CMD - Earnings call transcript Q4 2018

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Operator

Greetings, and welcome to the Cantel Medical Corp. Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Milicent Brooks, Director of Corporate Communications.

Milicent Brooks

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

Relations presentation website a we presentation to Investor This have in call. Cantel's on posted supplemental under can addition, found In today's be Presentations. section the complement

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

Jorgen Hansen

XXXX by Thank you, results. followed take some who Peter Millicent, fourth fiscal comments, and welcome, opening will quarter everyone. through I with will start brief off us our

open results with net XX.X%, will we call sales Q&A. reported this our organic Finally, the grew with growth. X.X% for We very We're up quarter. pleased of

of HCD product by business, well, performed segments our including X Our performance exceptional categories. our followed growth demand branded by major

million, year, in a record full which the guidance end range. the to higher XX.X% business grew fiscal our of came the at For $XXX

was first for end with strategic strategic Our plan. This in performance, growth year out laid our fiscal X-year included the of organic our our plan in objectives line XXXX. growth, X.X% which marks

XXXX. our exceeded goals. in sales ability that were us report was profit, to which -- pleased long-term achievement long-term we committed to meet and year doubling confidence objectives are our We This fiscal gives of to in continue our communicated

Now comments Capital our for increased on difficult comparable sales organic some of quarter, XX.X% growth Endoscopy U.S. sales offsetting grew the the recurring was attention revenue XX.X%. X.X%. experienced most to national we with year significantly due we'll turn each of the markets, the to segment. sales. Total prior in up in decline

growth Purification XX.X%, revenue solid For recorded Filtration the XX%. revenue sales grew and of growth full fiscal of organic XX.X%. up for with X.X% the year, Water Recurring was quarter.

the future to In this continue This were of customers year and Life low-temp nature the accelerated driven capital, dual-source remain moving Strategically, assurance, we a specifically quarter, cyclical excited business sequentially the noted. on this Given due system. opportunities in of we our water focus segment, REVOX rooms. current was filtration investments medical as quarter this in about our the our clean sterilization expected. broader sterility we this earlier as such installs in Science water, and beyond record as to have emerging sterilization, division order We approach one well segment. by previously new in categories, and key the to lower medical

Healthcare in with waterline is Xx led is growth growth of sales For the XX.X%. division driven by This for XX.X%, Revenue the organic by segments organic full grew X.X%. Filtration fiscal Purification of disinfection, which category approximately and Disposables by with by year, branded our XX.X%, X.X%, which mask our Water increased franchises. demand and sedation conscious portfolio, growth growth, in our grew market

of X.X% with fiscal sales X.X%. the year, grew full organic For growth

the X.X% with sales sales China. in total impact a Canada, continued of increased of the which Our international includes and organic performance prior high acquisitions, From international our XX.X% perspective, U.S. XX.X%. branded story, geographic Germany in growth, strong strategic portfolio X.X% growth XX.X% and operations year-over-year, growth grew year. versus with increasing organically

full with I that, will and results. X.X%. U.S. growth XX.X% XX.X%, operations organic For over financial the sales Peter grew year, grew of international now fiscal to discuss our With hand to

Peter Clifford

Thanks, morning, everyone. John, and good

consolidated versus the top through a was XQ net 'XX take quarter the of prior M&A constant at tailwind XX.X% organic On moments year-over-year were: the came was in increased the consolidated net sales Let's year for few and year basis, The quarter a 'XX currency results. to a X.X%. a elements X.X%, 'XX X.X% and sales walk full XQ XX.X% financial on for the line basis. in FX and

For by and 'XX. and by from XX.X% versus the basis year-over-year. at XQ versus to when the elements XX year net basis. in increased currency year, prior were: operationally XX.X% Gross sales Note, net XX.X% segment sales and on gross 'XX X% dilution for basis FX Organic year-over-year GAAP year-over-year. walk the and margins for in decreased consolidated year was margins we full X.X%, constant recast core of year a The X.X%. expanded margins our points Non-GAAP quarter. points came M&A tailwind basis XX.X% points the adjusted for a BHT, full decreased XX gross XXX was

