Earnings call transcript Q1 2024

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Operator

Good day, and welcome to the STERIS plc First Quarter 2024 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Ms. Julie Winter, Vice President of Investor Relations. Please go ahead.

Julie Winter

good and Chuck, you, morning, everyone. Thank

a speaking Tokich, our usual, Carestio, for President do comments. on we caution CFO; our Mike be our have I CEO. will today and words Senior open Dan of before call and As few Vice and President

of STERIS this This the call time-sensitive as expressed is is retransmission redistribution, written accurate that contains Any or of strictly without prohibited. webcast only consent information today. rebroadcast of

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

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

in used non-GAAP measures management well with including information press measures. as Additional available financial by Board GAAP of providing and as their intent Directors financial the analysis supplemental are financial and information in and reconciliations to measures, is Non-GAAP presented financial release during between operational call our decision-making. regarding definitions, these this of transparency greater the

call hand With those cautions, I over to the Mike. will

Michael Tokich

of morning to pleasure It our once highlights my this be good to with everyone. morning, Thank the performance. you first quarter and is you, Julie, review again

XX%, XXX productivity. decreased points year as to currency Gross well lower for offset of basis well volume more as quarter XX.X%. material compared constant as than by labor by quarter, prior driven the the was and the price Favorable organic continued inflation points price. margin revenue basis with XX increased For as

well of XX.X% Other. year-over-year first compensation, basis which increase points decline last EBIT year, a decreased revenue the and to reflects which in quarter as the in compared margin Corporate XX as margin anticipated with recorded gross is incentive in

The quarter per for was share. was in adjusted the $XX.X million, quarter earnings income $XXX.X diluted quarter the $XXX.X totaled rate $X and totaled the depreciation and Capital million. adjusted effective XX.X%. were million, first tax in Net amortization expenditures while

leverage. in first on reducing over the Debt demand. quarter the $X.X EBITDA and quarter to first for continue we were flow and $XXX.X slightly remains just to as XXXX our debt of as declined collect gross on Inventory strong billion. to million totaled meeting Free quarter was times able approximately we fourth focus Total cash X.Xx was elevated customer lead revenue.

that, will I over turn to remarks. With his Dan the for call

Daniel Carestio

time about for Thank rest the us more hear first good making to our to fiscal Mike, quarter you morning, our Thanks, everyone. for performance of year. the and and join outlook

fiscal Mike, As heard you had new STERIS' from and strong expectations. start exceeding our year our to a plans we

volumes equipment, share market capital quarter. organic as at Looking gains. driven as experienced rebound and primarily revenue consumables Healthcare, XX% growth well by grew in price This across U.S. segments, double-digit in continuing the our currency and service. constant the We to procedure is

to capital equipment the coupled of reduce chain addition, our to quarter shipments. strong environment, with a In supply ability times, improving very lead led

million orders. quarter first by continue the representing to quarter end our healthcare spending at almost of despite which Large capital of Hospital remains evidenced $XXX drive XX% the projects strong shipments. the backlog, orders totals robust as

of in We are increasingly our confident strong for our year a Healthcare expectations segment.

currency X%. Turning revenue to AST. grew Constant organic

of destocking bioprocessing med decline some the customer by categories temporary impacted inventory in X Our of demand. year-over-year performance in the and quarter tech was situations, market

returning anticipate of said a 'XX XXXX. do FY to year-over-year in quarter, bioprocessing last bit a represents and in we growth As not reset fiscal we

for the procedural that with anticipate expect half and to med beyond continue all are customer would we the tech growth of we first not align we time year, the will As experiencing. the inventories destocking, inventory at that

our half AST. of second for As are year stronger growth expectations in result, a the for the

Life slightly evidenced offset strong business in due growth demand our timing to backlog. and Sciences by revenue service in declined which of shipments for more the the capital the Underlying than quarter near-record remains the consumables. as

lumpy Our first the segment continue mid-single-digit despite growth to Life full Sciences for quarter expectations year be revenue start. the

particular, first basis revenue products. segment Dental a on by revenue of declined was X% as for in quarter organic constant Our control currency infection destocking inventory, limited customer

patient time see did first we for volumes post-COVID. the improve However,

achieve that We for Dental. will in year fiscal are the confident growth we low revenue single-digit

continue in, whether that be we supply direction Trends to All positive of and shift ability ship to has with There pockets year. greatly and the start in are procedure improved. uncertainty, management. a the our or products to still inventory are volumes execute pleased chain,

