Good day, ladies and gentlemen and welcome to the Second Quarter 2019 ICU Medical Inc Earnings Conference Call. At this time all participants are in a listen only mode. Later we conduct a question and answer session and instructions will follow at that time. If anyone should require operator’s assistance in today’s conference [Operators Instruction].

I would like to introduce your host for today's conference Mr. John Mills of the ICR. Sir, please go ahead..

Great, thank you. Good afternoon, everyone. Thank you for joining us today to discuss the ICU medical financial results for the second quarter of 2019. On the call today representing ICU Medical is Vivek Jain Chief Executive Officer and Chairman; Scott Lamb, Chief Financial Officer and Christian Voigtlander Chief Operating Officer.

We wanted to let everyone know that we have a presentation accompanying today's prepared remarks. To view the presentation please go to the investor page and click on the events calendar. It will be under the second quarter 2019 events.

Before we started 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're based on the best available information to management and assumptions that are reasonable.

Such statements are not intended to be a 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 risk and uncertainties that have a direct bearing on operating results and financial position. Please note that during today's call, we will also discuss non-GAAP financial measures, including results on an adjusted basis.

We believe –we believe these financial measures can facilitate a more complete analysis and greater transparency in ICU Medicals 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. The second quarter of fiscal 2019 was a difficult quarter commercially, and has caused us to revise our view of profitability for the new year and medium term. We've largely concluded our integration efforts and delivered our TSA and other cost savings.

But this can no longer offset a more competitive commercial environment primarily in our IV solution segment. We're executing well towards customers with high service levels, and most of our time is spent on external activities. But the reality of the environment forces us to make certain operational changes which will impact our profitability.

On today's call, we wanted to comment on the Q2 results and discuss our current view of the business and recent performance trends.

Explain some of the actions were taken from given the market volatility, and their financial and operational impact in the back half of the year, provide the usual updates on key activities, quality and housekeeping items.

And lastly and briefly reiterate some of our thoughts on the longer term positioning of the company and the opportunity for value creation. There unfortunately, not a lot of short stories on Q2. The company is running well from a systems perspective post cut over.

But the competitive environment and IV solutions and a few lingering production issues caused the decrease in revenues and profitability. The income statement was straightforward with a sequential decrease in revenues that led to a sequential decrease in earnings as most of the TSA cost savings have been in the P&L since the beginning of the year.

We finished the quarter with approximately $290 million and adjusted revenue. Adjusted EBITDA came in at $67 million and adjusted EPS came in at $1.99 with cash of $316 million. Adjusted revenue was down 13 % quarter over quarter on a constant currency basis, due largely to the comparison of the IV solution shortage in Q2 2018.

And during the quarter, we recorded two charges related to actions we're taking in our IV solution segment. Let's start with IV solutions for this call as it as it is by far and away the main driver of variance for the year.

The segment of reported approximately $80 million in revenues, and like the last two quarters had substantial declines on a year-over-year basis at 31% as the 2018 IV solution shortage carried to the first half of 2018. As we've said on previous calls, the unique temporary industry issues have largely been resolved.

But the changing competitive environment has led to this level of revenues. There has been a lot of volatility and IV solutions with a huge swing in 2018.

Between the first half of the year where our business benefited from the industry shortage to the second half with the industry had substantial destocking with weaker underlying demand on a year over year basis. Clearly the largest driver variance for us has been volume as our non-committed or trade business has substantially eroded.

And we have had to step in and defend our market share here. Sequentially without being ultra-precise the decline in IV solutions was two thirds to volume, and one third to mix driven primarily in our non-committed business.

To put it in more distinct terms, as we commented on the last call, we feel that there is real excess capacity in the marketplace. We have built significant safety stock to offer customers supply protection that is now in our permanent supply chain across the two U.S. operated manufacturing sites.

But in categories with this dynamic, we feel the logical move is to reduce output to get production more in line with market demand. As we know we have the safety inventory buffer that the industry requires plus holding some excess capacity.

When we built our 2019 plans, we assumed we would run somewhere around $100 million a quarter in this business, which was the animalization of Q4 2018 plus a little bit.

Given the Q2 results in market behavior, we do not see a reason to produce at this level for the back half of the year, as the excess production today has burdened us with extra supply chain costs. We've produced more inventory than we need right now.

And the cost to move around and store that inventory can begin to offset the marginal profit of the product pretty quickly. As a result, we need to take three decisions that impact our P&L in Q2, and the back half of the year.

