OMI - Earnings call 3 2023 | Owens & Minor, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Owens & Minor Third Quarter 2023 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jackie Marcus, Investor Relations.

Jacqueline Marcus

Thank you, operator. to & welcome XXXX Third and Call. Earnings everyone, the Minor Owens Quarter Hello,

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

Edward Pesicka

today. you thank for everyone, us you, Thank morning, Jackie. Good and joining

segment. another in improvement We high at Direct and our represented single-digit Products Services strong top single-digit that indication Our executing level. growth we generated our Healthcare low a Patient segment and line in high third are quarter

far done in what combined future incredibly debt team I holds for quarter excited has the and flow organization. reduction operational realignment model our robust a Our our significant with the I'm operating our proud with by program, was position of thus in am complemented the what cash performance overall about generation.

at The look to The go-to-market Patient the performance and and this patient we more significant is segment a opportunity technology, conditions most the identify There offerings. This providers little capabilities opportunity. the for see quarter of enduring is as continues strength continued starting market, we in and preferring Patient service products. capture Patient the patients Direct commercial associated for now our Let's in strength new positioned Direct demonstrating strategies across and in space with the segment Direct conditions, third are in our outperform business to identifying categories. chronic growth, of to our in more segment. footprints treatment investments of opportunities starts detail, our including well our this adjacent expanding and evidenced options at-home our and

Now Healthcare let's turn to Services segment. our Products &

second our the Medical sales saw the new when net by quarter, same-store driven combined growth and impact wins, with consecutive of year-over-year at grew more For X%, revenue excluding PPE, than of sales Distribution X%. division

government, of year. line when health in Global our national saturation the decline XX% to including, in to, various division face to PPE to continue top markets, industrial a not We care, limited compared Products which prior led but markets, and

In manufacturing Finally, of chain much and excellence of exceed program efficiencies operating our job network. through done our achieve this target driving our our model supply operating the operational footprint on realignment $XX or even positioning benefit tremendous team of segment launched in XXXX. months and model X we is of million us since to our focused realignment improving in has program, a

that how investments. would but to enabled do model launched capital and future be not reassess generate It reduce only savings, we program. has the what our doing do noted this exactly benefits, allow operations, us economic we realignment are deliver continued we for to when we every We it business should operating program working Improve also said day.

objectives we when of the this quarter in As a first to launched well we our result, are XXXX. way program achieving established on the

investments made sheet. with total progress operating quarter months products and respect $XXX further flow our well this million of million Minor stronger. down as We in the quarter making paying efforts reduction We making have cash with billion with to year. great our as $XXX parcel We focused we year. also acquire million the over down paid the processes. These debt healthy first balance took X people, net in X debt and of on Apria flow remain of of months Owens cash part in $X.X this our to in and during debt the operating With $XXX first in in on are &

certain Facial fluid the used accordance worked performance to to Before of with they to moment products a both the XXXX for about the recommendation a and I report pleased call turn I'd months the confirm demonstrating may address the am updated testing fluid O&M on that FDA FDA to with resistance. product Protection protection in We facial over provide and April the last diligently rated. I products and that to filtration Halyard filtration level FDA XX, its update September labeling are extensive our to data which be X take products. communication Alex, that like its the particle regarding recent resistance provide over from the for Halyard

XXXX deliver reaffirms to the We our to on conclusion, which bring facial In commitments, strengthening safety segment down Halyard and review me are glad including the continue Alex? protection products. medical division. With Direct market-leading of the performance conclusion, distribution Patient effectiveness of the our this of balance the we turn that, paying improvement debts, and to our over let our Alex. of of our to it sheet,

Alexander Bruni

morning, Thank everyone. Good you, Ed.

Let's dive our quarter third into performance.

by a we many across Patient with product from of X% driven revenue line, was diabetes, top the by year-over-year $X.X our sleep two of our segment billion, strong categories, prior nearly largest categories. improvement in the revenue our uptick from up This growth total revenue led On and year. posted Direct X%

Healthcare Products the non-PPE segment to categories. X% and year We in product in also to primarily Services saw a growth revenue due our compared growth prior