Becton, believe from assets will much the the than of we originally that As surgical in press earlier mentioned acquisition release, Dickinson anticipated. we close our instrumentation

a As flow. we and adjusted our per cash reported as share earnings for revenue, updated have result, free outlook

somewhat performance year. start the feeling we approach We still yet given that are X% our about are the conservative to optimistic our We holding increasingly acknowledge outlook to to growth. for constant currency our organic this is X% year, a

you Q&A. please That and can we give the begin prepared remarks. would our concludes Julie, instructions,

Julie Winter

you you, give comments. Chuck, Thank instructions can please for started. and Dan, can and your for we Mike get the Q&A

Operator

will come Instructions]. KeyBanc. Mishan And Matthew question from with first the [Operator

Matthew Mishan

first nice really capital I And start wanted Dan, equipment. start to the to the on year. quarter a

your pull are you assuming it's with quarter guidance. you kind first capital environment FY down the versus And some 'XX. I'm you for shipments? of are thinking one and bringing had the into shipments? in that also, As one about how you excess phasing thinking how order about the think about backlog not you forward the contemplated Did of

Daniel Carestio

QX. We've correct. year. the issues of been in the say perspective we what bidding is on would chain Thanks. over we in a a sure. That's from bit Yes, anticipated past What manufacturing overdelivered had I supply terms

to a delivery. on to trying they possible and need to manage demand where we're actually job so we do the better customer everything now, product our And did

might pulled that revenue in forward that otherwise QX. So some been

our But to is all across and produce our down better times equipment lead generally of coming are deliver portfolios. our ability capital getting and speaking,

yes, stuff, delivery some is that's as there, terms orders of you at back see a point the obviously, to longer in lead. got will the get there caveat intake, large normalized we backlog, only which And start the much to project Matt, more being times, of with declining

Matthew Mishan

little then And phasing from perspective? XX-XX XH-XH have just I [indiscernible]. is the current can It around of the you drag more Okay. seems the destocking, it, from a bit in on about the secondly, but some more then comment bit little still and a categories X think EPS And environment. catch when I you a counterintuitive didn't especially med And revenue tech?

Daniel Carestio

We Yes. agree.

First anticipated. off, yes, as the originally phasing remains

to the we're the Asia some really tech, foreseeable med and of given that been it and started see destocking that sort in In in Pacific, demand national all particularly stockpiles around have levels. that back to was we normal went filled seeing of terms in sterile PPE some of that

we're inventory. on surprised little What we're our is a that customers' of seeing pullback level a of

everybody else, now. said shouldn't that, be have too because we having inventory much surprised Now like be right

to solidifies, of in matching to of supply would ability confidence the comes expect to thing is out that ability down and that get wring one supplies an produce your demand. natural to inventory terms back levels -- some as chain So and are

think process don't I to going too take that is long.

with been aligned see going now. procedure the think is demand are higher. of And it's which period think what I a the on clearly inventory you'll for months then I rates,

our in directions Healthcare, are the the So Matt, I same that in our in opposite business. seeing agree we seem seeing thing. what And you with we're Healthcare know of terms X that Consumables particular, customers in

just whittle down they've to think I got inventory. some

Operator

question Dave Securities. come Turkaly with will next JMP The from

David Turkaly

how Just you number... -- little there a number the up like capital gains. to looking bit and called there's at new I'm And market press times? a there any highlight put reducing healthcare how you products you the if there you'd say, in are one I'd lead anything share that these into wondering out are or you

Daniel Carestio

mean, got of quickly. were teams were off stuff down our ability in to the able up in, we we backlog fiscal spilled Well, we this to challenges deliver would expect had terms a some that Dave, And that we're on parts year, and pretty line ready and push producing. our we to as continue I working monster into And that backlog.

in we generally in I a new just that. any not terms positioned, So or by on terms small think also in anything offer. as of basis spot good what but really a how competitive it's can product a It's highlight I total portfolio any our like terms speaking, product, product group of wouldn't on portfolio in single just products products a of or of is

David Turkaly

the were kind the board you so sort calling share And anything gains that is of or across there is more like we arena? market think any specific of there in out of

