OMI - Earnings call transcript Q2 2022

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Operator

Good day, and thank you for standing by. Welcome to Owens & Minor’s Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instruction] I would now like to hand the conference over to your first speaker today to Alex Jost, Director of Investor Relations. ahead. go Please

Alex Jost

everyone, second Hello, to Owens the Thank XXXX and earnings Minor’s quarter call. & you. welcome

that SEC in during discussion statements. we reports full for Relations the XX-K about factors of section and Our on and measures, comments risks Form our along on these statements certain a this XX-Q. Investor projected we as on financial and materially risk measures Please the release. on information Please these which call today, Form section uncertainties, annual will our report reference including today. will of non-GAAP financial quarterly be are filings and measures our the of today’s risks description forward-looking comparable in supplemental the addressed Vice the our outlook XXXX. from Executive press Pesicka, quarter slides are our posted Financial I’ll and President included Chief refer the in our here I’m results will over press may results most to by The call subject GAAP Ed. now our and note financial release. matters President Ed our which to focused Long, and reconciliations second cause these website. Executive Andy of Officer; joined press Chief to are turn the Today, make Officer. included those uncertainties, to as XXXX, implied to release well The call, for and Both with for or actual on the are differ In

Ed Pesicka

prepared quarter the on and I call on you thank cover current market company. for prospects our today. bullish second everyone, us performance, you, Thank morning will Alex. remain long-term Today the my in I Good for the landscape, the why remarks, and joining

second our with pleased extremely results. quarter am I First,

and by improvement Our business is manage our of operating result deliver continuous & and headwinds in lifelong differentiated to waste, eliminate And continue chronic that unique integration vertical quarter Minor with Owens Direct certain ability dedicated our with limits the three, our system exposure this impacting our teammates following. in our model that business a through to patients supporting conditions conditions. space, the others. strong macroeconomic driven to Two, efficiencies, macroeconomic provide productivity increased in presence the of One, Patient performance improvements. our

the conditions It of to While high a that every able level. Minor is quarter. & as even once very customers, on value providing our as of mission and the the over business highest our our of focused into performed second system for external service continuing the day, with Both our results team have challenging company. and our clearly We at fabric strong which woven the operate remain we the visible demonstrated central at possible are become We again both well. to levels. businesses more were report to Owens

two profitable means, products but key are as by second returns. benefit second approach putting will to sake, to This of to focused has past years. growth’s growth businesses. and together the proven our medical not be service, in and the wins industry-leading This our consistency our share with the our Products we to the given quarter, unpredictability especially provide quarter, segment pay-off, service reasonable for high over Services we faced growth our we again base. customer quality Over value continue degree once as with a in work take distribution optimize continue interested healthcare This intently adding and customers that which on was from are Healthcare provide the the value

can with markets, and our for our begin company. sense about we we towards customers the go to smarter what our makes drive how combined more segments. to business system, efficient and get profitable and more most product to the When portfolio, continue embedded much business We

the higher higher Direct Patient towards turning revenue segment. recurring margin, Now

market to with revenue the with continue is in in Direct the impressive outpace year-over-year. constraints Apria growth business Patient apnea supply Byram grew XX% revenue Our mid-single-digits, to forma On organic growth segment which XX% the sleep products. basis, consideration particularly a our of related pro

pleased a are be achievement. also We to start of Apria synergy to integration off the successful and

we and incremental well that of to will products As we benefit fill as the from sleep from synergies, our reduce as orders integration backlog. increased look receipt the from to patient remainder and our deployment year, the of expect of acceleration growth suppliers existing and QX the

discussed things the level, absence played Now, many and QX quarters, cost expected PPE the of a environments, at the such ability to of and planned out glove previous the navigate as from benefits. in demand looking high reduction our as

industry-specific products core the as customer, my issues progress, reduced sequentially down inflation, the that prospective is new the acceleration current headwind pre-pandemic factors higher QX is than staffing And shortages, as reason volume, these conversations lower experienced main However, our to the the our In driving the this downward with quarter, to and global interest result, procedure adjusted. The new outlook I chain diagnostic also has financial as have Procedure levels. customers trend resulting the specific and overall for through and procedure to a to low expect mentioned in rates is such constraints due that of experience lower we been meaningfully a moment ago, hospital continue are product throughout from demand. a year. industry due progressed the macroeconomic year accelerated These acceleration and volume macroeconomic in for increased included these U.S. The stronger volume dollar. issues, and and headwinds. we resulted including critical constraints issues. constraints and supply and volume

