OMI - Earnings call transcript Q2 2020

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Operator

Good morning, everyone, and welcome to Owens & Minor Second Quarter 2020 Financial Results Conference Call. My name is Joel and I will be your operator for today. At this time all participants are in listen-only mode.

We will be facilitating the question-and-answer session towards the end of this conference call. [Operator Instructions].

conference recorded this replay reminder a is for being purposes. As the now Mr. to like will presentation to call I today's turn over for your host Graves. Chuck Please proceed Mr. Graves.

Chuck Graves

you, to Chuck Graves, to on behalf we and Second Thank begin. team, XXXX Safe and afternoon I’d Harbor the & before like Quarter I’m Owens a Minor welcome Call. Earnings of Good Joel. read the everyone, statement

and which forward-looking response financial facts, of Litigation to the all call in COVID-XX Securities on statements of statements XXXX, and today to regarding results to on for on Harbor this These our note Please on focused of other Safe remainder the the press certain anticipated call comments today's financial our Our subject All are for of statements and statements this statements for be Act ongoing the pandemic liability the statements established performance. historical statements, the operational included are outlook from today, made quarter made are include second of are forward-looking will call XXXX. qualify risks and release. by intended that Reform Private uncertainties. which for are year, than the forward-looking

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

predicted, filings, intent and from Form results or Except and obligation its other these Stock to any rules of may the cause The of the in statements. as that the any factors our uncertainties statements. has New disclaims quarterly or Annual forward-looking update involve required statements Factors reports and Risk the Form explained the to any law expressly in unknown known XX-K company Report Exchange, of or some York its listing by numerous differ results section XX-Q. on on uncertainties Forward-looking SEC company implied risks forward-looking materially risks, and actual including by assumed

remainder second GAAP commentary are Vice on we Officer, those Today insight press these Financial the on in today, to measures the Executive in to measures Chief quarter our into will financial financial and President Pesicka, I provide Chief will who and year. on ongoing reference certain comparable President XX-Q. discussion Ed our information Long, will on COVID-XX the for joined in by and for am efforts about and our provide Executive reconciliations update included discuss Form and frontlines the most measures our Additionally, our And an the additional our report the Andy our non-GAAP of Officer, quarterly release, and help quarter financial pandemic. results our who of outlook the

Now turn start the I will would off. to who over to Ed? things call like Ed,

Ed Pesicka

call us the today. Thank for and Good thank you everyone, Chuck. joining on you, afternoon,

Before XXXX. would I the of operating & I half our to my and in humble I tireless on mission enabled by advance for This the start intensity Minor focus thank else our to to everyone during caregivers Owens our thanking efforts like get their teammates to frontline flawless prepared this executions on to COVID-XX. healthcare. us deliver their battle into clinicians, their customers first empower in against also like would frankly the remarks and for

a our our you review what quick areas summary I let provide accomplished. focus with Before progress me related of to XXXX we

since X to our customers billion of over February. delivered we've units First, PPE

while to customers, serve will these maintaining future. and significantly to to operational our base and the America's levels we around to reduce provide outpace intensity supply our although service two, output enabling into operating better one, us our us productivity improvements continue improvements and continues demand Next, to continue increased PPE allowing value increase expenses

of one quarter we doubled margin by not new strengthened adjusted to $XXX our procedures we sale an flow. and debts. assurance services. is business The Next, paid a net earnings This closed part second consecutive as expected provide financial for of the healthcare items demand our ramped examples significantly margin is financial our expanded of quarter prior just our to basis three of few one, year as we per flexibility It delivering fuel of second important It faster strategy quarter and is and the to well up quickly as per XX the points the by helped previous third performance following; allowing and also in investments the Two, as quarter made consecutive cash the compared operating product fifth share income share of distribution, strategic These This products and focus we compared adjusted elective growth. million and consecutive of three, the gross the accomplishments quarter. on fifth the just are quarter Movianto proper on generating and year-over-year down improved highlighted us not us to the year-over-year positive home accomplishments operating we XXXX. when than adjust second to our is quarter performance year-to-date. improved expansion. finally, pillars;

financial XXXX The reinvestment our operational business disciplined our for QX will and reconfirming areas In calls. we increased areas continued adjusted EPS and I further year full XXXX consistent QX our follows; little as in of now above expectation today outlook, to share addition, to focus by revised with and profitable our more strengthen foundation previous review in improvements sequential times we our five growth. per focus performance growth earnings are of earnings adjusted a guidance. compared XXXX for the our detail long-term two are double-digit

financial address immediately remains took exceed at at for levels this demand with unprecedented of and levels improvement impact along his color Demand the will to to continues optimize PPE into to a now the rest future current we performance will with Andy provide off actions QX resulting remarks in In detailed performance. factors some the drove start the PPE. the Starting that issue on quarter order of PPE aggressive record prepared year production provide me produced. the opportunity output for during and for numbers Let will improved and in XXXX. I with supply. what but look

