STE - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the STERIS Plc Fourth Quarter 2018 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference call over to Julie Winter, Senior Director, Investor Relations. ahead. go Please

Julie Winter

and Austin, everyone. Thank good you, morning,

few for this contains information usual call President STERIS and today's President CFO. expressed consent just accurate This without that redistribution, retransmission is webcast we open before today. of our as the call, our Rosebrough, and of a have Any do management. Walt have strictly or I comments of CEO; is Vice caution we As Senior on words and from time-sensitive Tokich, only rebroadcast prohibited. of written Mike

factors The are to or of events be factors made Some to STERIS' company through in forward-looking limitation, statements during new described the company actual revise risk statements, any cause forward-looking result this undertake filings differ as important future and in review information our or Many does SEC forward-looking or are available from those not without the statements STERIS' may update a statements. of materially website. results the considered on developments. including could securities or filings. those

call, financial on and today's organic cash growth per be income, constant non-GAAP segment addition, measures, currency revenue earnings including free will flow diluted In share, used. adjusted operating

their Directors over will supplemental intent today's the measures, greater analysis of definition, these this I measures providing to in of to financial regarding non-GAAP information Additional financial Non-GAAP with reconciliations financial operational is release, available transparency including financial Board decision-making. management between on including information measures. Mike. and by during GAAP are call presented call those the and used the hand cautions, With and

Michael J. Tokich

this to performance. pleasure of the Good to review Julie. morning, is our you, everyone. fourth be with my you morning Thank quarter highlights It

basis a the revenue tax in which to reform. to and somewhat rate press impact a favorable income to in to margin adjustments divestitures. Gross along of and share, favorably growth tax mostly Currency had currency margin discrete improvement. relating XX are For costs American the XX has a benefiting year-over-year. hiring unfavorable XX and R&D as bonus percentage corporate ramp with driven we points. was XX% growth from EBIT the XX.X% margin point to points product organic a basis diluted by at price. million quarter attainment Net of by $X.XX revenue our mix a growth an from business in XX%. price, expansion volume copy. somewhat lower partially margin by and tables item the quarter was X.X%, the for both gross of increased basis due percentage U.S. the $XXX.X anticipated in basis higher attributable North impacted and points spending, for adjusted higher increase the Gross XX XX.X%, in basis revenue The tax effective quarter, was had than margin IMS represents organic rate. release constant effective EBIT on of point Segment was lower limited quarter improvement or been a detailed the XX grew the revenue quarter XX% per in

leverage of in X.X terms billion a total over $X.X debt March of million under In cash, to debt we just balance times. ended the $XXX with EBITDA and of sheet, ratio just

liabilities. operating requirements of million, was pay XX% took and net for from to used we $XXX.X to UK, which Canada As cash income the repatriate primarily quarter, the the opportunity to debt. quarter, Free and the and million last assets year-over-year, forecasted we mainly due a to improvement year fourth cash higher during approximately down fund $XX lower flow was

I and amortization would totaled in now the year, With During that, any quarter this the Walt remarks. call while $XX.X quarter, expenditures million, we highest the had for $XX.X turn fourth over depreciation to capital million. was his which was

Walter M. Rosebrough, Jr.

with today. everyone. year good another review Mike, record pleasure morning, It Thanks, my is to you and

fiscal Our XX% earnings currency diluted full X%, were line revenue results to end while of for expectations organic increased our per the in grew $X.XX. share high year adjusted with as constant the

year brief was two As be approximately about expectations the The revenue online to growth reported and business million at grew year. we moving X% fiscal Sciences, the XXXX, year. year. capacity, this in our The about will majority faster I to full although better-than-expected than year. of rate organic are in impact anticipated year difficult including organic year we success. of HSS includes reduction mirror past revenue the strong into currency about first to year, constant so continues fiscal new Life the for expected, revenue will constant remarks the these it year-over-year divested actually more from X% results the or both favorable X%. currency fiscal largely businesses The grew of use into our At of than growth contract better revenue a organic of trends remaining results on improved for our fastest-growing our level, a two though segment. segment in past Sterilmed growth, on as top businesses driving even this segments, AST that which our anticipated the our the due during flat nine and as our currency AST revenue reflecting with months, the profitability above came growth last carry deliver Remember, was be basis. $XX the this my expectations exceeded each offset comparisons