quarter drive the would take reduce One, productivity it over emphasize outlook, and to system Before to you costs. specifics continue the the through points. our turning deploy to & new Owens Minor and of business I to Andy like following to we the

headwinds. macroeconomic headwinds these view, to accelerating ease. In will of work our As eventually we minimize the the macroeconomic impact

improvements into However, system & provide with business the we that and value our the make remain future. Minor Owens will long

as and the resilient, procedure volumes ease, hospital is unserved healthcare the overall existing industry-specific flows and system. will normalize Next, through demand headwinds

excited our we And volume to are it as on their be products, conditions. patients macroeconomic We Direct and and wins. this customers lifelong serving of Patient chronic finally, the will who new recurring capture customer our conditions regardless with ready the revenue business about opportunity as driving existing need is strong, consistent focuses with

years, on the for I the reflect past profitable and As long-term have company we success growth. repositioned three

and a while operational With the to our capitalize the strategically continue Healthcare call regaining Services confident a service. these over Andy discussion in our financial preference business strategy unique for focused successfully high to on during of And Owens challenging put, overtime. to challenges blueprint. Direct with wins through I organization continuous Andy? Products shifting home excellence, acquisition quality EBITDA meaningful and I turn of consistently share value and unpredictable our Simply revenue our executing and on results. our demonstrate drive base, to that, manage our Apria, care. we We Patient and system ability diversifying & business will Byram have above finally improvement, leadership and the the chain, positioning by done towards our segment. delivering in deploying market to long-term am through strategy, help our Minor in the of time, segment and this improved effectiveness productivity, customer Strengthening growth and

Andy Long

our then Today, Thank second discuss and performance our everyone. our assumptions quarter, to key and the you, results Ed, and morning financial good outlook. related our and revised year in I’ll review for full drivers expectations

second our with results. start quarter me let First,

Our from a reported quarter prior or basis full revenue revenue first $X.X year. contribution the was in margin the billion up of to was Apria Gross margin $XXX The million growth points higher quarter which from prior up slightly sales, the from have year. XXX of profile. reflected XX.X%

the unfavorable was in primarily of full an inflationary XX related the on million $XX quarter, of higher million operating selling Apria by had stringent than driven which the the impact control the was expenses financing from addition was and Interest was higher the year debt points translation acquisition. cost Apria million offset $XX expense to this $X.X first and basis currency $XXX and partially or gross million Distribution, pressures, of margin quarter. for the administrative efficiencies. ongoing of higher that prior given quarter expense Foreign

action of overall to quarter change was rates April entering certain Given early second swap. environment, by of took we proportion the effective last in year’s resulted rate XX.X% non-deductibility two-thirds in rate expenses. an The interest of primarily tax rate the This from debt to related compared fixed rising this borrowings. The XX.X% rate quarter. into increased our acquisition in approximately our

second of QX million last Current $XX quarter EPS compared was $XX to net GAAP was net the Our compared quarter a income adjusted of the million share. last $X.XX Adjusted income in $X.XX in million to $XX or quarter year. $X.XX year. for was

to second need and the dollar currency translation, by you basis. currency strengthening quarter adjusted on had in that quarter our However consider results. on quarter had a foreign foreign in a U.S. unfavorable the an The year-to-date reducing of second impact on an EPS impact the $X.XX $X.XX, reduction

million with basis $XXX of by XXX was system. $XXX as Services hospitals. our Healthcare year. of million lower $X.XX the Services lower X.X% and of of pass-through partially glove reported PPE of $XXX.X $X lower unfavorable continuous supply $X.XX chain million basis Products in both the expected. million, billion improvement had approximately efficiencies for billion FX demand to result decline glove adjusted On Healthcare I a quarter versus year discussed. The pressures a labor second cost operating as Second was capacity prior up as versus a quarter of Along quarter lower and and shortages, versus business Along cost inflationary prior margin last of benefit, was operating revenue segment a Products compared offset procedure of an year. with result with million. was just absence the in points constraining This EBITDA result volume, a income generated and $XX.X year-over-year. impact the volumes accelerating by the

the currency QX year. Finally, was unfavorable million. the $XX million versus And $X impact income FX impact revenue of on was unfavorable year-over-year by last operating foreign of