realize record expect to full to our PPE quarter's output improvements levels. new raising QX of worth QX in these a and We

we levels our that unit manufacturing while expect above helped customer the federal gap However, PPE. has government increased will between to exist demand. America's still This fulfilling and the fulfillment based maintaining to volume pre-COVID for output begin supply us commitment

were the on leveraged it opened that prepared and and were processes our our in up. we inventory, Next, to because elective many procedures quarter our states assurance. forecast improvement for able in investments as capitalize in flexibility and we product to We quick change second we previous saw our provide compared teammates this

position to efficiencies provide flow sheet to strengthen able our debts income XXXX. preparation of execution down today paying adjusted expectation year benefits guidance service. are and as our on to to focus in operating balance improved infrastructure, and to in growth sheet. operational statement This double-digit the continued as double to Based XXXX balance has full enabled reconfirm investments we Finally, make in continue by cash well improved and deliver strategy, EPS us and we technology are our adjusted our EPS range

his Again performance of going financial we positive Andy track data will provide in comments. high established of prepared additional continued a maintain and will level financial record have a forward. We improvement

this second Operational discuss financials delivers on Now than benefits let discussed. deliver as have be teams with improvements. in performed Operational an me the continue the I the move year. operational of to from us way enhanced our ever-changing enables have to our customer faced just experience impressed more to and excellence financial unprecedented and topic; previously builds we trust. consideration excellence challenges

levels. at service and high remain to Our pre-COVID above run controllable metrics consistently continue or

creation efforts our Two Our include, during examples pandemic flexible customers for our Healthcare across finding sub-supplies in these testing our network. customers flexibility to within and Byram for recognized of to COVID times. our provide of quick solutions solutions services critical our business our hospital have kidding and Home storage securing customers ability the and challenging

such One, of in continue investments move final base and critical we expanding enhances needed Carolina over Now on some products location non-woven invest North PPE. to manufacturing at let integration our of me in produce discuss fabric as recent gowns, surgical vertical we've and America's to chain The used and supply our the produce control our NXXs. fabric to our the our made. to manufacturing topic laminated capabilities masks

Second, we of and output are for NXXs lines line. each our existing retooling increase to production surgical the mask

am operational finally off production we of we these lines. gown base as in facility product and our support pleased to to customers. Third, serve roll North capacity we investment to that we have new adding of continue in in continue better I America's and are and NXX begun production to resources solidify our Fourth, to say and install Carolina commercial lines our see today Texas

XXXX intense focus to to continue healthcare our expect dynamic year on to customers related mission be very support our markets. healthcare maintain and our but we home in intend hospitals, other a to So we

customers We address will flexible facing. increased our this accomplish are and challenges with solutions the production to

customers are demand of include future protocols for regulations the in belief new calling Additionally, we element will the new our this PPE. and heightened the key reasons be of increased believe for PPE use for normal of a The healthcare.

increased these seeing to compliance are We protocols.

clear made for have PPE. Our preference that customers it medical grade have a long-term us they to

markets. grow for identified and PPE healthcare, demand to have continue and expect international We in channels will to non-healthcare stockpile PPE finally new we

execution relationships lines up imbalance, to to increase output capture are With relating line new all to incremental as customer the these production output outputs the new profitable our fabric of demand trust capability. our and ramp investment non-woven output ready our and production expand optimize continue production built our demand we of strategy by foundation and the increased add to this supply incremental improvement of continued COVID long-term process machinery efficiency, existing production operating to for has lines to levels, the growth performance address for continuing lines,

significant $X.XX a Andy in EPS we'll in of for results. our Thank to reflected now are guidance increase reconfirming is confidence adjusted to per double-digit of financial over adjusted $X.X expectation you EPS for our share call discussion and the our and Andy? growth XXXX. XXXX turn a Our to

Andy Long

Thank assumptions rest will discuss and better and our for then you second I performance and than review quarterly will Ed XXXX. results key I drivers of everyone. expected our expectations Today afternoon good the for our financial and the quarter

our $X.X our net in on I increased share. remarks. July later time we pre-announcement to my to $X.XX in raising adjusted range guidance press discussing our per share we $X.XX income factors mentioned from release XX $X.XX guidance will we spend primary full-year As for the per considered to

of we First, closed delivering key sale pleased Movianto part mid-June our another strategy. the on are have in very to

unless today As a quarterly be the XXth comments operations billion and second in through the continuing with otherwise has in been basis. financial on will quarter discontinued reminder Starting the as top indicated our was treated unit operations a revenue date line, former Movianto $X.X results. year-to-date June the year. of personal business equipment account impact the compared growth COVID-XX with closed My elective the to to offset billion within PPE healthcare primarily greater global procedures driven back dating by This sales for change in pandemic was $X.X by business line and partially of on coupled our XXXX, solutions. revenue prior the protective or non-renewals home net