With X% in expect now on UK we thought to modest more service, and driven growth earlier-than-anticipated than offset profit in you I which a grew both QX, revenue capital to will November modest constant which basis, decline shipments. XXXX. is in equipment be meaningful of Healthcare of year-over-year to in by of our currency the Total originally continue experience in divestiture continue Synergy due success was recurring remind in year. organic the regard fiscal consumables to Consumables FY we segment growth the in a we impact solid in expected While this FY business by comparisons revenues. organic change Products, improvements XXXX, to

As products we've in I which are segment past about Products of this new quarter, consumables. Healthcare our mentioned last many XX year, launched

XXXX, ahead we continue to expect to to Looking more a similar product at equipment. fiscal pace of shift we'll but bit introductions, capital

the environment, devices continued for our a a new more returning to which Just perspective, of for normal low- in and one committed the allocation a newest growth fiscal peroxide features. XXXX. two debt to Shifting capital goal combinations addition stable half some we normal cycle launched to revenue other historic ago. and fiscal in long-term spending X, Synergy completion anticipate to in With mid-single-digit capital a equipment capital reducing hospital our in growth time solid to new revert years fast We that recently expectations From example, our XXXX. to we've V-PRO sterilizer, sheet, our maX we to offers non-lumen a backlog hydrogen products, XX-minute levels we after accomplished will back year balance equipment priorities.

dividend of is earnings. growth priority first line with in growth Our

for revenue in investment second is and current Our businesses profitability. organic in growth our

grow be our substantial segment making investments HSS For fiscal in will XXXX, to U.S. in outsourced the we reprocessing business our

year the projects services succeed this We for hiring several the U.S. only term. facilities, during are not also run model the the that to remain substantial over to in planning build these but the in and optimistic capital invest pipeline business them. We out have to longer will

total will In alone These addition, we more fiscal total will two investment million growth spending the capital expansions $XXX $XX continue XXXX. in increasing meet approximately around areas AST capital in million of of demand. to of our invest globe out to in than

the priority but is will would enhance tuck-ins in available broaden unreliable, also find as you current portfolio. not timing of is know. in XXXX, deals businesses, fiscal for third marketplace. acquisitions, to We any consider continue deals Our prefer our our We've which we acquisitions planned to the that as

We our if outlook year, the transactions. will complete we modify material during

to Lastly, repurchases programs. at our level our compensation continue dilution equity share from contemplates offset outlook the to

we growth release, range be our X% X% at total entirely as an in the saw which Turning to to of of the the in divestitures. the specifics on in million expect almost of on constant and by Based outlook, currency March, $XX company approximately organic XXXX offset anticipate forward from be of will impact year-over-year, we basis. rates negative currency as-reported would revenue you benefit both the to end

As I our several for mentioned we have Northwell, reprocessing outsourced U.S. in addition earlier, the the in to new pipeline in centers projects

combined run rate translates projects includes and basis revenue full a new XXXX, $XX which million year in into million for in on future the approximately Our years. FY outlook $XX in Northwell approximately

with earnings. the anticipated not startup to year, costs is However, this revenue drop to through substantial

due fiscal startup to million to the we fact, all lose In of $X these combined $X XXXX during for expect facilities costs facilities. million to the

we fiscal year of U.S. points last the of full year, discussed given quarter, XXX expect tax basis of or from we had benefit a fiscal timing As another fiscal improvement points our reform additional partial basis so XXXX. in our in and XXX we approximately XXXX

parts XX% the I comfortable rate add, the that is effective moving for as I in result, new in tax of XX%. XXXX. the there in adjusted are guidance range year details fiscal still range the a our act, we to As in but tax is of quarter, did will this last

to prudent making us year, our dollars business the additional is reform. be think given will investments substantial this We we tax in available U.S. from which the