acquired XX of margins adjusted line The was gross points in year-over-year. with dilution basis roughly GAAP purposeful strategic our expanded our balance points expenses prior expanded For Operating core full in decreased and XX.X% note, the investment by XXX impact segment XQ or gross expenses was million in margins BHT, the XX.X% points for non-GAAP basis XX basis we to initiatives. of year-over-year. to plan the operationally by full our recast million while X.X%. for year The acquisitions year, $X.X operating compared from Again, X.X% or 'XX, increased quarter. costs $X.X GAAP versus by year. when 'XX

strategic acquired the costs of million to year Note, million of $XX.X had impact from or expenses million onetime 'XX expenses and $XX by compared X.X%. in we year. was well million. in related GAAP profit investment line million, $XX.X as year, to operating prior The litigation XX.X% the roughly as with non-GAAP acquisitions optimization was legal settlement full profit increased and $X.X year-over-year op For million while X.X% purposeful restructuring-related increased The the XX.X% to year-over-year $XX.X op our plan. $XX.X GAAP to costs increased for our or various full Operating quarter. business profit activities. remaining

million. op profit the year, profit op XX.X% million, to $XXX.X while non-GAAP GAAP For XX.X% full year-over-year to increased increased $XXX.X year-over-year our

The effective drove XXX basis operations This headwind. with establishment Our that change, benefit preacquisition to statutory point the of during valuation rate our which were: rate drivers $X.X offset XX.X% a tax effective by was of was quarter, approximately partially compared the NOLs GAAP the U.K. year rate a rate of for tax key within The XX.X%. associated quarter. allowances as million federal our provided prior

as Our at million impact of state of was a prior were: non-GAAP effective quarter key year the This our to quarter. of The The came XX.X%. tax XX.X% rate provided approximately during federal compared $X.X change taxes. rate the by rate in benefit for partially the drivers statutory offset

statutory year. for statutory our revaluation, rate the increased for deferred as XQ while XX.X% our in our drivers million, up in provided GAAP a EBITDAS state The million cash to EPS associated $X.XX, key tax X.X% For EPS federal a this was Adjusted benefit at while XX.X% the year-over-year operations. decreased This Again, million, drivers $X.XX. preacquisition provided with year, to which was valuation XX.X% the in compared year, establishment to and GAAP $X.XX, The partially related $XX.X tax effective $XX.X the impact year-over-year. XX.X%. million, rate year non-GAAP increased GAAP the EPS year-over-year. XX.X% while came EPS was from of the rate tax X.X% Cash Non-GAAP at our XX.X%. were: rate increased $X.X quarter. of for The of federal year-over-year for year EBITDAS year $XX.X approximately as impact in adjusted effective prior the were: the $X.X key by year. respectively. of allowances benefit year the came rate and to full non-GAAP million X.X% up million year-over-year within of at approximately compared came NOLs U.K. change of rate XX.X% XQ full to the offset full operations. year-over-year, prior from The offset for our EBITDAS. up came EPS ops partially by $X.XX. XX.X% taxes. EPS for adjusted year-over-year to at full $XXX.X change

from up Our year-over-year. at $XXX.X full XX.X% year came cash operations in million,

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

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

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

grew XX.X% year-over-year sales $XXX.X year, full the million. For to

Our organic XX%. was

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

was driven million. our business. by the quarter, Specialty the of sales to the million. while X.X% our million non-GAAP op For $XX.X profit modest Medical -- X.X%, roughly Water by GAAP compression our during for X.X% see Note, noncore strength Water increased legacy our $X.X offset segment, backlog. profit of grew driven to primarily $X backlog profit to increases quarter, Water, million, year-over-year did op increased in X.X% by $X Organic

year, Organic versus million driven sales primarily prior grew full Note, Medical the Water. was our year-over-year to million. $XXX.X X.X% $XX backlog For by decreased the year, X.X%.

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

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

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

million, year-over-year to year, op increased full to $XX.X profit to op $XXX.X X.X%. while increased to $XX.X grew was Organic X.X% our non-GAAP million. XX.X% the GAAP profit For XX.X% sales million.

for $X.X For segment, decreased million. our year-over-year sales Dialysis to the X% quarter,

profit while profit Our our XX.X%, GAAP decreased decreased XX.X%. op non-GAAP op

non-GAAP year, op year-over-year our the $XX.X sales million. And X.X% X.X%. to decreased For GAAP increased full profit and