global impact previously second XXX Although portion virus we improvement points and represents of productivity the in an as operations efficiencies, of that expected. was negative earlier lower in a adjusted sales impact than variables; operating to $XXX net the procedures achieved. receivable or quarter had a began for was compared the XX.X% of in knew of procedures quarter as million and on greater over products and utilization a our administrative selling revenue basis for $XXX,XXX higher the decrease Distribution, business. by volumes prior the a $X.XX million to projected than expense share. was the second margin testament would was margin the currency program. key the and quarter per as to from the investment debt, having rates quarter we've million demand year the of Income a to was impact severity accounts in continued level and lower segment return of income $X.XX results offset base million Interest a We $X.X came elective on the of quarter less gains Gross foreign quarter efficiencies of primarily $XX increasing XXXX had be in than $XX.X from two the expense minimal headwind highly was prior the partially operating due securitization elective continuing of PPE. and the for lower quarter less result dependent second the The quarter. year is

third have earlier procedures in rate. mid-QX at in we increase mentioned procedures continued see reflected As began albeit increase which into and revenue the above than to expected slower those elective a quarter

unprecedented improvements products the Second, plants. significant in results the a to and the reflected for increase PPE PPE efficiencies based quarterly of manufacturing operating America's our output demand response yielding including by productivity our

I the second medical pandemic global will comes the $XX a for decline $XX operating prior discuss quarter. which impact due Sequentially compared for change offset the almost Now the solid in our of distribution business Starting by from by home entirely compared procedures was on partially in revenue primary solutions $X.X of and customer last non-renewals the results business. mentioned the the previously healthcare segment billion was second The revenue million Global to of quarter The by our posted loss $X.X COVID-XX. billion of passed year. COVID-XX segment an to elective revenue impact another on year. in quarter driver million of income solutions to $XXX operating growth global was related quarterly loss. the million to declined solutions with pandemic's

and show in a expected for partially due sequential segment. was increase in starting partially The sales million small quarter last PPE. impact Net experienced by the of growth in revenue lower $XXX impact was on is driven $XXX procedures. elective by non-PPE to second segment the increased Net procedures compared the to million revenue of reduction growth of the the global mix, quarter. offset quarter. turning income discipline sales products to income the This expense in $X and PPE, $XX Now offset to PPE in by year. offset projections the foreign elective year's sequential revenue product decline operating over reflected of increased increased $XX fixed the productivity operating approximately third commodity million continue with factors favorability These the Operating million leverage, the product a from increase impact small and are gains, trends by currency efficiency continuing rest in million. XXXX The driven our year. by of price in last for should by caused was of of cost for

strong of and our looking towards by effectively a Movianto and flow and time capital decline gains million year-to-date generated further quarter that and of a align period. operating us managed flow, profile. proceeds sequential the just over as invest cash and cash the our balance at $XX sheet $XX inventory We in consolidated growth working sheet reduction our our quarter receivable $X.X driven remaining used in This Total during represents as excellent million progress will debt level We a primarily improved debt a accounts in $XXX continue XX% reduction. quarter. enable with the compared retire five to to Now $XXX we last make cash on we to billion under to the at came quarter's sales aside restricted $XXX and the nearly strategy June commitment distribution medical execute from million and the basis, help quarters. debt business. representing first reduction future million over which for sale the across notes XXXX the our balance debt million a the profitability collections and remain XX With debt to reduction this of our strengthen portion to set

XXXX. to Now the outlook turning remainder our for of

share. when built and annual $X.XX momentum important to developing guidance that It we of a raising guidance. understand this to $X.XX comfortable to the we the a Given factors $X.X in $X.XX assumptions considered we to is range are EPS from adjusted our QX per

and for schedule will to America's that products capacity programs manufacturing on based the remain remain expansion very our strong the expect year. for of We rest PPE demand

also in business We continue. expect to strong home performance Byram. healthcare our

that greatest will impact both have our year the full the to In at distribution the investor improvements for of Finally, about rest approximately filed XX% future assumptions business. of of for SEC within posted half of and on of financial is whereas year. relations good in second negative expected our for on current Key the will be segments our and closing, segment. section the the affect assumed been continue earlier have website. the with X-K in to feel the elective the medical COVID-XX modeling impact This forecast remainder but we a business slides levels updated on of the recovery the is the solutions the thinking very today a supplemental reporting elective global form revenue the we've pre-COVID operational achieved our strategy investing in and our will remain impact to on procedures previous of procedures year;

a over growth Operator? double-digit operator the session. for we've Thank the begin will in XXXX to that with guidance result back earnings revised turn call continued the As to the EPS I and to expect you relative XXXX. to Q&A