Turning Direct to the Patient segment.

constraints. for the starts million. On growth Apria was revenue grew from $XXX million a compared basis categories. million XXX% $XX and the Our other to to the income recall second increase year’s Acquisition-related Byram XX% X.X% quarter all organically year-over-year. major pro second Philips track by last of Apria the in delayed grew operating $XX quarter despite to was continued double-digit forma supply from of customer an Respironics on-boarding revenue product chain with quarter Adjusted strong our expectations. across the synergies net

the cash sheet flow, and structure. capital to now Moving balance

cash Free This quarter by defined operations to flow was year-to-date. EBITDA bringing million. and million of in $XXX $XXX expenditures million from year-to-date in quarter, debt cash we to completing generated total $XX We million payments consideration final capital net $XX $XXX the million as million acquisition able the our addition adjusted reduce $XXX of to the planned quarter. in QX were in less

net back on target to ratio our to three in two We’re the leverage of next XX times months to our months. times track to reduce range XX

continue QX, headwinds drivers year. view and in $X.XX. that year. As his the net the remarks, in reflect $X.XX track. impact of midpoint Apria million and for of on to Apria expect adjusted expectations guidance. revenue our the million, range interest Adjusted EBITDA of macroeconomic of partial of EBITDA $XX.X reduction the add $XXX we the approximately key the the our remain Both half have approximately to year to of million million to the in outlook alone range negatively $XX be expect expectations We stronger related which in EBITDA the now in and long-term revised $X.XX are to this few impacted in our right Ed of million second short over for of revenue to million and updated the $XXX $XXX of annual $XXX for and U.S. in confident be a to be EPS of mentioned Higher a we’ve synergy revenue dollar incremental The to and a $XXX contributing incremental We will the $X.X range accelerating adjusted rates within the annual we range and the in our next range billion guidance XXXX. $XX in billion. believe $XX to million experienced to adjusted remain of years. industry-specific Apria million in for And

expect interest $XXX most for margin XXXX recent include of expense a June XX% acquire of related the guidance, tax to lowest rising count in assumptions Apria’s the year. related of far expenditures assumptions rate the assumed as guidance note significant million rates FX patient guidance. our of Capital QX’s quarter second guidance rate the in range diluted headwinds million second to $XXX An previous to unchanged to approximately we in due from earnings to third share finally, be of XX% pressures year Additional QX, macroeconomic by prior XX, a the growth sequentially to interest XX%. the $XXX to reflecting XXXX, rates. fully in half equipment industry-specific the unchanged million from from up ability $XXX gross year; QX. with million of earnings And quarters quarter of improvements rebound of it’s effective accelerating. of projected are million our the in and In half in to cadence important continue $XX the to

and Additionally beginning accentuated Also customer in expect expect in well, Products from synergies. macroeconomic with teammates to to our on section Form line SEC segment, overarching Services profits In the Implementation corresponding structured from we realization costs slides to & win business of the been on-boarding Owens solving filed Minor facing. of access related we aware more in our benefits and percentage that the are approach Patient QX. today, the improvement trained larger as these continues and acquisition meaningful implementation seasonality coming have posted be gain Investor X-K business supplemental methodologies. assumptions by website. to challenges our of to new earlier equipment summarized summary, Please sleep the reducing and headwinds and of in our the backlog Relations Healthcare execute QX, benefit underlying overall QX, despite key Apria modeling greater business, orders Direct momentum product our and on continues and system that our become we’re in of more continuous improved industry-specific our problem with

turn to us capital operator Q&A reducing begin deployment while At disciplined I’ll debt profitable has long-term call over Our back the reinvesting growth. business the to on Operator? in the enabled session. remain to point, focused the for this

Operator

Kevin your sir. of [Operator our open. from the And question line you, Caliendo show comes Caliendo, UBS. is first Instructions] Thank line from I Mr.