basis, on million $XX our operating outsourced R&D revenue and investments, spending growing Despite four we to anticipate share to faster over grow which we to a diluted reprocessing a be approximately increasing count a for these the With than would year-over-year of XXXX. spending HSS about XXXX, fiscal be be benefit will to segments. in in anticipate currency. per our We business $X.XX of all on about including neutral, range $X growth million XX% fiscal adjusted from XX% earnings $X.XX share profit

of been consistent anticipated in purposes, three be has in on earnings similar XXXX. growth model XXXX. fiscal and and past distribution the integration-related is million free years, Reflecting earnings, our anticipate quarterly be your to the which cash acquisition to flow in spending will we approximately For FY reduced charges, that quite $XXX

before term the Jack of successful will this him a board we're certainly as words our board past decade changes take we Chairman our well after simple. Sohi, responsibility. from board he of ago in Annual I front. Jack and The the when Mohsen fortunate beyond. STERIS, to to appoint Chairman his fiscal played to their record with if Chairman company to products on the has who the current work about to new on over the will and solid Annual vital that member, on summer. speak very our has a has and fact that on behalf new coming team XXXX, to that wish board his have decision shaping STERIS for would come few in our and pleased recruited Jack General we General the extremely create excited him he the In say intends agreed to to two and and but since I XXXX Of regard, momentum, role didn't years acquisition Meeting. to retire of Dr. very fiscal decade has with The Association, Wareham, change his leadership to and I start decades. our retirement. wife made morning. long-standing AdvaMed. I announced Mohsen this board when that I this as my when say Chairman XXXX, entire since announced very, course, like board at our our year a was Industry also knew were to I'm in role We're this services Meeting expires served directors

a to open board to turn also as board Nirav welcome back Lastly, for pleased over of call new last member, Shah, week. that, we member the I Q&A. we are the who With to appointed Dr. a will Julie

Julie Winter

you, your and you can started. comments. for give we Austin, for Walt, would Mike Thank get the Q&A, instructions if

Operator

ahead. Please And our first Absolutely. go question JMP Securities. with Dave will Turkaly from come

David L. Turkaly

Hey, can me? hear you

Michael J. Tokich

Yes, Dave.

Walter M. Rosebrough, Jr.

Dave. you hear well, We

David L. Turkaly

I to ask I morning. all detail. thanks But a Good and question I the really investments, ask. you spending, never got that to get the Hey. understand for

priorities, your dividend? increase no capital allocation why the So given in

Walter M. Rosebrough, Jr.

We board raise expect haven't each earnings made dividends would things equal, We argue, note, decision and to do with that in growth each we decision. we meeting. look all make But at each board and in our time. being meeting, would line over we it

Michael J. Tokich

Walt as And be consecutively of have we – said, obviously, year dividend possibly years to XX of dividend consecutive Dave, consecutive XX And growth. looking will we growth. forward

David L. Turkaly

component. it Good you're to that one the that noteworthy hear. has And that is I actually cover few of that

the in we in as gross margin, looking curious guess, follow-up, I a the at what year and we're then of little looking specifically below ahead, thought. And quarter we're a kind So just I'm XXXX, just assuming some as of XX% Any of some terms outlook as are Thanks we looking kind progresses? lot. be that for maybe year your range? for improvement of you in the a thoughts points there? Should improvement basis to

Michael J. Tokich

we from the only leverage part as that SG&A this basis in XX.X%. did divested we in we year but got do, the normally the quarter, was was margin, margin, bit actually we XX an Dave. businesses to strive improve impact of the This, have anticipated gross points strive we had and nice actually lower especially business Yeah, of we FX unfavorable which And gross at improvement all some, as talked also our a because had than about we year, did about, we have to XX%. And improve of we not as us down little we standpoint. and see in to that

process to XX that EBIT range as So in to be points we points forward. to our that margin basis basis will in total, XX going our the thought continues past normal continue stated we in in expand have

So margin continue yeah, improvement. to would expect the we

David L. Turkaly

Thank you.

