IVC - Earnings call transcript Q4 2021

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Invacare Fourth Quarter and Full-Year 2021 Conference Call and Webcast. After the management overview, we will open the call to questions. Investors and analysts interested in asking questions will need to dial-in as questions cannot be submitted via the webcast.

For the first part of the call, all phone lines have been placed on mute. being March is XXXX. call conference recorded, X, Wednesday, This to the Invacare's and I turn over Corporate Lois Relations will now Investor call Lee, Treasury, Director Communications. of

Lois Lee

you, Thank Katie.

To Chairman, call webcast. Leneghan, XXXX Kathy Vice financial investors and investors slides be President help Officer. providing are Joining reviewing Officer, Financial Senior from with Chief results on we accompany on Chief Executive to and we today's Matt me our along, an full-year Monaghan, have Today President and our and and quarter business. Invacare follow update will fourth created this

For SEC can will our refer dialing filings. be global.invacare.com/investor-relations. a we webcast today's during link can call at those to in, you to Further that our slide in presentation information find found

due you begins, future today's those to second to our just from materially statements on forward-looking And may Matt by webcast on earnings slides I'd make may company Actual the our during are page their about statements to nature, we I uncertain. results the of release. that, statements and are note call, expressed included the uncertainties. matters differ that various that, quarter cautionary fourth in like our today Before refer

flow, of and call our net the I loss, of items EBITDA as explanation cash on today's currency and to constant constant the slides Matt. now website. appendix posted reconciliations the to webcast earnings financial will the see over release in our on please in notes be call, related adjusted currency non-GAAP in adjusted that an the For turn those free SG&A, such will considered information be discussed net sales,

Matt Monaghan

our compared sales before navigate the reported X, a to with diligently is in improvement morning. backlogs prior typical to seating inspiring. proud finished the than good with delivered and in like strength who our strong how challenges fourth quarter, mobility dedication pandemic by strong of net the year, I'm and And which growth Lois. the to caused ending sales quarter continue to products, thank order net team note continued was I'd this where achieving to you, the on in higher mission associates Beginning was year. Shared slide work the Thank new remain increase COVID. intake, excess currency constant in Europe. particular Driving double-digit a on

to That flow strong addition, and adjusted primarily of profitability the and quarter from improve reflects we lower improved optimize continue Invacare to in sequential the margin product rising performance, of with cash expense, Coupled must result In favorable offset mix materially. a Overall, effective sequential realized adjustments the position price environment demand SGA for gross improvement improvement benefit the for success, to current and costs. operating operating portfolio free fourth action. said, improve savings cost long-term and our Europe to scale-based of EBITDA, customer This we expected sustained we synergies in model. and taken to and to year, combination persistent and balance of working expect and pivot business Asia-Pacific and some one that already continue under supply to our sheet. competitive leader, slide the businesses a the as initiatives steps the help challenges. profitable and On capital now-familiar more we've starting chain create note such X, XXXX. end, To we demand us

result balance flow chain aligned as conditions. and levels strengthen sheet and are efficiency emerged products, shifting trends business distribute and including we aligning manufacture, supply organized where chain in free a COVID; of that responsive; and streamlined to staff capital how to improvements, product a how the make optimizing considering result, enhance freight and staff be to and to our environment; working current expect the have we actions for and As from supply improving current especially line cash logistics assemble

quarterly of XXXX first benefit sequential be majority of actions to following the year where performance, in is drive expected expected low anticipate we of the a of the occur half sequential the the three pattern While for these to lower second will this our typical point quarter improvements seasonal year final is quarters year.

anticipate of adjusted quarterly to fit review, America our growth product mix we XXXX shift result, and velocity operating EBITDA first a expect, a improved as of the better part after portfolio As North We profitability. and positive see full-year model. to selections anticipate to that with of as return result sequential the expected revenue quarter

Importantly, patterns years shareholder margin, likely impacted full long-term clearer view year drive anticipated COVID. external after new EBITDA to employment we include our transportation the and After cash of restructuring that over performance availability, will in routes, be greatly improvements gross that and will competitive we cost changes XXXX, partner in will business, to for remain summary. have more for labor In changes and us flow two costs of These value. who actions create to adjusted and our have call free scarcity, provide now longer and financial plan improved make to duration, turn a detailed a stability, financial over and customers. fundamental higher and times. supply customer engagement, material Kathy I'll better make changes the a