Daniel Carestio

Not we're of -- think really Healthcare. other specifically. a I lot in right good in good say tend areas sterile But infection really I in right IPT a I processing a we're is as position But load. now would in the technologies position in carrying prevention well think, doing group. to now, our of

Operator

Your & Needham next Company. question with Matson Mike will come from

Michael Matson

of I had the on had And questions of the just in does your know about Dickinson margin what compare talk How has growth that margin? the kind about deal. that, business of EBIT or gave maybe years? EBIT I us but the business? you you that a of Becton, gross then kind corporate gross Can couple that to margin, recent

Michael Tokich

similar. our we say mid- it's view single our would digits, into that, Yes. high would that healthcare. Healthcare of The portfolio bring of be I on rates the and it's as margin segment, gross products to XXX% growth side, Mike, similar Healthcare, long-term

So I a both have actually currently margin bit it's a would standpoint. perspective, gross higher a we little say EBIT margin bit from different from margin on what little the -- not and much

there, as the to incur expense looked models full million, million I equivalent which expense, credit that going higher appreciated interest think everybody year. think some Unfortunately, that we don't we is the are for are the out short interest of to $XXX at facility I in about were to run, $XX in revolving our I use going this

Healthcare So of margins. But we I'll expense call, clear once I expense. slower because what that a think to, normalized back of ramp some little out, be we'll interest there's a of that bit

Michael Matson

the called And hear quantify then of Okay. productivity every you in I also you And given know were gross you That's fiscal helpful. last of that, related impact. I your just lower year, to margin. quarter. then out kind that inflation didn't terms

you can comment know quantify of So things on either don't I or them. if those

Michael Tokich

Yes.

have inflation. million labor We term material fiscal and incurred we've been the that anticipated million first quarter. excess in So about that the $XX million, would we $XX originally $XX this we year of using

Michael Matson

that you talk about productivity lower productivity, Or... called out, Okay. can the And you that?

Michael Tokich

we parts. as products we've right? waiting are haven't having quantified touching we that, really issue multiple the Yes, So we're the on we times the same past, but in our that had are

So our which is for margin, should guidance throughout productivity of will year, that but FY to our not back EBIT flattish, 'XX. improve gross only margin more also get our the help which was where original

Michael Matson

Okay. Got it.

just sort challenge. that's the a chain of So byproduct of supply

Michael Tokich

Correct.

Operator

Steven will next from with Inc. come The Stephens Etoch question

Unidentified Analyst

This is Mac on for Jacob.

me. segment? decline, quick What margins a Just for increased this for Dental in sequentially. margins a the questions of is revenue couple outlook sequential Despite

Michael Tokich

what sorry, was I'm the question?

Julie Winter

margin. Dental

Michael Tokich

Dental margins.

Julie Winter

be they should Or long term?

Michael Tokich

are improvement. really should way which a rise much with to progress segment. -- are but that happy we margin we average. that than corporate happy that is There's getting go, near And they are more term, they Long that helping within EBIT efficient, to are the you drive said operationally they still the more Yes. making seeing

Unidentified Analyst

run forward? operating it's just row. highest I'll Healthcare any onetime they're there if is me me, time, know, Sorry But solid let been the repeat going bits? margins a and in this good a the X can't Or hear in you quarters some Are question. rate

Michael Tokich

volume the in this biggest time. driver is point at Obviously,

volume more continues that but We ready and remain if if -- through segment I of where mix operating there seen consumables Healthcare very And still is as side, especially know high the for have continue upside as mix on building our there, is potential the are we we the we year. are it to put to this don't margins. to off continue the new those increase. Obviously, throughout to pleased at. say we're margins says it

Operator

come from with Wood Morgan The next will Stanley. question Patrick

Patrick Wood

about the the customers your the ask I'll here. guess that to willing one, on degree. everyone equipment on with appreciate Amazing. just consume I like one number. how working the the presumably, it seems I'll them and equipment I of it obviously, that both place your the times to in side a lead through talking capital they're conversation be backlog keep customers healthy are curious -- and this just first has upfront some is gone? two, if end, is the like capital but big investing to pretty I'm

And some then I consumables that related it conversion that and consumable capital think side, equipment or pull-through essentially ways, from componentry that to that, for next important fair strong is growth to more about second going which the the Is a the at backlog is, the on side the into for is guess rest one of take look follow-on this whether the the of rest of component year and the year? year. it's the in

