OMI - Earnings call transcript Q4 2019

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Operator

Good morning, ladies and gentlemen, and welcome to Owens & Minor's Fourth Quarter Full Year 2019 Financial Results Conference Call. My name is Daniel and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call Mr. Chuck Graves. Mr. proceed Please Graves.

Chuck Graves

team, Good & operator. earnings and to we of welcome I'm Safe read Thank statement Harbor fourth morning, quarter Owens before the behalf on Minor Graves XXXX like and the to Chuck a you, begin. and everyone, I'd full call. year

for earlier will issued your we included the the Our and XXXX morning. of full slides today on XXXX, I'd of results to are call release press be outlook section. outlook in which to all like this our on comments attention related call for financial in also year Investor and focused the Relations website the quarter our supplemental to posted our XXXX fourth on

call Act this are to than All and Securities intended from are XXXX. statements, Please statements note are Safe for Private of that operational forward-looking statements risks statements are performance. and uncertainties. certain on subject forward-looking These to of forward-looking qualify established by Litigation Harbor statements our include the statements this which made anticipated the liability regarding other statements and on financial Reform historical today call made facts

on available made. and current represent call based on statements are information made management's statements at Forward-looking such this time the expectations are

risks, Forward-looking predicted, results assumed may unknown involve results statements numerous factors materially known the from any or statements. uncertainties that to forward-looking other and and cause by differ our actual implied

New any Except expressly Exchange, report or uncertainties Form as these XX-Q. Stock or of section and some Company in forward-looking SEC update reports annual statements. explained risks intent Risk any the disclaims of listing has rules law quarterly by on obligation XX-K in on Company Factors to the the filings its The York of required its and Form including the

reference Annual on press the included financial reconciliations Form and will our financial non-GAAP Additionally, and comparable these about and Report most release we are in certain measures our to measures information discussion GAAP today in our measures XX-K.

New host A on will link professional of forward Investor been meeting New website look and has Company York section we and City. Investor an Day the for investors seeing in in York. registration you Relations in Company's the analysts The XXth May Wednesday, to provided

joined provide provide by Officer our Andy Vice Long, on quarter and and insight the into This President And the year Executive for Chief Financial the on also outlook. will and morning, quarter Executive outlook. Pesicka, additional discuss and who Ed our and our President results Officer, who full commentary I'm full XXXX Chief results and will XXXX our financial fourth year

turn I Ed this would the Ed? who'll off start Now, to like to call morning, over things

Ed Pesicka

thank Chuck, joining for and good on Today, my and the going prepared to in morning remarks. call you, cover Thank three you today. topics main everyone, us I'm

performance in and improvement in First, third consecutive XXXX. operating financial quarter the continued the for

COVID-XX solutions. on our on enable growth Second, double-digit we disciplined the foundation business impact supply established XXXX our will & in delivered in investments on third, reinvestment beyond strong of foundation We the manufacturing adjusted in And global and focus these our the to XXXX. and EPS XXXX. Minor and believe chain American-based Owens building

our these on the a me that three our we the everyone into March, commitments last of have high three of on focus and things. on culture to Let start customer; committed to with industry the we historical financial three, One, by reinvesting when business. intensity standards; I say two, all to reminding came laser a focusing our restoring customer improving honored on I'm items. that board pleased to performance changing have leading our and service levels level

I our income, cash down to will around flow, pay few a improved Now, financial let investments. these debt share related details items. performance and with start me

of trend I sequentially in call, earnings that improved XXXX. net quarter. our quarter continued share the Both per third adjusted every in the during throughout adjusted income improvement committed income operating pleased say and sequential quarter As income am fourth to

of Adjusted in These EPS along were effectiveness, in in is important year-over-year and also increased quarter. from only $X.XX operating certain improved $X.XX $X.XX to QX, not income and did with note increased QX seasonality operational the QX. improvements in to that driven businesses. finally adjusted by it sequentially, to revenue it QX, But fourth $X.XX it then income mix, to share net adjusted improved also per for

we year-end generated in typically not fourth the flow, a Moving to in to the us flow a due quarter, is quarter cash quarter inventory cash for positive buy. that cash strong investments operating flow

flow what broader million cash a lens, the generated we here And the from quarter. fourth is flow accomplished. in $XX looking We $XXX cash through operating flow fourth combined million. was with cash However, the our of quarter operating second at

people how planning to inventory operations, was So It receivable drive result collection, our on quarters? did in cash just results a the flow and a process improvement achieve few. and investments training, to positive we over three past in technology, these name accounts of return

capital to key We deleverage flow accomplished down this metrics. improved pay levels service while maintaining improvement debt, and profitable long-term growth. the sheet position balance just for reinvest cash working well The described and as us as improving our and enabled us

continue last a reduced and we've the key accomplished. what debt priority. Here We nine make our to reduction months is debt over

business the over Capital In totaled in disciplined in investments million reinvesting we $XX have in manner. been XXXX. a addition,

of Let customer growth investments increase me that provide profitable and provide two satisfaction. great long-term will capital examples

significantly and clinicians. nonwoven and us our critical used States to protect the of control first investment patients products products is and of as chain PPE fabric laminated United needed in The produce to manufacturing such supply enables gowns capabilities manufacturing This surgical expansion to masks.