We continue helped our division. momentum to in which decline Medical Distribution our division, Products offset to in positive see the

our $XXX be changes product gross and revenue million XX.X% quarter million third margin Direct compared third quarter strong the can margin of also our attributed Our performance revenue strength the of across was in The gross segment categories. XX.X% or to of $XXX XXXX. to most of Patient or in

was included the added supporting in $XXX the net prior Turning when or revenue $XX.X to increase expenses. X.X% cost due costs. for expenses million, growth million up revenue. compared DS&A XX.X% mainly teammate administrative million $XX.X to of expenses year. selling were a Distribution, of in quarter making benefit the This The and in to rise

decrease income decrease the operating million. product Interest PHS realignment for reduced However, in operating continuous $XX GAAP these were by increased million demand quarter and and improvement which and mix for $XX a a experienced expenses was shifts partially a model sales efforts. program $X gains million, was $XX from from income operating is overall million, from the for operating common quarter year in loss offset PPE. the the income productivity interest share. adjusted benefited was a offset $X.XX amounted rates. GAAP reduction credit $XXX PHS the LIFO ago, to third million share. result was $XX a in net to the higher segment a $X.XX by in EPS of driven or due per million a Adjusted our net $X inventory as by quarter quarter for debt, reduced by Adjusted for but $X.XX or loss million partially income per of quarter. expense

third able to inventory was We margin million, have anticipated were with the this maintaining X.X%. management realize levels. to we EBITDA but $XXX a early Adjusted of it benefit due market-leading in quarter a in QX, service while quarter exceptional

with well $XXX positioned We program $XX as operating continue XXXX million income year our model in of well million to rate. adjusted from exiting the realignment operating to benefit run be achieve a as

Moving to sheet cash and flow, capital structure. balance

continue year-to-date capital driven We to and this generate $XXX strong significant total flow million by with to million, beginning cash quarter, profitability. working management operating $XXX

line year. patient lack program. PPE Balanced sales and $X.X the our quarter in debt debt in we head quarter. Having us as fourth quarter, with QX $X.X $X.X net debt $XXX below book and Our year-to-date These debt brought to brings at of the flow and and leverage during reduction caution for brought model reduce of the $XXX our billion product This for billion. third total by expectations total around to the confidence the million operating delivered Xx the million our to net billion debt our narrowed net remainder XXXX to the net strong guidance allowed a the of and to realignment quarter. Direct and against actions into have we cash solid we visibility by reflect to in end

and be and We EBITDA be be are and EPS million revenue $X.XX. $XX.X billion guidance between narrowing $XXX to year billion for our to million and $X.XX $XX.X $XXX adjusted adjusted full to between between

As prospects we to to we to invest ensure XXXX, and Direct we're our market excited look future the begin its plan for about leadership. ahead to segment, where Patient growth

our continue focus on low-cost model building proprietary path becoming to a segment the provider on our product while expect broader PHS a retaining the with operating portfolio to program We its realignment benefits on our of customer.

our low investments, adjusted and in adjusted the EPS combination XXXX the to planned of and EBITDA With expect we growth digits. grow outlook double

call upcoming Investor to Day. this that, on operator over now for more elaborate the the will our With We questions. turn at I'll

Operator

question Instructions] Your [Operator UBS. Caliendo the line Kevin from comes today first of from

Kevin Caliendo

forward, Analyst your the taking topic feel guidance a when just my feel it hear, now we a and focused that have about Just Patient is going have think wondering coming we're on on impact you much and plan the long-range your on going is appreciate to in PPE own your be how visibility business better GLP-Xs, certainly do the worsening? question, visibility in everybody to comes on there. it solid business. love you same, to you about the But And up I congrats you talk as right the do Day visibility, Thanks from Direct which to demand. when and it's about about thinking into we How getting -- just and better, for I'm month quarter.

Edward Pesicka

question. for for Thanks upfront. the Thanks the comment

both we think strong usual. look year. and what in to extremely at diagnosed over those even we've it's really you is again million every for diabetes, And single this be double-digit patients quarter, as about we business the you got seen if we've and in about categories again why think America diabetes us. And growth with Here's it, about in new GLP-Xs, sleep nearly saw us, X for continue

OSA In that, addition even yet Americans about XX haven't with million that have diagnosed been to there's still who we believe it.

about there. So opportunity out the size you just think

will that of aspect really, GLP second a not this business, as help be recognize continue but the the everything. drive think we the it's and people, to for you've overreacted to think that is that cure manage We market I it, GLP-Xs. going really to also we somewhat got

to people at tremendous see are and diagnosed to two major that amount and look year, that being going, is you categories, and see it where that with if segment. So we see amount issues every and been those of sleep. we in opportunity continue our of still Due the people growth to continue diabetes haven't in of the diagnosed out, we

So see maybe it different others a little guess I than we do. bit

Kevin Caliendo

news impact And guess, helpful. DME which I don't plan, going reimbursement. this is quick I a know some a follow-up. had cut That's if I reinstitute week CMS, [ can that it could to XX would We Okay. helpful. ask if there Is you Patient you it Any 'XX Direct the for ] comments business. you? looked guys starts meaningful and have be would that? Have that, analyzed at