Walter M. Rosebrough, Jr.

welcome. You're

Operator

from our Hsu Raymond next question John with ahead. go Please James. comes And

John Hsu

Good morning. my Thanks questions. for taking

start could you we currency growth X% top-line X%. guidance. maybe provided First, constant with The the to guidance organic

coming nicely in range. fiscal in XXXX the of performed high end You at that

equipment, year? like million So HSS is in improvement understand it with driving X% I'm right baked range with just still new some to the in to new the for capital this – projects why X% outsourcing, trying and for products $XX sounds segment, for in

Walter M. Rosebrough, Jr.

burdened, Yeah, a cat roof, once I a tin cautious. little think, on hot is a

as level. of our top range so, back X% And years the if two that go we at to you guidance end we didn't ago, and moved perform

of watch we can X-ish we're we'll X% sit. think little be think be above strive bit. this place that course, a pleased year as next But as to prudent So, we're should X% this And And this going this I we at to to probably X-ish a coming I year, or to or very year. well say. point, to is

John Hsu

this rate for like for at Okay. you point. around on have And projects slated it Great. year then that $XX run the be a some Thanks HSS, sounds will million at that. full

You about question a think But kind how is timing I and you fast the investing how margin guess, obviously that the So, basis, how should margin are you can about profile? get really, rate in and run there business. can that profile? the at we get full do the – think of you there is

Walter M. Rosebrough, Jr.

there. mean, Yes. time bit I long getting term, we and the million get $XX if million $XX over a obviously, of it's we're before little year this

days So, the not thinking you That's and be terms timing. that and should of weeks years, about point. first in months

money be have new year. where in get this do is, projects, point will the these when up projects, relatively these margins. this we again, expenditures, losing margins that and, money businesses. we not second normal starting things losing for new we total, The we'll in in in in to year business that's but as said, nicer expect actually the be in HSS AST we're space significant But run, to long type reasonable we or of any to us soon And

John Hsu

And Great. just... if Okay. I may,

Walter M. Rosebrough, Jr.

other in new ones for many forecasting the The come as ones both, on and trick that is you, how us grow.

we plant, You were you every an we go in margin on AST, a time, much may impact AST, the added back time in remember if had in when smaller rate. new

if hardly add in U.S. four plants, you coming that much at look XX it we as five others the does have at on some some out, it you you maturing global look We'll are of that business, because without if a are phenomenon, have even how like noticing, we AST. in. only will, or Now will can basis, it

John Hsu

about Excellent. focus you And on by And the where your Thanks down maybe about pipeline, comments then if do complexion talk some towards how your Walt. got maybe leverage renewed opportunities the think allocation that, but the see then related size, maybe last we one, for X priorities, could Thank Obviously, M&A, the capital you. a segment? just ratio times. just timing? nicely of to for also just you

Walter M. Rosebrough, Jr.

up on given timing. I've Sure.

terms think just things has And in that that So to if as we're any when if wouldn't to segment. of step working you to away from pick of you're me. good you I were their take on. radically different you we pipeline possibility, segments in and I pops want something as likely timing, as timing any question, a But be one have no possibilities. the characterize the up of do

the don't ways, if we sometimes different a we're we I now will, of putting feel radically those and between broader in clear, So, have together portfolio any have is much portfolio It different opportunities, we segments. about segments. that and

so, we've a mentioned, deal, you creates to I'll call much if to bit I moving And opposed thinking tuck-ins. not more at the tuck-ins Synergy extensions, gone look tuck-ins, broadened opportunity. that and pretty post just to And as we more inclusive which clean what to also, as our will, about horizon

John Hsu

if Great. we just follow-up Walt. from the Okay. do service I a looking perspective? of And quickly, what think just capital How that could maybe at and consumable one versus about complexion you're on

Walter M. Rosebrough, Jr.