segments in the investment home second has performance Byram, business. our Byram growing achieving healthcare. care investment fastest the one of This in strong health BXC The is enhanced capabilities assisted of in in

efficiencies value our have In to non-capital along that made to operating on we services improve to internal and operations focused addition with investments other and our expenditures, capital customers. investments solutions deliver

our will Investor examples demonstrations We at and provide Day. May XXth

provide XXXX will believe in continued enhanced we that growth. sustainable long-term expect We investment

move to me service. on Let customer

high focus on and strong levels, quarter service improvement. with continues. that say mentioned pleased we to note a continued Our to levels the back I'm last on levels service finish historical are our year I that now

remain customer on focused improve and service innovate. to further additional we'll and to drive continue will initiatives We

of that are health how value I we how pleased mission humble operate. more on discuss our current issue, focus am being change empower to COVID-XX company. day customer ideal it I letter our and values first into ideal our the the our value has values along during being Finally, been ideal every the the to which on values say in mission advance with The with direction intense and customers cultural to woven have provide fabric in our leading clear worked and integrity. later. that with Starting we evident see this will demonstrated the the I I care

industry-leading of and ahead XXXX. proud did board on assembling We to out mission built intensely To As a of performance XXXX. values that world-class continuous the did improving of the with year, initial be we many our levels fact can with focused team; in in customer I'm we the true standards XXXX my in foundation when to which we a say this organization March do, and and a focus build financial investments our service by ideal close and areas. in leadership long-term were successfully as operating expectations to historical on recap, on said the improvement; reinvesting we changing restoring north; financial our driven came rock for success. for business, what will to first on our going I are we reflect And I and solid by culture we our have efficiencies

Let move now into me XXXX.

While months we're major into year, achieved the two only have two accomplishments. already we

announced European service balance allow intention us our based products logistics business. our Movianto increase to while businesses, U.S. January, deleveraging our to focus sheet. will The and further sell distribution, core and investment in First, we our the in sale

Secondly, will allowing prepared we receivable launch to business, amendment success our of agreement growth the accounts adjusted position by strengthened double-digit long-term during improving his our Andy provide with additional beyond recently us This credit in will and to reinvest debt XXXX comments. our facility. with securitization details our for the profile EPS announced ability financial the provide and our

into off the our gas continue foot we pedal won't. we take As and we can't XXXX,

balance things. momentum business We we the great long-term several and in with challenges success. do to short-term have have we will XXXX, In

to aggressively work year. will customer non-renewals, the first the we impact from primarily of quarters mitigate First, of last three

do this and higher mix productivity will an wins customer shift business. We more through into ongoing growth improvements, profitable new

down generate to continue and will we flow debt. pay cash Second,

Third and growth. future for business finally, our in long-term success will and reinvest we

the not and starve are momentum We to gains short-term in business we pursuit of the risk established. going

service customer that ability efficiencies, we and We have of will loss to the drive the invest has proven a team operating improved with because leadership mitigate confidence customers. strong

clear. and from are services. with our areas; are have be for customers to forced looking looking framework. three our team. interactions and potential for for are for are than a and experience. of will current across we're products mix made customize into where goes based hearing not multiple and we investments being investments Unlike are mitigation in customers what is improvements rather our these Customers or looking looking the Customers conversations patient flexibility primary service Our clinician by customers technology, or a customer on Customers meetings adaptability past, not value. a do and with risk rigid many infrastructure, meaningful week is that There leadership and

investments aligned and Our with are customers want what need. our

are XXXX we financial puts from and As there at a a and standpoint, takes. of holistically look number

of expect of beyond of the on activity in to mix customer are financing income foundation the by additional we that in the investments, we impact result on these Movianto, believe provide color earnings strong and established customer adjusted Company and non-renewals combined $X.XX with retentions in expected a recent sustainable double-digit the XXXX. divestiture our XXXX. wins, will and range We planned portfolio XXXX with Andy the to efficiencies, associated operating $X.XX positioning generate EPS lost offset of be additional partially shift As growth incremental building outlook. the XXXX investments, pending past to

industry a me the of Before I been recently with headlines briefly wrap couple COVID-XX. I up, have and let in start that topics will discuss

support care seek the We chain and the are we & committed they supply doing spread to for of care important in global part the our providers monitoring affected closely situation. as COVID-XX We to healthcare virus. novel position recognize the and Minor's those stop coronavirus to health are Owens

we taken to is a the situation, fluid are this have While here actions date.

of customers. taking are our We care existing

procedures possible Halyard available our customers. to are existing We have the allocation product products extent greatest brand ensure PPE to adopted to that our

from when Additionally, noncustomer to PPE have have who products unable their manufacturers. sufficient existing providers obtain possible, or with been we worked distributors

of up to the PPE production our We ramped our products demand. meet have swiftly increased

to that fill demand positioned requires portion supply ramp takes and disruptions. our resulted is note our from Americas, that to chain others initial of that the of has believe this positions products favorably compared the Asia. these we a It in well capacity supply chain time a production located we to significant these for While from investments, are important that source products portion is which

and for to should chain allow supply more Americas-based Our reliable quicker time market.

are And taking finally, our care teammates. of we

global and have We health workforce of supply teammates of to our have our safety and the steps ensure integrity chain. a taken facilities the and and

evident very customers reliance patients we take and time. their seriously critical our As our us from on to actions, place take in care this their of that responsibility the

and constant support. to assess suppliers, lend customers, industry We our needs and to with government associations agencies are in changing and our our close communication

customers our do exploit with and to continue to situation. best will our the highest COVID-XX and integrity not level serve have the of We

progresses, update our will the Company COVID-XX financial impact of you to on we results. As XXXX and

the will retired our a with to to a effective in in of Army make finally, XXXX strategic Director members former new will with Mike is Bingham tomorrow. Gwen strong we additions like and Board welcome Board elected to the Board Co-CEO Prisma our two Directors. background join look to and and to General Directors U.S. December forward know would of of great Riordan, supply our Gwen the & three-star chain leadership. they Mike Health of working in Board. I was Gwen and Lieutenant And

