ICU Medical Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: Second-quarter results exceeded expectations on earnings momentum, with organic revenue growth of 6%, adjusted EBITDA up 10% to $110 million, and adjusted EPS up 13% to $2.37.
  • Positive Sentiment: ICU Medical raised and narrowed its 2026 adjusted EBITDA guidance to $415 million–$435 million and adjusted EPS guidance to $8.60–$9.00, while increasing expected full-year adjusted gross margin to approximately 41.5%.
  • Positive Sentiment: Infusion Systems and Consumables delivered record sales, growing 12% and 5% organically, respectively. Management expects Systems organic growth at or above 6% in the near term and continued mid-single-digit growth in Consumables.
  • Positive Sentiment: Strong free cash flow of $62 million, including a $20 million tariff refund, enabled $50 million of debt repayment and reduced net leverage to 2.3 times; management remains on track for approximately 2 times leverage by year-end.
  • Negative Sentiment: The outlook still faces pressure from tariffs, unfavorable currencies, and higher oil and diesel costs, while Vital Care declined 4% organically and is expected to remain slightly down for the full year. Some pump installations occurred earlier than expected, and the timing of Medfusion 5000 FDA resubmission and CAD development remains uncertain.
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Earnings Conference Call
ICU Medical Q2 2026
00:00 / 00:00

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Operator

Good afternoon, everyone, and welcome to today's ICU Medical Second Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question at any time, please press star one. Also, please note that today's event is being recorded. I'd now like to turn the conference over to John Mills, ICR Managing Partner. Please go ahead.

John Mills
Managing Partner at ICR

Good afternoon, everyone. Thank you for joining us to discuss ICU Medical financial results for the second quarter of 2026. 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 Calendar, and it will be under the second quarter 2026 events. Before we start our prepared remarks, we 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 representation of future results and are subject to risk and uncertainties.

John Mills
Managing Partner at ICR

Future results may differ materially from management's current expectations. We refer all of you to the company's SEC filings for more detailed information on the risks and uncertainties that have a direct bearing on operating results and financial position. Please note that during today's call, we will 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 Medical's ongoing results of operations, particularly when comparing underlying results from period to period. We've also included a reconciliation of these non-GAAP measures in today's release and provide as much detail as possible on any addendums that are added back. With that, it is my pleasure to turn the call over to Vivek.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thanks, John, good afternoon, everyone. We know it's again a busy earnings day, so I'll try to be brief. I'll walk through our Q2 revenue and earnings performance and provide some color on the businesses and then turn it over to Brian, who will recap the full Q2 results and detail our revised guidance for the year. After that, I'll come back with a few comments on our assessment of progress against our near and midterm financial goals that we've outlined for a while now, our mission of creating a comprehensive infusion therapy company, and our capital allocation strategy. Revenue for Q2 was $548 million for total company growth of 6% on an organic basis or 1% reported.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

As a reminder, the reported results for the last time are impacted by the mid-2025 creation of the Otsuka ICU Medical LLC and the resulting deconsolidation of IV Solutions from our income statement. Adjusted gross margins were 41%. Adjusted EBITDA improved to $110 million, and adjusted EPS was $2.37. Organic free cash flow was strong, and when combined with tariff refunds, which are excluded from our P&L commentary today, we were able to repay $50 million of debt in the quarter and believe we're on track to hit our target of approximately 2x leverage by the end of the year. The broader demand and utilization environment in Q2 continued to be stable, with volume in line with our guidance assumptions for the year.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