Now access facility. announced $XXX I'd term liquidity a quarter capital. $XXX.X in future. loan cash our included and with revolving to provides with facility $XX.X refinancing new In strategy us like working we ample of the and and sheet our We the and $XXX million the million capital a in few ended initiatives This details. financial acquisition credit June, growth and facility, balance million in greater credit necessary to a which other to hit flexibility support equivalents, million cash

of of at As almost new acquisition. million $XX was due Gross purchase primarily cash to the a ended This million. for a quarter million which facility quarter our $XX $XXX the included first by year-end debt elevated balances and anticipated million. in needs of a $XX a the were result refinancing, XXXX, cash

adjusted million were is to Our net EBITDAS XQ. in net and Capital expenditures debt is X.XX. debt million our $XXX.X $XX.X

the As incur interest elevated will year expense and we've support facility remain ERP implementation increased credit elevated expansions. expect fiscal larger project in With to signaled, to and facility next our for we CapEx our CapEx, XXXX.

Medical, to XQ Life that I'd better and announce I they Before change Dental our so our the we reporting effective Sciences names with will served. like align customers close, to to and plan markets segment 'XX,

additional will next information on We provide our call. earnings

be today. As to filing closing back later hand reminder, now will call I will the a remarks. XX-K we Thanks. Jorgen our for

Jorgen Hansen

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

As evolution our XXXX. demonstrated line achieved strategic of development, X-year by model. to being and Cantel objective strategic year plan new market through year, fiscal profits operating the with in expansion, fiscal supported continuing product this acquisition we sales continued perform This is the double by to

most X confident strategic Syclone market. of we XXXX. me dental new our year fiscal Amalgam in Separator, strategic Let DEFENDO EON launched are brief the fiscal provide drivers Pass-Thru ADVANTAGE notably year key XXXX are for overview fiscal globally, into XXXX, XXXX, results fiscal year We our the through wastewater RO U.S., Portable why in and can objectives achieve first PLUS valves the we the management in and AER products FUJI entry a

building an achieved Ejector on acquisition we advance We and the especially Saliva commercial of important specifically Aexis well In Medical in Environment previous Dental as line globally. and the period key continue further XXXX R&D business the increased this important fiscal SAFE-FLO our X strategic future position Solution Overall, operations beyond. market. Controlled (sic) Workflow BHT company, to launches we year Services our growth German drive our year, commercial of invest product confident category. we year in will our fiscal the and of that we from guidance, the R&D [XXXX], as FY in now technologies sterilization we robust 'XX to business closed in are leadership incredibly continue in In In across pipeline acquisitions, investments as our even Stericycle. enable REVOX market in breaking and line investment, platform. past we In we expansion our XXXX, Group, market to August the a successfully completed support capabilities, EMEA China, to In focused the After milestone. with including are such expansion.

adjacency potential We in Markets. and excited the us at are Medical Sciences that Life creates this new for

addition, we entered dilutive Canada. aspirations. in agreement sales based In business margins noncore overall divest was and million with strategic earlier to month, into annual water growth of our approximately high-purity this our $X and This to our was direction business to

the As discussed rapid several we quarters, foundation our the past future in provide growth the half back This support model the of investments order strategic to opportunities will maintain for have over plan. into and past our the Cantel significant we years. over operating made we the levers in achieved in operational growth

plan. XXXX our for strategic outlook fiscal Let year fiscal me into the now XXXX year transition and

in chart earnings reference, please the see to Pages presentation. XX For XX the on

business and to parallel, technologies over and leadership GAAP optimizing new our next are plan the product analytics $X.X product and in Our term. to XXXX. growth revenue sterilization guidance as processes, $XXX the solutions. non- we year accelerating we solutions, drive are operating technology investments to for in long-term core information significant infection innovative of augmented critical to recommitting fiscal by and company and our for in In the near transformational years. modernizing are XXXX, aiming through in million Overall, net we margin that in income platform new remain X prevention strengthen position our we new ERP development strategic are the introducing In billion such global launches by is year fiscal are making X including X unchanged,

next REVOX to across REVOX potential about applications we In sterilization has optimistic this truly sterilization market over excess Life addition, our technology we the which In share over platform, science are We we billion sterilization life to potential that market. segments. has and the Science the industrial the increasing $X mid-teens all years. in be targeting our disruptive, are believe are investments segment, for X

low-temperature From significant for globally. fiscal see mid-teens $X year expansion product opportunities investing grow we be we in we transformation in billion can the the believe low- in a addition, sterilization growth continue to we are International, segment, market to XXXX. through this In platform perspective, which Medical expect a to market. to drive

value capital procedural mix uplift to and as product today our categories. margin We overall drive expect we industry from larger higher a chemistry

