Good day, and welcome to the ICU Medical Incorporated Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I'd now like to turn the conference over to your host today Mr. John Mills, Managing Partner. Thank you. You may proceed..

Great. Thank you, Tanya. Good afternoon, everyone. Thank you for joining us today to discuss ICU Medical financial results for the third quarter of 2021. On the call today, representing ICU Medical is Vivek Jain, Chief Executive Officer and Chairman; and Brian Bonnell, 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 it will be under the third 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 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 these financial measures can facilitate a more complete analysis and greater transparency into 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, and we hope you and your families are well.

It's been a busy 90 days for us since the last call with the resolution of our Pfizer dispute, the announced acquisition of Smiths Medical and a record, or near record sales levels in our most differentiated businesses, all of which aligns with our comments on the last few calls about it being a fluid environment. The volatility in the U.S.

supply chain and in hospital census for our customers did make it a bit more challenging quarter operationally than the normalcy we had described in on our Q2 call. Q3 for us was really about meaningful increases in U.S. volumes and good stability or small improvements in the international markets.

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 see again our teams face-to-face around the world and to meet some of our soon to be colleagues from Smiths Medical life.

While results were generally in line with our previous comments we wanted to use the time today in the call to comment on the in quarter trends and drivers of our business, and try to explain some of the growth we had that was slightly above our expectations.

Then relate that to any impacts on near-term business and at least our current feelings about next year in each segment.

Try to sketch out how inflation has impacted us at a high level relative to our budget for the year, provide an update on the Smiths Medical transaction as well as our normal housekeeping of items of which they're not many, and book in the scenarios we see post deal and comment on the criteria by which we'll be judging ourselves, post the Smiths Medical acquisition and given the transaction we can pass on the capital deployment comments we had recited for a while.

The short story on Q3 as follows. As we previewed on the last call, we did see sequential revenue growth in our most differentiated business segments and stability in IV Solutions.

On a year-over-year basis this resulted in a reported and constant currency sales increase of 8% driven by market share gains and increased utilization in IV Systems and IV Consumables, but was also likely helped with some pandemic ordering in the context of a difficult supply chain. We finished the quarter with $328 million in adjusted revenues.

Adjusted EBITDA came in at $72 million and adjusted EPS was $2.07. It was a clean quarter again except for some costs related to the transaction. And it highlighted the power of mix and our operating improvements as EBITDA improved, but it also illustrated some of the additional costs we are bearing as gross margins could have been higher.

We had an extremely strong quarter of free cash flow generation of $62 million and finished with $545 million of cash on our balance sheet, as operational improvements have materialized and restructuring integration costs have dramatically reduced. When looking deeper at the results, it was really a big uptick in the U.S.

business sequentially from Q2 to Q3 that drove the performance more than the international markets where performance was fine relative to Q2 with either small sequential gains or neutral.

As we previewed on the last call Asia, Europe and LatAm all had good results on a year-over-year basis because Q3 2020 was really low, but nothing was dramatic sequentially. We're most tilted to the U.S. market where we're dependent on admissions electives, and again we saw procedures as pretty solid and admissions as, okay.

I know there's been a wide range of commentary here from all the companies, but the simple message from us is our U.S. customers were busy managing COVID spike and the day-to-day procedures. 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 $145 million, which was a 25% increase year-over-year on a reported basis, and 24% on a constant currency basis. The U.S.

market grew just a shade under 20% on a year-over-year basis, and the international markets were even higher due low volumes last year. Core IV therapy grew globally over 20% and oncology was over 30% and both had strong sequential growth in the U.S. market, which is extremely important to us.

We had talked on the previous call about feeling positive about the U.S. market and our growth product setting up well for the rest of the year as it's been the rest of the world opening up. Now is to the question of why it was this much? First and most importantly, we've improved our position in the market of implemented new business.

