CMD - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings and welcome to the Cantel Medical Corp First Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Milicent Brooks, Director of Corporate Communications. Ms. you, Thank begin. may Brooks, you

Milicent Brooks

Development; and Thank and you, issued Controller. we first Company Brian Capone, Jorgen On press call quarter for the Clifford, morning President Seth and Chuck Diker, good release EVP Peter announcing fiscal Yellin, Earlier have Corporate Officer; VP, Board; Chief everyone. Financial Chairman morning, XXXX. Officer; this EVP and and Strategy results today's year Executive the a Corporate Doug, the Chief financial of Hansen, the

have addition, complements Investor In website found supplemental today's call. posted the we a on presentation This Relations and be Presentation. that section under presentation can Cantel's

you, making the to measurements, operating With of to B. today’s Hansen, that, non-GAAP and involve I only financial materially Reconciliations risks EBITDAS, with is like may Such profit, the statements. net pleased the non-GAAP Company’s call in non-GAAP risks to we remind everyone release. Commission. statements directly The including are statements predictions comparable the introduce actual and from to measurements on reports Jorgen most may financial forward-looking those also are would references without and limitation, and measures provided gross share CEO. a non-GAAP begin, diluted income, today’s non-GAAP will detailed these financial debt. GAAP filings earnings uncertainties, earnings be per call the conference Securities that this in differ Company and contains I President results Exchange Before forward-looking projected. and to am All

Jorgen Hansen

will fiscal XXXX comments, brief start will our financial results. off first followed quarter Thank some year you, Milicent, I through everyone. by who Peter, you and opening take welcome with

call Finally, for Q&A. we'll open the

organic quarter. pleased extremely results We X.X% sales net are our by XX.X% and We grew growth. this reported with

of organic the grew from chemistries, segments and XX.X% placebo of products major reoccurring all including with Industry services. growth mitigate strength by hurricanes sales September. strong driven to by impact primarily and in XX.X%, the three in most able growth we our experienced and products were of August revenue Our

Germany see to accretion online branded driven continue acquisition. installed Revenue increased offset which X.X% I with the comparable flat has in recorded organically to was to by will base. over helped due acquired year with for which up strong placements demand Healthcare our year which BRIC remainder in mix expectations are growth. Purification and by business. it driving for BHT all Disposables growth our This results With and solid prior equipment revenue. performed Group chemistry our perspective, and and our led Australia sales offset branded and service continue financial XX.X% facemasks, XX% year provided were satisfactory continued across by We Overall, business. the This hand Cantel's revenue this the commercial expanded in portfolio when prior notable grew Filtration our for growth first quarter product in of year the and prior BHT includes we portfolio XXXX. growth Asia-Pacific versus into XX.X% for lines of the has organic for international previously stated XXXX. line first legacy our discuss for Peter year consumable our giving Water period in in declines sterility now well tough lower driven to and Operating segment. organically, margin guidance acquisition the margin X.X% adjusted includes and their Margins in the This quarter to which X.X% warranty ongoing fiscal important quarter differentiator regional business sales our our results. expenses. sales of XX.X% performance divestments by segments, for primarily this distributor, segment all assurance a that, by impressive and DentaPure markets generate product From be was to up fiscal and year-over-year. our International we to Group continued business, of expansion were Europe. Canadian U.S. our

Peter Clifford

Good morning John. everyone. Thanks,

came year-over-year ’XX Let’s the take walk as came in X.X%. consolidated a a constant on The ’XX our at through a the elements to walk sales the minutes FX a quarter accounting few consolidated increased sales versus results. line, XX.X% margins net an of basis. M&A note result in and at on year, policy basis, X.X% at prior XQ net On organic tailwind a Gross were financial top XQ currency sold, X.X%, certain XX.X% change, was XX.X% versus in points which goods XX gross XX year impacted into of basis negatively GAAP ’XX XX basis expanded in contracted non-GAAP cost XQ Non-GAAP in as measures. when to reclassified impact. the XX.X impact BHT by step basis margins administrative margins driven the up GAAP the points policy of well in gross by and cost the points inventory margins current cost our gross factoring accounting recast. as we’ve change both year-over-year for

GAAP BHT were tax drivers benefit almost was As profit X.X million contingent to our was capital the a the drop roughly The balance partially a XX.X% in was the million. GAAP from our in basis Key offset final operating came the in op non-GAAP tax based XX.X% XX.X% associated basis rate expenses effective XQ The op increased XX.X acquisitions prior GAAP exclusively rate quarter, the acquired at XX.X. XX or business initiatives. increased XX which year-over-year in down the by XX.X% quarter, investment compared awards. from was points. planned points to Operating the X.X year-over-year related for acquisition a for margins expenses excess gross last the of rate or for of strategic increased profit million XX.X is year. purposeful dilutive reminder, prep Effective jet tax to ’XX year quarter, resolution Operating X.X%. our from benefits with share liability to line while million impact to cost of the by of profit by