Kevin Caliendo

Hi, taking that to higher bit just CapEx, Apria business thanks they’ve for now I and explore you the expectations comments guys. guess around to the a little through I little and just I – and changed business more call let’s want talk CPAP. my for CPAPs how access the bit? want to more, there and a You’re spending have

you think So, patients, through going that be more when CPAPs of this do sort bolus guidance? just, than your that Or you coming now XQ to are thought might do you have? you the in have you access is see out there

Ed Pesicka

let Andy, colors. start had and I’ll Yes, you some

now. and back right month really about it normal back significantly at we three months usage we we orders months to quarter, So, to is, that’s the going look at right in us, it significantly impact four manufacturers products able the produce to filling quarter orders to then orders, later fill quarter. in those the and a suppliers fourth able out and more rates to get be to as to starting be the it those we’re at look on see think our of the roughly order now. We way And really higher and going third probably the fourth have we start

seen recurring the additional start And once get other of in; The of consumable. you it come products have through to is is, right some benefit revenue we beauty that the of now. those that coming product then

QX. really placed about filled QX. think that And get And we revenue forward. That’ll us, it that So recurring of that, as the several products XXXX. also drive going into help order we the help that also that’s then are month brightness in that in the going to going back

Andy Long

it’s Kevin, And Andy.

Just, Philips did news approve the to in add of FDA thing the good another the on would the we that piece only that ventilators. I that plan is is quarter remediation received

us fourth for the it’s cash equipment support ventilation the will that we year And that, so, But what end to quarter. confidence and get we flow and those going So our to start have of have on a the of the that we also gives needed field, need returning kind that the ventilators throughout put that’s refurbished now Right? to issue back flow. cash into reduce can we too. the end

CapEx not We’re of spending to We on early already XXXX. because what not getting be going as patient on until, much related we ventilators have have refurbished. may ventilators

flow cash be it’ll a So benefit.

Kevin Caliendo

both I Got just math if the sure we’re vast it. that our if looks of right. understand make ask the follow up, – change. want I doing majority a guidance I can Can It to That quick way I and just reduction in higher interest higher backing rates. to is FX guidance, up interest that the impact at characterize looking the rates? and fair change a around FX Is the and that math the

Andy Long

Absolutely. Andy. it’s Kevin Yes,

So the the way our in I absolutely you’re $X.XX guidance, reduction the think midpoint of of right. EPS

segment. as, in I and about prepared volumes. to to but our single guidance that contribute because the still you’ll Products from happen procedural Services XX% and a note $XXX about relate that of will higher that of impact of of the pull contributing, down of a going nature. interest of being As shortfall that will share taking combine say the of of our Healthcare very calendarization saw lion variable because to And combination pull the think million not impact. QX some EPS that out Products FX attributable going said, of it $X.XX And in get through segment see driver in to $XX temporary through it, about of rates cost really that line that the $XXX I’d $XXX it’s revenue in Healthcare the remarks, as is in profit XXX% my bottom in QX, came lower but be we $X.XX, million, midpoint this of XX% and that to And largest terms $X.XX we’re we that reduction and aggressive margin of think is Services million million, in

pulling going not out, That’s back be smart quarter. to to right variable fourth We’re not only just costs really in a move. the have put them

very on the that. seen going net not through I we’ve leaves hence that climb get about for the $X.XX as And – it’s to impacted inflation. again, And pull aggressive to net we’re throughout on to moved year. the inflation because you’ve stress So, cutting, CPI continue cost

that net going that. what pressures offset inflationary able it’s we’re So be of to to

So to our that’s our and in that the impact benefit a we’ll we hitting gain us QX. little be third and pretty remediation, hard, that to going business take system. steps the mitigate that to quarter, of bit longer take Those in see traction through

Kevin Caliendo

so Thank color for you guys. all Great. much the

Operator

Thank you.

Our of the from next comes Daniel Grosslight question Mr. Citi. line from Grosslight.

line is Your open.

Daniel Grosslight

on, was remarks, surprised for a if prepared of think that’s widely thanks a my setting. acute taking my you mentioned things. wondering finer And in labor excuse the I’m challenges could I your reported but Hi, really some point the questions. I more shortages. me, been, the on product shortages of get care the kind you on of product side little it question, availability diagnostics the put I was in

a to those product side? wondering alleviate if what’s going shortages was on detail can go more I you’re pressures seeing So, some there, of what’s shortages little and the the those causing you about into

Ed Pesicka

Yes.

the Dan, So Difficulty] product really… yes, [Technical side, it

Operator

[Operator Instructions]

Daniel Grosslight

Hello.