First, we've already started to slow down production towards the end of Q2 and kept the Austin plant down for a few extra days post our normal Q3 maintenance shut down and we'll have some sporadic slowdowns as appropriate over the balance of the year.

As we've said before, these are typical manufacturing products that have a high fixed cost component. And the deceleration of production causes negative variants as we produce at a slower rate. Second, we're going to revise our relationship with Pfizer to also proportionally take less product from Rocky Mount.

We will maintain our manufacturing redundancy as we've always talked about, but it makes sense to buy down our contract with Pfizer to take less output. While the cash payments for this will likely be later, we have decided to take this decision now.

Third, we're going to take some action to optimize our current inventory and logistics network immediately to speed up the movement of product through the network. Basically, if you have lower margin products, taking up more space and moving slower through a fixed pipe, you find yourself getting backups in the whole system.

Those backups have led to excess supply chain costs, which will take some time to get out of the network.

I'll come back to summarize what this means financially towards the end of my comments, but each of these buckets, less revenues leading to less margin manufacturing variances, an excess supply chain costs, each impact the balance of 2019 and to some extent beyond. We have described the volatility in IV solutions on previous calls.

But that doesn't make it much better right now. We have been very focused on the longer term, and we have to make economically rational decisions even if they are negative to expectations.

It does not make sense to waste capital building inventory that isn't needed for to put good money after bad to keep all the various plates spinning and the hope that we'll sell our way out of this environment. What we feel reasonable about today in IV solutions for the longer term is two primary items.

First, we feel the quality of our customer book has improved, with us holding the best list of sustainable relationships versus the day when we bought the business.

Second, we've survived the bleed out of the vast majority of the non-committed trade oriented business that still lets us run a healthy production environment after we absorb the necessary slowdowns and shift some production from Rocky Mount into our more cost competitive Austin location.

We have been trying to operate with transparency to customers by illustrating the generic drug like regulatory framework, high capital expenditures in value and a healthy supply side situation to a business that was historical pricing anomaly. We have the inventory on hand continuing excess production capacity to make us a competitive supplier.

And even with all this commentary, we continue to follow our repetitive comments on MPV base behavior I'll be at that value has tightened. Lastly, we continue to be vigilant here on quality with no new commentary. Again, more on tying this back financially.

Turning to infusion Consumables, which is our largest business; Infusion Consumables had revenues of $ 118 million Q2 which implied a 3% decline year over year adjusted for currency. The sequential decline was caused primarily by the timing of some OEM orders on our swap cap line, and temporary delays and oncology which were finally out of today. U.S.

volumes were a little bit lighter than expected but there was no customer churn anywhere really in the U.S. market. The rest of the market was pretty much as we expected. This is the segment where the most advantage now is a joint entity.

And we have largely rationalized the product portfolio and brought together the operational efficiencies of the combination. Commercially, we have all the pieces, all the technology and all the scale to compete globally and should be able to offer more value to the customer.

We have one important new customer and have on college demand that we can finally now satisfies production is improved. We continue to feel positive about this segment into the back half of 2019.

On infusion systems, which is the business of selling pumps, dedicated sets and software, which is important because it's a business that brings a lot of recurring revenues. This segment did $82 million in revenue, which implies a 4% decline adjusted for currency, and it was the levels we expected.

To give a bit of a longer story on pumps, we have a few different product category areas in which we operate. The vast majority of our product line is our core Plum LVP infusion pumps. This was the product line that the old ICU medical pre deal was deeply dependent on and then had lost significant ground in the U.S. market.

We feel that this line is stabilized for us and we've gotten back to the core marketing message that there has been a number of independent and clinical reviews that have validated our approach. The plum line drives the majority of value, and we feel the best we have since we bought the business.

We believe we've stabilized the plum for the first time in years. The value creation aspects of real incremental cash flow take time as it only happens when we improve our install base. But we feel like we're in a good dialogue in a number of geographies. We have two other much smaller categories we do participate in the pump line.

One of the two is our specialty pain pumps, which use a proprietary disposable syringe. This disposable is manufactured for us by Pfizer in the Rocky Mount facility. As most customers already know, this line has been on and off again in Rocky Mount.

We've been able to manage it with deep inventory allocations, but it did impact us negatively in Q2 and likely will continue to impact us a bit. Pfizer's already rebuilt the line months ago and we expect them to be up and running consistently at some point this year. We just don't have a specific date and have been juggling this issue for a while.