The capital environment is status quo. It does appear investments that customers need to get done do get done. Certain currencies for us continue to be painful, particularly the Costa Rican colón and Mexican peso, where we have large production environments, as is the Japanese yen, where we still have a meaningful commercial business selling products made in North America. In terms of geographic mix in Q2, North America drove the growth as the previously mentioned OEM wind down was recognized in international geographies. Getting into our businesses more specifically, our consumables business grew 6% in Q1 reported and 5% organic and was a record in absolute sales. Growth was balanced across all four product families and consumables, and all improved year-over-year. For the remainder of the year, we continue to believe the business will attain mid-single-digit growth.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Please remember, Q3 of 2025 was a healthy growth quarter for consumables last year. Our IV systems business grew 13% reported and 12% organic, and it was again a record quarter in pumps. Dedicated sets generally followed the same trend as consumables and capital sales and were strong through the quarter, offset by declines in the OEM revenues that will continue to impact growth rates for the remainder of the year. We did have some earlier than expected installations, which will come out later in the year. For Q3 in the near term, we would hold to our comments from the last call and expect organic growth to continue at or above the 6% rate. Just wrapping up the businesses, Vital Care decreased 4% on an organic basis and decreased 32% reported due to the deconsolidation of IV Solutions.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

As expected, we did have sequential improvement. We expect stability for the balance of the year with the business down slightly for the year, given the Q1 results. We wanted to jump right into the financials today. I'll turn it over to Brian and then come back with some commentary to assess our financial performance and how it aligns with our strategic goals. Brian, over to you.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Thanks, Vivek, and good afternoon, everyone. Since Vivek covered the Q2 revenue for each of the businesses, I'll focus my remarks on recapping the Q2 performance for the remainder of the P&L, along with the Q2 balance sheet and cash flow, and then provide commentary on updates to our full year guidance. As you can see from the GAAP to non-GAAP reconciliation in the press release, adjusted gross margin for the second quarter was 41%, which was in line with our expectations. Relative to the assumptions underlying our original full year guidance, we did experience higher logistics expense from elevated diesel costs

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Which was offset by lower tariff expense as the Section 122 tariffs in effect during the second quarter carried a lower average rate compared to the IEEPA tariffs incorporated into our original guidance. During the quarter, we recognized $8 million of tariff expense, which represents approximately 1.5% of adjusted revenue. We also received $20 million of tariff refunds. We have excluded the full amount of the tariff refunds from our non-GAAP income statement, and they therefore had no impact on the 41% adjusted gross margin rate. The tariff refunds are, however, included in our free cash flow results for the quarter. Adjusted SG&A expense was $112 million in Q2, and adjusted R&D was $22 million, representing 20.4% and 4.0% of adjusted revenue respectively. The adjusted SG&A rate of 20.4% declined by one percentage point compared to both the second quarter of last year as well as Q1 of this year.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

The improvement was driven by operational efficiencies from our IT systems integration, along with favorable expense timing in the quarter. Restructuring integration and strategic transaction expenses were $21 million in the second quarter, which was higher than previous quarters as a result of $10 million of non-cash asset write-offs and other charges related to the exit of several manufacturing and distribution center facilities as we near completion of the consolidation of those facilities. The remaining $11 million of spend related primarily to manufacturing transfer activities and IT systems integration. Actual cash spend in Q2 was down sequentially compared to Q1, and we continue to anticipate reductions in both the level of activity and the amount of spend in the second half of this year as we close out several of these longer-term projects.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Adjusted EBITDA for Q2 was $110 million, reflecting a 20% margin rate and 10% growth compared to last year. However, similar to the past several quarters, the year-over-year comparability is impacted by two discrete items. The first is the deconsolidation of the IV Solutions business, which contributed $2 million of earnings in Q2 2025 when it was included in our consolidated results for one month. The second item is the increase in tariff expense of approximately $6 million year-over-year. The combined $8 million year-over-year drag from these two items was essentially offset by higher earnings from the core business of $19 million. We have now lapped the impact of the JV deconsolidation and tariffs, and going forward, these items are expected to have little or no impact on year-over-year earnings growth.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

It's also worth noting the earnings from our 40% equity investment in the joint venture contributed $3 million of EBITDA in the second quarter. A similar level of profitability as last year, reflecting typical seasonality for the business and a few one-time favorable items. Similar to last year, we expect the full-year earnings contribution from the JV to be breakeven or a small loss, which implies offsetting losses in the back half of this year. Finally, adjusted diluted earnings per share for the quarter was $2.37 compared to $2.10 last year, an increase of 13%. The current quarter results reflect net interest expense of $16 million and adjusted effective tax rate of 23%. Diluted shares outstanding for the quarter were 25.0 million. Moving on to cash flow and the balance sheet.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