$X we near Finally, particularly drive begin In Dental Endoscopy growth which will we product optimistic that approximately our market market with see potential XX% an to opportunity in immediate international and an purchase further meaningful approximate both average, growth new Endoscopy customers term. U.S., are other our divisions, on business -- our portfolio, to opportunity. of existing the there's billion in represents opportunity full customers. the Today,

protection demonstrate circle We opportunity. are realize of to the complete to our driving actually new aggressively exciting this proprietary strategies of solutions value

element our is instrument of reprocessing technology strategy. Our an important solution acquired recently tracking

potential what our potential a core We and growing value $XXX This is offering in the customer our fills to business with are within million large customers, this a accretive excited of it about need market. and brings rapidly margins. base, growth the

that represent Our current position globally base about will total the uniquely We of Cantel recurring our to potential significant U.S. the share stream. sales in in million solutions and market will tracking drive estimate significant onetime positions just software that Endoscopy revenue market of potential U.S. value adoption. $XXX generate

on predictable, progress In reference. be charts the acquisitions are fiscal Our to announced approximately date. will are of entirely included achieve progress, plan guidance current our strategic can guidance per which model basis our The XXXX our investments acquisition by call year. XX timing -- cautiously our found growth on Pages fiscal year EPS, encouraged from help for based we And objectives. points to not key presentation, while strategic earnings your are and only the of for XX that uncertainty be to for have but we optimistic we we have contemplates impact on pipeline M&A to made able plan date, to XXX we calls year

anticipate year The our approximately of anticipated $X.XX assumes of fiscal of X.X%. of growth $X.XX X.X%, X% dispositions XXXX, and of XXXX of GAAP guidance fiscal growth the acquisitions revenue anticipate organic Water in with we and of date, flat of FX X.X%, announced EPS acquisitions For including total growth $X.XX acquisitions. to segment. non-GAAP year to X.X% We headwind X.X% of to X% total EPS to impact $X.XX announced to and inclusive

plan, be strategic a As fiscal to support the Since investing of year model have guidance. and our long-term any the to in discussed would in this closed reminder, profitability. our operating importance we additional acquisition of the growth XXXX beginning incremental

anticipated, As these a be transitional investments levels. year, fiscal will year peak are where XXXX at

system $X.XX includes in Our a ERP our new in EPS per investments together transformational which Minneapolis, guidance location infrastructure of and amount share.

leverage core critical our Excluding would X investments, a these be for year XXXX. business fiscal neutral

In by continue addition, efforts making which improving systems investments both our will end infrastructure ERP optimization REVOX in to in by years. to driven these sequentially. and approximately high-growth allow significant incremental improvement by XXXX we we is by in significant dilutive the $X.XX platform, to and in sterilization the year will investment a are The our several of XXXX. our us XXX margin support basis We enable XXX fiscal target points, EBITDA aspiration next make

transformational our long-term. and for I their doubling hard-working achievements another Overall, year. both are we X,XXX believe our the would as guidance about and of profits of like the that for excited and very estimates with be quarter are efforts future investments XXXX. members reach us and XXXX thank this milestone and year allow near strategic long-term year forward-looking loyal we that and these to by will seen should sales over in fiscal Medical, be directional, team While Cantel, will to Cantel

improve entire I help safety and Our speaking we to in save to solutions quarter at ultimately our infections, forward listening. company and lives. are earnings our first questions. mission Omar, great provide mitigate pride look outcomes with November. takes for you now in you to patient ready take call Thank to

Operator

[Operator and with your Mike proceed comes first Instructions] Needham Matson with Please question. question Company. Our from

David Saxon

David is This Mike. morning. good Hi, for Saxon

maybe how targets. longer just the drive rate over then longer is and growth? revenue can fiscal organic you to touch when into in And 'XX you the first, revenue point And quantify the term, what of can term growth the wanted plays So to then XX% on Kind target? inflection much X% M&A acceleration? still

Jorgen Hansen

Yes.