We spent a lot of time – airtime on integration on the previous calls about how much work it's been and we don't need to do that anymore. Q2 service levels to the customer globally and global fulfillment rates have been very strong and it should be noted we did put a little money and resources here to stabilize in Q1 post cut over.

The only key activity left is the manufacturing site systems conversion in Austin, which is now scheduled for early next year. From a quality perspective, there's not really much to report. Since the last call, we did finish all of our MD SAP inspections and all of our device sites and all concluded positively.

As we said on the previous call, we did have a full FDA inspection in Salt Lake City, earlier this year with no major findings and we're on the clock for an Austin inspection and are prepared. We continue to be vigilant and expect inspection of our other facilities during this calendar year and will update on each call.

Okay, to come back to the topic of earnings results, how we think about the near term of 2019 and the future? The attached slide number five basically shows the call down to our 2019 EBITDA guidance from approximately $325 at the midpoint to a range of $260 million to $275 million.

IV Solutions revenues are $50 million to $60 million less than we annualized coming out of Q4 and the effect of volume reduction in our non-committed business and the resulting mix impact leads to 50% of the adjustment or approximately $30 million. We're done chasing this, we are assuming it's at this level from here on out.

Then the absorption adjustment is another 25% and the excess supply chain costs are the remaining 25% at about $15 million each. This would put the back half quarters at approximately $60 million to $65 million.

The core question is of course, well, how much of this is permanent versus temporary? The margin from less revenues could likely be permanent. We have always had contingency plans if volumes deteriorated. And part of this extra slow down and move into Austin is to get production to meet demand.

The supply chain costs are extra until the pipe gets flowing at a normal pace. It will take a minimum of six months from today to get all these activities done so we would assume it continues into Q1 2020.

As we think about this question right now, we’re extremely cautious, and given the competitive environment and volatility in IV Solutions, it is safest to assume that we will be a $60-$65 million EBITDA per quarter for the next few quarters as we work through these issues.

This is the right level of profitability, allowing us to compete in this environment, even if Q3 or Q4 revenues comes in higher for IV Solutions, we still will not change this view.

We have delivered our earnings expectations for 21 quarters in a row which is extremely hard as a small company, and we understand and accept that that’s all out the window now, but we have seen the competitive environment change, and we need to make sure we can compete through whatever this cycle is.

We’ve consistently said that we been actively calling on customers and trying to illustrate the value we can add to the system and the value to the system and having us as a healthy participant. While it’s a long journey, we do believe that this message is resonating.

Feedback on the products continues to be solid; the products that are necessary for the system have been reliable for many years. We never assumed it was always a straight line up, and we cannot flip our behavior into short-term focus even with these changes.

We will continue investing in R&D, appropriate capacity expansion in our production network, and into commercial resources to serve our customers. Our belief in our most differentiated business of IV consumables and IV systems and the attractiveness of the industry structure merits this point of view.

We ultimately will get judged on whether those businesses can expand and create value with a stable IV Solutions segment, so we have to keep our focus and investment on that. From a value creation perspective, we understand and accept that these changes will rebase of view of our potential.

We still have a belief that we will absolutely maximize profitability to the most sensible level in our business like we always have.

We still have a belief that even with a little less cash, as these adjustments impact cash, we have a safe and strong balance sheet that can protect shareholders and be deployed for value creation as opportunities emerge.

We have made significant capital investment into our factories and systems over the last two years and are in the final stages of some major production upgrades.

We still believe the categories are deeply valuable with a number of intrinsic value drivers, including high-quality or hard to reproduce production assets, sticky product categories where there is differentiation, and we have a set of strong, experienced people to do the work.

And we have a culture of not wasting shareholder resources and respect for capital, hence the decisions we want to make as the environment has changed.

As always, I’d like to close with things are moving fast, we have improved our most differentiated businesses with urgency, and we’re taking realistic and responsible actions to compete in the realities of the market today and believe we have the tools to do so effectively. We have hit a big bump, but we will overcome it and emerge stronger.

I really appreciate the effort of all employees to adapt, move forward, and focus on improving results, and our company appreciates the support we’ve received both from our customers and our shareholders. With that, I’ll turn it over to Scott..

Thanks, Vivek, and good afternoon, everyone. To begin, I'll first walk down the P&L and then talk a little about cash, the balance sheet, and the balance of the year. So, to begin, our second quarter 2019 GAAP revenue was $312 million compared to $360 million, down 13% from last year or 12% on a constant currency basis.