For the quarter, free cash flow was $62 million, and it was another solid free cash flow quarter, reflecting strong quality of earnings along with the $20 million from tariff refunds. During the quarter, we invested $11 million of cash spend for quality system and product-related remediation activities, $11 million on restructuring and integration, and $19 million on CapEx for general maintenance and capacity expansion at our facilities, as well as placement of revenue-generating infusion pumps with customers outside the U.S. Just to wrap up on the balance sheet, we finished the quarter with $1.24 billion of debt and $298 million of cash. The strong free cash flow allowed us to pay down $50 million of debt, bringing our net leverage ratio down to 2.3x. Turning now to our 2026 guidance.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

As we reach the midpoint of the fiscal year and in consideration of the factors I've mentioned, we are updating our full-year guidance for Adjusted EBITDA and adjusted EPS. For full-year Adjusted EBITDA, we are raising and narrowing our previous guidance range of $400 million-$430 million to a range of $415 million-$435 million. For full-year adjusted EPS, we are raising and narrowing our previous guidance range of $7.75-$8.45 per share to $8.60-$9 per share. For gross margin, we now expect full-year adjusted gross margins to be higher at around 41.5%, reflecting the benefits from lower tariffs and accelerated synergy capture, more than offsetting the negative impacts of higher oil prices.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Our guidance assumes a stable macroeconomic environment with inflation, currency, and interest rates in line with today's levels, and it assumes the latest forecast for oil and diesel prices and no changes to the tariff policy and rates that are currently in place. We continue to expect adjusted operating expenses to be approximately 25% of revenue for the full-year. Net interest expense should be approximately $65 million, and for modeling purposes, you can assume an adjusted tax rate of 25% and diluted shares outstanding of 25.2 million. As previously noted, the full-year earnings contribution from the JV should be breakeven or a small loss. To wrap up, we're pleased with the business performance through the first half of this year, including record revenues for both infusion systems and consumables, and the continued gross margin expansion as the benefits from some of the long-term integration projects are realized.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

The goals we've previously laid out for 2026 have not changed. Deliver at or above our long-term revenue targets for our core businesses, expand our margins by capturing some of the remaining two percentage points of opportunity, and improve free cash flow generation. Although recent volatility in the macroeconomic environment can make forecasting more challenging, we believe the momentum we have in the business positions us to exceed the goals we've established at the beginning of the year. With that, I'll hand the call back over to Vivek for some comments on how these results fit in with our commentary over the last two years.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Okay, thanks, Brian. I hope that was straightforward for investors on the current financial performance. I wanted to put these Q2 results and our view of the full year into context with our comments over the last two years. In early 2024, we said we had to prove that we could deliver consistent revenue growth in our differentiated businesses. That was a combination of commercial execution and innovation. When we schedule our quarterly revenue growth, as shown on slide three of the attached presentation, we feel that at least for the last nine quarters and going forward for the balance of this year, we've had acceptable revenue growth in our differentiated businesses. Underlying these revenue trends, we've remained committed to innovation and did not skimp on R&D investments or capital investments, even through some difficult times. We believe in all of our differentiated product lines.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

We're at the beginning of new product cycles, which fulfill our mission of creating a comprehensive infusion therapy company. Of course, there may be quarter-to-quarter variances, but it's obvious that new products should support our delivery of long-term predictable revenue growth and ensure our businesses are bigger every year. In infusion consumables, we continue to drive incremental innovation and have scale underpinned by leading brands with great clinical data. Our innovation in the core and adjacencies of this business adapt to the different methods by which medications may be prepared, conserved, and delivered, both in the hospital and the home. In infusion systems, the LifeShield, Plum Duo, and Solo family of products are being well received in the marketplace.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