Second, we believe there was some pandemic ordering, which was really the combination of COVID spikes and part of the country combined with some industry shortages and a general awareness about the supply chain, which probably caused wholesalers and direct customers to hit the order button a bit more than normal.

It's really difficult to know exactly how much of this contributed, but we would rather talk about this now versus coming back to explain distributor or customer destocking later. This primarily applies to the U.S. IV Therapy portion of consumables.

We think the actual run rate is somewhere between Q2 and Q3 of this year and we're not exactly sure when any extra inventory in the channel will burn off.

The 2020 comps are not meaningful as the business was so impacted by the pandemic last year, but going forward into 2022 we continue to feel optimistic about the segment with it being a bigger business with growth at or above market rates. Moving to Infusion Systems, which is primarily our LVP pumps and associated dedicated sets.

This segment did $91 million in adjusted revenue, which was an increase of 3% on both reported and constant currency basis. On a year-over-year basis, the increase was due to the implementation of competitive pumps earlier in the year, a little more demand due to COVID spikes and pandemic ordering of dedicated sets.

And that was – and that was with non-LVP products declining almost $5 million year-over-year in the quarter. On the last call, we said we had a great quarter of competitive installations in Q2 of 2021 and those pumps are now active in the market.

It's been hard to follow exactly what's been happening in pumps between the loss of install base in the first two years when we bought the Hospira business. The decrease in non-LVP products and the growth in LVP. Let me try to give a few facts that may help make this clearer.

First, if you go back to our comments in 2019, we were talking about our install base of LVP pumps bottoming out in the middle of 2019. Today as compared to mid-2019 our U.S. LVP installed base is about 20% larger and LVP revenues are more than 10% larger reflect our 50/50 geographic mix.

Second at the business level, we've had a decline of almost $35 million in the non-LVP products since we bought the business. We've had the best year-to-date of competitive LVP installations since we've owned the business and have a strong backlog heading in the Q4.

The obvious question is where does this show up on the P&L? And it shows up over time, as we begin to get the dedicated disposals and software revenue associated with these pumps. We continue to not see capital as a customer constraint, rather just the issues in the markets of nursing and labor shortages at our customers and fatigue from COVID.

But we still believe relative to our size, there's solid competitive opportunity, and we're focused on commercial execution here. We believe this business is a larger business in 2022, where we do not have to speak about non-LVP products that declines anymore.

Finishing the segment discussion with Infusion Systems, we had $81 million in adjusted revenue or a decrease of 6% year-over-year on a reported and constant currency basis. Nothing really unusual during the quarter with sales very balanced and versus Q2, which had a lot more in quarter volatility.

We continued to believe the quality of our customer book has improved with us holding, the best list of sustainable relationships versus the day we bought the business and the entire industry has moved forward into renewals of long-term contracts.

The volatility in the supply chain and labor shortages, transportation costs and raw materials was felt by us here in Q3. So we did not have as robust of a production environment as in Q2.

As a reminder with COVID spiking in the summer of 2020, we moved our annual plant maintenance shutdown to Q4, and it happened last month, which does have an impact on margins like it does every year, and Brian will go through that. We continue to believe this business annualizes plus or minus $80 million a quarter.

Okay, obviously the topic of supply chain and inflation is on everyone's mind. And the facts on the freight are all true. And even when turning onto IV [indiscernible] here in San Clemente, you could see cargo freighters out on the water 40 miles south of Long Beach, which we've never seen before.

We wanted to give a bit more color to add to the last call and the economic impact to us in 2021, and how to think about it for the future. To make the math really simple this year, we will sell somewhere on the order of $70 million more in consumable sales, across IV Consumables and dedicated sets.

Even with a conservative assumption on contribution margin, we would expect half of that to flow through to the income statement. But we'll only capture about half or so of that contribution in 2021.

Yes, normal around T&E and healthcare costs did increase a bit over 2020, but the rest is the impact of increases in transportation, particularly around fuel expediting and raw materials and labor. On the last call, we said labor was permanent and we continue to believe that. The harder item to know is what is really permanent on the other category.