bias to business, XX%/XX% don't suspect if capital it there's will, of If newer one is equation. And we it in little the there's a because the recurring a have of to more nature know if that the of or not takes you will of you a a tuck-in gross does obviously. can reduce versus sense, in now. the side my capital we is those particularly the life there product, consumable, segments. revenue, opportunity some just a have of if any the against maybe for different on but that the longer. be depend radically In more pretty actually then you much. consumable, view, you're opportunity; which We're any use capital Yes. little I tend do bias opportunity, have And marketplace, would reason in life

in a we not revenue this strong have in is thing business. do large nice Sciences the is we we and bias there so, the service a And is Life which our And because there. business – add very recurring business, have have other would Healthcare, I because capital part, both

can side you capital, the consumable have don't well. you if get that the to as So of

don't bias. strong we have So, a

John Hsu

all Great. that color. Excellent. Thanks for

Walter M. Rosebrough, Jr.

bet. You

Operator

question from Mishan Please KeyBanc. go next with ahead. Matthew comes Our

Matthew Mishan

questions. you want goes. With start off far equipment And cap healthcare thank Great. the mid-single-digit the recovering AST, just kind understand X% with to as segment for the I to to Specialty at Because growing taking the X% are a it and Services, that consumables guidance just I businesses Healthcare the Walt, pieces below range? X% to as Sciences, low- the moving that generally growing as to X% of potentially range, average, plus company keep what at think is well. to X%, Life all

Walter M. Rosebrough, Jr.

mean I the range, our it you last would business higher, into year, something move correct. capital take if higher the slightly Yeah. take question. which suggest math, if the flat, and math below math, last no year's was statement And the is you

And – was it the there a But normal of over going that I'll of about we we generally had call are like same speed, cautious a that reoccurring. just last on caution just level I fire that of we it, a of speaking, at very more the places mention know side would little on And did as segments a than that top we put a little that little there year. where would will is couple Now, X% the were believe of much. we couple to as raging growth. continue much fire that

Matthew Mishan

and the that Okay. little that we'll as talk Life where about increases? consumables you're particular? growth Got then purchases? growth base And stronger it. point also, driving that you installed not you are start can bit a seeing to in the the what's attached equipment or consumable have Sciences, whether seeing some to in And that, more Like

Walter M. Rosebrough, Jr.

Sure.

in side, On market the twofold and what going doing the capital There's we're on about issue. it. a what's it's really

pharma the plant be had a bulk clearly pharma from a is where and it's we our the spending having period increasing matter, related There of component. smaller a side, we now of to equipment, And pent-up there is consolidation where very for done is adding pharma pretty research on dearth that. capital and/or was little in capacity of not for research is, that the not has first because was better increased terms, really do spend long And too, in happened They're which going lack that to The since the business. long and of dissimilar, our equipment a for capacity. of, to a time. business attractive replacing spaces lot demand people but weren't

kind there seeing we're a So, biologics businesses and it the double to we positive vaccine type support. relates as of on that going

market that's side. the So, really clearly, we've seen And driver in general. the from marketplace, the that in

of in lot a would new does really washing In nice addition, the and, application. steam job has us We've as and a the that's require played a And other, general, product job in as driver. peroxide done on for the a building sterilization our I vaporized done well, capacity, the the are say, but that hydrogen really VHP-type well specifically, development that because they have space around the space. guys nice

Matthew Mishan

Sciences, you that (XX:XX) potentially is seeing in Are or V-PRO, you're compete a competition their on that their with divesting where Life business, side that J&J that? and Life infection where V-PRO hydrogen business, market advancing on you prevention And is advanced sterilization alone them. or Sciences in space peroxide and that that's

Walter M. Rosebrough, Jr.

to We good had our the wilderness fortune of lines. have any in walking product be in by never the ourselves

we every work literally one but of in of of, do in largest work We So, tend them, space most not the be in; spaces player them. the all have not we if we of to in. competitors good most

other of is us a plenty pharmaceutical of there's spaces. global yeah, So more and some that business, our general, And you business than competition. for remember have in to

there the so, too. And competitors globe, around multiple are

Matthew Mishan

Services, on, the – I'm understand the Okay. should growth that couple Healthcare next margin you're – about the and are profile what the how see to And some I Specialty investments in of get the next the over potentially run looking can business like differently? over you you're And doubles? or still deals or that are are And that also years? doing then over new But excited couple they years. lastly like, long high-single mid- we at into making that to thinking we of really be of low in space, long-term structured JVs then digits the if of

Walter M. Rosebrough, Jr.