The biggest update since the last call is that we've made substantial progress on the additional verification testing required by FDA for the Medfusion 5000 syringe pump and believe an amended package will go back into the FDA this year. Both the Plum Duo and Solo pumps and new Medfusion 5000 pumps offer the opportunity for value creation through competitive wins and upgrades of our existing install base. The core tenet of the Smiths Medical acquisition was to have the most modern infusion devices connected to a single software solution across hospital LVPs, syringe, and ambulatory pumps with platforms that anchor the business for the next 10+ years as the product life cycles are incredibly long.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

We want customers to have the right tool for the right job, all connected with a common user interface and software solution that minimizes training, speeds onboarding, supports interoperability, and enables standardization for our enterprise customers. We're close to delivering this vision. For the longer term, we've spent more time and energy over the last year and have a clear development plan for the final frontier, connecting the home care CAD environment back into the same common software framework. There was some news during the quarter from our IV Solutions joint venture, and this is important even if the revenues do not flow through our income statement, as it's part of creating the most comprehensive infusion therapy company, and IV Solutions are still commercially commingled with our differentiated lines in the U.S. market.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Our joint venture partner announced funding of a half a billion dollar investment into IV Solutions production to bring their PVC-free products and production technologies to the U.S. market. On August twenty-fourth, we'll have a groundbreaking ceremony for the first and largest greenfield IV Solutions production site in the U.S. in this century on adjacent land to the current facility. We had mentioned their technologies previously, and we're so fortunate to have found Otsuka as a partner. Their financial commitment, novel technologies, availability of additional resources, and long-term cultural philosophy make this the win-win for U.S. customers we described at inception. We'll eventually have new offerings here too for customers alongside our new pumps and consumables.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

The other comment we made in early 2024 was that it was clear we were under-earning, and while we are pleased with our improved earnings power, we believe we still have room to go. Before that, I'll try to put the current year's EBITDA levels into some context. While we will have record EBITDA this year, we're still burdened by two painful headwinds. First, we're still bearing incremental tariffs, which are in the $30 million-$40 million annual range. Second, a specific basket of currencies, the ones I mentioned in the introduction, the Costa Rican colón, Japanese yen, and Mexican peso, have made a negative impact of ±$60 million over the last four years, with the colón the strongest and the yen in the weakest position against the U.S. dollar in 20 years.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

These are reality, so we have to focus on the items we control, and these are specifically the two points of additional gross margin to hit our targets that Brian referenced. These gains will come from the realization of synergies from our various plant and logistics consolidations, some incremental pricing, and overall product mix. These opportunities will still take a number of quarters for full achievement. While improved EBITDA is great, it must show up in free cash flow to create value. The key point we've been stating, and Brian just reiterated, was a reduction in cash consumption for all the restructuring and remediation work. This point dovetails with the capital allocation discussion, as we believe the reduced cash needs will allow us to be at or near our two times leverage target by the end of the year.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

We've been pursuing both operational and strategic choices in Vital Care. As we've made all these lines cash flow positive, we don't feel the need to do something value destructive to chase a small improvement in the growth rate given the performance of the differentiated businesses. Again, our team's shown the ability to be creative in finding the most logical strategic outcomes. Even independent of the portfolio discussion, our goal has always been to be two times or less leverage, which felt appropriate for a mid-single digit growing manufacturing company. We're now just slightly over a quarter turn from that, and we got there the old-fashioned way. Since our time here, we've tried to protect the share base with the only meaningful equity dilution resulting from the shares used in the Hospira and Smiths transactions.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

We know returning capital can be attractive on a thin share base. Our external M&A needs are minimal as we have enough organic innovation in-house. With the only wild card being a changing interest rate environment. In summary, it's a good place to be with our best business growing. Both, again, will reach record revenues in 2026, and we could see a vast number of projects nearing completion. We expect our consumables and systems businesses to be reliable growers with an industry acceptable profit margin, the tightest and most optimized manufacturing network, and each with a multi-year innovation portfolio. Ultimately, we want to transfer value from debt to equity. There's no confusion within the company in the pursuit of these goals. We don't really have any frivolous activities here.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

We produce essential items that require significant clinical training, hold manufacturing barriers. In general, items that customers do not want to switch unless they must. The market needs ICU Medical to be an innovative, reliable supplier. Our company is stronger from all the events of the last few years. Thank you to all team members and customers. With that, we'll open it up to questions.