Kathleen Leneghan

Matt. Thanks,

currency the unfavorable Turning slide fourth as quarter actions prior implemented Gross we and X%. pricing to by during of freight the material XXXX lagged higher of performance benefit was since the net year profit with both sales finished the in impact to costs. reported strong quarter increased constant X, and the

favorable by partially benefit improved However, higher gross driven costs. by mix, product the offset margin and actions of input pricing sequentially,

by lower working capital, levels higher stock due $X.X Free million, driven Importantly, operating by cash costs, compensation. inventory flow million lower typical. by and $X.X $X.X continued with income improved including increased improved million, by expense elevated to employment than EBITDA adjusted SG&A by driven

benefit million compared year expense. and X.X% X.X% $X.X Sequentially, and by and prior by doubled, currency actions the input to more the to restrictions of key healthcare fourth as X. of higher than growth Operating offset Turning as the gross a of improving categories improvement prior a result the of profit to in income reduced increased to all driven result Europe, In of year. compared slide quarter pricing reported net revenue was sales increases constant easing SG&A product costs.

to X. sales currency offset reported net sales Turning North of in net declines in In and currency seating products. by and fourth declined constant growth Constant mobility both was approximately than X.X% slide America, X%. by more products lifestyle quarter

temporarily inefficiencies America fully system As a of North further controlled latest operational The revenues our was ERP by impacted. in efficiencies quarter-end, the result the and deployment of the in were quarter, with expansion expected.

profit higher chain input financial recognize we unfavorable the variances. operating parts disruptions, As shortages supports costs, decreased to expect benefits led customer performance. continue will margin and matures as supply Gross system customers, improving more that engagement and to and

ERP the were previously-quoted of from we In addition, incurred latent to fulfilled operating small benefit rates. support software. quarter, the a early actions realized We costs at pricing though taken orders during higher activation latest even the

quarter products, X, slide all Operating mobility lower increased corporate related corporate was in and and freight net to Asia-Pacific sales decreased due largely delays than respiratory prior which fourth attributable Asia-Pacific by profitability in declines Turning offset for reported compensation. revenue, and and expense currency includes in growth for to other, almost loss with inbound to more goods. to seating constant offset to products year. finished SG&A due compared the the lower to the fully by lower employment business stock This business costs, unallocated Asia-Pacific

Moving to slide XX.

notes company took allowed of the $XXX had maturity which debt As and of sheet. XXXX, we financial new In of extended approximately XX, December nearly convertible XXXX on notes million with cash and of us improve of to million convertible to its XXXX. issuance the our total debt balance $XX XXXX, steps retire all to flexibility our

we reduce financial XXXX, higher working sheet. and ways balances capital As expect to by and supply disruptions. continue chain reaction improve to to to the to from results the manage always, balance caused we COVID look global for our In our recent

investments, restructuring We and the sheet are planning fund optimize to needs. may to business throughout expect we year, to which balance we have our further support transformative

taking and Turning Invacare changes or supply will narrowing of slide success. end driving no product In the the longer a improved which the chain items long-term These durable profitability. business meet XXXX, needs, actions and company for by actions, to which is those strategic organizational include portfolio year XX. position for of the customer

As the improvement a and to with XXXX free EBITDA quarterly improvements sequential the XXXX for quarter and year anticipates of effect. be actions company improve cash first compared prior to balance year expected the adjusted flow full-year profit the result, adjusted the negative, the EBITDA to as take

Act For is of adjusted the benefits. In actual excluding on guidance in based be expected expense of first half the CARES higher restructuring the SG&A to timing XXXX, the actions. on the is XXXX clarity, year the performance, based EBITDA

in compared be exchange a Foreign to rates XXXX. also foreign exchange headwind changes was to to anticipated due

as the earned variable in be seasonality, Finally, is customer in company the free with rebates funds in quarters, flow to half historic XXXX. especially line expected cash the but first from

sequential cash EBITDA. will free However, flow in improvement three the the the now in adjusted expects for aligned of the to year Matt. improvement turn quarters back the I expected with over call company final

Matt Monaghan

Kathy. Thanks,

make foreseeable XX. the dynamic at business reasonable and the high will on to and about over future. to to slide figuratively now to the still We're to conditions continue assumptions ahead impacts standing able Turning change. certainly world back ground, is look The look last our years, business two

successful perspective, that some of big end more enough us by have to though, steps We make take XXXX. will the

users have future. appreciate We our Invacare. a dealt change associates looking take too. all Thanks all to healthy. forward end be our to We're continue with community Katie? We'll markets now the questions. and the and customers Our that support broader to bright

Operator

first question [Operator take Bob CJS Instructions]. our Labick Securities. from We from