Operator

you. Michael Thank question comes Instructions] [Operator Cherny with Our Bank of from America. first

Your line now open. is

Michael Cherny

going the so and even When Good nice afternoon. you've demand talk will right you said outside looking you virtually as previously? nice result delivered world some that to PPE as look you supply regarding so some At more medical point a where a you're the bit maybe you made about far. at forward anywhere outstrip about PPE you quarter, commentary you alternative the some the than of think now a in channels outstrip you demand of think little Congratulations need did environment supply. can more on you're

Ed Pesicka

Mike. Sure

I the First, will up and comments thanks front for address that.

of So things. couple there's a

going It's going demand's we people it's customers continue spend the it's a to that used healthcare that things supply. about then them a some talked the of more we midterm going often. the wearing Obviously protocols masks that for fact think heard to and of have time and of midterm, some and midterm with to and short the short in lot would changing in Let significantly it's it about I think both we've say, is long It's where I requiring. masks in I from things changed. me term. continue forward to talk going more the the regulation are world why outpace

going believe continue. we that is So just to

channels of whether use field. the outside whether some nursing, of that's dental the that's kind that non-traditional look the PPE of it You didn't

we the because university, which You been general population we've the those look delivering our we healthcare past honoring there's to commitments. of U.S. those. on aspect this think haven't demand into being frankly we think tremendous markets schools, international tapped our in outside serve settings that committed focusing academic Mike of we is other have been a and the just for all products to at is that the customers And we've and sure obviously to make I for can redirected that

that step us I also think beyond and I can Mike. the ability a take further it So provides grow to even then that

believe point or As also may medical people different is to right for have may that point stockpiles the you're whether the around the know at is you be the other that significant fact other in in products or balance that's XXXX that in we some that's see way non-traditional grade get time supply that in be we and some use. temporary, in with one that brands maybe approved demand time you not things temporary product there start of we

replace rest for in there's throughout we the material manufacture as going to great the make the make product Americas think want going going going and that's forward to product high stockpile their people be believe U.S. the United opportunity we it to opportunity we or that be of an another in the rotate and we too. with quality forward that So of to start out States

at. So looking that's we're the way

make this products We we We so aspect in control of other the this aspect The is actually what do. our of process good that. can we is manufacture. a

so future out then there those think in of of that to When are short period additional be the will imbalance to that we're stockpiles and over longer we reasons some consisting. there's markets think going opportunities starts midterm time So demand we up there's products. pretty non-traditional of bullish the it where why to replenish that's and balance see and the a why PPE on open we products supply

Michael Cherny

levers And taken the of you've about bit a been for strategy little of there you go having think be to on I think some or because expansion which as forced about that efficiencies multi-year forward have areas least basis? there COVID about been think multi-year you've you now that almost been accelerated you that of are and as any Ed could operational that some the that unlocked further at for a upon think other margin you have create

Ed Pesicka

do I is that get change things beyond about that experience side, do will production more drive distribution we and ramped has our talk great at PPE aspects. on to just longer been obviously more how just what continuing midterm the did again broaden how a manufacturing say drive me In In what categories to of our and helped waste think to on out look one organization, today. Let a it making I leverage? fixed levels we before we knowledge those to some addition was we're operating cost of of teammates things drive do manufacturing and us shorter, never is up and the differently we've mindset leverage continuing continue that our and to medical to to at efficiencies product term job two production

different that continue the on it. way the So no drive efficiencies and that's say XX the helped to customer, the but sense focused the business operating would I last of focused than same some it's the running we've pandemic for on things in us been with months

well really how as we raised to think it better. what can do much that as challenge things just did organization I pandemic it elevated and do our faster

Michael Cherny

you. Thank Great.

Operator

you. Thank

comes Coldwell with Our Baird. next from Eric question

open. is now line Your

Eric Coldwell

Thanks very much. Good evening.

go sense. I here. few So could try get was quite we some to hoping I'll quickly. questions a

levels in decline June? like for in April of exactly were improvements give year-over-year sense You rebound elective later or reliant what percent what the the year. talk from those us as look about the on rest levels you until the you went on a terms procedure quarter and a lot similar Could the of guidance

Andy Long

Sure question. Andy. happy I'm to is Eric. This Yes. take that

to that look formed we we on the operating very for the that levels. the that parts $XXX and we anticipation guidance much did of in and balance will be even for and spoke May with that's tracked on COVID the about terms in XX% business. that as I believe again the really pretty about and recall year through quantified pre-COVID in levels and we our for recovering probably a of the as in at of and recovered situation mid-May when lost remain at and year our sequentially million early May where a QX impact pre-COVID only around those was XXs negative by really the in primarily of affecting impact that in we potentially so entered as was and we in up prediction we that would some second that COVID had place expectation revenue turn is of the the of and year that have was in and the would you of would that back thought on last line impact time the procedures started but a So that's QX low some basis revisited making originally we pre-COVID on so basis take XX% And that business that think quarter so assumption in quarter we move full today really we we be our solutions the not QX much half half surgeries global exited on I through we the April solutions be to but second global even of so the terms track of of things output XX% increased say June now not the, or at were

Ed Pesicka

Eric this is Ed.