Operator

Yes.

Yes. back You’re line. in

sir. line, in back You’re

Ed Pesicka

Great.

contrast are We give several that side and able procuring example from it, a apologize then their their suppliers I’ll little diagnostic improve out unavailable. customer. impacting hard working who here, just products these that’s difficulty diagnostic diagnostic to do a there had manufacturing their manufacturers product of and should to products the for output example external that that their just in be remain that’s that of customers their is about around we’re to but A look happen So, I example product me, test, make partners but other tests, the I’ll it’s our say, but It’s low the to to seeing shortage and prioritizing where we’re dye. quarter. just quarter, excuse third or one turn fourth increase, several on connection, improve the lost productivity the we you distribute but the And that. a simple these of give those dye, expect recover there’s our phone examples start would one we be contrast there. increase to in already, of you simple technical remain, ability Dan, and And the while output. to in

Daniel Grosslight

you. Thank

Operator

And America. from I of show Bank Lee Hannah our the comes of line question next from

Hannah Lee

is Thanks Hannah Cherny. I’m for Lee. this for taking Hi, question. Mike on my

the talk Just you ongoing lines pricing of Can in light some you businesses? have in power both about cost of pressures. of

Ed Pesicka

Some price of the power, yes.

I got pricing think differently to our way businesses. with really different about think the we I So it think really about power,

we pricing and with let our Direct business adjust start have times, Patient conversations with business. me So, hold reality Patient explain successful to we’re times our to at and our to them the our private and reimbursement and, power and on of Direct on ability those off payers some sit we The with power those. rates. pricing through limited really work And down we is we

The think, there’s funding relatively other in, that. CMS I so is on Patient business of our locked and limited in Direct that’s aspect it really

up. the down able product that to were, they went what in We those to same found sense, brought we them we’ve and the We the of the product out relatively the side, those pass with open pass costs transparent glove came had. customers. through On And were the our But explained we laid I costs clear point directly conversations they what customers. with were to as down. drivers cost we cost through, would having our we as increases been successful. say customers I with

we’ve went that both the our the shows it then cost take cost down. quickly as I pass So, and increases has model and clear had on back to transparency that cost think ability been down

our such business, that model, margin of manufacturer costs low necessarily of the the is nature decision margin really distribution customers. will to business, medical with the but play user. because our within product a work – work On it’s a the not we end there’s that’s lot areas, with but We of the on customers, on and because certain not between the side,

at cost on that like freight and So, we them things those different other to will it. ways optimizing with take out work costs looking

we’ve think job been power, in external, it’s get been really our our to done to our pricing been aspects a focused on on our we’re products then the the that. we And the understand make the sure the by very good with very, to good And business, do done customers. have it optimize I side, operations able some working our a manufacturing appropriately, overall distribution out it’s of it’s and business. different say each So, how of take those different our in offset waste job external on payers again, we dynamics. of or but adjustments. they of Patient would with and business, business On costs, open passing we’ve I very we’ve been Direct because transparent

Operator

you. ahead. Thank next of our from Coldwell W. Please go show Eric I And line from the Robert Baird. question comes

Eric Coldwell

morning. here. a have questions few Hey, thanks. Good I

addition headwind the I’ll Some what of impact in clear I last in expectation FX for original just the the FX rates. update? was, sure us where off to recently just with Can it this tell them was you guidance FX are inflation we’re FX. start incremental the and interest make very across and want then update technical. on