Yeah.

you the I business level. components mid-double at look mid-single numbers digit appropriate think at if consider mature are of digits business, or unit those to the

really And so, that's clear.

So, I do the think is case. that

business in the margins the we getting have bit that, because up little However, your time those center do as way well. longer, to will people infusion. And rely productivity business. the in run, improve HSS course have we capital the the short to It reprocessing work this over take particularly to of and outsourced infusion you or a on

mentioned a to I take will it earlier. get So, longer and bit maturity, to as

depend how of it will quickly potential greater the will flipside us really news margins. The it good story. the to longer quote-unquote, the the kind is. growth, it it is, see, take faster the So, But on long-term news/bad ultimate grows. It's

Michael J. Tokich

service would be referring our capital Walt capital sell that. business, we then And Matt, with that into those to to the owned, the associated is to, the about your investment, would talking about operated, and add XXX% just going question ones and

(XX:XX) than a Vmed is joint Northwell and joint at is venture in time, obviously a joint this no ventures So, venture. point other

Matthew Mishan

All right. Thanks, Mike.

Julie Winter

more of reflective thing I'm that I'll mid-teens sorry. is, one obviously, margin corporate allocation. add not

Matthew Mishan

All right. Julie. Thanks,

Operator

is And with from Sachs. Ro Isaac our Please next ahead. question Goldman go

Isaac Ro

relatively to pretty place that a some In was And years. FY Walt, And taking ask trying in guidance. growth. Good you marginal where days, just are seeing through most growth slightly the at is, to Help hospitals fiscal find the or I on tertiary? it lower reason kind on move surgical are more going think there was companies evolving. if underlying morning, nature Is in good the the what the access you're trying to in at with you year? what's Thanks. look this interested of prior as rate where you're Just the us system. end volumes of growth but are dynamics it time, with I rates device healthcare that above-market seeing markets yet the are growth. guys. in-patient question Thanks. And the is a obviously, X%, same that's XXXX care curious X% just consistent centers at/or through where primary probably

Walter M. Rosebrough, Jr.

Great it's And or always working a is in particularly say, in-patient, would question. I of patient on the length moving reduce general, of to parts. the Sure. surgery. in days first, everyone the of stay amount capital, game same

at So, significantly. the time, the for actually day because shrunken the up, we've volume XX%, hasn't grown patient years patient and procedures procedure matched same volume have rooms number XX%, last the of XX we last over the XX by years

it patient different from that's they procedures. when hospitals report report when days, clear that is indeed So, very

outpatient seems GI campus. that bit. And a hospital expansion you cycles be an be or outpatient very a or procedures center it other is of and that issue terms going. are in surgery those center, it second the ambulatory an a more going half, Clearly, may it of in or on raise The clearly Again, be hospital-based like not more the whether center, last setting, procedures we seen in recent that significant setting. we've a go may are and in those setting, whether year, seeing procedural ambulatory where time, year into a

though where hospital can is there get over building where a they to it to seems what and where And you'll even centers" start work going relative only like of we transplants, XX two two hospitals tends long kind the cycles or do the rapidly run, own capture that three very of from rooms, been sort building it's in will. to see see their now. or that its happens But put different that But very another as in operating years, relative procedure, XX kind phenomena either in we three way the If ambulatory be minutes. hours. procedures, one XX ambulatory procedure last significant six back look of then right you their grew or customers. through seeing you on takes have you to to takes when where if "outpatient growing surgery heart, lung That's inpatient, one centers

it's but just and procedures phenomenon. watch those so, And not volume we of procedures,

Isaac Ro

a to through both bit existing of little channel just you a can vein kind expertise make That's just to something on where which sort Could leverage would to a of tied to helpful. kind of the product into some where M&A. about as invest And product trying then prior maybe categories, question kind your category it it's up getting versus adjacent help you organically wanting new us adding of new sense you balance is, frame be all of into capital allocation, of types into to the well tap either together? your businesses growth? follow lines I'm going as totally of to new versus that's or talked directly

Walter M. Rosebrough, Jr.

