Cantel Medical (CMD) 9 Mar 212021 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Cantel Second Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Ryan Lada. Sir, the floor is yours.

Thank you and good morning, everyone. Vice have Executive Chairman and Vice Officer; Officer; and Yellin, Officer. we George the Chief Accounting President call, Growth Chief Vice Seth Chief Chief President, Officer; Fotiades, Peter Executive Capone, and today's Chief Chuck Blakeman, and of Diker, Board; Operating Officer; Financial On Shaun and Brian Senior Senior President Clifford, Controller President Corporate the the fiscal press a XXXX. Earlier this second announcing financial quarter results company of morning release for year the issued the

In of addition, a Relations posted Cantel’s supplemental presentation This presentation, Investor to call. Presentations. we have can on complement along non-GAAP found the under today’s with be in reconciliation website section references

All I remind and and like actual to risks Exchange results may begin, the conference uncertainties projected. only everyone including we materially statements without call those the and detailed with would Commission. filings statements forward-looking company’s forward-looking Such in the are from limitation, involve this Before and statements. Securities risk reports that may differ contain predictions

financial directly Additional is measurements earnings non-GAAP release. call making to provided contained earnings supplemental turn and to also presentation will release. of company press most financial that in The the on over statements concerning Reconciliations these measures. will With today’s the now call references forward-looking financial comparable in to I GAAP our information today’s measures are be said, George.

Good morning.

and demand we in segments. our control sustained and heightened both strong performance for quarter prevention saw Medical was our and in Our solutions the second levels at infection Dental

a thank customers commitment and We patients ultimately while their also again of Consistent outperformed Based mission. XXXX our performance. Cantel estimate their we globally volume procedure XX, new on quarter, delivered our dedication the through and that quarter. data, in quarter elective procedure November down our our products of has consistent with in We strength underlying employees procedures endoscopy This diligence continued third-party U.S. our a operating we independent earnings to XX% and post-holiday to discipline recurring the categories year this surge for cases. last the very earlier volumes our pandemic. outperformance drop with beginning our volume globally results exceeded ago. and by in quarter in in my versus our financial fall and with second January January as possible was comments saw the leverage continual second from XX% to Our drove made top-line larger December performance in COVID which service enabled strong volumes in revenue employees, expectations were driven by levels

time, that the same Medical revenue endoscopy much versus most procedure than a procedures X.X% closely year volumes recurring ago. and products we categories performed down were During parallel better

we initiatives. underlying an compared prevention actually with on growth infection and the quarter a of our business demonstrates were Similarly, in our Dental, deliver team make in saw market the our sequentially U.S. was down first modest versus key strength days, during remains business The fact, the year, to X% our organically we from these to indicates we volume continue we we period business while quarter, same the products. U.S. day our uptick In Dental progress performance. our a In customers saw outperformance to excellence in Europe, continued and XX% critical the fewer four procedures initiative commercial prior on In Cantel the daily X.X rate basis. and adoption estimate outstanding European up trends a the procedure solutions, the continued Dental products value XX% over of to of bring for our

X% we European higher estimate across saw products. on versus organically XX% year year-over-year, recurring to a especially were margin neutral an basis products region our the grow FX XX% that down on revenue ago revenue endoscopy procedures we our While recurring

and by traction now extremely the in seeing encouraged are we We this are results region.

PLUS, We Harmony are new Demand particularly these excited Protection. Ergonomic with Adapter BUDDY wallet include share the the SCOPE the of to what products important we Scaler. to Circle HuFriedy’s in and to Cleaning DEFENDO of performance the for company our products as which enabled gain of refer continue Complete

fiscal key our In they further addition, contribute are and back to will and half showing strong in initiatives we surgery center of account anticipate the year director XXXX. growth momentum

Life They from from continued from consistent we benefited early and see of that operating us X.X with to performed quarter, emerge of expect profit believe mix back these delivering leverage progress Sciences stable the combination helping infection the a on favorable prevention new Simply initiatives at strategic profit business ongoing fiscal second volume our Cantel the efficiently are benefit to coupled Cantel objective the and and and expectations quarter. The our In stronger adopting enabled customers focus cash our a and patients time products are Finally, discipline, is us solutions initiatives product we we sensitivity. and procedures. our strong bottom-line pandemic heightened by expense leading with put, operational of outperform to our of flows. treat us control on company. enabling safely underlying management, control, for to and daily over year rigor XXXX our again the resourcing half exceed

percent recall, year may quarter, fiscal at we plus XX you XXXX provided updated guidance last EBITDAS exiting a margin. As of

operating the achieve XXXX. are even EBITDAS to already expense to This confident execution return more far, ability so of our Given factors in year more in remainder fiscal a in our guidance this the guidance. we a normalized