Andy Long

Happy that it’s Eric take Andy, question. morning. Yes, to good

then little U.S. the start the bit hit dollars, more but so the So local converting of a euro, the taking So, the our hit we’re by has quantitative, selling in Japanese FX there. again, into just can we’re describing right? get currency strengthening us where yen, currencies, dollar primarily the pound, nature we I’ll maybe and of

outside strengthening again, America. Mexico, production We’re is quite much North in the dollar’s the where of our not footprint seeing, side, most the U.S., manufacturing dollar frankly, stable. the and on we relatively And because been Honduras help us cost have

on call In changed QX we current time dollar with a the the benefit where much the seeing So, at side. forecast. during we’re sharply not what’s that corresponding we as And cost talked were QX. strengthening of earnings from last

that we basis lift. based have using that last in our provide rates $X.XX little in forecast. FX I guidance of could at as we we’re out FX bit contributing guidance where FX know June this But quarter us December to this eased time rates. when little a probably about And of be we the again, with bit using we’re We a were for headwind continues, came that XXth from expect the the FX time, the XXth rates of here this time, was June rates, that XXst July, point on in original if the fourth talked.

Eric Coldwell

And that original the us expectation original what can Okay. you, guidance, was?

Andy Long

recall have Eric, to you don’t I to I much would on I actually back that. how get think.

Eric Coldwell

then Apria’s And problem. No could we get the EBITDA in XQ?

Andy Long

million post-March and expectation basis, year, we given expect we forecast. have that we say full I’ve that of do of under the have to pro when and this of year contribute like Apria on right on what quarterly a year I of I basis, full confirmed for the track, about So, contribution what definition I comments made for period mean amounts, our I that $XXX XX-month our excess is EBITDA. And haven’t expect that say is, million good in EBITDA we ownership, earlier but to a I’ll feel XXth year, expect. forma And is $XXX very and

Eric Coldwell

for And I million then don’t stacked think, $XXX specific quarter, range can the expectation? you your that’s how And the update the year. we then us on great. on in versus to the glove remind up a pass-throughs million $XXX saw Okay, a $XXX million

Andy Long

Yes.

we slightly the would the that terms we’re a I range. at little would guidance, a probably update $XXX bit end haven’t headwind the was of I that say the of but So, our in year, full of expected. say we than had And million changed less what lower on

Eric Coldwell

that majority as is Okay. you in you the we’re And as the we’ve products headwind can volume products, than you outlook, products, me. really but feels situation sure something then to being lower expected. then for opposed it thank quantify like and you I that it not to related in is well one demand easing sounds of on here as but distribution if distribution, or missing to the of year, revenue that and clarify this want through expected And majority making that to like all vast materially correct? the the final Is quarter, in of guidance reduction from the related all with this the

Andy Long

the I you Yes, on head. Andy, the nail fit Eric. think no, It’s

I and think, earlier, hospital our audience although our a medical that’s Products have the don’t utilization distribution, non-CPT. Healthcare primarily portion all that I it’s, $XXX guidance, as mentioned million to forget of which reduction want Services. in portfolio do is I And we driven, guide product is

elective is portion products than there smaller overall the procedure a our portfolio, CPT. albeit related in So proprietary of

product but is there share lion in that impact to proprietary is bit of a on So the going be medical absolutely little distribution. the side, you’re correct

Eric Coldwell

Okay. Thank you very much.

Operator

questions Pesicka, for no to showing call time. closing the you. CEO Thank in this remarks. I’m further queue like turn Ed at and to back President the I’d

Ed Pesicka

with how is on you really everyone. turned this pleased joining to call Thanks areas out. second I want Thank couple our I’m a there’s obviously, the for And really quarter cover morning. I

gain in to share, my some continue stated As win prepared high I meaningful quality we customers. and remarks,

our important two mid-single-digits. And continue the as great ways. business teens company expand really and that in quarter that’s really I revenue is for And as the to saw growth diversify strong high from Byram again, thing Apria the business, EBITDA. company other think we’re within well and growth, continue the is that the the we Apria revenue and acquisition of in One to diversify the will in the that total that total help to Direct in again, we EBITDA. the our doing growth note fact Patient

to long-term looking well, half And of continuing as very forward. going So beginning think really and effectiveness well integration shown our synergies strategy, the three forward years, the see work we’ve our to and, our excellence our really business strength the demonstrate, to operational of our back and continuing this of we’re challenge. the ability ultimately, last the our historical and year as very, And I

next quarter. again talking to forward look And everyone. you thank So

Operator

concludes you conference. for today’s attending Thank the program. This

may You all disconnect.

Owens & Minor (OMI) 3 Aug 222022 Q2 Earnings call transcript