Robert Labick

portfolio. understand it SG&A could right. might and revenue what gross but I'm of means and much product this optimizing discussed So, walk Maybe that, enable look lower lower standpoint assuming from? modeling away a how just a how narrowing You me going what revenue this help And down should much you expand we initially, upon But is from and segments, margins how the maybe that's segments higher if forward? road? could at profit you gross the kind initially affecting? little

Matt Monaghan

or our all That's to. environment and when supply something able we'd to products. that's current the else the everything, balloon caused is and perspective, one to you the as in of be supply is that environment, the all it's XX And features colors easy options looking world. array looking maybe come It's if the not practically variety in segments. whole from all of hypothetical our as chain on easier chain level sorts like you XX multiply by of much, vast of and things of high a that and the the especially at that challenges in is, of really vast capital not just the with XX inventory, features deal challenges around have From working or semi-custom example segments custom having sizes so that our at effectively offered

from a big with change that's us working to effectively So, makes our what customers no provider the and better able out to us. of the offering, are it's XX things service Maybe lowers hypothetically, breadth moving velocity customers, tightening capital get on a but, facilities thing. the XX It going loses increases that to through effectively variety, some fringe of somebody offering. colors from up essentially, colors, to

Kathleen Leneghan

I in we would that actions revenue with place. modeling From we while or that the elimination decline that. perspective, a actions the have to would that pricing the put would product would offset add be to take discontinuation, because of

there And as so, the and takes both down slightly, maybe flat, discontinuations. be could on well puts be as that pricing revenue would

Robert Labick

the should and about eliminating we about You restructuring. talk size geographies? And be and the and be facilities? where this you scope coming? Or reductions? manufacturing again, discussed cost will incremental think they how overall additional, what some transformative Will Can

Matt Monaghan

Kathy Again, answer. maybe too. two-part a

of two of imagine current of centers, facilities, service sales that the trade, was even are that or years you at ago longer not our pre-COVID, they locations, what supply, offices, map map routes and operate current network constraints created were we all If in which ago. pre distribution manufacturing

easily. where so fundamental move principles how points either this It's customers close inventory, can the to different network or we in we're mentioned nodes are effective ports inventory the distribution So, about not are looking be as lanes Kathy entry, different does at And in accumulate year of product most when too successful. and of and Asia-Pacific – always forward. the where examples to of infrastructure talk avoiding in that portfolio, this and where remarks, available And reality bookable really certain go recipe physical easily these or unpredictable that [indiscernible]. expensive prepared We've calendar available. passage are the in crate you're that do look going we that not sea just we when so the revise how conditions, variety that there operate then flows to we to got smaller lately countries is narrowing a our current serve, in the at is smoothly

Kathleen Leneghan

there actions solidify visible the finalize But costs second to through very those, go process being restructuring company half we in of that we're as and will as XXXX. be to the obviously, the year. we related to incur in Robert, expecting start benefits the will the

Matt Monaghan

way the with in answer think to as Bob, plan. today making as those our internally We that that, see the other I Well, reported they're as outlook. is effective XXXX

Robert Labick

me, headwinds? kind trending, the and Last guess, headwinds not on handling Can queue. And raw back of one I Obviously, chain, would unique right? of trending? and supply volumes How's There update a industry same are your question. you headwinds, overall, How face you these jump share us Invacare, overall I'll how is competitive to majority the in are impacts lot for is the materials environment? How's everything vast be else. of give a the industry an doing? the

Matt Monaghan

I think guess, nobody it more inflation. But less I likes relatively is common everyone affects what's Well, equally. or

aren't recovering. the census, industry compete in be if maybe And fully arbitrage exchange a in one the there costs another, availability general that long in access would we working I serve, our I industry or is company and can healthcare But then relatively well there. with some than suppliers to we there's location markets Now, any labor better together. generally, facilities is customers who say, freight worse to manufacturing Maybe to everywhere. care relative term are or or that's access back value think but this pre-COVID

environment. have everyone's I or we the deal everyone. less And that's probably very more most same freight. trying dynamism of cost and really and is dynamic to components with situation, in And for now a the think right just availability

Operator

We from take Mishan our next KeyBanc. question Matthew from

Matthew Mishan

year start about of should there's in fourth want delta XQ a we where off XQ because just the kind sequentially quarter think first last with year last sales the between where ended you compared down. I to to them were big and How XXXX quarter? those