We find ourselves asking the question of why some of these raw material and transportation services are inherently materially; more valuable over the long-term than they were before the pandemic, particularly as a total utilization for healthcare end markets is still below historical levels at aggregate.

Obviously some of these costs are indexed to CPI, but we believe in the markets and just as we experience in our own IV Solutions business when capacity increases pricing rationalizes, and when there's shortage the markets penalized.

So for us, it's about trying to get price improvement, where we can trying to illustrate to customers the need to have some of these cost index and ultimately to just ride it out, serve customers with a belief that supply and demand will normalize over time.

Moving on to our normal housekeeping updates, commercially more of the world is open for live customer conversations at any moment since the pandemic started. Our commercial teams are out installing new business and helping customers manage the volatility in the supply chain. Nothing new on quality, we have a light quarter for audits, et cetera.

Operationally I think the comments on the supply chain I just covered went through it, but our fulfillment rates dipped a bit in Q3 from the very high levels in Q2.

We have been working to ensure that all the high running items are secure and those that customers need daily are prioritized, and some of the more unique custom items had to take a backseat in Q3 with a substantial demand increase we saw in consumables.

On the Smiths Medical transaction, late last month the Hart-Scott-Rodino or HSR waiting period in the U.S. expired with no issuance of a second request by the FTC. While the FTC reserves its right to take further action, this is a key milestone to clear the way for successful closing.

We're in the process of securing all remaining global regulatory approvals required for closing and the Smiths shareholder meeting to vote on the transaction is currently scheduled for November 17th.

In addition, our integration planning management office is now getting up and running with teams from both organizations with a goal of preparing for a swift effective combination once the deal closes, which we expect to be as early as practical in the New Year.

We're pleased that after our reset in 2019, we have gotten back to strong cash flow generation. But with the volatility in the supply chain, we have gotten a bit too lean in some areas of working capital and inventory. And we probably need to put a little cash back to buffer the system.

Q3 EBITDA margins show the power of more disposables in the mix as we laid out on the last call and the results of our focus on the high hanging fruits from our Hospira integration. And we're about to start running up that hill again to drive value out of the next integration with Smiths.

The income statement will get cloudy next year with a lot of new businesses to be added and integration costs, et cetera. Before that happens, we did want to go back and recite the criteria in how we judge ourselves as it will apply to the Newco also post integration.

At the end of the day, the score we measure under our ownership is, are the businesses larger or smaller and more or less profitable? That's the ultimate score regardless of how hard we've worked.

On the last call we said we are getting into a more normal revenue environment and 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 Consumable segment in 2021 will be the largest it has ever been, and we feel good about that continuing into 2022.

We believe the same about our Infusion Systems segment as our U.S. and global install base of LVP infusion pumps and related disposals will be the largest under our ownership at the end of 2021.

We have improved profitability in 2021 versus 2020 and while the new businesses will get integrated quickly operation and on the P&L it is certainly our goal to keep proving profitability. And this is the case without all the regions having improved utilization dynamics or new products which could be additive.

In the short to medium term with Smiths Medical, just like Hospira, we see two basic bookend scenarios for the acquisition. In the best case, we will have better execution to improve Smiths top line performance, drive operational improvements and focus on cash conversions and returns.

In the worst case, we continue to fight headwinds on Smiths Medical's top-line but we can drive operational improvement and generate solid cash returns over time. Either one of those cases is value creating relative to the transaction math. And once the integration actions have been taken, returns could be generated quickly.

But over the long-term the same compounding criteria applies. Are the businesses bigger or smaller and more profitable, and our team understands that point.

While the pandemic introduced substantial volatility into the markets, strategically we do think the weaknesses it exposed in the healthcare 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.

Smiths Medical also produces essential items that require significant clinical training, capital expenditures and in general are items that customers do not want to switch unless they have to. The combination allows us to become a broader us based manufacturer and bring our focus on vertical integration and redundancy to our collective network.