XX.X, tax Key came up initiatives geographic restructuring rate at were from year of while this XX.X% our points the prior in EPS EPS effective GAAP of year-over-year non-GAAP the were impact basis state XX.X cash of drivers and strong from non-GAAP activities XX.X offset increased flow last related $X.XX Our federal quarter. XX.X% increased to in our the year-over-year. from XX.X. up quarter, continued flow rate for while XX EPS million, the Adjusted year-over-year. XX.X% for to XX.X% EBITDAS up XX XQ a million quarter, year-over-year for came $X.XX. at year-over-year our XXX.X up at adjusted in came ops Cash the EBITDAS adjusted was million, months XQ XX.X% operations was our EBITDAS

segment insight into results. some Now, let's provide the

increased Endoscopy XX%. organic while for just profit grew $XX.X GAAP sales year-over-year op prior increased comp quarter Organic our to op was For to of $XX.X to $XXX over segment off million, of XX.X% million. non-GAAP XX.X% year the XX.X% million. coming XX.X% profit

our For increased at during even profit leverage. sales our increased driven million. the op by grew year-over-year record op $XX.X quarter. for stable segment profit XX.X% Note, $XX X.X% with the backlog over $XX.X a to Organic remains strength while record non-GAAP million backlog. XX.X% our just quarter, sales $XX.X the water million of to to million GAAP was X.X% providing

million. quarter, year-over-year to Organic for was Disposables segment grew Healthcare our X.X% also X.X. sales $XX.X the For

XX.X% our million to to op million leverage. profit op $X.X GAAP Our while profit increased non-GAAP providing $XX.X XX.X% strong increased

increased segment our non-GAAP XX.X. expanded XX.X% increased quarter, For op GAAP our profit sales million, Dialysis for our to $X.X the while year-over-year X.X% profit op

a hit to like and details. few I'd Now, liquidity balance sheet

the ended this to at equivalents, Our debt of included capacity. balance $XX.X million, with in a this as million the and always the quarter working sheet million incredibly remains We borrowings cash with million capital. quarter Gross strong BHT. acquisition $XX.X $XXX.X of $XXX year fund significant cash ended

of We ERP we million remain continue will paid to levels six as X.XX. million implementation while Net were is have plus Capital quarters down support elevated $XX.X project. EBITDAS next million debt for pay signaled $XXX.X XQ our We to debt. expenditures net 'XX. debt down CapEx adjusted $X.X our the is of to in

As XX-Q close now be business I'll call for back filing of Jorgen before our a hand the closing reminder, we'll the today. remarks.

Jorgen Hansen

positive performance the business we The pleased in competitive markets and our strong Overall, our position of Thank quarter. with you, we our serve. Peter. are this trajectory

M&A With Group critical the portfolio, the leadership start evolution about our on of thus perspective, we this a basis. in of this presence the about acquisition excited Cantel and BHT pipeline in of the at and encouraged the are global remain completion have optimistic for an our From entire very help quarters. of are coming the Endoscopy potential in with quarter, position in leveraging we the confidence high by deals and global mass scale

prevention. verticals our product in all evolution technologies exploring new are segments, Taking this Furthermore, evaluating executed pleased in product opportunities fiscal XXXX Cantel's the well be year supported new market the continuing our our by to launches to product new model. by through fiscal pipeline, of XXXX development, year We infection as forward profits line we operating potential of plan of that strength as sales businesses and the several acquisitions look doubling expect linked we are expansion, new strategic in and acquire together, will of with fiscal existing development XXXX. by and strategic within new

him our in thank team to this warm our Pronovost patient to welcome Board In their and efforts safety achievements areas month. close the I Peter extend a the and for I physician of quarter. His quality a Hopkins in Before last company. X,XXX to rejoined Medicine. loyal critical position School our addition experience of Board would and great to and and a University He's closing, hardworking would like at I members professor our Johns like to who a Dr. makes

lives. to now second for infections, I you Our pride solutions safety March. ultimately and on earnings second -- to forward speaking you take our with Doug, in mission provide questions. look mitigate quarter to we're to entire and earnings help patient improve Thank our save call great ready company outcomes, in takes call listening.