I'll you Thank financial turn time the over call and results today for your for and discussion of XXXX. outlook Andy a Andy? for our to

Andy Long

with structure, our improvements begin for then full-year Thank XXXX. our you, fourth quarter I'll debt outlook on results, comment and review Ed, Today, recent of and good morning, discuss and to everyone. our financial a

treated purposes as in keep mind business our that now unit from results For today's of operations. please are discussion, Movianto discontinued

mentioned to expect we today, My in previously, close As unless indicated, on a continuing half the will first we this this comments basis. otherwise of be transaction operations year.

by the the for Products revenue lower in offset business, Medical lines. year. Solutions Distribution primarily certain discussed my prior for $X.X from in to will Global and net last in net into $X.X the The due primarily driven of Global comparable Distribution results of that impact to resulting was later presentation. net fourth previously and compared in incorporated year. was revenue three first our the partially in revenue reduction outlook quarter, billion For majority year-over-year business The discuss billion revenue increases is primarily change customer change by Medical quarters our XXXX The was of non-renewals, will I the affect

Net year million XXXX. each revenue over product $X $XXX in for in and than to QX result within Gross due in of XX% favorable selling XXXX billion prior with of QX the of in of administrative $X.X year, Products of the XXX XXXX investments, primarily Global in of improved business lower mix. our compared million basis margin the full $X.X was net lines current margin billion growth. to points help Distribution, Global to segment, drive expense as future was a efficiencies, the and quarter Solutions coupled expansion

Company and or basis, $X.XX for $X.XX share share. per basis, XXXX $X.XX income full $X.XX net share. On quarter income was currency the total million million was quarter full a fourth net year. for per adjusted per $XX.X for income a adjusted $XX was or the the year constant adjusted net On

Global Now $X.XX billion the year. full the $X.XX let's segment revenue for to in review was the results prior year. billion compared Solutions

the strong operating customer revenue $XX compared for was our income $XXX in income Global partially by the million million non-renewals health have a As drove home primarily driver was operating revenue, as just care, described. growth business, the lower I've offset of change. our I the continued change year. Distribution Medical mentioned, last result Solutions' year in in of to The

last by last annualization and Products by exchange an Net was Halyard foreign approximately Global and income cost $X.XX favorably incremental the performance $X year business, revenue the operating of impact revenue compared $XX the to acquisition, million of XXXX. to to year. to billion segment April by was impacted offset negatively billion on million support income revenue commodity compared of includes affected Turning was net was closed currency, our product this XXth price segment, $X.X $XX Year-over-year favorable acquired mix, million. Operating unfavorable foreign trends. partially which in

made the debt sheet discuss our like profile. balance our I'd Now to cash flow, improvements and recent to

million of operating the flow, working cash For and generated primarily increased year, by $XXX improvements driven we capital operating income.

of the of we we from Over $XXX for flow. the this, generated quarter fourth strong and we were operating manufacturer for to flu million last flow Typically, in three help ensure the quarters, for able inventory the cash our season supply in shutdowns as million cash in holiday flow continuity cash to customers. build as a Despite $XX isn't operating year-end generate preparation quarter. perspective

third of $XXX quarter Total XXXX. over to the billion the debt last of million $XX reduction a a and million December sequentially was compared months XXst, nine $X.XX of at reduction

several made financial future. to of to decisive for the we've foundation review the steps Recently, changes three Company. the we've me let taken position better strengthen Now, us

discussed, First, down divest made we used for The from as the this debt. Movianto decision transaction million. our strategic previously business pay proceeds will $XXX to be to

accounts an which our Second, includes we additional flexibility, to ability to enter amended receivable agreement credit other our program. into among things, provide securitization

access while This while by we business, I debt. which Finally, balance strengthen of of we in XXXX, to stronger balance cash, going lower the cost the even to AR result us further enable healthier up necessary providing invest in we have actions turn expect us use in to established will an to further we foundation our forward. flow, in to XXXX to this fund These securitization will ample which the allow debt. ensuring in in business cash providing investments liquidity. can footing us financial reducing fully which good should million executed build will, the that sheet program us generate refinance enable sheet continue liquidity with $XXX to again, on

our few website. basis, continuing in which which guidance represents important our outlook excludes expected to posted for guidance discussing operations a quarters summary XXXX, It's be clarify that for performance modeling like of XXXX which are earnings schedules, minutes a XXXX. four our financial found of on I'd our business to our can Next, our Movianto spend all on a for

a $X.XX. As you've range of heard from XXXX Ed, for our to be to adjusted in is expected $X.XX EPS

range. to of the billion revenue for of Medical impact the of briefly were that in customer driver previously line, the range. considered outlook discussed in our Distribution discuss developing is me with billion $X.X $X.X some is Let The the our factors top guidance this Starting main non-renewals.