We do believe the market broadly defined does not want a winner take all setup in these essential items categories, and the combination positions us better. For now we focus on what we can control in these moments.

Having the best list of supportive healthy customers, win new important customers, while we wait for volumes to normalize around the globe.

Keeping our employees safe while delivering the best operational stability for our customers, making sure we drive differentiation in our most valuable categories, using our liquidity and taking risk to make the company relevant to customers and focusing on our own execution. Our company has emerged stronger from all the events of the last few years.

Thank you to our shareholders who are patient on the time it took to deploy capital and use our liquidity. Thank you to all the employees, customers, suppliers, and frontline healthcare workers. Our company appreciates the role of us has had to play. And 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 third quarter. And then talk a little about cash flow and the balance sheet.

So starting with the revenue line, our third quarter 2021 GAAP revenue was $336 million compared to $319 million last year, which is up 5% on both a reported and constant currency basis.

For your reference the 2020 and 2021 adjusted revenue figures, which exclude contract manufacturing sales of Pfizer can be found on Slide number 3 of the presentation. Our adjusted revenue for the quarter was $328 million compared to $303 million last year, which is up 8% on both a reported and constant currency basis.

Infusion Consumables was up 25% or 24% on a constant currency basis. Infusion Systems was up 3% on both a reported and constant currency basis. IV Solutions was down 6% on both a reported and constant currency basis, and critical care was down 8% on both a reported and constant currency basis.

As you can see from Slide number 4, the presentation for the third 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 third quarter gross margin, and sequentially it was the same as this year's second quarter.

Compared to last year the higher gross margin reflects the benefits of favorable product mix coming from faster growth in our consumables business, as well as higher dedicated disposable volumes within Infusion Systems offset somewhat by inflationary cost increases.

At the time we provided our original guidance, we said we expected adjusted gross margin for full year 2021 to be in the range of 38% to 39% and we now expect the full year to be at the high end of that range.

But as we previously mentioned, the specific adjusted gross margin rate for any given quarter will fluctuate based on the level and mix of Infusion Systems hardware installations, and the timing of our annual plant shutdowns.

And the fourth quarter gross margin rate will reflect the cost related to the scheduled maintenance shutdown of our Austin plant.

Moving further down the P&L, SG&A expense of $75 million in Q3 was in line with our expectations and represents a year-over-year increase of 6% as last year's third quarter spending was below normal levels due to COVID restrictions.

The year-over-year increase reflects higher selling expenses from increased sales along with increased travel, promotional and incentive compensation expenses. R&D expense was $12 million for the quarter, up 21% year-over-year. The increased spending was in line with our expectations and reflected timing of spending on a few larger projects.

Restructuring, integration and strategic transaction expenses were $2 million in the quarter versus $4 million last year. The third quarter 2021 spending mostly consisted of expenses related to the Smiths Medical acquisition along with one-time regulatory initiatives. We expect full-year spend to be around $15 million.

Adjusted diluted earnings per share for the third quarter of 2021 were $2.07 compared to $1.90 last year, an increase of 9%. Diluted shares outstanding for the quarter were $21.7 million. And finally adjusted EBITDA for Q3 increased 16% to $72 million compared to $62 million last year. Now moving on cash flow and the balance sheet.

For the quarter free cash flow was $62 million and Q3 was another strong quarter of cash generation driven by a combination of solid earnings, declining, restructuring, and integration spending and continued strong working capital management with both accounts receivable and inventory at their lowest level in several years.

Going forward for AR we expect DSO to generally remain around current levels, but we may see a slight ramp up in inventory over the next several quarters to ensure we can successfully onboard and support new business and carry even more safety stock to buffer any supply chain disruptions.

The strong Q3 cash flow allowed us to end the quarter with $545 million in cash and investments on the balance sheet. Additionally, it is worth noting that the $26 million earn-out payment for Pursuit Vascular was made subsequent to the end of the quarter in the month of October.

