchanged deliver revenue growth as expect.
And our differentiate business units, while progressing with key product platforms.
Progress on quality remediation and ensure reliability for patients and high compliance for regulatory third regulatory authorities respectively.
Focus on cash flow again by improving working capital and addressing all the available items on the P&L, whether above or below the line.
The groundwork via separation and the integration for capture of the remaining synergies and rationalize the portfolio to becomes easier after separation stability.
To be direct on our goals for the next year or two.
We want our consumables and systems business to be reliable growers with an industry acceptable profit margin with the tightest and most optimized manufacturing network and each with a multiyear innovation portfolio.
Over the last few years, we took an innovative component supplier in a scaled it to a global leading player where those efficiencies should be available to us over time at our size.
On the legacy ICU portfolio, we need to continue share gains and offset the inflation we experienced.
On the acquired portfolio, which probably lands between $900 million to $1 billion in revenue.
Still large enough to deliver an appropriate profit margin.
But given the lower revenue level, we need to fully integrate and optimize it would take some time as we had to focus on service and quality first.
There is no confusion within the company in pursuit of these goals and we don't really have any frivolous activities here.
We know we're still off the EBITDA level, we expected a transaction, but the company is large enough to get there overtime.
From a balance sheet perspective, we want to focus on organic cash flow generation and if a strategic opportunity arises in a value creating manner for any of the periphery of the portfolio, we will explore those options.
We think the order of activities and the way we're judging ourselves now that we're at the base of the acquired business is first sustained revenue growth, we get that sounds awkward given the negative totals, we just announced but it was very messy as we stabilized.
We to Miss the days of doing a little better than we expected and it's still within our muscle memory the <unk>.
Second lenses are we getting back to generating cash as we used to which is hopefully combined with improving earnings post our production changes to improve our overall leverage position.
And then to have the next level synergies get incorporated for improved margins.
Core premise of the acquisition was to enhance the product offerings for the categories that drive our returns as well as add logical adjacencies predicated on the same characteristics sticky categories low capital intensity single use disposables with opportunities to innovate and participate in a logical industry structure. These portfolios make sense together.
We are working on how to integrate them either literally or economically when sensible and we're focusing on all lines to show up with improvements on the P&L, we produce essential items that require significant clinical training hold manufacturing barriers and in general are items that customers do not want to switch unless they must the market needs ICU to be an innovative reliable.
Supplier in the combination positions us better.
Our company has emerged stronger from all the events of the last few years, we've gotten knocked down a bit but we're getting closer to the top of the hill to drive value out of the combination. Thank you to all the customer suppliers and frontline health care workers as we improve each day, our company appreciates around each of us must play and with that I'll turn it over to Brian.
Thanks, Vivek and good afternoon, everyone to begin our first walk down the P&L and discuss our results for the third quarter, and then move onto cash flow and the balance sheet, along the way I'll provide any relevant updates for the full year outlook for each of these areas.
Starting with the revenue line, our third quarter 2023, GAAP revenue was $553 million compared to $598 million last year, which is down 7% on a reported basis or 8% constant currency.
For your reference the 2022 and 'twenty three adjusted revenue figures for the total company and by business unit can be found on slide number three of the presentation as vivek covered in some detail the Q3 year over year revenue declines reflect a combination of growth in the legacy ICU businesses.
Offset by the impact of the legacy SM Backorder recovery that occurred in the third quarter of last year.
On a sequential basis adjusted revenue increased by $12 million or 2% relative to the second quarter as we again saw growth in the legacy ICU portfolio combined with stabilization in the legacy <unk> product lines.
Moving on to gross margin as you can see from the GAAP to non-GAAP reconciliation in the press release for the third quarter. Our adjusted gross margin was 36%, which was in line with our expectations and reflects the impact of two specific items that we have discussed on the past few calls.
First is the scheduled plant shutdowns during the second and third quarters as part of the key TSA separation from Smiths group as well as the annual maintenance shutdown of the Austin IV solutions manufacturing plant.