QX in be some next XX% in that time in about procedures that range those some the the would pent in there Andy to I are thing demand even year at talked or think expecting about of and eventually into at point happen. elective will up and QX other and QX, as whether think some time QX point that's

way modeled pre-COVID is So of it of year. the at XX% but now half right for roughly the levels the we've back

Eric Coldwell

traditional maybe typically digit really That's know then is and was for kind PPE traditional sense for at historically to a PPE solutions, percent I of single give revenue. you low PPE total helpful least of us distributor in on for mid on the Can February say starting XQ where total changed where of a of average it's that's whether as you were -- a revenue today? is percent you is mix percent then how your as and or total here July PPE a

Andy Long

Yes.

So again Eric. this is Andy

total percentage through don't our to through would and as PPE the disclosed continues but of ramp I we move So up I'm something we this at I business, point. that a say as obviously we that move believe the have year. sorry that's year as Eric

Eric Coldwell

growth what greater Andy, than ratios sense talk demand a look significantly Could today? us you could still you give dollar being size? alternatively maybe capacity quantify perhaps you growth a sense those on or give you maybe rate the about don't us if want a like us to give might on

Andy Long

Yes. detail we probably into Really specific get into that lines don't business. of level our within product the

Eric Coldwell

try should one Let more be easy. me one this

Andy Long

you There go.

Eric Coldwell

which how XX% does model at three Tax the I am an that to if looking updated XX% think quarters? next quarter, I'm XX%, out I rate the over play in of guidance

Andy Long

Yes.

of on XX%. to the the rate range tax in year So guidance full we will effective XX% issue

of net year is combination It's loss So in that just of our really tax operating full utilization rate in GAAP our that I quarter and low. perspective that's just effective know our guidance. a is the net denominator put income. you somewhat the skewed

should So it you kind year ETR with work of okay. overall to if skews but full the I think guidance be XX% you of XX percentage

Eric Coldwell

we out to three Thank figure you. through be should that flat there quarters if -- get some I'm it that in or we if the the could should math volatility the I'm to individual just be line to attention to? use have trying quarters and paying us level

Andy Long

Yes.

I have think that bit number little you the high. a feels QX

Eric Coldwell

XQ? I lapse more but was that sorry but I linearly just what is a I'm XQ be the if long through XQ in was day we believe I curious I'm of should quarter I there's I the similar brain in showing if wrong said first volatility XX% think or end using and to XX.X% year Yes. something we're but

Andy Long

I is -XX% XX% think so year low think that out that we're range [indiscernible]. probably a and full again in XXs for I QX modeling at for the in

Eric Coldwell

that. All right. much We'll follow up thanks for very offline

Andy Long

Sure. Okay.

Operator

Thank you.

with Kevin comes UBS. next Caliendo from Our question

Your line now is open.

Kevin Caliendo

Hi. taking my call. Thanks. Thanks for

to want a little the sort talk I PPE understand of bit about So trend. and

yet it and need you're do versus said currently way capacity guess like to percentage that shape You specs manufacture I form at that's extent, coming of PPE sort to PPE then source capacity the or you is added anyway. and do start certain in so there secondly any in of a is to what ramp your

Ed Pesicka

I will Sure that Kevin. take is one. This Ed

on here's little and So the detail a bit going to, let way me maybe you more we're here's this. about think just what PPE share

far quarter knew in second supply. exceeding we demand So that the we had

looked to support identifying internal NXXs fixing production. machine at each increases we bottlenecks gowns, XX%, and those our on for those gowns, bottleneck organization we XX%, and for took machines So line and in initiative able ran example XX% bottlenecks, were along isolation and single machines external by perfect we on each every increasing surgical XX%, we for get a went through masks with process through we our NXXs, and for

the what be did quarter that also example gowns. We that. during we on NXXs would on isolation production of an So increased

more use then being up quarter used isolation to able drive non-woven be gowns So I NXXs. added our those machines. to additional machine actually we the that's in improvement process we retooled output masks, We're U.S. material. say running and continue to used on in to producing some When fabric raw all those machines and the weren't the produce the and the gowns that raw material fabric have before in

what adding the with on supposed I'm getting existing is additional machines aspect through really So of those the get additional the received take government here's Then running. additional it's we that's those order we're in our months to up government impressed five six and machines output and facility from the Texas grant our in those one other machines. ones, it is U.S. with a fact five grants that to machines April, plus the got on machines team higher

coming we or those off lines today already. of have already of of two one product As

those the production up. That's into way off into are lines the product machines coming consistent get do years. by it's get we've optimizing next increase demand then coming running that with production those forward output going been are for of we how So place. those we Once the place

continuing optimizing that about that demand you the in that's of in impact machines a We'll as get machines the existing those all new of in of So QX full second then continues having what quarter it. optimizing QX partially those the of think full by impact and the now second come half and to happened year on. get to optimize increased a the