where have products and that all level call get I'll bring equal, things being we of we say, to I granularity, services it. where into we don't But and expertise. channel businesses We Yes. have new into will prefer

when thinking. already forces where another in of move done we Department, each much the of instrument significant though clearly But clearly, step ago a with we to strong. business a half business US it piece was forces dominate We Even very now, we segments it's thinking moved adjacent the I'll years as of was that next business, couple because to have best that deal ways it, do that Central a So, that big Sterile separate or business, repair major is then the right times highly set the feel is, it, and of in service the like call out, we've that call that and secondary we're separate five move. and in HSS a for sales understood still moving, I'll our a in. customer a had presence that IMS in step great our would Endoscopy we

the into obviously, and and cleaning GI XX with of assist the Same in we more that's care of years we products So, kind GI in side specialty we're the for the the look procedure moved XX, time, will to thinking long GI at. GI, procedures.

at. be of we kind looking would would that thing be the So,

Isaac Ro

Thank Understood. you.

Operator

question from And Great Please Review. go Stratton ahead. Lakes our next David is with

David M. Stratton

thank backdrop you I or you new and you. margins and was going quick, forward us your trending given part and could and what into if the your remind year? input morning as especially sales see in is the it volatility (XX:XX) costs of Good wondering commodity much of Really that how of

Walter M. Rosebrough, Jr.

here, about areas On is now our service. which our XX% think talking really product, you're manufactured is of I business the that

So, to a the aren't labor want of variables, it, materials. than all more those call variables the as, about input in lot we inflation it's

are labor couple about the you would be think And good if prices you so years, of next or costs have what pretty that, likely in doing to indication.

material. raw how On cost for versus our would the of in-sourcing much are significant I type manufacturing on (XX:XX) is people other typical, XX% of to is of And how there us. side the fairly it product of guess, XX% much are business, And making in it inputs. we're depends it's

pickup on predict bit, or And work the on little steel by we it's now, it right we be don't going prices a line. we are difficult little next will Obviously, But seeing We're and that us. number product And think bit to to the a inflation. happen steel is so, side. of the on to going a a for what trade. seeing how depending significant barrier little varies nickel handle

up, a this we sleep time. pick in losing that are point it's over something little general, in at but So we're seeing not

David M. Stratton

Thanks. products if a could when Products I was with Healthcare you in little you shifting color more Is out segment demand needs what equipment just on meeting you're are a capital new wondering or coming your that with your to the And products, of customers' old being you into to refresh give talked Great. seeing about the then, side. new systems?

Walter M. Rosebrough, Jr.

Yeah.

does two product Our function development at look components.

have. rapid they've things. we things sterilization for while. of we're customers our current certain products sterilization a is V-PRO had The first the use a that. And is, new peroxide are them approach is is more sterilizing that can giving hydrogen to hydrogen peroxide It in and great But example a what there

into peroxide We're the of cycle put giving hydrogen half it a lose also so technology that minutes hour, aborts waste kind we they taking redo XX of they from takes time. some less and the instead them have half it, So and run a thing. to the system, plus don't

we – that them have you capital because product, to Then to a to should reduce a equipment the five- like a product side, is a is, new something people universe. the value view again the happening there's we think that's question will, nowhere, most timeframe, the from reason that true them. want demand to have in where the something a life we the with seven-year to do you that different, So, and flip average as you meeting to customer if our product side in if of of give have products

kind probably in But our but products a of of, the of we to call improvement We product product. to we're of (XX:XX) than type the basis, first-to-the-universe more US are places, new of Endoscopy percentage or have again, of I'll products. have product X% terms X% kind of that business number those the side side, it, X% other to that in

David M. Stratton

you. Thank

Operator

Winter And over question-and-answer turn to to for like concludes would our back conference the any this remarks. I Julie closing session.

Julie Winter

Thank you, this time forward to taking everybody, many seeing the we on us weeks. for you join And next few morning. out the in road look of the to

Operator

concluded. now presentation. today's Thank attending for The conference you is

disconnect. now may You

STERIS (STE) 9 May 182018 Q4 Earnings call transcript