first lost mentioned, quarters for As of of the to comparables year-over-year we've business XXXX going impact in XXXX. reflect earlier three the are

offsetting of service home headwind, businesses. our expectation health our this Partially is growth in care and

in have due been to in primarily lead times expect we realize While winning to continue long and business. growth, new and to the investments to benefits, take the time these invest implementing

to realize investments these and expect benefit line We beyond. in of the XXXX top

expect margin of pricing gross result XX% to ongoing favorable expansion XXXX towards lines XX.XX% in we mix terms of continued business In products favorable in and business. to from in XX.X% as of margin, commodity impact our the XXXX range higher the a

services. and reduction of actions as our how benefits in investments meet our continued administrative the calling infrastructure, While a in such our business to not we expenses, efficiency future range Distribution our service needs, customers see areas out we specifically expect by improve their of partially technology the a realize to you of to for Selling can the and offset year-over-year as

expected well for provided the the costs interest more associated facility. profile in our I with discussed resulting debt impact credit agreement favorable rates new our changes factors in securitization that in as our including amended also receivable accounts as forecast XXXX the earlier, Our from

During cash the $XXX generated from the coupled to through levels by our of XXXX, for the to we expect flow sale. debt proceeds range business the million further in received reduce million pending $XXX Movianto with

$XX As planned $XX XXXX. double-digit enable the EPS We to a believe million have interest will to growth deliver between we expense in investments the & Minor Owens year foundation for year. and expect strategic this result, beyond million adjusted built we XXXX

number that account of COVID-XX I event. not of does amount take to the and our the situation, emphasize projection into want impact for variables do given surrounding the uncertainty potential this XXXX from

stage to have out coming will As estimate better this over expect earnings a the the our weeks, plays on this our on performance we have QX the call. world of impact during XXXX

I'd to XXXX. earnings make also we the like comments a of expected as few about through move calendarization

particularly the in earnings year XXXX. first to XXXX, pattern to on in customer our results, we XXXX impact that be non-renewals expect seasonality our our continue half three quarters. the We we and fact to to to saw past of similar the be of second in in we will be reflected in experienced the stated, based Simply skewed earnings expect the as the

to basis EPS XXXX. of year-over-year also show on in beginning expect continuing QX begin growth a to We operations

to this find am you any with Minor. I is since the will you to the solid. Owens first business my and speak very since initial is on Finally, I impressions. here of fundamentals opportunity as leave joining core as you rock The are bullish strong team wanted the my & with company,

and made team work to flow am of great is lot has for to delighted for profitable the here. in the I strong XXXX and do, Of laying to and be course proud cash years growth there come, foundation in strides a

to begin the that, call the to you. operator the with over I'll And Operator? Thank session. Q&A back turn

Operator

from first with Your Eric comes Coldwell question Instructions] Baird. [Operator

is Your line now open.

Eric Coldwell

me? can hear Hi, you

Ed Pesicka

can. Yes, we

Eric Coldwell

morning. Good

to quite jump questions I few in. actually. I So, have have a back might

chain explicitly they - more that you as when what's point. COVID-XX - First more update? whether give do you're negative based your customers not your marketplace? off to I'm this make or know the have at best us negatives, to to at increased in you us you building - now just But service future in some into positives to disruption you that can't could you're potentially So and demand you best terms in guess positive investments what on can service guidance of I when terms point, early see supply guess and having this others of skew ability give the

Ed Pesicka

start Sure, comment I'll after, This is if add to I'll he Andy start. and and Ed, wants can.

think is, we to takes think are about consider. puts and I there it So we the way have several

just me understand you you, go can about through so Let are thinking those how this. with we

product is, So, the what first sale I teams. of call point

Americas. So have of and manufactured gowns, where those that Minor and sell needed - the Owens the doesn't have of able we the Distribution whereas or a and customer other now is manufactured swap have capabilities China Medical specifically, ability, we're that others selling a in manufacturing products manufacture PPE so distribution margin impact, because outages point seeing to products, impact, to we that does again business sale, over - a really revenue have by product channel, see we're that starting it our products the because people are we we don't. Asia, already at & to masks product is That distributing have the it in product manufacturing to net that but in a because material

our where and the a can standpoint. has the potential and incremental that from customers not stock-outs provide throughout That need an product we that We customers sales margin others revenue fact distribution through products incremental too - to both from a where actually are actually because us we manufacture. channel of seeing in products benefit

The it at the one this other is know long of situation how though, look don't to that thing side last. we we going on is,

have a a extent could the about non-personal to think because a in headwind are products consider product other and products. PPE others China revenue, our the besides fill that by really could factor are manufacture you some that and manufactured is we on got manufactured products, negative of those nobody protection here. smaller this the can't being on, that longer other even there goes and that we And within that's traditional then our don't is put take in to So that

we On around XXX between our gowns both in have share you, I protection and as traditional well we and up with as will facial and drapes. people the extensively, ear ramped up surgical loop investment have and XXX ramping additional standpoint, NXX hired facilities mask focused

ramped So up. we that have

that our We now more our have increased current has us. production cost. capacity this there high ramped We've the That we've a continues, equipment front-end too. in will up for upside equipment. through idle And had longer the again, be investment

So that this, upside there depending on we believe are potentially the considering. those we're of lot a length but is of the that factors

over me additional turn any Let you want it color to add that. Andy on to if

Andy Long

No, Ed.

very I summarizes think things that well.