Operator

Thank you. If you'd like to ask a question, please press star then one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question. We will take our first question from Jayson Bedford with Raymond James. Your line is open.

Jayson Bedford
Jayson Bedford
Analyst at Raymond James

Good afternoon, guys, and congrats on the progress. Wanted to ask on the system strength, which at 12% obviously stood out. Is any of the strength here reflective of an uptick in the replacement cycle, or is that still on the come?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Hi, Jayson. Thanks for the question. Yeah, it was a good quarter in pumps. Some stuff came in early. Some installs came in early, as we mentioned. I think it's very much consistent with our commentary to date, which is, we haven't really started our upgrade cycle in earnest. This was installation of competitive wins from last year or earlier in the year.

Jayson Bedford
Jayson Bedford
Analyst at Raymond James

Okay. Just on LVP pricing dynamics with Duo and Solo, is it fair to assume that price is sticking?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Again, I think we've tried, as we've brought innovation to the market, we believe in any of these categories, price should be in line with value, and we think the value of the device merits what we're charging and offers a unique value proposition to the customer. We feel good about where we've been able to hold that in the marketplace.

Jayson Bedford
Jayson Bedford
Analyst at Raymond James

Okay. Maybe Brian or Vivek, on the first quarter call, you had talked about a $10 million impact from an increase in crude. Is that still part of the guidance framework, or is that excluded now?

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

I would say we have incorporated kind of the latest oil and diesel prices that we're seeing in the market into our guidance. The economics as to what the impact is on an increase in either oil or diesel has on our financials is still the same, and I would say now just reflected in the updated guidance.

Jayson Bedford
Jayson Bedford
Analyst at Raymond James

Okay, great. I'll let someone else jump in queue.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thanks, Jason.

Operator

We will take our next question from Jason Bednar with Piper Sandler. Please go ahead.

Jason Bednar
Jason Bednar
Analyst at Piper Sandler

Hey, good afternoon, guys. Thanks for taking the questions, and I'll add my congrats here on a nice quarter. Vivek, I'll start at same place Jayson Bedford did. On Infusion Systems, any ability to size those earlier than expected installations in Infusion Systems, just as we try to think about maybe the cadence of demand here and growth third quarter and fourth quarter?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Hi, Jason. Thank you for the question. I don't know that it's that precise. I think we would say we feel pretty confident in words we said on the last call and this call, which was at or above 6% for the next bit of time. If you kind of just reverse engineer the math, that would give you some direction. A couple million dollars. I'm not sure we'd say a lot more than that right now.

Jason Bednar
Jason Bednar
Analyst at Piper Sandler

Okay. All right. Still really good performance. The competitive dynamics that you referenced as driving that Infusion Systems strength, you're benefiting from wins earlier this year. Can you talk about real-time dynamics you're seeing out there in the market as you go into bids? I don't know if you're willing to talk about order inflows, backlog, where you sit today, and just as we start thinking about the back half of this year and the jumping-off point into 2027.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

I think, we've been in this infusion industry for a long time. Despite the headlines, nothing really goes that fast. I think it's obviously very valuable. That's why many participants are talking about the situation. We felt pretty good at the end of last year, what we had signed and had installed. We continue to feel pretty good about it. I wouldn't want to mislead you that there's some uber acceleration of the market. It feels pretty normal, and it's just about delivering good technology. I don't think there's some out-of-sync acceleration or something like that's sort of going. We feel good about our own book and where we're holding.