Daniel Carestio

Patrick. Thanks, Yes.

the else costs read on say in that -- the financially. everywhere XX% So by and they conversations many this is customer, to margins thin with Healthcare what would up pretty under I the but Dan, in interesting gone is I What system, U.S., the way. the have you would the in I it's operate with. is stress start because labor mean, places, particular, the

So cash is a challenge.

get without Now it and there's processing is said as and growing the the than because sterile luxury seen can't utility ORs, a everybody and equipment. procedure capacity through is STERIS process volumes recovering Without SPD to returning, demand. the they more agrees pent-up And surgeries equipment having capacity. get are that, without a that instruments

for our in is -- period speaking, So to wood, we've generally remained on intake. terms knock time. strong of outlook pretty And for we've that robust continue of pretty the order some

have on and the and yes, is as the focused or pretty or the units, sterile us other chemistries be, is consumables organization sterilizer that pull-through onus those whatever that sure highly estate make real and the in to place a in Healthcare department, that steam to dedicated have consistently AR, that a we processing strong channel we may we washer that. the focus And go accessories on in the an with along get but all that

Operator

Michael The next from come question with Wolfe. Polark will

Michael Polark

first, X counted must the I disclaimer. say of including I remarks, prepared minutes

all-time call AST. So it conference an few on first to record. parts kudos there, that My be might a maybe question is

different fresh is ASP With revenue expectation tech of full for destock, than med year your was the related internally it call-out before?

Daniel Carestio

No.

say we of mean, I would not in a I I have care themselves that second confidently range between in weighted to expect the say anticipated, I and of in it recover sorts we're the that XX% now, year-end. than the seeing sort think that issues we'd health we I negative I may think out bioprocessing be sooner would And what by what is somewhere that it pick right year X destocking of the, number X% year-end. And front expected. is I the some be half more out for probably that than those don't know, if kind destocking and can we half. the and Mike, think

Michael Polark

follow-ups two and on medtech. So there bioprocess

it out quarter this So called you've on year-on-year. third is think the I bioprocess,

run So versus quarter, is it consistent at order it sequentially X is deteriorate March those least question rate customers? of June of it's pattern incrementally? in terms overall definitely for Or quarter been quarters. in My from Q-over-Q did kind the

Daniel Carestio

It was the comps QX. it a is the the flattish QX also why for QX two in reason are the little toughest highest, and sticks The to us. out comp two in more

Michael Polark

in the PPE I call-out. and the there kind on noteworthy reducing categories levels? broad-based ex I ortho. would as stockpile kind of stockpiling? neuro then and inventory see interventional call of And appreciate device that especially heard Or Yes. let's the national of terms you kind customers, In it Any medicine, that. say, you of cardio

Daniel Carestio

surging pain are in spine see that say it's broad-based. say that and also and now. I ortho would right still I And and We management building inventory. there's would some

scheme not that's but -- amount plants necessarily grand So of... in flowing a volume our through huge of the the

Michael Polark

Okay. price, very to the topic. prudent kind parter, more X my of that straightforward first consider entry seemingly a I your on second but buy, is that hope transaction earning was see. My you're which return I BD on nice so is

longer Over revenue anticipate from term, this do and/or mid- cost synergies portfolio? the to you

Daniel Carestio

think they're on some scale things And channels mean, that. like has I synergies, are in of more -- mostly there do I and as to BD -- think mean, do with -- cost instruments I I some business with processing that marry the it terms leverage trace but instrument well department. way as both tracking minimal. and the synergies and up sell-through there's repair instruments our instrument sterile the through

technologies the supply, think a the I OR life in infection of a STERIS, washing instructions dealing cycle to to in repair different sterilizers do and compelling back with prevention And instruments. manage terms is and Everything for the types having is the instruments our customer for we ability our use from all and available through group having story of through sterilization perspective. washers

Operator

Instructions]. [Operator

with will from question next Sandler. Our Jason Piper come Bednar

Jason Bednar

a guidance I start the rationale. wanted to little bit with

It guess, early You flow there's way beat know make cash year into and to you obviously, strong decision into I free updates talked to year was not full you year. pulls or, this some conservatism, like to the all update consensus we're we've the pushes by any year almost year quarter in $X.XX, maybe elected strong, guidance quarter really but case, talk revenue, one really about, as the but fiscal did? can only that core the sounds update not about fiscal I you went guidance.