Eric Coldwell

to another Great. go and with I'm going take it here. one

what from - other had related, well that around gowns. of so in with any out China also also - with bigger get Somewhat with your of graces opportunities obviously you've market has I'm back the to quality biggest that it impacts customers but public has and for their that of potentially your curious prior issues competitor the market coronavirus, documented created one suppliers, manufacturer? some in seen - good in to you but

Ed Pesicka

Yes.

issue other facial what's gowns even COVID-XX. So is related this on think I the with gowns, to and that strategy around our with understand to products protection important and

care. taken through our within to here You our know here approach an customers of what enhance, health advanced we've is have - we empower done, that one - we're we've mission

an So, take we integrity standpoint. are commitment we customers foremost, it's and care to, really who to of - those have going first from a

from defined which you're existing product we've your an basically is some going customers the annual amount actively to us, you're done your doing buying we the weekly hey, in Where on customer what and based you're on that gap, first. we're if going that it addition allocation said, can is both basically to to and is So, that. basis, fill existing get we get

again, making we're of that So we sure, needs. have commitment to committed, fulfill those those honor all our

since then, other I this, the the people doing we've that it feedback non-woven around positive level What on think we done that customers, And from produce again, in high we specifically produced yes, the way - we've need can doing integrity, is, understand and produce fabric are we've to we handled gowns. aggressively. is had material; of U.S. we some where the a help And we're

We products them both So ramp then to those we finish up products for months weeks that into in who those are Mexico and our is days time and those China. the Honduras which have producing substantially. market lead versus get means in

gowns to as us ramped over going That of of void continue by higher void provided by to on ramp as others. XX% a the the So it's with and we on created gown to have has by well flexibility fill production portion up that. fill the portion our a issue

share of revenue we're brand related our I takes, about picking up we just when the where were why to point to that and talked where that of That's some where able sale puts then brand, additional that. product some another is have change actually that is pure the of and replace with from coming don't we

Eric Coldwell

back to I'm great. going one then in and ask That's more come later.

get net But you the that did to just on. it's focus a and how a big of we What's think can were you that? or you to theme. us customer and not living the should one inherited issues, of when in join sense It's or the all stuff a the you some bigger I distribution, of the all impact many number, we're fair later. is, Ed, losses knew losses, probably firm we new if out there. give wins they trying on consequences three we the customers It's two lose, probably with On and - that it's I'm be maybe customers

the revenue thinking, nice a little because most the offset. perhaps better is, margin and/or is losses, And benefits low the Street's commodity you were like from shortfall losses to other because looks I And better hard of it extent for impactful are the then, I'm mix? that there these a and right bears is than losses on really and costs other these which the the is my question and revenue models sense of side to of that too margin overall high Byram how that to for accounts were were trying guess large is extremely profit standpoint? revenue people margin probably it a were overcome because a how just get

Ed Pesicka

piecemeal lot so a let try within to me a here. of out so it that Yes, questions question, little bit

Let time has service the And and really first of of and bleeding into the had substantial we bulk loss spent even And with second quarter, our it about right, third XXXX. related customers, poor the that quarter from you're fixing to the all quarter that me first talk revenue was in loss. substantially. I revenue changed

are that major tough. XXXX, far, quarters customer first has look quarter - first that customers. at moved those fourth If had customer base. into We some non-renewals that I three of binary. so We and So at the of I of lost the quarter of if pretty look - some

We renewals. have quarter very of even we this significant and fourth strong customer had year into - a had

past have beyond, and down We XXXX robust into than had continue probably to that things. a robust very we different pipeline of really the and more have, in going have a couple comes to

Distribution service improvement drastic in Medical is, in business. One our the

a quickly. solution to ability chain market are significant with provide of some now market the crisis, now very adaptability we risk. this recognizing the and we provide and manufacturing flexibility is What that customers supply has is think what mitigate different changes I that as

of of yes, right. I our would things improve started up for ramp momentum, those to that our manufacturing footprint, have you're the that service, But All say us. change all production,

multiple on nine could you leaving, and customer, it last a XX-month impact I first the quarters a to that you they're after transition were calls, talked of that. then fully they announced take months there year is out When to lag. The lose tough, customer for that up have as and three

the Medical value So Distribution we want our paint to I that's and bring. the around picture

As And but detail I'll little about driving I talked Byram healthcare in Andy about then talked efficiencies let continues to that lot in home go be business our strong. this I a operating business. year

So the to margin the expansion when you mix at businesses. relates look our within not just business,

a efficiency in Also operating margin different as So has each driven at product as business and customer SG&A. mix has the improvements in business, the that mix. operating well both

remarks is, we're talked in in close a about I'll is lastly, one business. doing the things then this, and And of reinvesting lot prepared on we're this the I

continued We go going and can are I reinvest those. to through of some operating to efficiencies drive

sustainable to and provide addition we've market on go-to already. significant instituted new growth. that that a serving In we model, are traction is customers focused which frankly, the And infrastructure, long-term gaining

of revenue margin of with and That's It's that the are the the in a around around it's those gross So of investing we focus is factors? what more revenue, what's been description why that's see driving the from where have SG&A, rates operating happened and as more areas description efficiency. going. higher it. growth really Really, margin both that's of improvement

I'll detail over that, turn with a maybe that little provide it and more to can supports Andy he So that.