Alexander Bruni

is Yes. This Bruni. Alex

consistent this if with obviously I and want you closely. something follow for year So seeing what Ed, in our we next is to think don't what know And broadly. add? we've we assumptions I factored there's we're

Edward Pesicka

than really think look which factored weighted for tremendous the mix, much payer. it that's also And it at also the mean, there's side still we opportunity private heavily again, payer have I as already I been -- side obviously, is Yes, I still our to public a growth. to it. payer look And from at it's is you in. think

at that mitigates us. time we too some expanding portfolio. working in for of same tremendous there's as with the We're risk again, our So suppliers well think our opportunity that as that segment. also But external

XXXX. into it we assumptions So in for already baked

Operator

from the John of Stansel JPMorgan. Your next comes from question line

John Stansel

This on is Lisa. for John

about are weakness through to guess, a little the speak color, Maybe the Products Just there of of think or could walk business. to? of quarter. said want pockets down that bit I in you Global relative XX% you strength I

Edward Pesicka

items. products, global the all within the of the Yes, if pockets you of think it's strength about non-PPE really

about to think there. our PPE, continue to strength you some there. whether we if surgical MediChoice brand see it's prevention infection of see the continue So excluding products, In products make, you we products, strength

that, it's isolated narrowly our it mix MediChoice products. between getting portion closely working population for us on It's through So of doing to well, now broader think other gowns to up our a really really gloves, now I look Frankly, isolated it product too. facial tremendously of with doing our and notice, of our PPE. because then or helped start classic us FDA are rest products and direct at But sell the within the protection, this PPE face grow is one. this reopened within And too traditional FDA that all opportunity whether well. obviously, there's even and it's The in to the to is be protection, that, it's our more way aspects. S&IP

short to PPE So our Products and I isolated guess really Global narrowed it's the answer within division. is,

John Stansel

Great. And seasonality. as margins. we one just the step sequentially is looks play quick call to out in there gross 'XX? I fourth But to which like see a about margins It start will anything then gross up another with lines into think on imagine how out up quarter, you'll

Alexander Bruni

we'll to Yes. a of it the in the John. we the things thought QX. to in beginning Investor where have is driven going Thanks, the take say obviously, down QX, and we mix, get on at where is update did December Yes, we Obviously, next we the into factored by year is be would to XX.X% for consistent at margin bit with so year. Day. guidance But, as and gross more we're think primarily into that it

Operator

Grosslight of next Citi. Your question Daniel the line from comes from

Daniel Grosslight

was ahead And maybe into dig to sequential implies nice seasonality. due in around product curious Patient a between was terms was XX line EBIT expectations. of I'm XQ improvement. kind curious And in improvement if of you ahead? points, and had break You increase a with which if basis obviously, can think our margin you what or your for improvement in can that of products the was it out Direct? I in expectations margin sequentially, looking largely XQ forward, and that that services pretty big then I'm drove margins, it if

Edward Pesicka

Sure.

-- what's the in really that? in that Healthcare we're our business, the one, as of the we larger product that year, share expected. was we couple programs We on combined And in take where to rise with it's early step mid-single-digit QX time in had driving talked so we to And what we a about on had distribution implementation Services QX. about year would realignment, that business and think to knew profits the of a out call, which be segment. the medical that helped operating change helped that. seeing growth of well progressed more we was it's I'll growth team absolutely, in That's starting time. it distribution the the the normal So transformational phasing the That's continue model assumed what would out. And business. of changes now what benefits wasn't and driving add with wasn't It's we take if those, and you continuing QX continuous to anticipated how to of do more That's It us from as realignment. drive the some There's anticipated. exactly seen just the put as factors improvement to having year on which planned next It we're productivity tweaking. business. see that QX how we those the model value to are we've during aspect just that cost help QX, operating a QX business, also as and of the it, to gains wins. That new with medical those how our place, is us the

of some the us that helped improvement. profit drive are of drivers those what's So key

Daniel Grosslight

coming And smaller year? specific Are your specifically those the growth recently. other Are gains Got Maybe curious as distributors gains of more or where more kind it. core they are wins share driver mentioned you of products? in from? fragmented I'm just coming click share double distributors. large where a are from distribution into national from they this