Operator

question your proceed question. of Matson the [Operator Company. Instructions] comes Our & line from Needham Mike first Please with with

Mike Matson

I just tax I wanted start with reform. guess to

tax your if expect the current out would point you rate, even a company higher significant legislation that based for rate? so What can't your I on this the parts and coverage it, on at And what in within mean as expect, a within that You stand there's do were but legislation, a become if tax number tax our rate? I you wouldn’t -- universe you of to know, put decline lot which do moving a has you law. know

Peter Clifford

we early and think profile through it profit That if regardless I ahead our we should benefit 'XX the get reform EPR and 'XX not could legislation better needs Yes, of U.S.-centric of the on on how to but it its tax and held obviously as the still a to make the one-on-ones in disproportionately or being I a and reform. view Washington said desk process. makes desk, cautious provide we've our mean corporate calls and table House I what meaningful would we House that the I that do, discussions But a from given stated legislation a should to an think through via many we're Cantel update XXXX fiscal compared by President's in to actually we're encouraged think tax to give way is through peers. perspective. provide President's the might that of monetize previous tailwind at The

Mike Matson

have and investors among of the or their they medical impact dental thoughts big push days into these just so Disposables what is Healthcare a make topic Amazon just business? distribution potential your to curious any products, another area? distributing supplies were move if regarding are, to then dental kind that into your on Would And

Jorgen Hansen

Great we in something deep operating question certainly watching. we're our change point, We are our Mike, perspective, consolidated obviously has a sort how this any but don’t that the have any impact landscape. by is quite material understanding business it’s of universe. From Amazon Jorgen. that our might on of had not this already at

of distribution best distribution setup of not obviously or feel we the is we of negative a the could be current watching technologies, and are of element development. can with areas done but Amazon. promotion by do us, products it which are this the would proprietary days think good positive not for and that now, and that how training of any in mindful strong One we sure But a overtime. the I’m position we’re whether the evolve We say opinion be that we potentially regardless how development have channels I

Mike Matson

now? sold being that that sort Currently is though of with Company, right of some currently part through all the distributors of

Jorgen Hansen

of distribution medical the of Yes, business dental the bulk It’s the a sterility bit than the a different through but still dental piece, bulk the the insurance there goes side. on little of business, channel bit the that the is a is of side. through

Operator

comes question with of from Company. your from Raymond next The Our question. Myers Benchmark line Please the proceed

Raymond Myers

quarter me do to Let you another market, Endo is to growth you be expect there. ask this And first What continue? good happening about able competitively? rate the

Jorgen Hansen

there I comparatively. Since say of wouldn’t has our last change call, a been lot

and side, well. On a stable us there globally in in were the pretty we it’s In picture, installations. strong with client the the new a Germany, the obviously leader which BHT is capital Germany as installed base or a have leader position

a perspective, same on again while. it’s a capital So seen we’ve that for the players

players and that is customers in the more eliminate the side procedure growth doing previous that calls, are penetration about we prevention Endoscopy all as really to procedure the of about infection, side talked very from of the we the the getting starting On the see the activity have procedures. we business and solid to risk have infection solutions business, access despite more

we a are coming very I this quarter contributor top with a on we year, first Company still would happy feel segment. hyper will growth and the main lot in on growth for That the growth growth good opportunity and in say of overall. of trajectory the of for that said, is to continue business So particular in quarter the be a last that

Raymond Myers

asking backlog follow drive to And How systems to water quarter? or the will X% reach how good you systems going business should up good. now? water backlog? we the Very continue high Can You healthy is the that high another after new growth view expect I on forward? it about the plateau backlog a

Jorgen Hansen

to ending backlog the about Sequentially, first for quarter ‘XX. the fourth increased $XXX,XXX the from quarter

million. above So it’s $XX just

it intend with a quarters signaled we times, out. long lead As the look the and the past, is see business in two cycle about to we business

have it right see upon to environment a back the space. what buoyant quarters based it, pretty are we circle there to a So be tends first market two digits digits mid-single on second really But tougher sort question sort to teens. been call see our future. achieving line strap inherent we kind HCD in is continue in water in in of that beyond the that X% as can we in targeting Embedded low mid-to-high of and towards now, aspire bit that that your in single of we and to macro Endoscopy and of quarter, out of sort and

in tend So, in line segment being you by is X.X% completely I we quarter Endo towards, and organic our aspire HCD what we that this think X.X% of towards. water at in with really to was and growth in drive when what really XX.X% look

Raymond Myers

ERP next that your the overtime? touch you've on cost to that globally. on rollout improve quarter expense can we how performance lower we started as this to anticipated to facilities you side? understand revenue Good your Right. that as I the side, structure well consolidating cost is move some the structure, been Could