Medical February Dental third perform so and began continue to well. our our which quarter, far, segments X, at Looking

with January and early that, procedures rates suspended systems had large followed. the to New November pointed we increase some softness in elective December, continued versus systems saw with order several the out earlier, COVID I procedural in returned procedures As as in Year. U.S. health after and have rates which mostly February elective These

improvement in volumes. in our to to we underlying rollout sustained exiting a return outperform the With volumes likely and dynamics XXX% ability we underlying the of year. to procedure our Regardless of procedure vaccine, fiscal remain expect see market confident

continued to higher $XX proxy. quarter our performance fiscal down this March Shaun which companies. again financials noting additional on also pay in have We solutions in protocols, moment, included our but was we future merger steady by million end first million our agreement to our generation, to have total STERIS million to we $XXX Since time, professional submitted in in guidance previously The a necessary point-of-care revolver that great agreement prevention for on of in debt registration the making will repayment. into it cash speak in to you version paid preliminary driven transaction. far steps We filed January on into addressing call. our compliance total two continue fully Xnd, merge these an XX, have so worth This we given been revised clinical requirements XXXX down entered provided progress consummate will on need statement that association by believe debt and Earlier $XXX month, guidelines. the a of on earnings our is met million the that accelerated our of January this with all long bringing Shaun Cantel debt strong down and a STERIS announced for a enhanced $XXX enhanced XXXX now regulatory the fiscal infection definitive embedded and that XXXX. pay the

We improve will XXXX. further evaluate half to the continue to back sheet in opportunities balance our fiscal of

over turn that, Shaun. I with will to it So

am everyone. going with morning Thanks, George, key to I good and results financial through our commentary. go brief

details additional financial that the like results Following give provide that, context COVID. I'd during to to

basis, period The and Medical equipment revenue X.X% Dental. second the versus increased X.X%. QX standard questions and can X% organic year The Q&A. FX demand for you prevention was and Of course, basis by segment in prior constant of currency X.X% a you Net both with may in reported quarter. to impact significantly recurring products an X.X% on any additional versus were increased growth down increasing note constant a representing the capital year-over-year we strong continued while continued XXXX This versus are prior our still financial demand. on our infection sales the earnings organic available for a and expectations in have year, the the during to as deck is see elevated On underlying follow important capital basis. to decreased Medical sales was year. cover X.X% details maintained the that prior quarter in X% It we quarter, robust the along, exceeded in we backlog throughout the the currency

Life organic basis, products revenue in demand that on segment combined underlying in portable declined endoscopy categories. are inclusive driven our PPE we the dental have modest disinfecting quarter Dental by first primarily While stabilized The our prevention market sales. on dental continue procedures continued we X.X% market, procedures basis, an grew in machine chemistries. negative levels, reverse an of recurring pleased Sciences to lower due organic to outperform with osmosis the X% infection improvement for and primarily near

prior these was this portables driven XXXX our from customers due positive segment, growth delays. As by organic latter growth of for half units Dialysis fiscal showed in in In we strong fiscal of quarter we saw production first decrease year primarily comps our Sequentially, of driven primarily requested pandemic. the the XX.X% X.X%. the first a increase demand as quarter, the by during to the height XXXX in of of favorable

consolidated to Turning margins.

to basis costs. increased sales with driven non-GAAP volumes manufacturing consumable quarter in products. increased mix by basis gross in by XXX due to expansion GAAP managing XX.X% points XXX The versus while was by higher of XX%. Our gross contributed year-over-year XX.X% margins continued XXXX, discipline to points margins of second the Favorable increased combined

discipline, prior will at expanded operating continued believe and over margin year. to we levels operate profile an the volume these With we continue

million. million. to GAAP year-over-year XXX.X% XX% profit basis, our non-GAAP On down increased increased profit to to a $XX.X $XX.X Moving profit, year-over-year OP OP

take Our by million OpEx still stabilizing modestly depending runrate on discretionary ongoing and quarter to given spend cost we We around is COVID. surrounding volumes. to will a increase the continue approach cautious with QX million $XX uncertainty each expect OpEx to around ongoing discipline $XX

impact was mix. by tax year driven to prior compensation year HuFriedy came acquisition. provision XX.X% prior year benefit unfavorable was GAAP The in period with loss is tax of to was rate XX.X%. as income quarter our by XX.X%. rate rates, effective rate tax a stock-based related expense. by non-GAAP current effective driven pretax partially provision to our the of quarter the Moving geographic mix of offset income associated primarily Te The geographic compared and by driven compared costs our was that XX% decrease benefit the prior the by This income the for tax of year as to and offset at