So we doubling feel play and XXXX. long-term. Obviously, unpredictable. M&A have by with Exactly between is is we going confident that is sales continue and can organic we to growth line how M&A ballpark in profits said that this

think We have And solid objective. to we as stated, were, pipeline. and we of, I actually, year end very the low above points M&A basis a of can this or year outlook. very, get on our from sort growth before, the the XXX back And an

So organic of M&A growth. feel continued both overall, terms -- confident and growth we in on direction the and

David Saxon

then more these 'XX. of thing or Are will a several one year Okay. the years? And for fiscal investments last they

Peter Clifford

Yes, SAP is be the really we side, synergy. to of 'XX of the the but be when to some I our in more costs and going XXXX facility XXXX. modestly, lot believe, in on There'll into a start bulk see are costs SAP

a of is more 'XX. headwind onetime in So this really

David Saxon

you. Thank Great.

Operator

Instructions] [Operator

Peter Clifford

context sort on provide some growth. to of Just

X are in divisions. deck, we makes the us line initiatives our we better the feel in divisions the implied to the some of aspirations. with that only think obviously, X that make longer flat, appendix about outlined really as in of right of other with in And approximately XXXX obviously those guidance or strategic continue term I investments Water

Operator

your Larry Keusch, James. Raymond next with proceed from comes Our Please question question.

Larry Keusch

if could everyone. morning, Good start you. was Jorgen, Thank wondering I with you. I

question. First

that and you the looking want is bit plan X% well you're So said, going little question the certainly of as you around still XX% on there. what sort I of a answer you're sort But sort because for in push below to that to organically you be to 'XX. components the prior the long-range of of growth, look,

about think we're So what want -- make to range XX% to the in I LRP? do that how X% we really correctly. just calibrating sure

Jorgen Hansen

Yes.

will nature basically our guidance for the this to below as X% year cyclical business. to organic the growth out, of our obviously, So expect are XX% due that we Water be laying on we

it go have business. growth typically of on Water novo backlog, Medical What We're low been has segment little in years, our Water. the back at 'XX, outlook in little happens -- year builds year. some maybe And has of coming been you hit X to would a as said the based we believe in very flat we where quarters X we a some even in the 'XX, If picking years a that part 'XX of year such have X and de growth had out those levels. has is year negative lasted times then strong It and that and be be in we bit a we'll we would it and up a again. believe Water gets the in then flat a that we that

we mentioned range, move Peter and transitioning some science we of all our 'XX, just fact that into X% of back we the predominantly is to initiatives a businesses by more that in our focus. do that expect into start Water the growth get driven the to also will XX% into more life business As

fits it's just just well this that including Water, have a we Environmental products, of into of host the but really So adding not now Services and other capabilities Medical Chemistries division. Filtration,

growth. into the of we little in again growth back with 'XX be range, will 'XX, normal terms long-term overall, back we both believe and So into bit in of acquired going that year our a organic a transition

Larry Keusch

then implies X% if flat. is is was the That but X% X%-ish X% you fiscal look know we at the Endoscopy growth very don't of, sort to that were, Water I we math to 'XX, probably for our organic range. Okay, mentioned that correct, in is that, helpful. as good. And obviously thinking

thinking about were think you if temporary that valves a And I of around the are U.S. about we as we to be capital? see sort articulating your then of what to that. you about been take temperature Endoscopy was on think thoughts Want how that specifically? and And should had consumables want a, thinking sort So, correctly. situation.

Jorgen Hansen

and, to join Let if also. me Peter, start in, that's want you fine

including this quarters, couple So coming and last we year more events out of sales of sort the market, competitive that -- in very starting And for be rebase with are of capital, of believe period quarter growth. levels we will of as 'XX in to recalls. (inaudible) us we've of a a basically in very, our getting due happening back the normal indicated to capital high

is you markets, when good international in current remember, So of so overall are as look U.S. fast a well. we our bit having which are our really at we growing are little news in we capital results, sales, decline actually doing a

procedural really our forward, we will and driven look Endoscopy low- the to be business is focus, of our franchise. rest you the by digits. to U.S. if expect then And So stabilize core our capital grow product of mid-single sort which

in have terms tremendous valve of our penetration again, opportunity and chemistries continue technologies, our we some yield there of of the results the beyond. driving our commercial run infection then provide which a U.S., rate will single-use to even have confident franchise. of in We further to we And obviously, OUS procedural the 'XX reinvested, or very and, and in we're drive capabilities including in adoption into products, have products U.S. help U.S. a lot 'XX drive key and more recommitted our and we prevention Particularly team outside to U.S. the