Andy Long

Yes. Andy. Eric, this is

out to has. then first impact that million as But our that of issue Just this that that's organization annual how guidance come to change. a two, year in comment the is more that in so And of quick efficient, basis, to revenue that reacting when $XXX perspective later add to you reporting just we terms able in has performance probably reaction XX-K mind an million put of understand absolute noting just to to we're level - discontinued lean Movianto react value our quarter that. $XXX see as we're and I'll that become today, things Keep or where our the in you'll know business another more revenue. the operations. in that on an of full volume our terms be And of

or XXXX and change As revenue for about you'll about decline, ballpark share a resulting in line $X.XX - that the place normalized in drop that was the the and XXXX see a you'll global Halyard annualize you million earnings see of per our look of that you to $XXX top once took $X.XX. acquisition at performance XXXX,

change that see looking next in like see in a noticed can you revenue gross per margin more can driven we've And the noted, a with similar earnings with in the - a that share. efficiencies that we're the you've you've less, in single digit at far change improvements operation, you year,

for efficiencies So growth the it laid us think I well into really positions that going business forward. the demonstrates we've and

Eric Coldwell

Okay. jump have end, so let the in. I more a few might much. at Guys, Thanks I'll others

Ed Pesicka

Eric. Thanks,

Operator

Thank you.

Cherny with question next Michael Bank America. from Our comes of

line open. now is Your

Michael Cherny

need and and Andy. of bit perspective, getting box confidence to of some then But Ed since the so Day or the a from thanks might internally ahead Obviously, Good the bit you for Analyst to of be the all we are should for I the details the be and on related far. morning, myself see the and levels other commentary. a checkpoints control, give of but you you, for return that year I you need will dynamics? towards double-digit talked to base be of can course on of a market return double-digit the you looking over execution an to of what what the XXXX are you introduce growth in that in to do the growth in this terms beyond, the market, checkpoints that expectation the guess Since coronavirus about? did what checking and what see in outlier terms

Ed Pesicka

Yes.

new that whether and it's maintain I'll wins products start both in and care business, with a our our we've what is looked driving time a strategy amount our Distribution right of of aspects or to Home at go-to-market line, this our in and a business that at of continuing take in three retention various our one I'll as expectation our as So investments at was our healthcare, actually beginning made, to is Medical our Distribution infrastructure significant products. aspects as the and to it's organization. through well business, businesses, customers. our the four business to health we've our commercial is We've the service top opportunity servicing now, start the all rate see then invested in our business, Medical area business. now about bit where launched is spending talk one home that optimizing little we

And now, manufacturing different do where our of that classic they with through the that that home product "Hey provide & customer it's struggling, of base, business, the the customer can an it's business, So, Distribution parts one QSight, we're a solution things company. base health Medical Minor different whether and have the company, navigate or acute clear from person for put we whether the whole is whether the is we you work our all one services how our Owens it's it's complex loud PANDAC." became care, enterprise together care whether all

that flexibility down wants, around person ability great their strong can and adaptability. one to the foundation understand have as service their That with goals we with sit again, their around needs well as objectives. We and and that provide customer the built combined every day,

And custom specifically, several of two during availability of and - recent have our that performed outages one of both being of because did the put sure surgeries products. able couldn't to together customers, that crisis in kits the make to around SurgiTrack we were that existing some product services certain leverage not days our be PPE

internally that So looking we're at, to drive that's is double-digit growth. what

The our the and year lastly, the you second operating keep service myOM our initiatives for that look within And thing but the drive in at operating QSight. it technologies. things during to continuing about internal Investor is year like that. demo to profitability way QSight's we're improved business. customers. is look metrics branding been enhancing myOM's investments efficiencies another Day. technology, are we're drive Those on and the we'll at should managing actually we're and profitability operating and at during that That's both driving talk We'll help around, and to it to

Michael Cherny

I the the I that growth as this On all dynamics did think - factors return Understood. into of missed updating on the maybe you in that how And on FusionX and apologize. the forward? performance mention maybe to then, going you comments, and anything in

Ed Pesicka

in FusionX on prepared specifically remarks. talk We the Yes.

is neutral looking I on at the impact in I business. or FusionX way FusionX looking the XXXX net more are we're type the think at think way we of a

took at risk space that's pretty willing We a with look But FusionX. overall hard willing structure was benefit to on continue contracts a accept - shared to level well also - we risk cost we as were hard those at on the fluid FusionX. right we and/or look what and risk were what a what pretty took accept level what contracts. As - did as now it's we we our within FusionX

our that XXXX, business that in it be impact net comfortable that business. we position a So should neutral we're on

Michael Cherny

thanks much. Okay, so

Operator

question Jones next Our with from Goldman comes Robert Sachs.

line Your open. now is

Robert Jones

XXXX, investments Movianto for here, But guidance? can to that are Great, 'XX about the I obviously year-over-year thanks relative the then XXXX to we operating I in operating continue things know sequential just guidance to that going improvement a you lots income the market, this basis, around how If is at think mentioned that or some trajectory performance the pressure will things operating of about you that a you trend some out guess I just parse income questions. a to operating in go put back if given think trend and growth? on there's on on think that and of initiatives outlined the the the additional for we internally. some adjust throughout the like the in of - the on XXXX guys income have I embarked look for should you of income

Andy Long

characterize way think this I - Yes. I is yes. would the No, Andy,

that take one. I'll So

as impact through business. and the of off year, we characterize be investments we're we correct home some the first throughout three itself of of of - And to And year QX we investments the for continued ongoing result volume, of sorry, as business the natural on to QX move the down into also to the impact return quarters we a in we making the about particularly for in business. the the care our lost will QX get then accentuated the of QX in really as and we'll in then, tends in business then, it will business end year. the lapping lost move as see we be and And of impact as normalize. just way that health QX, that the to would pay again, to in the a that I'm begin line. remarks, looking prevalent in and manifest But growth be described then, the the the the top will year the QX, that see the in and step prepared seasonality, in terms would be So move from as a business reset historical

also describe those XXXX. we that will earnings the all the in kind pattern XXXX. to continue of think of shape I We'll for in curve show had that