Second and more meaningful impact is from lower manufacturing absorption as we reduce production volumes in the plants.
As Vivek mentioned for the period beginning at the time of the acquisition.
Through the first quarter of 2023, we increased inventory levels each quarter by an average of approximately $50 million.
In order to address the legacy SM back order situation and to bolster our safety stock levels across the combined company.
And these increases drove around $10 million of additional manufacturing absorption each quarter that positively benefited gross margins by roughly two percentage points.
As we took action earlier this year to align production levels with underlying demand the inventory increase in the second quarter slowed to 27 million and for the third quarter actually decreased slightly and was a positive driver of free cash flow by $9 million.
As a result third quarter gross margins generally did not benefit from the over absorption that occurred in the prior quarters for.
For the fourth quarter and extending into 2024.
We expect inventory reductions to accelerate and the impact from producing at levels below current demand will have a temporary negative impact relative to Q3 gross margin.
The exact impact to gross margin over the near term from the inventory reduction will depend on the extent and piece of the decline, but we expect the inventory reductions to continue through at least the middle of 2024.
The actions we are taking here are the right economic decisions, even though the manufacturing under absorption will temporarily impact gross margins over the near term.
On previous calls we've talked about our desired long term gross margins in the primary drivers towards that improvement continue to be one manufacturing absorption benefits from volume increases towards historical levels for our acquired product lines plus continued growth for the legacy ICU differentially.
The products.
Two price increases as our multi year contracts renew and three synergies from the integration of our manufacturing and distribution networks and service, which should more than offset expected labor labor inflation and our Mexican manufacturing facilities.
And it's also worth noting there is a high degree of variability in the gross margin rates of individual product families across our portfolio. For example, our IV solutions business reduces the company's consolidated adjusted gross margin rate by approximately five percentage points.
Adjusted SG&A expense was $106 million in Q3, and adjusted R&D was $20 million total adjusted operating expenses were down 3% year over year and reflect acquisition synergies lower incentive compensation and our usual focus on SG&A cost management, which has more than covered inflationary.
Pressures for Q4, we expect total adjusted operating expenses to increase slightly relative to the third quarter.
Restructuring integration and strategic transaction expenses were <unk> 7 million in the third quarter and related primarily to integration of the acquisition. This represent the lowest level of spend since the acquisition.
Adjusted diluted earnings per share for the quarter were adopt for $1 57, compared to $1 75 last year. The current quarter results reflect net interest expense of $24 million, which is an increase over the prior year of $6 million and equates approximately to <unk> 20 on a per share basis.
The third quarter adjusted effective tax rate was 6% and includes a discrete benefit related to U S. Federal return to provision adjustments, which contributed approximately <unk> 25 per share diluted shares outstanding for the quarter were $24 4 million.
And finally, adjusted EBITDA for Q3 decreased 3% to $90 million compared to $93 million last year.
Now moving on to cash flow and the balance sheet for the quarter free cash flow was a positive $14 million, which when excluding the onetime benefit from the accounts receivable sale program in Q1 of this year represents the first quarter of positive free cash flow since the acquisition. This improvement reflects lower spending across all three.
The key areas of the business, where we have invested heavily over the past 18 months the largest contributor to the free cash flow improvement as the previously mentioned inventory reduction in the quarter compared to inventory builds over the previous six quarters.
In addition, we also saw a sequential step down in cash spend for quality improvement initiatives for legacy <unk> and during the quarter, we spent $11 million on quality system and product related remediation, which is the lowest level since the acquisition and the third area is acquisition integration where his previous.
As we mentioned, we spent $7 million on restructuring and integration.
Additionally, we spent $21 million on Capex for general maintenance.
Capacity expansion at our facilities as well as placement of revenue generating infusion pumps with customers outside the U S and we expect Q4 capex to be about the same or slightly higher.
Over the near term, we will continue to prioritize free cash flow, while actual free cash flow results may fluctuate from quarter to quarter due to due to the extent and phasing of integration activities as well as timing of annual bonus and tax payments, we expect overall improvement driven by optimization of inventory levels.