For your reference, the 2018 and 2019 adjusted revenue numbers, which exclude contract manufacturing sales to Pfizer cost, can be seen on Slide 3 of the presentation. Our adjusted revenue for the quarter was $290 million compared to $341 million last year, down 15% or 13% on a constant currency basis.

Infusion Consumables were $190 million, down 5% or 3% on a constant currency basis. IV Solutions which we primarily sell in the US were $80 million, down 31%. Infusion Systems were $82 million, down 7% or 4% on a constant currency basis. And Critical Care was down $2 million, 18% or 17% on a constant currency basis.

Adjusted diluted earnings-per-share for the second quarter of 2019 were $1.99 compared to $2.69 for the second quarter of last year. Our tax rate this quarter was favorably impacted by some discrete benefits related to equity compensation. Now we estimate our tax rate for the full year to be in the range of 70% to 19%.

And finally, adjusted EBITDA decreased 14% to $67 million for the second quarter of this year compared to $77 million last year. As you can see from Slide 4 of the presentation for the second quarter are just gross margin was 42%, compared to 45% the second quarter last year.

The three largest drivers for the year-over-year decrease were 1.) The ramp down of IV Solutions production and the associated lost overhead absorption 2.) Additional supply chain costs related to higher than optimal inventory levels 3.) Costs related to improving customer service levels.

Just as it took us months to ramp up to increased production rates and an expanded distribution network to support the IV Solutions shortages in the market, it will take us the rest of this year to ramp back down; and while the majority of these costs are temporary, it will take at least six months from today before we see a significant reduction.

For the year, we expect to see gross margins in the 40% to 42% range which clearly implies that the second half will not be similar to the first half due to the operational changes we're making.

As expected, year-over-year SG&A decreased approximately $14 million, and the decrease came primarily from TSA savings as a result of separating from Pfizer and standing up the business on our own. As a percent of revenue, R&D expenses were relatively flat year-over-year.

Restructuring, strategic transaction, and integration expenses were $37 million in the second quarter versus $19 million last year. This includes system integration costs for our Austin manufacturing facility and a one-time charge to move our U.S. pump service depot to our existing Salt Lake City facility.

In addition, this includes a one-time cash payment of approximately $22 million to reduce our contracted commitments to Pfizer.

In addition to the $22 million one-time charge, as you can see from Slide 4 of the presentation, there was an additional one-time charge of $16 million as we restructure our inventory and supply chain around the IV Solutions business to match supply with market demand.

Also, there was a $40 million non-cash adjustment this quarter to the carrying value of our contingent consideration payable to Pfizer, reducing the value of the earn-out liability essentially to zero. Just as a reminder, this is based on reaching a certain three-year cumulative earnings target by the end of 2019.

Now moving onto cash in our balance sheet. For the quarter, free cash flow was $3 million, and cash remained approximately the same as March, $315 million.

Net working capital decreased slightly in the quarter and due to the changes in our IV Solutions business, both internally and in the market, we expect cash at the year to be between $350 million and $375 million, obviously, below our original guidance.

The EBITDA reduction is the largest driver of this, and we still have a bit more cash tied up in inventory.

In the second quarter, we spent $20 million on CAPEX primarily related to general maintenance, system integration, capacity expansion for our Consumables business, and transferring a portion of contracted solutions products from Pfizer to our Austin manufacturing facility.

And as we said on our last call, we still expect to invest in the business this year similar to what we spent last year or approximately $100 million.

Due to the changes in our IV Solutions business that we talked about, we are updating our guidance for this year, and we now expect adjusted EBITDA to be in the range of $260 million - $275 million and adjusted EPS to be in the range of $7.55 to $8.15.

Lastly, I would like to say that we finished most of the integration and delivered on our TSA savings, but due to the more competitive IV Solutions environment, we have had to make some difficult operational decisions that will impact our profitability. However, these decisions are necessary for the long-term strength of our company.

And with that, I'd like to turn the call over for any questions..

Thank you. Ladies and gentlemen, if you have a question at this time, please press *1 on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press #. To prevent any background noise, we ask that you please place your line on mute once your question has been stated.

Our first question comes from the line of Larry Solow with CJS Securities; your line is open, please go ahead..

Great, thank you and good afternoon. Perhaps just question on the Solutions and then one just a general question. On the sort of itemized deductions, just starting from the bottom on the supply chain costs and you spoke of sort of optimizing logistics behind that? I guess to questions to that.