Jason Bednar
Jason Bednar
Analyst at Piper Sandler

Okay. All right. I heard you on the Medfusion resubmission. Good to hear that's going well, or the package is coming together. Any thoughts on submission timing, just so we can approximate potential approval timing, knowing that we're still having to deal or be at the whim of the FDA?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

It's a great question. We tried to, at least directionally, say this year. We felt like we got a little burned on the Duo. We never even talked about its filing until it was approved. That's what we've always done in consumables. Given we were in tougher times, we had to be more transparent. Then this one, of course, didn't happen on the first pass. I think we'd rather just leave it as this year. The testing was not hard, as we said on the last call, and we're just plowing through it. For today, I'd like to leave it that it's just sometime this year. It is valuable to get it done because there's a large upgrade base available on Medfusion pumps out there also. We have every incentive in the world to get it done as fast as we can.

Jason Bednar
Jason Bednar
Analyst at Piper Sandler

Right. Understood. Thanks again. I'll leave it there.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thanks, Jason.

Operator

We will move next to Brett Fishman with KeyBanc Capital Markets. Please go ahead.

Analyst at KeyBanc Capital Markets

Hey, this is Will on for Brett. Last quarter, you mentioned that you were mostly done with undergoing the SKU rationalization and those efforts. Could you just talk about how much more there is to squeeze on that, and if you could just comment on any contribution you saw as a result of those prior actions?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Will, thanks for participating. I think those comments were also really at the end of the year call, the February Q4 call, where we said Vital Care would be impacted by some product choices we were making there. We did most of that, as we said, and then we reaffirmed that on the Q1 call. We did most of that earlier in the year. That's why Q1 was so negative in Vital Care. It's still negative, but the point is that, for what it's worth, the comps get a little bit easier and it starts to stabilize from here. It was only specific to the Vital Care line, and that work is largely done. We highlighted a small product line exit on the strategic side, and I think it's in the queue in an international geography. That'll kind of get lapped out from an organic basis, too.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Most of that work is done.

Analyst at KeyBanc Capital Markets

Got it. Thank you on that. Then, it's good to hear about the Medfusion update. Any update on CAD timing?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

I think, as we've said on the last call, we really want to prioritize Medfusion, and we put all the resources. There's a finite amount of testing resources, and we tilted them all to Medfusion to start. It will follow it. I don't think we want to give a specific timing.

Analyst at KeyBanc Capital Markets

Got it. Thank you very much.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thank you.

Operator

We will take our next question from Larry Solow with CJS Securities. Please go ahead.

Larry Solow
Larry Solow
Analyst at CJS Securities

Great. Good afternoon, guys. I echo the congrats on the quarter. Just another question on the strong systems growth. Can you just help give us an idea? I know you mentioned 12% growth, obviously, you still had it in the face of this OEM decline on the ambulatory side. Could you give us an idea, I guess, is that completely now wound down and what was that number? What was that headwind approximately year-over-year?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thanks, Larry. I think we talked about the OEM business in rough numbers. It was meaningful to us. Obviously, the rest of the pump segment did quite well this quarter. We wouldn't want to mislead you or anyone else to say that is the baseline, right? It was unnaturally high to the question that was just asked this quarter, which helped offset that OEM, I think we've talked about it, Brian, as being a point or two drag on the segment over the balance of the year. So we overcame that by obviously more in the LVP and other lines. I don't want that spread for you to think that that's permanent. It was a bit of timing this quarter.

Larry Solow
Larry Solow
Analyst at CJS Securities

No, that's fair. You mentioned all the sales up until today are competitive wins. Nothing on the replacement yet, which I think is supposed to be more beginning in 2027. Just curious, have you had any discussions with customers? Is there any feedback, just anecdotally, on that front?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Sure. To be clear, some of it is upgrades to existing customers. The majority is competitive. Certainly, we don't want to say they're all competitive.

Larry Solow
Larry Solow
Analyst at CJS Securities

Okay.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

There is always some upgrading going on.