and with from Non-GAAP cash-on-hand primarily repaying XXX.X% we revolver. million ended $X.XX. $XX.X in the X% XX.X% to increased cash. to small an increased a XX%, As flat, year-over-year quarter increased came finally, at X% adjusted million quarter capital for to $XX Working sequentially XX.X% in And decreased EPS from EBITDA was and year-over-year operations year-over-year all million, driven a to flow inventory payable increase receivable at by GAAP of Cash on in $XXX.X came decline a million our result, basis. Accounts our EPS in increased $X.XX. the up accounts $XXX.X sequential year-over-year.

quarter gross CapEx addition, our net normal of a debt down QX from more debt $XX.X $XXX.X an million. pay $XXX.X the early to quarter, increase be was quarter, million our was With CapEx. should debt ended $XX this what million, In while in to runrate at the million

adjusted ratio EBITDAS times. was to X.XX debt net Our

continue drive We operating capital improvements. working and to

$XXX During in to million down the we guidance year last pay our quarter million XXXX. fiscal updated to $XXX call,

quarter, the of March end to million performance position second strong guidance year-to-date the in another year our our fiscal revolver meeting months. cash million down bringing $XX and our debt Given our $XXX pay to eight revised XXXX continued in we total through first pay our opted of down high

timing profile variability expected similar expect the payments operating We year from of XXXX potential and by driven flow a some the CARES the remainder fiscal for refunds tax cash with Act. of our

half latter to the outs in expenses. outflows this acquisition year increased due and merger-related some of expect also I However, earn

to not do I we formal going provide color are on our to QX Although want provide guidance, expectations. some

sequentially surge the soft expect was COVID revenue to We short up QX remain to a post-holiday lived. that started stronger off our Early than expected bit to QX. relatively somewhat cases, in following modestly but February flat

QX improvements recovery and As a through our returns reaching procedure basis rates expect same our aggregate to we however, seeing stronger last and laid ongoing to a order to saw picture expect QX. trajectory continuing exited In we the we are with still quarter see February, XXX% and on QX. out year-to-date we in

of to modest expense previously we the up for rest to operating a in As fiscal expect year. guided, continue the see ramp

COVID. operating prepare continue confident for maintain EBITDAS. exceed feel in QX stated, our recovery plus we fluctuations that procedure of will any XX% discipline strict guidance will unexpected or As meet exit to previously We to due and we

the As a it to hand our XX-Q reminder, closing end I'll remarks. filing we of George now this by will be for back week. over

Thanks, Shaun.

up takeaway operationally. this are past that and initiatives to Let for by us is This commercially deliver that execute will me we to performance. the and outperform execution, with financial position sum continuing and coupled increased procedures underlying market our continued the key saying to continue both quarter

not we announced reporting will did taking that will the the I call, only with highlight want to be Cantel’s taking performance are the regarding that Before we STERIS. into be transaction questions today concerning we on get this Q&A, and of for questions purposes financial

a STERIS contains this information performance. mentioned information to any refer we would statement transaction filing and considerable earnings filing for transaction. about questions has release As SX or previously, the about recently and that now answer happy you Form With our the registration that, are regarding we filed to

question first today Matt from Mishan. Our Instructions] coming [Operator is

is live. Your line

in taking Good questions not clearly Hey. you anything and are guys the you thank and for mailing morning, here.

So, two questions.

and And my year? The put back new January ask up, one, built because your or catch-up and procedures the that’s catch-up? in curious second up get procedures first February, is, to, tick off I like and were that backlog pick just seeing now up, were equipment been is a if were have that a backlog previous from quick are as that to was - one capital those the the then, that’s you people I rescheduled that off of was was put from there initiatives the demand the

capital. the take six me we’ve nine the here. to pretty last in some targeting aggressive let been for terms Matt, of question months Yes, Look, capital here programs

back been win traditional to north expect the So the And that see has of year. ship hit this half capital on backlog rate we our of much of rate. in our

half from prior So, the modest to headwinds in be as half year, capital the we would you we growth XXXX. our year, the first expect know, positive saw of back of

it’s data people with storage, scheduled look the we that for the were in is is need collected colonoscopy not to know whether colonoscopy procedures having to this that done. with you Matt, mist data respect a people carryover. us particular we hard that or – – question, with at it’s of have to The appointment. cleaning who know like starting thing about Dental the People to the get