As well as declining spend for both quality remediation and restructuring and integration.
And just to wrap up on the balance sheet. We finished the quarter with $1 6 billion of debt and $199 million of cash and investments.
During the second quarter earnings call, we provided updated full year EBITDA and EPS guidance based on our Q3 results as well as the latest outlook for Q4, including recent progress made to reduce inventory levels and the associated P&L impacts.
We expect to end the year at the lower end of our previously provided guidance ranges for adjusted EBITDA of $375 million to $405 million.
And towards the midpoint of the adjusted EPS range of $6 to $6 85 per share.
For modeling purposes for Q4, adjusted EPS guidance assumes interest expense of 25 million a non-GAAP tax rate of approximately 23% and diluted shares outstanding of $24 4 million.
In summary for the third quarter, we feel good about the sequential top line improvement and positive free cash flow generation, while our inventory optimization initiative will impact gross margins in the near term longer term, we have a number of opportunities to drive improvement and on SG&A, we've demonstrated our ability to operate.
Additionally, in further synergy opportunities remaining we are still convinced of a longer term opportunity financial returns and our ability to tackle the remaining issues and with that I'd like to turn the call over for any questions.
Thank you well now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
If at any time your question has been addressed and he would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to collect questions.
The first question comes from Larry Solow with CJS CGS Js Securities. Please go ahead.
Great. Good afternoon, I guess first question is just on the.
Sort of what the gross margin and revenue outlook. So it sounds like we use like 36% as the baseline for gross margin for this quarter. It sounds like you're actually dipped a little bit over the next couple of quarters as you continue to increase sort of.
Or decrease the amount of monoculture, maybe even below current production or demand levels I should say.
Any sort of visibility as we look out over.
24.
Obviously, you'll need revenue growth I guess.
Improved gross margin so what what's.
What's your confidence level.
Next few quarters that you can actually grow top line.
Year over year.
Should drive bottom line growth.
So Brian on your question about kind of gross margins and how we think about Q3 I think.
You summarized it correctly.
We believe the Q3 gross margin level generally reflects production.
Levels, I would say fairly consistent with underlying demand.
And that the fact that we will be more aggressive in taking inventory levels down over the next several quarters.
I'll put additional pressure.
On the margin line relative to where Q3 came in.
Alright, Thanks, Brian.
On the rabbit, sorry got it.
Yes.
So just like in order to get back to like this.
48% I forget our long term goal of 38 to 40.
This revenue will have to kind of if I just do the math you're kind of running.
10%.
Manufacturing, 10% above sort of current demand.
In order to get about that level, you'll need revenue to grow at 10%.
That math correct.
Yeah.
I think <unk>.
Certainly we don't see.
Current.
Current demand levels being what we would expect in the future, whether that's 10% more or something a little bit higher I think it's too.
To be determined, but that's clearly an opportunity that we have for I mean in addition to the other items.
The reason we made the words in the script Larry was one of course Youre right revenue growth is the most valuable thing that over time right.
I think we have a high degree of confidence that we're through the twists and turns and can be more predictable.
The second piece of there's lots of components of gross margin right prices, obviously, a component in revenue, but also what is your ultimate production network and whether efficiencies can you seek out in the running of.
Your operations and we've had a ton of variance there and we have a number of sites that were running substantially below capacity because the revenues didn't materialize right. So you have to deal with you have to deal with dosing. So its revenues the biggest chunk of it but it takes a little bit of time to get the house in order and it's obviously, a big logistics component of tumor cells.
And just to break out.
What sort of your confidence level.
He definitely gave you confidence.
Could still kind of get back to even though the EBITDA part of it can be a couple of years later, but in terms of revenue do you feel like 2024 it could be.
Growth to over 23, but maybe margin improvement doesn't come until 2005, when you get better pricing and revenue economy stable it gets to a point where.
Gross margins on a rebound a little bit.
I mean generally speaking this is not a time to be a hero right. After we have what we've put everybody through.