Larry Solow
Larry Solow
Analyst at CJS Securities

Yeah. Okay.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

We have been in contact with customers, each one is a unique situation. It's a little bit like the car analogy I always use, right? The thing depends on how many more miles you got available to you. Some of these devices have been in the market more recently. There's less of an urgency to upgrade. Some are older, and they're on their natural time horizon. I think people who, there's not a nice way to say, who stuck with the original Plum platform obviously believed in it, and we continue to give them the reliability and safety of that platform with a whole bunch of upgrades. We feel good about it. We don't want to squeeze our customers into having to upgrade, or get an off capital cycle earlier than they need to, so we're trying to be cautious about that.

Larry Solow
Larry Solow
Analyst at CJS Securities

Okay, great. A couple for Brian. On the free cash flow, really nice quarter. Even without the $20 million, it would've still been a pretty good quarter there, $44 million. Year to date, I think you're up to over $90 million. What's the outlook for the back half of the year? Also just on the remediation and other expenses that is impacting you guys, and I think it sounds like this quarter was still some more in there. What's the outlook for that as we go out to next year and beyond? Thanks.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Yeah. Thanks, Larry. I think, year to date, free cash flow has been $89 million-

Larry Solow
Larry Solow
Analyst at CJS Securities

Okay

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Which does include $20 million of tariffs. If you were to even exclude that, we still feel okay about that. We did say that our goal for this year was $150 million.

Larry Solow
Larry Solow
Analyst at CJS Securities

Okay.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

I would say, we're not really officially updating our guidance there, but we would say we feel good about where we are year-to-date relative to hitting that target. The items that you mentioned, that being spending on the restructuring and remediation activities, we did say that would come down in the back half of the year. We continue to believe that to be true. I think we have pretty good line of sight to hitting our goals on free cash flow for this year as a result of that.

Larry Solow
Larry Solow
Analyst at CJS Securities

Got it.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

If I could, Larry, that's why we could make the comments on the leverage ratio.

Larry Solow
Larry Solow
Analyst at CJS Securities

Yeah, no, absolutely. If I could squeeze a little more, just the 200 bips kind of gross margin, longer-term target. Is that on actions mostly you've already completed, facility consolidations and stuff like that, and should start coming through over the next few quarters? Is that kind of what you're referencing?

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Yeah, sure. The majority of it is, but not all. We still have to get some price, and we still have to continue to make sure the mix of the most valuable products are growing faster than the rest of the portfolio.

Larry Solow
Larry Solow
Analyst at CJS Securities

Got it.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

In-flight, we were very clear on the targets, obviously got knocked down a little bit because of tariffs, but the goal was to look like a normal medical device company.

Larry Solow
Larry Solow
Analyst at CJS Securities

Got you. It's a little more than blocking and tackling, but you kind of have a pretty good line of sight, hopefully. Maybe not so much on timing, and there's always things that could interfere with that.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Yeah, well, that's a little bit why we went on this extended discussion on currencies, right?

Larry Solow
Larry Solow
Analyst at CJS Securities

Yeah. Absolutely.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Obviously the money went somewhere, and the impact of the change in the production currencies and one or two key selling currencies made a big difference.

Larry Solow
Larry Solow
Analyst at CJS Securities

Yeah, for sure. Great. Okay. No, I appreciate that color. Thanks.

Operator

We will move next to Mike Matson with Needham & Company. Please go ahead.

Mike Matson
Mike Matson
Analyst at Needham & Company

Yeah, thanks. Just on the tariff refunds, hearing from some of the other companies that we follow this quarter, it sounds like there's been some refunds in some cases, but there's potentially more coming later this year, even next year. Is this kind of a one and done thing, or do you think you could see additional refunds?

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Yeah, thanks, Mike. On the tariff refunds, the $20 million that we received at the end of the quarter, that represents the majority of what we paid in IEEPA tariffs, but it's not all of it. There is the potential for some further refunds. We don't know if that's going to happen in the back half of this year or sometime next year. I think the process is still very uncertain here. There is some additional amounts that we could potentially receive, but it would not approach the $20 million that we've received so far.