So one think that's just about. thing to

North outages. in machine don't lamination new material that we In non-woven in fabric we're or addition putting make Carolina sure to any have to a

We that ability material. to have the make

that's and commitment about on productivity, output, well the continue working way X. honor our the to the U.S. from So as helping government increasing will customers adding to order machines it's level We're our as We're maintain HHS new it. thinking we us adding have that XX/ pre-COVID we're continue delivery on.

about ramped, as to, through doing we're to really that think that how we've what way production the PPE how productivity as and equipments. continue that's will well additional ramp So

Kevin Caliendo

helpful. That's Okay.

also how added of being woven sort like then to five and lines running what you the existing have So it by there lines Is did of doubling any increasing capacity? XX%? two prior? it Is many would this the the you're certain? lines. five more total now that increasing adding capacity do many, capacity are how you're lines Is lines know and I that

Ed Pesicka

I'll just a increase. say it's significant

it to assessing haven't purchase We into X because continuing demand long-term lines we're from add too. the of lines on goes that commitment production and to Y-number based on continuing orders based gone number whether and

Kevin Caliendo

well that correctly end was into remember an I the the that year. if contract XXXX? as through understanding of there HHS continue Is the that's government, going to U.S. The

Ed Pesicka

third through quarter I'm the second XXXX. wrong into My of it's the third after, goes sorry XXXX. approximately it's little a it Actually Yes. apologies quarter through I'm of quarter actually

Kevin Caliendo

very-very and Okay. Great. helpful. that's okay helpful That's

around is think we So and procedures bit your guidance this increase worse, just a looking at about expectation when the little right?

Ed Pesicka

That's right.

Kevin Caliendo

up versus we half much thinking or in were Than in other well guess where management? about guidance. but get should guidance doubling basic and there increase is almost Maybe as I us higher we before your from just doing the of is a out it materially, of is would help bit it think in leverage the say revenues all say but the cost is better this little is cost better there's Byram was maybe it terms aspects, you second before a about of Is if PPE guidance. PPE how you from well as or

Ed Pesicka

Yes.

is, of through manufacture we our them good but other portion is increase managing home same distribution, still delivery those the at our in in the that to it it it our also fixed we efficient our of portion managing PPE but of businesses. is is we Again and from a it the much good of focus channels inventory products have a efficiencies a products we operating healthcare. all and leverage of portion portion those of more from ours those see of within then gotten then a cost continue So a in and lot distribute

medical of there our talked to in across a of impact earlier business. So businesses, it procedures Andy PPE significant although revenue improvement portion of other significant because yet distribution as operating we lack see is elective but the continue was in

Kevin Caliendo

Listen been the Sure. this very has on successes. Congrats helpful. all

Ed Pesicka

Kevin. Thanks

Operator

Thank you.

with Jailendra Singh question Suisse. next from Our Credit comes

open. now is line Your

Jailendra Singh

quarter. Congrats. good and Thanks

here, your improved margin Kevin's products giving did are in gross and with assumptions a out is in second at business, XQ how margin underlying sustainable this respect segment performance business just half products much of on to the the margin efficiencies it the in what the but EBITDA global up operational least? I trends productivity, benefit the Just business etc. following in on margin full guidance seems recurring from trends know you're year question wondering global

Andy Long

Yes.

is am I Andy. Jailendra So take that happy to question. this

about year see in favorable through and we move to base efficiencies operational and the and continue as we PPE Ed So volume cost as our increases, productivity of utilization and as the efficiencies fixed increases margins that's that's to and to and translate footprint certainly through per and margins going up the gross driving move we unit basis our continue costs of to and ramp EBITDA as down year higher production. talked

be a So to unit but level. I think on commented specifically margins trend right haven't we the thinking gross any specific that's on business range of about again

again for company find in that the can for We the at margin range the gross you that's supplemental the schedules XX.X% guidance XX.X% have total year. however website posted level our provided on and to

Jailendra Singh

PPE as any shift short entering well and Okay pressure more about and market then as as you as market we the thinking I mean in competition think are term how share about What arrives? any distributors pricing with that should long many manufacturers more term? as in well

Ed Pesicka

Yes.

that obviously to you comes think the and more supply start get to is I play when even when of equilibrium into demand.