Peter Clifford

Yes, take first. discussion ERP let's the

of timeline the U.S. think we've So for sort Endoscopy first slate, go-live, shared our stuff the our previously docket as our first is in on the I business.

of our first 'XX. the so, on four for it. that and team has And And the go-live project is intended quarter off kicked business we likely is Endo hard working U.S. months probably ago

of it's get so, we systems. And step trailed really a cost fixed to various the an as to less run were go as really each that ability it in lot a phase out and months, sites locations live by scale. long what And going X probably add so about after we with we is be

have historically our cost to gross that some we plan. to as about on businesses, that actually going really cost-to-good as addition it it's far back know just quarter, headcount of sort much headcount reduced margins a as So as in immediate gone think as it we pivot. mean strap for meaningfully higher belonging again cost administrative accounting I announced, as half the and one I And new don't sold. an quality-type the rate had we And of of

in accretive 'XX. segments. every rest XQ perspective So, shift that XQ, it with And x one in that our get divisions that XQ a non-GAAP from 'XX item, we made the our was margin gross of 'XX consistent of here versus

Operator

[Operator from the next of Instructions] Steele Our Raymond Jon from line your question Please comes proceed with James. question.

Jon Steele

the are If the we the with second in quarter? you any that tail could you just off hurricane start And quarter. expecting estimated then, impact in first fiscal had still

Jorgen Hansen

John. hi, Yes

As we manufacturing we impacted or hurricanes lost of manufacturing, days able site three back have about, was the team rebuilt four but we where was gain a an talked inventories in get get from perspective nice operations effectively in to manage did that and or and online quite site to back two the Houston, our really job quickly. the we were through

not line strong very uptick have some QX of quarter. any a have really second a will we speculate to that bit postponed and So impact have procedures QX. be We been the able might in see understanding to of in little top

On the flip second has the quarter quarter. days first four in the less side,

we it’s going forward impact show as to So sites but anticipate did not us a not so really that going would a be so impact, any op I major day minimal big we and either. far overall, been to it’s

Peter Clifford

think And impacts as far XQ. so pile on I to that, as in

a on commitment avoiding did job, able brought the Jorgen hurricane side disruption and the in operating us essence, the offset allowed the via disruption. As have that plans side center we’re offset. did about business service variances customer but the -- Endoscopy is and us that and nice service on just that really I we was some What especially water. and the two some headwinds the for in And just plan little that piece see ways offset argue completely of but a Florida there, of pull have to thought nicely mentioned is better the obviously side team in on didn’t they we increased I shutdown, Saturdays utilization a the that only sure overtime, but to from customer a would we're the making that water those

Jon Steele

looking was some back growth. going comp, came with despite impact Endo, the organic double-digit hurricane for. than to we Acquisitions better also tough growth a little then despite a were bit in And strong very

you that, of BHT So as plan? can on part of are C.R. the tracking us how Kennedy kind update and give an

Seth Yellin

Seth Hi. It’s Jon. here.

I realize and days lot and in Germany financial operation, to we’re us we seen our and the the out think the still I but us of that market. the market. done that early for that the to and is in Australia exceptionally very business. integration we’re one the run think set work remains see. encouraged that existing the picking business. important and acquisition. Medical a it has the Cantel with well to with with we C.R. our an Kennedy It’s really we’re traction market portfolio transaction, results what executing that team on, objectives and think well But good and From right that BHT team full integrating I complete we’re It’s into with encouraged for now forth certainly that a brought of pleased process up people

pleased So we’re that with acquisition. very

Jorgen Hansen

major three business of our the to it’s well, job that's and Canadian into market. team driving might a done platforms all as our addition really a been great And Candidate it’s add nice

So, some positive developments we that of by as see well. team excited the to

Jon Steele

taxes guidance guidance. last 'XX for on tax for more me; device expecting you back going the And your medical to that out a the that two was to just of be quick then believe call just I second. one, ones said,

kind was the And your million think right terms on just of I thoughts So is latest that? number to expense? of in curious $X of

Jorgen Hansen

tax we XXXX, our fiscal, device med addressed had through good they At our medical XXXX. a the I fiscal a do we full guidance. in to question. And year, as last there in X.X million, partial rate I over with the is impact the pencil device back think we since change. think that’s That’s since fixed. call, out that they hoping come the and million weeks. year risk as only to to a call stated in we’ve other sort kind issue was of January can and which next $X of that’s last a might this $X still with growing was get on in it where comeback to as million. million that that And if we And point, two that tax haven't our But and that meaningfully X.X corporate XXXX, the not

Jon Steele

last then me. one And from

I to have think you in mentioned product launches that, ’XX. you’re fiscal new going X

would by there segment really color be about any or you’re excited helpful. anything So very

Jorgen Hansen

is say to high. I Seven little but… was meaning several

Unidentified Analyst

Oh, several.