Could you give us a little more color on what exactly you have to do there? And I assume over time, most of this impact from expenses should wane, maybe in the next whatever that maybe, two or three quarters, is that fair to say?.

Certainly, the bottom two on the walk down there are more temporary in nature. We've had, on the middle bucket, we've had contingency plans. On the bottom, it's totally a function of inventory coming out of the system and warehouse and sell space coming out of the system.

It's really, Larry, to take some of the old dated product and other inventory out of the market and it's about squeezing down the number of pallet space and other things. It's just a high cost to hold the stuff..

Right, and the absorption, obviously, your plan to move more into Austin over time, which you've outlined, I assume that sort of the remedy.

Does that plan – is there a ping on your overall improvement there or expectation on that or is it just at a slightly lower level?.

At the end of the day, if you're making less pieces you have negative absorption, right? For us, is the final equation of how many pieces did we make this year how many pieces did we make next year and then which site do we make them.

Over time, we think we get back, but it requires you to get fully up and running into Austin, and we don't want to show something that happens in the quarter, right? It took us in earnest nine months to ramp up when we were hustling. We've been out a little bit of time here, a couple of weeks.

It's going to take a full six months to get healthy and get those extra out of the pipe..

And it doesn't sound like, for better or worse, that you expect another leg to drop in mostly your most of the current revenue is sort of committed business, and that's at least a positive.

Is that correct?.

I would say the non-committed or trade, whatever you want to call it, normal business is a fraction of what it was when we started this business, but it has been incredibly competitive out there, and this is as much about the environment changing on us, and we've tried to incorporate that in what we're saying from an earnings perspective to give us the flexibility to handle situations..

Okay, just lastly, is clear that the story of the quarter and the outlook is on the Solutions piece, but Consumables and Infusion Systems certainly don't seem to be hitting the cover off the ball. Your competitors, from what I read, sounded like there's no true competitors in different segments of the market, but it sounded fairly positive.

Is there any – have you seen any decline in the overall market environment, whether it be hospital utilization or anything that would impact you?.

No, I feel like it's a little hard to be totally transparent into what everybody's business is. The products are slightly different, and people have different levels of install base that they're renewing and refreshing, right? Which account and the numbers from quarter to quarter. So, I don't know that it's always apples to apples.

I don't think we see any big major structural stuff there. We did this incredibly complicated cutover, and we fell down in a couple of production spots along the way in Consumables, and we made our comments there on what we believe on the LVP pumps..

Okay, thanks, I appreciate it..

Thank you, and our next question comes from the line of Matthew Mishan with KeyBanc, your line is open, please go ahead..

Great, thank you very much for taking the question Vivek. Hey, in the face of this, in the same quarter yet a competitor announced about $1 million of capacity expansion and IV Solutions, and you kind of look at it, and you say to yourself the competitive situation doesn't look like it's going to get a better over the next couple of years.

How comfortable are you that this $80 million run rate of contracted volume can stay and $80 million run rate of contracted volume?.

I think that's a question that we are, again, trying to incorporate in what our comments are here and be cautious for the exact reason you're saying.

I think some of the capital that's been pup clear disclosed isn't necessarily for new capacity expansion; it might be for catch-up on things of happened in the past, we may be positioned slightly differently.

But I hope our comments also illustrate kind of what's happening in the industry and also give us the ability to compete in the event the environment changes.

We've been chasing this, and we're all tired and kind of disappointed around it and so we hope we priced the competitive market into what we're saying, right? That's why we've changed our view of the world.

Right? I'm not sure I feel comfortable answering that question, what is the world three years from now? But the idea is obviously to make it a smaller portion of our overall portfolio over time..

Okay. And then making it a smaller portion of the portfolio, you also want to grow the rest of the business.

Why do you think that Plum is now stable and could start to increase its installed base over time? What has driven the stability care and your ability to maybe come back in and start winning and taking some share?.

Let's stick more on the first part of that, right? Because that's been the objective through now. Which is why we bought a business where that business line was literally 100% neglected, and ICU was downstream of that. We've had it for and four months or something now and we've had people out there actively calling on the customer.

It started with that, it started with a redefining our value prop to the customer, and there's been papers and studies and the like, and I feel like just the hustle of trying to understand where our install base was and really developing a deeper relationship there is what we've been focused on. That's been the primary effort to date.

It bled out a lot over a 10-year period, right? But I feel like just calling on the customers and understanding where the business is in the reason the product was a very high market share product at some point in time; we've gotten back to that.