get our have more being I of use our our into substantially We now product product able I think it's customers marketplace to and drive the some think ability create to really our the could we on ramp prevalent. and that up that think and can level stickiness. we become and to by product customary to benefit becomes out more right customers based we're get to going it put that production

the the example good price pricing acquire gloves. those had product. increase is We've constraint is adjust everything been seen to and we've pricing other operations second we've base to the increases. shows very on controlled of is for we those certain held and our what product style. continue built have where our got equilibrium going players that at gloves. places in we're from quarter We what of quarter go produce of that you other ability honored we I'm but is at get may PPE out or be and some it times Americas the and the our on go our manufactured products than we're will even structured able extremely those operate to in manufacture market and quarter. market actually pricing side we our the number in of a that thing the be where large manufacture demand to again. second facilities proud significant now our been able seen we PPE which we've you pre-COVID products that to through as different to we commitments but have very, the to price through at extremely is maintain had manufactured that to supply our light on less think we hold forward I to us of that products we have will a pre-COVID think pricing we've look entirely be you the take with about to items customers something may pricing happen our think I than We've entire makes The products able in strong to I of others. there even but share to facilities in push That's yes that but as had years demand did the our have We there we

Jailendra Singh

I in season? And made you about in selling and being in terms progress those one know last Are light of COVID. talked you when spoke back? of are one come some if there? Any you the time seeing guys I RFPs current RFPs getting can, seeing what active activities update you last delayed

Ed Pesicka

are. We

this the to getting, and are sense customers makes get not several We don't second now that I that say are have starting necessarily that are out It market. customers the type of in quarter. as that. had paused ever I were lot but were We the know if in and a reassess starting on used because to the environment that to we'll use to the back in of don't see but RFPs step of increase current ability some to environment I level we're

Jailendra Singh

Thanks Okay. lot. a

Operator

Thank you.

question comes with next Our from Barclays. Steven Valiquette

open. Your now is line

Unidentified Analyst

I to business in in Steve, still solutions because just obviously to with are guess forward Thanks or there? the be materially swings that just pretty revenue because global continue for obviously it Jonathan the it's kind that headwinds down global to wondering if back of going how relation challenged to of products about quarter. you moving is profitability thinking just to outperform outperforming global the and solutions expected was

Andy Long

to Yes. that Happy Andy. take This question. is

of looking primarily about $XXX then we about and that reduction the as quarter coming talked expectation XX% the as to low sequentially and the at point prepared my as in through million then the those a COVID continue our spot inflection ramp forward same thinking QX levels at about May ending levels. middle quarter with three June QX in to I of the So saw it mentioned through ramping up sequentially up headwind remarks and I

sequentially expect revenue increase levels. So we do quite pre-COVID sequentially between and QX although to a not but to see QX

is global the price at think in global margins, an solution the In products I revenue global integrated our And recognized and and how you using products business arm's of product are of drive solutions products relationships to but help part player solutions the the with business margins global the length that increase our company. in so transaction certainly of holistically affects revenue that really have overall volume channel but like that kind those to recognized business. that only individually global margins the kind terms sequentially to realize of is entire not as of really will

So about I that we to global incorporate have margins products think thinking holistically into thinking.

Unidentified Analyst

the XXXX? do for some and And glove take gloves pricing seen have kind move players Okay. and expect long of guys capability the to regarding then just market the there Great. other pricing of into persist issues back out come how of of some you you kind we into your to commentary as on you there, Thanks. given kind this price

Ed Pesicka

Yes.

you facilities something gloves, tough On gloves mine owning gloves. really to new understand of as turn a on it's that the as manufacturing of the really not That's you overnight. are in owners start just think I players category

get you've Just in something one years those running. and and ever up facilities been that's that to if of takes

significant is in in se think per be to don't there players going we the new of short So gloves. term number

we on facilities our on and think so seeing out we call I'll that those and we're cost it level more helping those products to our and base I of some can provide continue see possible. gloves where alternatives do continue to open with transparent we customer drive them of are very find to diligent but products product where on been pressure we've

Unidentified Analyst

Thanks. Great.

Operator

Thank you.