Robert Jones

Okay, free give specifics come maybe been Day. Andy, You And saw in anything didn't pretty highlighted are But that late. about know flow? - it the in cash to it's this we at you and thinking relative on that's you XXXX? I what then, you helpful. Analyst solid flow free of cash was know How will it XXXX on

Andy Long

nature. working believe that believe to The be activities. improvements a that flow with job to XXXX. tremendous has gains those I words, benefits able other but continue are In not those. those sustainable operating to we'll and done Yes, on in I only build from back, do drive give capital think cash long-term we'll in I team think able be we'll not I still

more efficient. our we've accounts will the receivable Some that in and dividends of collections investments made terms making pay of that actually

be that paying which in $XXX anywhere can and our from million, balance into $XXX million as that of sheet divestiture. So, deployed from the the that. about we million to to debt and expect expect I of flow flow our improving overall you down of from the to cash come $XXX could to range business And be would into ongoing mentioned, commitment cash both proceeds investing see net Movianto

Robert Jones

one, market guess helpful. volumes. ask in super such a hospital point given that's more given the of high qualitative then just level I vantage could kind it, one it's just and And your if into Got I that focus

know hospital that and do say the as heightened during really heightened those procedures the periods Do the avoid about in the you organization of incremental periods, things of volumes within setting. overall think hospital talked to like seasons noticed you in you times in of influenza actually way, folks you you of maybe or would those suspect past, volumes maybe flu that about like see elective or more the As bigger bad kind you've a demand influenza? folks postponing in

Ed Pesicka

products variables tough that here's we it season, first this demand products. really, - substantial flu COVID-XX the have asked seeing. by these Eric, I about is partially that this that's suppliers flu season we where don't are But know they what we other in mean wildcard made and in then Asia demand some be severe if market. a is we've right is here we And which manufacturers are or variables, the other a see the more increase know, to the believe seeing other their year stockpiling? we're China what partially is and We because of seems is, for get because stocking now You see are flu-related in issues and out can't was because question These that think because the them. seen. what We're little are we and was what you true are have

protocols allocation times, run our and When out a have when you rate see make stock then in a have to complete X somebody we put to the X a product of run we for of from normal from sure to a rate others. go to don't normal customer certain that's

then channels So others existing and customers, care with we then balance down we're can. the existing other on of that that focused continuing that's customers our to excess why channels our of out helping our and where aren't traditional all shutting allocation taking to

associated is are seen again protections, outside face for but the gowns we it's our that we what not seen PPE have purposes, with of traditional see we - manufactured products non-elective So, drapes, visits, apparel. those slowdown, a whether and are surgery, have business, slowdown not normal elective that. traditional surgery, staff that We have seen that spike

a very, are would nothing spikes have guess very PPE. but for other to that I products with and anomaly be in that demands China in small produced sample seen, have The we do

provide too." So existing and that customers. protocols gets that and is, to protect "Okay, nice saying inventory it again what's produced let order the me at it we down strong that go customers to sure in to China, my here's to make So our can are case products - in we increase continue have looking shut it's

manufactured then extends competitors. let know me of kind related out data some believe products answer we get products, have by we've then stockpiling. because and that in small is are China, it's if seen and that guess, I this period in manufacturers question, partially say case people is time." what we're And of other continue, because spike PPE "Hey, flu, a of significant your seen we in to - for can level then So really them the partially of demand long see of a but which stock advance, And base points I these a business in seeing just

Robert Jones

helpful. all that. really That's you Thank for

Operator

next Our Instructions] [Operator comes question Kevin from with Caliendo you. UBS. Thank

now is open. Your line

Kevin Caliendo

How I the what talk terms securitization. great. call my a that cost Can Hi, your for the quickly little Thanks talk and bit facility? little you about sort to any that Are it? to is of taking want AR you talk a restrictions that Can a around of you that deploy you expect bit capital? around deploy that? how everybody. just in bit little doing more of expect to there detail about

Ed Pesicka

And talk Andy Kevin. whole Sure, let recently, specifically go most our just able part details to we together through it's that I'll and that. was through and the everyone's around of aware that obviously, debt that that, With were put realignment.

Andy Long

Sure.

reasons million of securitize the million one, $XXX secure our and of that to - the amended to provided our credit behind I liquidity. the $XXX us - of chose AR it to provides AR, to be; agreement up to an cost we with lower which into So guess would program enter securitization really raise us allowance agreement

favorable with versus just existing with again maturity us debt mix our So And profile. us it does it our debt. helps a rates provide

couple to of would the portion earlier that timing, of expect terms I months, [ph]. QX over In over deploy of the and next QX

Kevin Caliendo

Okay, that's helpful.

losses in customer losses, talk industry? since - share real maybe middle there the three customer first March? like quarters been little gains meaningful is year. in Has terms the any really the bit quarter of a shifts about or was into Can you of the of In everything it customer the seems fourth

Ed Pesicka

well And traditionally really we a really stated now significant earlier, the of into amount saw I change move would the said a the to ability retention. up business, I binary in quarter first into really quarter Yes. you that to here. And fourth say, get start I to pick as starts as

we We lost major haven't - customers. any haven't

robust it We have I those more our it's renewal, coming will ever pipeline are renewal is for most advance in of tell customers retaining when has been. our than and opportunity you for up

lot the amount a have our that of on with we think to of I has focus do customers.