Daniel Carestio

at to quarter. I in terms really they're year. going this business -- short, look this that in very Healthcare And say we're we're how of our would delivery terms over In and a we perform of did nice Yes. we business optimistic

some out the there. market. worked with how think terms to there's that going data that and these relative and are the to think on with a out, are to ball. no AST, crystal high Sciences there's know degree Life confidence We play guarantee we there accuracy of of things understand things the We of timing events. get of have no In we XXX% have we all but XXX% some

taking answer a So we're have conservative different the the a we'll in future. conversation approach. to short And great, things is do continue if sometime

Jason Bednar

for, Makes sense. to well And core then been X as to consecutive Okay. right. back Dental growth wanted now. think, All business come here. down The flat has I the quarters to I

down unprofitable here and obviously backwards there have looking are the taking going or So areas getting shutting first, forward. easier exiting you SKUs? But actions you're commentary or maybe taken certain

And the running does bit it's a little seen we've asked like performance because market. below I so far seem really just

the So there's to I'm the What self-inflicted has to just trying if to getting see factors optimism business here single-digit -- to here? two-parter. a figure peers? back out or here that And you some market a other for if relative Or back it's low maybe then contributing that the again, given segment, maybe positive pain follow-up to any that weakness trending contributes ROI? growth your as a on of been where that's

Daniel Carestio

to how now, and stuff. to a got it's time stuff different being used as get of would a things. it half couple that And type a infection I of overbought and se little peers per comparisons of Yes, our that business. and a Dental the of ago because that amount burned control down. of needed I think years overstocked much versus few of way is more world type have relates different the PPE almost of also the some exposure say a the of it was that than and STERIS we And business,

job the a really manufacturing What from is to Dental a we well And we say on OpEx product innovation from Hu-Friedy sure expect that growth, expect doing of the instrument would to side, nice we're and continue. until management has and as see would the see we is perspective the recover and and perspective. brand cost I delivery managing in the a in that really And would terms well overspending. market Group the done making also team not stuff

Operator

KeyBanc. Matthew come will with question next The from Mishan

Matthew Mishan

GI to just like about talk wanted procedures. longer-term I

or they're a systems age in to and starting about to demand, play one over larger how endoscopy you of you're the looking down little the see screening business, for, that's seeing like strong endoscopy. bit guidelines, and reducing could kind to Cantel colon XX factors a starting hospital realizing of the I I cancer X? lot they're of XX your at the of and GI for and the saying change of that One talk is just was hoping doctors next a that through. growth was some pent-up year think, And

Daniel Carestio

of Yes. quarter scheduled. I the colonoscopy X I ability up sort that What screening. that has of until would is ago was for The I ago don't the more really mean governor on past, open say for the recommendation age the and in a months terms staffing a drivers to or XX lot does it get the know, up about helped. Healthcare

I one I told tried in February. they of as soon that was could December, know personally me get the I as and in schedule to end

think of lot I that's a So been sorted.

a So both it does strong consumables our impact, we particular, is and is it we quarter. contributor with first Healthcare delivery major have equipment capital AERs why also in reflected, had sell, that in to the in in all an but that the

Matthew Mishan

of a an reset modeling next And dollar Is be the as I that. Corporate mentioned type incentive a follow-up and perspective, Other, something comp was year-over-year a kind believe in you quarters of and increase the that well? drive several over then that from should that comp we incentive it on

Michael Tokich

we Matt, quarter fill have will called last if comp we we you hole, Yes, expense $XX to year-over-year. that that you out recall, incentive from if have will, million an a

corporate of couple big in So there. that A drivers is of driver in other the expense. a that increase

Indianapolis, a opened center Indiana. in We new distribution also

that is cost. at So also additive

health And care rise. that is usage of is then the one benefits employee things of the we're on seeing our other our

incurring there. expense we're more So slightly also

$XX last the we main saw the components sure, quarter. out million are called first that that for But those in we X So quarter.

Operator

remarks. back I question-and-answer over any This closing the to turn for concludes go session. conference our Please like Ms. to Winter would ahead. Julie

Julie Winter

fall. forward join we to on many road look you this us the seeing out for everybody, taking to the of you, morning, this and Thank time

Operator

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

disconnect. may You now

STERIS (STE) 2 Aug 232024 Q1 Earnings call transcript