Mike Matson
Mike Matson
Analyst at Needham & Company

Okay, got it. The other thing that I've heard from some other companies today is that, in some cases, the inflation that they're seeing and the impact of oil prices has been a bit worse than they anticipated. I guess from what I'm hearing from you guys, it doesn't sound like that's the case, but I just wanted to get your take on that.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

I think that the impact from oil prices is, I would say, for the second quarter, largely in line with what we had expected after our first quarter call. It's still obviously a negative relative to our original expectations for this year. I guess it is hard to say exactly what the outlook is going to be, just given the volatility that we've seen just on a day-to-day basis. Our guidance, we think, takes into consideration where oil prices are today and where they're expected to go this year, but obviously, no one really knows.

Mike Matson
Mike Matson
Analyst at Needham & Company

Yeah, understand. Finally, you called out this IT systems efficiency improvement that helped lower the SG&A to some degree. Is that something that will continue to help on a go-forward basis, or was that kind of a temporary thing?

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

I wouldn't say it's temporary. I think we'll continue to see the benefits. I think, though, most of the benefits are probably incorporated into the results in the second quarter. The other thing I would point out is the reduction in SG&A spend as a percent of revenue, in part, was driven by some of these efficiencies. We also had, I would say, just a few kind of one-time items, or let's call it expense timing benefits, that probably contributed this quarter but won't in the future.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

I mean, just to be more direct, I would say the current Q2 run rate is not the right run rate for SG&A in our mind. If we had the chance to invest more, we would do it too. There are always things to do.

Mike Matson
Mike Matson
Analyst at Needham & Company

Yeah. Okay, understand. Thank you. That's all.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thank you.

Brian Bonnell
Brian Bonnell
CFO at ICU Medical

Thanks, Mike.

Operator

We will take our next question from Sam Eiber with U.S. Bancorp BTIG. Please go ahead.

Sam Eiber
Analyst at U.S. Bancorp BTIG

Hi. Good afternoon. Thanks for taking the questions. Nice to be on the call here. I want to come to consumables. I don't think it's been asked about yet, but back to sort of that mid-single digit organic growth rate. Vivek, I think I heard in your prepared remarks that each of the end markets you participate grew in the quarter. Curious if there's any more detail in terms of maybe what's driving end market performance, census, new customer wins, and then the durability of growth there.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Yeah. Hi, Sam. Welcome to the call. Thank you for following us. I don't think there's any unique commentary there. I think just like many of the reports from companies over the last week, census was solid and stable. That's the biggest and most important thing. Admissions were solid. A little bit of incremental wins, et cetera. Not a lot of price this year. I would say it was less price this year than last year, as we talked about earlier in the year, more on wins. A little bit sort of better performance in North America, maybe than some of the international regions. Those would be the main drivers.

Sam Eiber
Analyst at U.S. Bancorp BTIG

Okay, that's helpful. Vital Care, I think I heard the prepared remarks that, and maybe I'm reading between the lines here, you're not going to rush into any sort of deal. That business, it looks like it's stabilizing a bit. I guess any catalyst that we should be looking out for in terms of when might be the right time if you need to get through more remediation efforts, the FDA Warning Letter. Just curious the state of Vital Care.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

I think we'd answer it more directly, which is it takes two to tango, and we haven't sort of found the right intersection of fit and value and circumstance and ease of doing something. The line I say where we found the most strategic alternatives or most logical things just means we're trying, and we still think there's logical things to do. It just sort of has to line up right. Hasn't yet. I don't think there's any secrets beyond that.

Sam Eiber
Analyst at U.S. Bancorp BTIG

Okay. Very helpful. Thanks for taking the questions, guys.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thanks, Sam.

Operator

This concludes the Q&A portion of today's call. I will now turn the program over to Vivek Jain for closing remarks.

Vivek Jain
Vivek Jain
CEO and Chairman at ICU Medical

Thanks, folks, for making the time on a busy day to hear about ICU's Q2 results. We look forward to updating you on Q3. Everyone have a great rest of summer. Thanks very much.

Operator

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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