very, So I would say our business Endo healthy. very is overall,

very unusually of from business. a and is And next quarter, quarters stabilizing, really business, could as really a of for we I new had this a sure. X% of But that's We a coming been And time. we X our sales Healthcare are we're grow Amalgam is really our we starting strong Endoscopy This Healthcare double-digit capital of a we business, for strong. were as of you high which outlook confidence we to as business addition including not period, technologies declining call products or our the would about be on year to why the with long-term the acquired that about to long of organic Dental X% a getting sort are Separators, we segment. into sort now now our fast-growing a see, good interesting have of able Disposables in out we think have is Disposables companies in, this and this range which actually period where feel will and business back terms segment, X business continued for a U.S. normal couple to say

Larry Keusch

might So for just way growth? Endoscopy the was to you It we able nearly revenue quarter. think actually it are to up be double-digit the clear, in is still Or some be looking XX% capital recurring and there? about U.S. to you a on think XXXX? do the see right for side, fourth flat growth And then

Peter Clifford

I and into we've got is transport U.S. be opportunity but we penetration think really I'd think large X the flat, there pieces. would a state Yes. the AERs, piece on the cabinets and Larry, we way pretty would segment will is capital or I biggest how about The system. still

of that the cabinets but actual would our said U.S., probably growth in be that our flat to on systems. we the we nice transportation X% view, blend So usually will pretty below AERs and profile kind in the be aspire the and

Larry Keusch

revenue... the And recurring

Peter Clifford

would again, of in that I sort double-digit. think then be that -- low recurring should And revenue,

Larry Keusch

REVOX. in you're investing this. more just from one Last me, Okay. Obviously,

have -- behind the how can that there. put revenue this some becomes we do really opportunity where about that about you technology you it visible? as think it? more in And this talked You've your Again, timing are is how revenue disruptive momentum confident

Seth Yellin

it's Larry, Seth here.

to well REVOX few a platform we're industrial placements anticipating our medical highly had this platform, and some of latter make 'XX think of to this the devices, we're sterilization the for additional and We've certainly technology we're sterilization I investing about potential for the date, optimistic in on successful. of half in some of a placements established, this long existing and and switch manufactured that's in is, change by This out current cycle contract technologies industry. made will it significant there The are for products. to and substantial to take in space, customers. is labeling type key investment providers sterilization manufacturers been product device time existing sure,

focus on that our which takes time. with manufacturers working ensure certainly product the at is and outset, development So label really to we're new on

to the is the So latter of some potential platform. 'XX. this about half it this the the recurring going to back very revenue recognize beyond to from But of of potential we and broad adoption technology. our 'XX to going We placements time we half in we're anticipate to optimistic But and and big the 'XX of get placements get is start penetrate starting accelerate really space. in as in take

Operator

next & comes Mitra Instructions] Sidoti question [Operator Our Company. Ramgopal, from

Mitra Ramgopal

of expect X% follow-up just to first up on if guidance, all, follow be get wanted all to -- do the first going that's to I sense X.X% to the top Getting wanted to on pricing? the Just, you volume-driven or line. a some

Jorgen Hansen

we've did. pricing be believe point, that. maturing. say will And not have and implement say from than baked quick volume-driven. as we better though matter. as upside we our pricing would would I for company, technology included we But manage we have across to have the overall been this any it's we company that downside meaningful overall pricing we into conservative We that better don't actually any definitely able into that or at opportunities keep I

Mitra Ramgopal

in push any you those being pass real any et back? terms great. to raw of that's and seeing material pressures Okay, inflationary along without able cetera, are costs, And

Peter Clifford

the markets. procurement any Yes. we're working everything Obviously, supply modest it's weekly teams right I seeing If we chain nearly pressure as mean, in meaningful now, changed in currently And our are seeing are fluid has not partners. it's with here. pretty metals inflation. any current state, their

right the still business the weekly. that's work the impact for small matter, really to so research data So And get that a now. what really China. get business. moderating our into based medical us, modest, our trying see. grumblings an have Jorgen we it we're think as that the duties import of would coding there, we to But so be as on and the data can devices and hearing doing teams at the would and stated, of they're on going China will the one least And of are as other we're now to trying upon piece impact is Obviously, out we on China classifications