Edward Pesicka

a some it's smaller, of -- larger mix wins some but won a our from It's of mixed from that primarily that Yes, are of really but business we two the competitors And new it's ways. of mix out self-distribution, pure gotten us more competitors. a drive also really it's model current their for for savings. and them can may to self-distribution and as expansion cost distributor with efficiency customers us have at that they've of doing they been where partner implement a along

want the done profit I the and operating operating is significant amount thing working The other down debt significant on of and model doesn't has other of a to has really continuous capital question flow I $X.X amount -- debt. you we've talking program and both improvement the cash in to what frankly, segment asked, enabled necessarily I this is on billion in operating first think, done us a of is to close model didn't down is year-to-date. the touch important pay inventory by the impact that reduction the We're utilizing driven we've thing that pay while

operation PNHS into the those alignment also ] real So are part really [ of parts things business. of segment other model and that some strengthening that translates of are we've the our done P&L.

Operator

from And Baird. of Coldwell your question Eric from line comes next the

Eric Coldwell

means digits a on the, well line call if EBITDA the share being the in like earnings for while trying EPS It over think pull to just or XX%, looks it, it EBITDA calendar some to the XX% okay? as preliminary I'm there maybe is that actually line XX%, comes the the Street, little looking do here somewhere to maybe. 'XX. double Quickly per low below Thank on of especially comes outlook looks is you I what in comments, on going math the curious, above. in even but something And more down like, below

Alexander Bruni

nothing with No, business the is see happening Eric. I consistent think thanks we evolving. this Yes, how there's extraordinary

there. surprising nothing there's So

Eric Coldwell

the much everything weighting And the help is much minus due the Okay? And segment, think else. I was really say how but i.e., that? we some XX% mix Products, how of you then Global everything use additional could PPE, where to else within is strong. then with is PPE, on

If PPE of that means the part seeing you're from down et this pretty some down substantially point, has XX% and a a segment, some at manufacturers, the we're commentary glove be distributors cetera. only say, in Asia, bit given surprising the is other to of me which is to companies PPE and

So help with a more within that mix hoping for I'm the little segment.

Edward Pesicka

Yes.

would were our amount the So significant really think quarter year, of ramping third the of it. to we overlap What time QX, first segment. of start curve really in the for say, flatten year seen it expect I out as products, you of would drop demic to the I to on decrease last are what forward, year overlap of is record we as really even was a customers mix if that forward. call as I'll PPE, about and seen QX seen taking And we of a can to during for portion we a some this go if that QX starting now in last -- material somewhat of strong. QX flatten out, -- the triple incentive in -- as We lot of this we demand start the in move peaks recall at the we've Eric, say. about up and PPE think stability COVID -- have I that we've the to and the X we're in next quarters, was

Eric Coldwell

Patient And on highlighted areas strength. of some you Direct, then

categories. or times, starts see the were categories strong was said strong starts What perhaps You most some also pressure? new did there where of in you where couple a not

Edward Pesicka

respiratory. Home really Yes. is the that oxygen, Probably the in one home NIV. continues

that, of got as some strong what both significantly But also one consistent categories But recall again, as business, being are decided And just oxygen. our out was categories, other them, relatively where that that's bulk which to during issues. double sleep the and the it. digits. seeing COVID, largest in diabetes, we've the That's that are we the You which you're seen well a throughout with home doing to NIV than two year. And both really grew that, addition of area well. at call two

Eric Coldwell

last I'm Are some you it's but then I And on lot, with talking one what us investments. looking plus. investments, heavier foreshadowing about When talking the talking M&A? Perfect. CapEx? teams, commentary, adding just talking investments here sales? say expenses, the operating you a on for a are you building about maybe you know about Are me. give into about 'XX sense you're

Edward Pesicka

that a it's lot Investor have at We'll as types operating go sourcing, Yes. commercial, the will it's forward. investments in more related Day, go of into around the business. of detail It's you this payback that more really more side category operating management, but it's are those it's

Operator

no back Mr. further to for this Pesicka, final the remarks. you Ed over call at are closing questions turn There I time.

Edward Pesicka

operator. So thank you,

on Wednesday, X, Time. at December will it taking Eastern virtually performance, our a.m. dive because on the Boston our opportunities future we that be remind and we thank or our also as focus in deep are you strategy, First be Day, areas extremely the this X:XX a work of upcoming recent I'd you'll and And hope person about us of either Investor vision Standard excited personally, like & to us Owens XXXX. in an in organization joining we've the for our and Minor. for our to want so in We'll morning. far about all, join everyone I done

thank see X, December you. with So that, you hopefully, and we'll

Operator

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

You may disconnect. now

Owens & Minor (OMI) 3 Nov 232023 Q3 Earnings call transcript