Well I I think we would measure ourselves and we're trying to say in the script.
We have.
Deliver these items one by one and we have to stop.
Darts with showing that there's been a lot of revenue growth and a lot of valuable lines here. It hasnt shown up in earnings on the P&L and so we need to one show that we have revenue growth in all the lines.
The second thing is we generated more cash per quarter before we did the transaction that we've been doing since we did the transaction and so the second.
<unk> stake in the ground process can we generate cash given using some of the work down on the balance sheet to do that and does that by a little airtime to get the rest of the house in order and finish the integration to make sure. We can get where we want the margins and then the contractual items you talked about a 25 thats probably the batting order up.
How to measure it from what price right now.
Got it and I appreciate that and then just lastly about just stepping back even with some of the obviously you Mr. <unk>.
But we had a couple of years ago, but the stock prices basically been cut in half you lots, two and $5 billion market value.
Q1.
I guess, it's my job.
The company and what the right valuation.
How do you think it will I don't know.
Maybe maybe perhaps some of your end markets.
Pizza that your customers your hospital customers.
Health and or any other concerns.
We should all.
Thanks.
I mean, there is a lot.
I, just kind of just piecing it up a little bit I think generally speaking.
The health care systems in this country and around the world that we participate in.
Our stable and increasing so there is no.
There is no concern about that.
Obviously, it's been a hit parade of issues for us.
Okay.
I guess, we look at it and say the company's pre transaction the enterprise value of the company was the same as it is today, but obviously the cost of capital change and we used to be.
To be more predictable and generate a lot more cash than we have recently.
And so.
I look at it I think can say our consumables business is 30% bigger over the last couple of years are pumped shares <unk>.
8% improvement over where we started pump share a couple of years ago.
I believe those assets are worth more but thats the reality is the whole.
All the business lines have to deliver et cetera, and so.
To me it comes back to I can understand I can understand the skepticism because.
It's hard to be able to pinpoint whether it's revenue growth cash generation.
That's been consistent and we need to get back to that consistency.
Consistency it doesn't matter, what we believe the industry logic or the underlying.
Assets in repair together, if they don't grow or create cash I can understand the skepticism independent of all the macro stuff is it but theres enough.
There are enough opportunities here at.
Two and a half ish or whatever 2.3 to four whatever amount of revenues, we can see over the next.
Short and medium term to profit ties out appropriately.
But it just takes a little bit of time to get all that work for them.
Okay, Great I appreciate the color. Thanks.
The next question comes from Jayson Bedford with Raymond James. Please go ahead.
Hi, good afternoon.
Maybe just to go along with the <unk>.
Gross margins China questions here.
As you can appreciate there is a lot of moving parts to this equation. So I just wanted to just simplify it.
Don't think I heard a gross margin and updated gross margin guide.
It is an expected gross margin in the fourth quarter or you can give me of the year.
Okay.
I think for the year will be in the 36% to 37% range for adjusted gross margins and what that will imply is a little bit of a step down in Q4 relative to Q3 for the reasons, we talked about primarily related to.
Accelerating the rate of inventory reductions.
Okay.
And then you.
Mentioned that the inventory drawdown in Q will will last I think in the mid 24 is the expectation that gross margin bottom sometime in mid 'twenty four.
I think we don't want to say something we will regret positive positively or negatively on the right. There Jason It is a function of how fast we can get some of the other activities done and the revenue growth rates et cetera, I think we're trying we don't want to Miss.
Lead any anyone that it is going to take a little bit of time.
I don't think we can tell you what month or quarter precisely stops, but but it took us five quarters six quarters, we are building for five or six quarters.
Probably it will take a little bit shorter than that to get through it but not a lot shorter than that we've been into it for a while.
Okay.
Is there a right level or what is the right level of inventory here either on an absolute or a ratio of sales. However, you want to.
Jason I think.
We believe that the right level is probably somewhere between where we started 2022, which was.
Less inventory than what we needed.
<unk>.