In the third quarter, we spent $17 million on CapEx for general maintenance and capacity expansion at our facilities, as well as placement of revenue generating infusion pumps with customers outside of the U.S. We expect our CapEx spending in Q4 to increased relative to the Q3 level as a result of the annual scheduled maintenance shutdown in Austin.

And for the full year, we continue to expect to spend around $75 million. Now onto the topic of guidance. Last quarter, we narrowed our full year adjusted EBITDA guidance to a range of $250 million to $260 million and raised our full year adjusted EPS guidance range to $6.80 to $7.20 per share.

Given the strong third quarter performance, we now expect to finish the year at the high end of these ranges for both adjusted EBITDA and adjust EPS. As it relates specifically to the fourth quarter of this year, we expect the P&L to look different from the third quarter due to two specific items.

The first is the higher than anticipated demand that we experienced in the third quarter, which we don't expect to recur in the fourth quarter. The second is approximately $5 million of additional costs related to the annual scheduled maintenance shutdown of our Austin plant.

For modeling purposes the adjusted EPS guidance continues to assume a tax rate of 21% in the fourth quarter. So to summaries; our results for the third quarter were very much in line with expectations. Plus some benefit from pandemic ordering.

We saw continued sequential top-line growth in our most valuable business unit of consumables saw the highest level of plum dedicated sets since the Hospira acquisition recorded the highest adjusted gross margin since the third quarter of 2019 and generated strong free cash flow.

Overall, we're pleased with the business performance in the third 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. [Operator Instructions] Our first question comes from Larry Solow with CJS Securities. Please proceed..

Good afternoon, guys. Thanks for good quarter, and thanks for taking the questions. Just first question, Brian or Vivek. On the guidance it sounds like certainly Q3 was a little bit better than expected.

Just trying to get a better feel for the pull forward, do you expect – do you expect actually to lose some of that next quarter or do we kind of feel like Q4 is sort of flat with Q2? So you had a little bump up.

Q2 is also a good quarter, but I'm just trying to feel is there – was there significant pull forward? Actually you can contract in some of these categories next quarter or just less growth?.

Hey, Larry its Vivek. I will go and let Brian pylon. I felt like in the prepared remarks, I was trying to say that consumables had a couple of million too much more than we frankly thought, like, maybe three or four something like that too much and consumables. And that's why we – we said the real run rate is probably somewhere between Q3 and Q4.

So we can't tell you exactly when that's going to, sorry, between Q2 and Q3. We can't tell you exactly when that's going to come out because of how weird it is out there, but that is sitting there and maybe just a little bit in the other businesses but then also the plant shutdown, right. So that's why we're kind of saying we are in Q4..

Okay. That makes sense..

And that just sounds every year until the annual – until the annual numbers we talk about..

But I know you guys have talked about it a lot during the last shutdown too. That makes a lot of sense. And just, you mentioned 20% your – your base has grown 20%, U.S. base on the LVP pumps. Can you sort of help us, has that number like the started, it must have grown pretty significantly this year, then too I imagine, right.

That's sort of over a two-year period, right, two-and-a-half year period from the bottom?.

That's right. I mean, I think again everybody has, if you listen to every, all the competitors talk, we – everybody has a little bit different way of how they count market share. But I think at some point we thought we got into low teens and we improved on that by 20%, right..

And just to clarify the supply chain, the example you gave there, so $70 million consumables and normally you'd get 30, 35 that would fall the bottom line. Now it's only maybe 15, 24 at the bottom line. So you're actually on consumables alone losing 15 million....

If you kind of said, you ballpark, right, exactly, a little bit more than 30, right. Should be contribution, but plus 20 – almost 20 or something on the bottom line, but usually get all of that. And the difference is exactly the inflation stuff.

Now the inflation may not be in the consumables business because it weighs the least as easiest to move around, et cetera. But that just the way....