Kathleen Leneghan

We obviously, Matt, will first our that XXXX. perspective. quarter But some product lowest We benefits but there QX be mentioned same QX, see normally, be the earlier the elimination expect this would quarter in first would so year, because or would that anticipate revenue probably on a we we also as actions well. been towards call, from as the will same have product discontinuation. that drop That the Matt would that quarter more have, lowest. is a see would a on QX, normally taken. quarter But from our of naturally seasonality be seasonality for impact impact we in will lowest revenues pricing and

Matthew Mishan

that first moving the It characterization? sounds the take last just somewhat if fair a quarter you pieces, XXXX of like to where year. Is similar was

Kathleen Leneghan

assumption. reasonable a be could That

Matthew Mishan

kind Can impacted you talk where a quarter it? that fourth the of about the little you implementation and and more ERP are now in how in sales

Matt Monaghan

November things December and we higher going that kind normal of we ramping output up October, as to of customers starting as brough check wave weeks bit enough for throttle in products, and configured the that can would availability first kind and December of and, the a off or throttling starting is online were up non-custom order of took invoicing normal to ERP in to of of company weeks a have offset really orders fulfilled so output. right And light like the shipments live. and were sure make October The all are order do, two output, you three velocity little But appropriately, technicalities, right couple October the next that. it sure make implementation, this of wasn't and

the throughput was now impact. is and that is the really working. All functionality online So

from expect So, the here, we customers more already than to efficiencies using have previous system. grow system the

is we're encouraged helping I with and a interact by that, us think mid-functionality more So, of easily. customers lot

Matthew Mishan

understand just you what say some the help was seasonality that bright that improve quarter the Can typical the you versus to kind me actions in and of in is for the of that? I'd spot how implemented what much fourth that Europe. me drove of profitability

Matt Monaghan

that. through you take can Kathy

Kathleen Leneghan

profitability in A been savings the of fourth are SG&A implemented had had that seen Yes, benefit we've of in the financial results. definitely. nice cost previously, quarter. that that sustained and We the portion

sequentially it Markets We as more both well growth compare also to when to nice XXXX. in year-over-year. had open as growth, you seem relation

So, where quarter improvement chain rest at that earlier because we now and by of through of most well. year were just the versus by expanding as the that nice like margins have manufacturing the which historically additional of the volume as in in cost a side as the the well, as previously really operation the as but there their be house, implemented efficiencies coming well, impacted challenged within supply well growth fourth the They issues, we see improved continue but to were the definitely been and driven SG&A. can revenue margin, the businesses savings definitely

Matthew Mishan

Any on any FDA on guidance? quarter impact on the or did have warning that the And letter? update

Matt Monaghan

very a corrective are. clear what those action we say I of do all very our observations very actions course take corrections monthly normal internally. submitted we those update, underway seriously. think that and would We've kind know normal those updates need to on [indiscernible]. to needs FDA, we Typical to correct that of different We clear those We're and

Matthew Mishan

want you balance, the payable payable and from move managing to in look XQ to and there has next out reverse out you're call how accounts been some is to I and historically, into how but variability you given that that Lastly, supply chain the expect accounts XQ around you back there as anything that, year.

Matt Monaghan

both answer we Maybe that.

an working not has imagine to to it's on costs and total a the payables cash capital out five have much terms transportation the weeks stretches days have weeks the inventory physical end. gone by of port, on XX a in But, and of the easy the flow receivable lengthen container inventory out gotten out so side. inventory into and transition follow that example, period – crossing or into to converting time we four As needed ocean that the COVID clearly, back to for

normal So, I think that's kind cycle. of a

As improve. of swiftly know, XXXX, inventory narrower you'd improve products, that to would things moves the us velocity, those we system Kathy, if helps to we add don't more through selection I make expect that. in

Kathleen Leneghan

the receipt without of delays terms payment the come spot a I we just It And as And we inventory time. would on. up to down those think just lengthened. is AP to that's matching those continue anticipate relation is really is transit that beyond XXXX. significantly the into of come going

Matthew Mishan

And you can accounts the year-over-year with you think payable flow guys free coming down? improve still cash

Kathleen Leneghan

going I in that turn was cash but needs inventory just still cash, we sheet free balance our significant to have to say see on investment would flow. in improvement to

Operator

[Operator Instructions]. no further We currently questions. have

So, our team. to I'll back hand it speaker

Matt Monaghan

everyone to Yeah. taking you, this by And hope thanks contacting Happy Thank for three. have good a for all you time call Katie. morning. day. the follow-up I to

Operator

Thank your disconnect now concludes for Please you today's lines. This call. joining. all

INVACARE (IVCRQ) 9 Mar 222021 Q4 Earnings call transcript