But not as much as we have today and I think it's kind of somewhere in the middle and if you were to.
Put a value on that.
Probably could be.
Somewhere that's something that rounds to $100 million.
Okay.
Just maybe to P&L here on revenue I think there's a lot of noise in the year over year comparison would shoot you identified.
<unk>.
I think you said sequential growth in the fourth quarter, but can you just comment on your ability to grow revenue on a year over year basis in the fourth quarter.
Okay.
And fourth quarter starts, yes, yes sure.
Fourth quarter.
Starts to look better from a year over year perspective, I don't think we expect these wide.
That may not be wide positive, but it's a much more normal comparator in the fourth quarter.
And demand is okay out there right.
Right now.
Again, we've.
We've said a few things we regret it here over the last number of quarters, we don't want to put ourselves in that position again.
Okay. Okay, and then does that maybe about if you could talk about plum duo.
You mentioned enable limited market release are you taking orders now and I'm wondering is that impacting pump sales or.
Or have the potential of a pause pump sales again, so kind of a hallmark.
Yeah, I mean I think it's.
<unk>.
What it takes time I can't remember, we talked about or it takes time to get.
These new devices seasoned in the market implemented with an integrated with all the various vendors et cetera, and we didn't want to set the expectation that.
All of a sudden immediately theres going to be.
Plum duo sales thats not going to be the case.
Nothing happens fast in the pump business, but the product life cycles are incredibly long as evidenced by the market share leader.
And what new innovation does and a vision around the different pumping modalities and how they come together gives us a reason to have a lot of conversations and gives people a reason to listen.
And hopefully there's been a couple of drivers of breaking through that inertia.
People now have to make choices and we have a very credible choice that Ken.
Be an anchor product offering for many years and so I think I.
I think we feel pretty good about it but.
It does take time, you've got to get it on patients Youll learn things along the way.
Regardless of approval and just make sure it's rock solid and we are in the process of doing that.
Okay.
And then maybe lastly for me and I can jump back in queue.
You mentioned.
Plum solo as well as a refresh syringe.
The timeline on those here.
I think it would be the goal would be.
To talk about them like we did with Joe when its approved obviously, we cant be as.
In the same we can act exactly the same way right now I think if we could get them on <unk>.
File with regulators in the next 12 months to 18 months, we'd be we'd be happy with that timeframe.
It could be.
Could be inside of that could be outside of that but safely.
Safe window as fast as we can.
But I think we feel pretty good that we cleared a lot of the regulatory hurdles in the base architecture of duo here, which may be make some of those other things in the software side of it.
<unk> here.
Okay, and just just to be clear just on.
Cash flow generation.
It's earmarked for debt pay down is that fair.
Yes, Thats still priority number one for us.
Okay. Okay. Thank you.
I think on your revenue question Jason.
I mean, it's a little bit of the previous commentary there too.
It is very very messy this quarter with what happened in <unk>.
Three Q catch up next year and so.
The standard we certainly are expecting ourselves is to be able to grow all of our all three of our lines of business year over year right.
This requires way too much explanation way too many words to describe what's going on on the revenue. So your direct question.
Correct answer that.
Thank you.
Well. Thank you. This concludes our question and answer session I would like to turn the conference back over to Jane for any closing remarks. Please go ahead.
Thanks, Operator, I guess I'd make one comment on behalf of ICU medical here, we did have one less participant on this Q&A portion of the call today, we wanted to acknowledge the passing of mission.
Tenured analysts we had from Keybanc.
Would offer our condolences to.
To his family and his colleagues and he was.
A critical thinker and a supportive partner brought a smile to our phase III interacted with them. So just a moment to recognize that.
Back to ICU we.
We understand the situation were in we feel like we are.
Finding some stability on the products that we've acquired continue to get good growth on our legacy businesses, and we just sort of need to bring the pieces together here.
It showed that with evidence of revenue growth cash flow generation and ultimately margins. So we appreciate <unk> interest and we are obviously, Brian and I are available for anybody who would like to discuss further thanks very much.
This conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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