That's just, but that's a good example and that's, and I'm sure there's more inflationary pressures, other areas being impact. That's just the right, I mean, that's not the only piece you're right using that as an example, but I'm sure there is....

No. Well I was using the examples of the cost is coming in three primary buckets. The costs came in and then, bunch of this is in already. But it is fluid out there is the three buckets, laborer, trends, particularly if you have to expedite trends it's brutal right now.

And raw materials and the known is there's a supply imbalance on both capacity on the trends side and on some of these raw material production. And why are those inherently more valuable today if there's less global demand? Yes.

There's been production interruptions and yes things there is core inflation, but excess in some of these kind of seems a bit much to us..

Right. Okay. Just last thing, just on the timing of the Smiths potential closure. So you mentioned you got the Hart-Scott-Rodino was passed FTC approval. The shareholder votes on the 17th.

I think originally when you did the acquisition, you said by the middle of 2022, so it seems like that's running ahead of schedule maybe early in the year, maybe sometime early in Q1.

Is that a better guesstimate for timing?.

Yes. I mean, I think one we're happy and pleased that I think things have been considered in a constructive way and as soon as possible, as soon as possible..

Okay. Great. Thanks. I appreciate it..

Our next question comes from Matthew Mishan with Keybank. Please proceed..

Hey, good afternoon guys. And congratulations on one of the better, relatively in line quarters I've seen..

I would, we've been so busy with all this stuff. We haven't actually even looked that closely whatever he has done. So hope that relatively broader market not just us but….

I was referring to you relatively in line with expectations..

Okay..

Not mine. You were above my – you were above my expectations guys..

Thank you. Everybody gets their 15 minutes..

So you guys have had a lot of competitive momentum over the last couple of years, and I think this has been building towards the moment where you're implementing and planning a lot of new pumps winning in consumables and really kind of executing on a lot of what's been going on over like the last couple of years.

How much of this would you say is catch over some stuff that may have been delayed from implementation of COVID? And how do you kind of think about like your pipeline like new business activity going into next year?.

Sure. I don't know if I would call it catch up, a little bit on some of the full line implementations that were delayed certainly in the back half of last year that got pushed to this year. That's why the competitive [indiscernible].

So there's some portion of that, but in the other areas in oncology, in some of the regular core IV Therapy areas, they’re just been the regular day to day wins in market expansions that have been happening. Those haven't been pent up.

I think it's just finally, we've got – we had to get through all the solution stuff two years ago, get contracts resigned. I think we did a lot of that and that finally let our teams have time to go out there and call. And now it's a different challenges.

We had a little bit of a run on the store and some of these items and we got to make sure we can deliver from the supply chain standpoint. So it puts a lot of stress. We budget for a certain amount of growth and when you well exceed that with all the stuff going on right there, it puts a lot of strain on the system.

And so we're feeling that a little bit. In terms of the pipeline, I think we tried to preview a little bit, but we felt about each of the big profit driving businesses and consumables in palms, we felt – we feel like we're in pretty good shape at them bigger and more relevant next year than they are this year..

All right. Excellent. And then I guess, like the important question around the combination of yourself and Smiths, I think you had indicated pro forma EPS approaching $11. You've now reported your third quarter, at least your numbers are moving up a little bit. They've reported their half year numbers.

It's only been a couple of months, but how comfortable are you still with the $11 of pro forma EPS, approaching $11 of pro forma EPS?.

I would say we don't have a whole lot more information as of today than we did in early September we had the call, right. Because of the way the process worked or the alternative transaction, we didn't see a lot of information at the depth we want.

So I would say our point of view is the same, not because we're more confident or less confident just because we haven't really seen anything materially new in the interim, right. We haven't seen monthly performance since then or anything, right. So we're relying on what we thought then..

Okay. Excellent. Thank you very much..

Thanks, Matt..

We will take our last question from Jayson Bedford with Raymond James. Please proceed..