I the improved to has drastic with value this availability the of to part to significant people understanding the the leading think has that and service I our back think value to we think I that bring, we lot and also a crisis standards, manufacturing also level, a - do industry current footprint. on amount continues of of which do product COVID with have, show

know time and you, those talked RFI experience talking an incumbent, continuing makes times, lining process to window them for as also providing in take too, up the a makes that clinician skill an that that an not strong that drives out set, of you're almost your to are and All improves recognize - of we year long if interim value. the it's it And the especially mitigate when significantly RFP goes us. they to get I to things, it things and and show then could multiple risks about a experience value two offering - patient need the from drives customer it a really letting help award,

are. and that we process see in right significantly now So process where in we

Kevin Caliendo

enter this And, on little bit, have you hospitals. in like have slowdown for yet demand quick - from one just you touched the a people have in kits have any but I - seen into to seen end March, we and surgical one as yet

we're and you're all understand going or regular the procedures surgical here is I just think one the wondering analysts that for in procedures or how elective we're of behavior consumers be is week procedures to of patient kind impacted thing. and wrestling any by if seeing and last as trying with things to two slowdown

Ed Pesicka

seen now. not as have - We that we of not have

Trays Procedure that whether our seen or not yet. elective have substantial Custom we're that is us we a showing non-elective, decrease seeing CPTs not for it's So surgeries, in data

So only now. I point data as right the of that's have

Kevin Caliendo

Okay, thank you so much.

Operator

with our Thank Eric last a question follow-up you. is Baird. from Coldwell And

open. now is line Your

Eric Coldwell

much. thanks very Hey,

maybe of Just couple a ones. quick

price I here On pipeline I'm conversation opportunities. say market supply know that don't and - couple confidence? the to if you times but you've to the I allow I for does but know and it's shift fully, and to of the current curious, early, one chain disruptions there, one service want mentioned that turmoil from of does of future a out notably integrity

Ed Pesicka

to we to backfill small capacity them we outside it's health or Medical with us have they've have those and thirdly, to of around outside with us committed to they've channel, it's let current channels, everyone - I Distribution that Byram possibly Minor channels our to one, think, that And is committed from have. those always turmoil me we're manufacturer. the work Yes, the those our anywhere whether them, relationship number distribution whether own know or aggressively that contractual that distribution foremost, they're value products we are we'll going having then channel, that for made customers sure whether home us, our this, products look, committed our just Then we are think - I replace distribution and approach obligations channel where and Owens we working and stock & we've whether one we or the it's out with it's direct care whether to it's getting is from it from our share specifically have our they of have, our on, understand on that - in other are you gotten significant help to we that integrity first of important can. product and and it's their

our to honoring is it's have not and contract a it. thing - pricing, other we've we The commitments are levered done whether we IDN GPO

We have not bullied.

have making of from any would we been that I integrity goodwill our customer around here help to serve humbling competitors look, our patients. clinicians work care value industry, is done gotten we Have is, around But to our sure the customers. sure believe not And what we service ultimately do our ultimately because to have our and significant it's mission we whether is so? cure We really base. ability we're with make or serve can in health pretty our and to us focused

have have sure time goal yes. to dialog I say So, of make need we've that we common we're handled would that's it. Has to to patient in need, way changed? working not impacted the any the and

talked QSight four not our may supply when months I to our make domestic manufacturing changed. if dialog supply our sure or ability the quick I it our You leveraging same had ability, about ago, would footprint, chain, has technology our is and footprint, today, of manufacturing that chain, not and know, flexible be our our three by our impacted have our have weight to about talk our customer has SurgiTrack some that as and

now is as base. potential customer That our recognized value both and base, customer to existing

around it. So patient. on we how that's values the about operate really with the way the we've I would and attacked our leading answer it it focused Eric. That's That's thought we the way way

Eric Coldwell

leave going I'm gone to Got long time. Thanks it. much. We've it a there. very

Ed Pesicka

year foundation around I closing a I rally now. values it. helped a just on the call, completely I'm about it's here heck the organization our rally year. We in I'm do since about pleased couple and built that than we did the a and our excited customer, extremely the progress the joined. this Watching us appreciate really a in made with strong excited. about make I I'm We've excited let we've rigor be can to mission, been what I discipline. I've we on. focused with foundation. lot we a I'm around we of we and grow the it, It's XXXX quarter. - comments. going a did heck were of just that's I time. of get said last think would me at thought guess, great been a further so another proud point

and have we'll a leadership and in results, how knows that deliver knows We of focus execute great beyond. on XXXX place team in to how

on are long-term. We focused clearly

focus. not going short-term are We to be

invest long-term growth. long-term profitable We actually XXXX. to double-digit believe the growth beyond business disciplined are provide in We to in reinvestment going to continue of EPS

of So extremely a are business. excited accomplished, and what we as we've where going where we're

many May going seeing team team. leadership the portion really And see to the give in Investor entire the of York. our opportunity XXth forward last It's you New I thing, to look or to management Day the in a good you of

In addition to that, we why value why they have some and of we the to investments we've believe made business. - the show added and why why

I to the New everyone. look forward seeing the next talking thanks Day to in May call earnings you at XXth and York. in you. Thank So, you Investor

Operator

this gentlemen, for Thank conference participating. and Ladies you concludes call. today's

You disconnect. may now

Owens & Minor (OMI) 4 Mar 202019 Q4 Earnings call transcript