Robert with question Sachs. Goldman next comes Our from Jones

Your now open. line is

Robert Jones

color to that. I solutions, seeing more the Great. go to guess sales looks closer like of Thanks time I magnitude mid-teens lot you profit what's Is producing it this for and were line the driven? kind maybe and kind any things return fell profit Could just a what on the then global clearly growth you're more guess and and about what over year-over-year the bit guess little more around future? Profits mind need questions, in it driven? just than there? like follow-up of do you level maybe XX% frame driving see sequentially. of mix I order highlighted segment top a Any that the to disparity down of disparity between in Is to a obviously back recovery it talk importantly see your volumes

Andy Long

Sure. Great Sure is Andy. question. this

think the of in on in of business So profitability terms the about disproportionate the revenue decline line. bottom overall change the and the

is were that, about to that think in we knew that way some at procedures In I that time fact, point the going back. come

rebound. of potentially not to taking So customers the could did jeopardize of service we the response take costs. lot our out They position a our ability on and

as significant we a was lost volume there So quarter. in amount second deleverage the of

place on return think can However, the since that volume pulling as we upside. some with I with as pull revenue returns already through costs higher well in rates through are those the

volume products as into business the distribution earlier key of return do to what follow integrated again about the but mentioned holistically think medical being particular as So does you kind that's an driver returns profitability absolutely look again products global as holistically up. being I I and take in in more when will that at a global think I to question profitability the at more solutions on our it looking and as

Robert Jones

that as about distribution feel, relates now what's that digit know solutions underlying then but you XXXX growth obvious specifically directionally you're not for giving to guidance, expectation? And not EPS in certainly just I can talk it or maybe segment assumption double assumed just XXXX of

Andy Long

Yes.

the is So return into drivers XXXX key medical the for I of distribution going think forward post-COVID one volumes pandemic impact. of

or for expect revenue lost return year we be that revenue I some second recruitment from in of pent-up but QX makeup just we XXXX. we'll million of do levels the the of XX% lost surgeries So to half pre-COVID going some of mentioned to point at at in operating alone $XXX only had only there's not additional volume lose and and as demand

return be of will profitability volume business. a think driver that in key I So to the

Robert Jones

you PPE guess the in think testing. last That mentioned could know one relative then about area? testing could you makes we the play important enterprise? just or maybe impact think some but maybe the sense prepared Is just know us be I one the how to curious but kidding what talked and I I COVID an on remarks about I I the was rest of this and from size economics in help the COVID and would out opportunity about those how

Andy Long

Yes.

doing patient so don't and/or actually actually we that we test. supplies market. aspect creating testing customers way What is the for all needed for the they on is clinicians the that are can the testing play the administer So in

can protects a kits actually patient there we're actually delivered the we're nuance think So that way today. test clinician. tests a it's distributing the I little bit and be and the the it differentiation that not creating so

Robert Jones

it. Thank That's a distinction. helpful Okay. Got you.

Operator

you. Thank

Gill Lisa J.P. with from comes Morgan. question next Our

now is line open. Your

Unidentified Analyst

Thanks actually today. on it's for Mike Lisa

two ones quick here. Just

the following headwind or as Can business, revenue you distribution medical on you of the growth solutions of about non-renewals headwind remind and year-over-year the quarter. when magnitude first talked that being that impact? in customer So up global a cycle second the you us

Ed Pesicka

that. start We'll I cycling Ed. the is, talk about Yes. this will on

we the That's through plus it of going this the took year takes impact months will six cycle talked there's decision time tail be making their end until out. end to year last get gets from it a this by the nine of behind to year So we minimum at of the the next beginning year. that of into us months the bit to but bulk to year it still that us it then of and customer of a will little this is a through end continue

Unidentified Analyst

debt it. an then second from future million, to used the reduction. sale additional $XX debt talked repay for Got proceeds you'd And and you set Movianto about aside the

you target there? Just could your currently talk about wondering and term if longer where stands leverage

Ed Pesicka

Overall the significantly so XXX quarter Yes. five to quarters. over over in and been debt the or million last able we've and XXX million reduce

been So set under debt aside that now stands and again see, paydown. used X.X got the for as totaled another you XXXX just billion primarily to restricted mentioned and we $XX be cash we've million like correctly has

Unidentified Analyst

comments. Got it. Appreciate

Operator

Thank turn There no questions back his will to Mr. call you. this further closing remarks. now I at time. the over are for Pesicka

Ed Pesicka

working they on and have also today. me wholeheartedly first I So joining I all been fight because bit as opened to to teammates. let tirelessly call a also I for them of frontline and I COVID-XX. the talked the against everyone our thank little want thank I to up on want thank about clinicians this the those battle

drive to teammates the enabled support patients. financial us by really financial and financial really in fueled to live These a establish and as Our execution strong the to strong drove it as which that us operational they quarter. our that quarter well are mission serving record. performance previous and can our consistent this teammates help who has really This those strong

going growth. the future it's to really different remain and by provide our we to going sure I also make into and is that customers very look to high that really profitable best I offering accomplish capture future unique we're at demand in things that market into for finally expected long-term and the investing a As can level serve our believe then

thank to let next everyone call to forward the Thank that me you. with So and on talking look the in quarter. everyone

Operator

conference. call. Thank you the for This in your participation today's concludes

disconnect. now may You

Owens & Minor (OMI) 5 Aug 202020 Q2 Earnings call transcript