Hi. Good afternoon..

Hey, Vivek. So a couple of fourth quarter questions and then a couple of questions on 2022. So either Brian or Vivek, just the fourth quarterly implied EBITDA I think it's my back of the envelope is right implies about $63 million relative to 3Q down about $9 million, $5 million due to kind of the manufacturing in Austin.

What are the other ways if I just look at sequentially EBITDA?.

I mean the guess second one there; Jayson is if there was a little bit excess that was stocked up by distributors in the quarter because of shortages in the industry, right. If we had more sales than we frankly expected or we could itemize what customers they made sense to.

If that came out in Q4, that would penalize those businesses right in the quarter. So that's really the biggest driver, a little bit of – some of the inflation is in if, a little bit more on that coming in Q4, but the biggest driver is exactly the plant shutdown and if there was any excess, right..

Right, and nobody wants to talk about it when it's happening. Everybody loves saying I had a great sales quarter, and they're like, oh, there was destocking when you don't have this, rather just say there's some of it now and not have a debate about it..

Okay. Just on that, I guess that the $3 million to $4 million of overage in consumables, I think you mentioned it's related to supply chain issues.

So is this over ordering on the sake of your customers or has one of your competitors had issue that you steered more business your way?.

I think it might be a little bit of both. I mean, obviously we're heavy in some regions of the country that really had COVID spikes. And so there was a lot of, yes we can get your hands on in some spots.

And I think other people may have been down on a few items that shifted our way, and I'm not sure I'd call that necessarily permanent business or the industry was just short and we were the beneficiaries of that. So obviously we tried to make it our permanent business, but we remember much I'm from the other businesses..

Okay.

And then on 2022, I think for consumables, you mentioned that you would – you hope to grow at or above market, just remind us what is market growth in consumable?.

I mean, clearly this year is not market growth because of what the silliness of last year. Mid-single digits something like that is, if you add in the higher growth pieces from oncology and some of the other specialty items in the regular IV something like that, but it's getting to be a big business now. It's good..

Okay.

And then just also with respect to the commentary for infusion systems on 2022, I think you said it would grow, Is the expectation that your non-LVP business is flat in 2022?.

No. I think we just don't have to talk about it anymore. It's gotten small enough and we think we have enough growth now with a larger install base and the winds we think that are going to implement and we never have to say those words again..

Okay. Okay. And just on the….

Sorry, go ahead..

That's really, no, I'm sorry, that's just very muddied up the waters of some, two things mud up the weather and LVP one when we bought Hospira, there were – there were wins. There were – actually there were wins by the competitor out of the Hospira install base that hadn't happened yet. So we actually went down the first two years, right.

And then we had to bottom out and go back up. And so we built back up off that – off that base. That's made it hard to tell because it was shrinkage then and then the not LVP stuff. So that's all kind of behind us now..

Okay. And just lastly on pumps, COVID historically at least the last year-and-a-half has been a source of hesitation from a pump deployment standpoint. Do you think we past that now and kind of the new headwind here is just kind of short labor shortage issues at the hospital level.

Do you think, again, do you think kind of COVID, I hate to say is behind us, but is that still a source of hesitation from a deployment standpoint?.

Yes. I don't know if you'd call it just COVID I'd say it's like it's the hangover of COVID, it was fatigue, right. It's just exhaustion. And if you're short staff and having to make a bunch of changes right now. If you have a need to do it and your equipment's told you do it, people are doing it. We're installing every day out there.

But it is a factor, right? It is a factor. So the more normal the world can get the better off we'll be on this topic. I don't know if I'd call it COVID, I'd call it like the aftermath, right? The labor knock-on effects and the exhaustion knock-on effect, et cetera..

Okay. All right. Thank you..

Thanks guys. Appreciate it. And I got a lot of companies are reporting today. Thank you for making time for us. We appreciate it very much..

Thank you. This does concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation..

Okay. Thanks everybody..