Jorgen Hansen

coming have all product launches three Yes, several. segments. Yes, we in

profit extensions We is the side since have obviously Endoscopy, high some in new very is which a line important this area. high on procedures growth,

anticipating we or We consumable systems planning systems some of a business and disposables to health the water margins and technologies with business, as well. good and are business water launch our of new central a and new the great side in as in water products new well couple rental are in portable adding

about through to So the teams. drive good to organic we feel growth our pipeline and commercial continue our really ability

Operator

Mitra from comes Ramgopal proceed line of your from question with Please Sidoti Company. question. & next the Our

MitraRamgopal

Just a couple Jorgen. of questions. Hi,

quarter a there. to on potential to nice the entering look force First, you need just make terms expand countries for I’m still And it's as really investments existing the at margin sales of in feel in markets? from you you contribution international or just wondering or whether you had international the new distribution expansion, continuing

Jorgen Hansen

been have and of we question with is now continue last perspective mean now good And markets. to organic national is Yes, I over through and both no think these growth we markets focus growth, the really the a was upside. a XX% great have that more to market are across our market much markets of much international scale our some further has mature lot in and perspective, getting like it's we M&A the this there in that year. from -- quite we business the larger, early. drive and we is its quarter this of to as of down almost it's opportunities profitability of that in we The markets the I results I incremental have of continue additional doubt will to from and resources. investing the think have more are organically think But we way invest it’s commercial in varying the line really to about endpoint expansion, terms showing sort U.S. regions, more still grow

As the have reason the upcoming XX some Peter in is Asia-Pacific operations the which we for mentioned, important work timeframe throughout European on months ability ERP leverage well. next as and drive side very our that and to

Mitra Ramgopal

Okay, thanks.

Jorgen Hansen

in Yes, pretty down the I would business in of line we’re good say. terms aggressive

Mitra Ramgopal

a existing looking that noticed more I much goal be expanding at of several quick terms as pretty within on an just always market? acquisition you terms in next trying you're the your of to but I get question X in the a Is also out or front. candidate. that sense to end opportunities, years over going about segments was eye And expanding the look billion of keeping

Peter Clifford

sort I for last on many think several as we've the quarters. calls said of

acquisitions the certainly, we on find overall businesses the faces portfolio targets within remains still overall be fit fit fit a profile at of are the an about good our our of or fit we're look and play evaluating prevention. but profile rest can lot verticals margin new terms our strategy. and and But division at strategic of that There that bolt-on to part an acquisition we strategic right prevention right actively we really the in and divisions, trying opportunities, really well think going in growth infection important they looking a and focus within would to evaluating our as have and of infection this fit thinking are continue of a that part to continue that as these focus in with prevention. owners of to verticals We umbrella that opportunities do infection we're new

Mitra Ramgopal

valuation there in then, follow-up that remains on And stable? or Are another changing front. of all seeing you is be markets the at to terms

Jorgen Hansen

some remain pretty think where mean I we are above of what we've Look, to there stretch willing markets think areas healthy. seen are I expectations on. I

we certainly see that other see off good businesses of. that think good we I values can we where our think areas generate returns we

So, meaningful to remain shift seen months But focused so the it's target say pursue. things dependent. or picking any market last we in disciplined pretty on the over six our spots in it's wouldn't we're and somewhat certainly, targets trying the healthy and and I the be so. markets, we've carefully competitive

Mitra Ramgopal

side, with I on Jorgen, the you about you're opportunities front And finally the and then, just coming had you back if product of I wondering, was believe see have any some updates REVOX pretty technology excited the just you'll that. that on us? for

Jorgen Hansen

can higher we an are long-term long-term business medical with sterilization, Yes, certainly something U.S. continue the on do still many are that to early and our manufacturers we site It's key forward. expectations where installations sterilization and developing evolving we have the we still will something of for. REVOX that hopefully line that some but over now have couple next of with customers, is expand that in it's in the the platform solutions day be the

still we So, quite feel bullish, us. it's again a opportunity for but long-term

Operator

closing are to hand in There questions management for call comments. the back queue. the I'd to further no like

Jorgen Hansen

thank to everyone Thank I all March. calling at to you. call speak you for in. Well, you in our quarter second look forward

Operator

you teleconference. for gentlemen, participation. today's Thank this and does your Ladies conclude

have time. this lines your You a may at day. wonderful disconnect And

Cantel Medical (CMD) 7 Dec 172018 Q1 Earnings call transcript