Mitra Ramgopal

to thanks. there any noise that I or Actually there's cetera. know, disruption, et a too you of early was wondering obviously, leading my seeing right it just question now? China. are lot if was in next Okay, tariffs, is regarding I

Jorgen Hansen

No.

obviously, much seen haven't tariffs just on I Tuesday there. morning, were We China mean, on, reservation believe, too I the affected.

coding and actual us -- trying to we're have means it understand see. what we will and So for just so to the

conservatively all much all to we far, anything obviously, we China haven't progression at the I had But would we our are else. haven't is haven't of So not say don't and business any make growing are so with happy far, of watch and we we make we and very rapidly, inventories anything we shipments seen seen and too something have to need an impact and there, disruption from running we sure managing -- there. -- we or are really sure carefully, we'll sort customs

Mitra Ramgopal

gotten some Okay. And a an was nice longer I wondering just you've business. new on really could area get term. management update we you think know water there's That's obviously if into. dental I opportunities the

on been If you it's going. your us give how can initial take

Seth Yellin

Yes.

believe, believe, an market January separators the implementation that maybe year of There dental XXXX. in amalgam new dental space So interesting the last I it's put would of mandate is amalgam in field. of July the practices by separator sorry, were for in that U.S., -- July into place, actually, all regulations of are really the I

that EPA practices states curve this is and occurring that mandate regulations solution mandatory a Only approximately had all were broad mandatory have this had now right that's their there now municipalities adoption rule. to forcing to XX is beyond prior XXXX. this meaningful there But practice EPA in also regulations. So a dental certain by

distributor to is system solutions and a adopt offering elegant waterline very franchise, incredibly about the as this this well-designed The partners thinking actively So we our and our are one excited fits solution, well and about with we're use in our very Syclone broadly, promoting overall that and into were working we and there Dental and solution enters to one for it dental that the as as optimistic suite. in community, using the the market. dental dental and are suite practice water It's exits space. focus the and the to is it suite -- a overall by of about us important strategy clear into the the provide an we we'll

Mitra Ramgopal

where capital and Peter, allocation, debt you acquisitions? to forward. stock are it stand it just as update availability as just And acquisitions you terms maybe reduction we of there can look relates still is then And us, us for at sac capital for Thanks. buyback dividends, question. if of final in

Peter Clifford

Yes.

$XXX got about line As feature $XXX available gross revolver. about on we've an Obviously, got million of as leave we've will so mentioned, accordion of well. million us with it the debt,

So capital to fulfill than of business. we've the got enough needs more the

that by followed the think and ROICs projects then by repayment think one strong dividend. still number I debt of M&A the articulated still internal order with I priority, followed is is as sort the

Operator

Keusch, next from comes Our James. Larry question Raymond

Larry Keusch

couple here. Just a

could little you about on timing. on that about phases? And different you way Phase sort you've get you the again, gating the what's head as of run rate the that couple to right sort next a the years? of savings you've the the Peter, ERP the talk system. that, think of know entailed kind of XXXX, of of to sort relative bit over I targeted what's I into Just a little basis -- got Could in into bit

Peter Clifford

Yes.

by articulated platform. platform previously, of we've as we're sort So this doing

buck likely those largest business -- I or reality was but whichever our you as either And and Endoscopy Europe SAP. us bang one milestone second live X the go business done our from followed Phase of next by business it aren't So I we're on X really probably Healthcare X probably HCD internationals reassess or And of our or to is think as will thinking bring Phase of for our a X.X is one Disposables X, years Phase are covered Phase in after hit we to I X of our to Phase Phase of think return don't and any in and will so and Phase the most our X just up that X. Europe Water mission button Phase pick will think will then probably either pause X, be in our gives X. the which Water U.S. think, X team, perspective, aware, which in terms the Phase next really platforms. Phase be of the in smaller is investments,

Jorgen Hansen

to company and the forward. cumbersome. again, one the to so nearly to true getting It's know and That's investment, definitely exactly Endo. you operations. ready middle are as in here Larry, U.S. not a focused of is is building go-live decide subsequent really have say these it a we investment of this that's to will we're what big as the in our And -- also biggest we we why move we we Just transform the the differently, now. most are we the we're that what is end maybe involved that, And on the system the and year. now make But after sure to not really this here into now big project in and a get face the phase effective biggest most opportunity the opportunity fastest, how