I don't think we're at the point yet where we're saying hey, we think we're going to grow X, Y, or Z but we're certainly in the conversation, right? And that's why the market's competitive. It's a great time to be a customer out there across the board, and I think all the players know that.

It is a healthy, vibrant market right now, Right? And our product needs to hang on its own merits, and people can do the work to see whether that's the case or not. But we certainly put a lot of time and energy into that..

And then just last question, I just want to make sure I understand the commentary around the safety stock that you've built.

Is that inventory you're holding in some warehouses and distribution or is that already in the channel through the distributors that your customers have to work through?.

No, that's inventory we're holding.

So, one of the reasons you see cash not growing even though we're still decent EBITDA numbers this year is because inventory will be up year-over-year, right? This idea that on a low-price item, everybody sitting around with lots of idle global capacity moving around really couldn't serve in a catastrophic event anyway, right? What really does is product sitting in a warehouse here that is months of coverage, and that's a value prop we could offer a customer..

All right, thank you very much..

Thank you, and our next question comes from the line of Jayson Bedford, with Raymond James. Your line is open; please go ahead..

Hi, good afternoon, and I apologize for the background noise. Can I just recap the IV Solutions dynamic here? There's a lot of detail but just kind of let me know if this thought process is correct. So, you came into the year thinking you were going to do about $400 million in IV Solutions revenue.

You now seem like you're on track to do about $325 million.

I guess one, are those numbers jive with your commentary?.

Yes..

Okay, so, the EBITDA impact from this seems like it's about $60 million. What you're saying is that half of this is permanent; the other half is arguably transient as you realign inventory and production.

Is that a fair recap of what's going on here?.

Yes..

Okay. IV Solutions, it seems like the implied guide going forward here is about $75 million $76 million a quarter. Is that primarily – it was kind of vast, but it's a little more specific here.

Is that just largely your committed business meeting the trading business is pretty much gone?.

Yes..

Okay.

And that's how we should think about 2020 as well from a quarterly run rate perspective?.

Plus, a little bit of wins minus a little bit of losses, something around those lines..

Okay. You mentioned supply constraints impacting both Consumables and the pump business.

Is there any way to quantify the impact, and I realize it's pretty small in the grand scheme of the prior discussion, but is there any way to quantify the impact in the quarter and then are these issues behind you?.

I prefer not to categorize a quarter; I really want the results to speak for themselves, Jayson, when we put it out there.

I think today; we finally have had new production, online in oncology that helps – got kind of a double whammy with the recall we had earlier in the year, we had to take some new parts of the online to replace things that were already in the channel. That's all finally cleaned up, and so we feel much better about it..

Okay, and just trying to understand the commentary, you feel positive on the Consumables segment in the second half of 2019.

Should we interpret positive as we expect the business, that segment, to grow year-over-year?.

I certainly think that's what we intend, right? We were positive on the segment all year, in our comments the end of last year, getting, right? We've just had some challenges. Nothing is structurally different here.

There haven't been big churns one way or the other, right? There's been more wins that we haven't implemented to the time being and losses we've had out, but it just hasn't come into the income statement yet. So, ultimately, it needs to speak for itself..

Okay.

In terms of the balance sheet, your sit in on 300 some odd million in cash, what's the plan with that cash that's just sitting there?.

I mean the plan is the same as it was for three years when it sat there before we bought Hospira, right? To ultimately use it to drive value and capital deployment.

We did authorize a bigger buyback and stuff because we don't know exactly what's going to happen in the marketplace, but fundamentally we believe that capital and the unlevered EBITDA we have is better used to bring other things into the portfolio than anything else and leverage ourselves more to a concentrated set of product lines right now, right?.

Okay, I apologize, I missed it.

What is –?.

Jayson, the background noise got a little bit worse, if you'd get some more quieter, it'd be great..

What's the size of the buyback?.

You'll see in the Q, we up to100..

Okay, thank you..

Thank you, and I'm showing no further questions at this time, and I would like to turn the conference back over to the CEO, Vivek Jain for any further remarks..

Okay, thanks, folks. Look, this is a harder message for us, and it's not one that we're frankly have been very familiar with, and so we hold ourselves accountable.

All employees are rallying around making this the best company we can make it, and it is never a straight line up, and we respect people's opinions, and we respect our own capital and make sure we do the right thing. So, we're open for any questions, comments, people know how to find us, and we'll make ourselves available immediately.

Okay? Thanks very much, we'll talk to everyone soon..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you mail disconnect. Everyone have a great day..