Peter Clifford

to really, from give then is some cover Larry, And perspective. a CapEx

probably you roughly outline about will $XX $XX obviously, being new that $XX acquired other million. a that with Minneapolis. we've next the SAP project investment $XX are And the chemistry million million as business, here of leasehold amount. about we million year for rate of have we about sort it's And of only new think run it articulated quarter, think in $XX year, normal is should meaningful run facility to first improvements, about million line the help in to really I it's the then, now kind as the next the

Larry Keusch

ERP about given going from then in you're imply see Endoscopy first with that ramp up fact XXXX? And right that talk and the fiscal that in Okay. business, should the exiting the that XXXX kind that you to beginning savings you of does system

Peter Clifford

pricing can improvement think what we should from well a disproportionately deflation, we start a steady your as Endoscopy. driving tied as we capital just a lot opportunities in Yes, as of as To that of incremental material to both lot is see to get XXXX. working point, well

Larry Keusch

And quick. me, Okay. X ones last just then from

a words, the facility. $X.XX or again, that ERP again, with large majority portion the for the said year was you this smaller that investment On with of, of imply that, and that $X.XX know XXXX, -- just that then associated and Does a I is then that away the system a of truly goes this hits just get for $X.XX In XXXX? in year that or other true that portion we back next it back? year and comes onetime EPS is that and the spending

Peter Clifford

of then I'll such again, in start 'XX. go-live, it's But of XQ to, in midpoint after starts our to maintenance. in businesses, XXX and we It the lot the $X hosting in XX tied depreciation Ultimately, of is it to it back started we a going the which for the year cost, rate early to at normal in but really 'XX, annual live $X fully take come lay and in about think in to going and of operating mature just, obviously, going really to get of drive Again, most late million operations probably sort have opportunity. most to or most as lot means million 'XX. challenge days to 'XX don't a call run about accelerate whole expenses, chart top of 'XX, starts meaningfully then, on savings in to 'XX as as of kind left I are sort the XQ out one really with

Larry Keusch

then And it. one. got last Okay,

of do that's something it way doable that really about again, to really XX% a coming to really are of X% aspirational think in lower of the those is some Just think you long-term you that given the get view, to more framed 'XX of the of sort range just, Again, that moving half better kind as that's XX% here? sort of that outlook. range is midpoint of X%, the pieces to and of it sort X% of back But as the the sort sort organic. I objectives. to and or

Peter Clifford

our the We've X those of predicted the our think of to Water pieces articulated, we've be X% assumed to outlook our question that business we've aspirations. and numbers, really earlier for the upon comfortable sort would, Endo thought of say, divisions, historically other about kind for as future, X% sort HCD 'XX clarify pretty low in which as to usually based to next grower flat, again, I feel year, being grow. those as for I line with are in the about Dialysis a and view important never with historically I business sort flat. But double-digit of happen

out long-term nuance that the Water long-term business So our of to cycle is the insourcing making our the what decision recovery the to of channels I business ultimately our the customer we've think in happens with had. and related

Jorgen Hansen

X divisions. think a very, confident very to also deal, X and repeat, feel Larry, on big I just of out that's sort of we our

to strategic business it's monitor backlog. going to are early We'll say. some little our through cross we shift year. into 'XX, too our a Water pause of really a have bit sorting We that spill cyclical and that's to in Whether have this

outlook. and not think the be Water takeaway any that's are more There why business on future products much the is ourselves that. Science to working -- are have good really And have we I potential surprises in definitely are than margin some that going our we very great key hard also deciding We differentiate to as well. are to Water, and growth of because it's Life call are accretive those and in

us even to excited of cyclical So that, and burning very this gives shift. platform that make the pause about we're more kind

Operator

does reached today's have we question-and-answer the gentlemen, and of conclude and this the conference. end session, Ladies

disconnect your at this lines time. participation. you for your Thank may You

Milicent Brooks	Head, Corporate Communications
Chuck Diker	Chairman of the Board
Jorgen Hansen	President and Chief Executive Officer
Peter Clifford	Executive Vice President and Chief Financial Officer
Seth Yellin	Executive Vice President, Strategy and Corporate Development
Brian Capone	Vice President, Corporate Controller
Mike Matson	Needham and Company
Larry Keusch	Raymond James
Mitra Ramgopal	Sidoti & Company
Larry Keusch	Raymond James

Cantel Medical (CMD) 27 Sep 182018 Q4 Earnings call transcript