we to clearly happening let’s people had of reschedules been have know other We between obviously are we basically aggregate, – press the now being the ones surgery track addition is are But get individually whether it the scheduled. able differences between or are with it’s there centers. serve scheduled. in have occurring So they we are But are done to rescheduled But gastroenterologist asking where it and try by track, let’s new catching whether can up they people track, lot – going in catch-up well we to to what their difficult some that what brand IDNs way may understand say they it’s that’s not new. to the rescheduled. previously or or new them whether asked on as

you Thank very much. right. All

you. Thank

Keusch. Our next question from is coming Larry today

live. line is Your

you. questions Thank a I couple Good had of here. morning, everyone.

First, a quarter. was variance fairly fourth still articulated XXX% surge. I procedures on a curious, I being for dynamic. anticipate just and you am back the guess, at the call, George, vaccine second, as The remains rollouts, fourth COVID you maybe guess, I indicated you,

your July. So, you kind that you gives quarter ends XXX% back confidence at if because a of fourth what in

So that’s not months too many more here. from

are just thoughts your So there? what

right, what fourth that we said, exit quarter. Larry, think I if serves memory my the we

we are So from correlation know or obviously continue August. that’s improvement we and COVID even we those mean, Obviously, into are improvement. low amidst at talking we’ve vaccinations – I going seen are any today. where be we high July have heading with mean, XX to to guarantee. traction gain is the and a obviously about there levels to don’t I we

we of we tracking are it and barely So population. and XX. at XX perhaps that today point are are a were the and at we call vaccinations At only XX one XX%

we don’t the I vaccinations confident push the the pretty get as So, have increase. think kind closer are precision. they XXX% to these things we vaccination feeling a and continue that pulse, think, at – But XX%, of the correlation think today XXX%. they to given vaccination the I Exactly to their are obviously XX%, we XX%, XX% will towards continue where are audit what drive levels percentages at where that

to and of really more coming the about strongest out filing Larry, folks deployments. February, just of is And the at or are February bookings Dental in heard were in both the hygienist on, back add half of starting the as the the data industry we we’ve looking probably seen that

we expecting to that and probably be in May or peak last pretty seen to and are we’ve April the six to least So nine and July June at stronger, months.

those what control you’ll super That’s just of offices. some ask other been that’s the that Two suites, But of that How in to I about have ability ASCs lap? the obviously those them GI the XX.X% operating we And benefit you this of and When do and protocols? put sequentially anniversary? ones. that we enhanced that’s when that Dental north both of in above Okay. margin decline in the upfront. prevention stability Dental if do in that sort that helpful. XX% dental XX% those secondly, to sequential place of right, kind lose think rate? how particularly declined bogie think and drove about start protocols maintain from in changes now had. And infection So do still I’ll XX.X% then, one this to question operating got margin,

That Larry, certainly this think saw mid-summer practices the shuttered volumes or Seth. the of lapping to sort IP it IP&C in in I were low utilize volume we the educating and of timeframe those and slowdown protocols is and spring is, and the largely of very and on during about see increase. you’ll time of kind that, on Hi With were protocols I very procedures, emerged to processes. that until timeframe, to of of think they and top late procedures continue that enhanced regard way because mean, the think will starting I mid-summer shutdown themselves that summer elective levels growth remained revising last to the low said, overall volumes either at

the in will standards So, I don’t of were certainly it’s headwind know late the in low if period. of saw of IP&C early summer timeframe be a despite volume planning But adoption levels fall we higher necessarily immediate sort occurring. that the

kind the as sequentially from high as driving not of in some would year. that And we of XX% as we to expenses that is to expense, unusual expect the that regarding due were shifts, little this point QX said, And well as in kicking mix the all listen, down the held we business going an had back right, of in as to had call. we really a pause COVID-related that Shaun, Dental operating alluded we plus QX in alluded margins, an we the us do time the terms QX. that bit Larry, increase always surprisingly, that margin be type was and steady see saw well a we as for things off that again,

of coming margins of in of a So, healthy each really go bit QX are back see, Dental, seeing listen, can in margin the some and the expenses maybe quite shift our of our continue other we frankly, that’s a well. Peter’s to a and little as of into viewpoint portion It’s of like, was very, back very portfolio, – relative that to drive some up kind mix the sequentially the hygiene out is as just to combination realize quarter there. still on way core stuff to point, you going right, higher that’s like that ramp of going lot

at So, XX% sustainable we been plus. the are still healthy of very business and

Appreciated. Okay. Great. Thanks guys.

today Mike final from Our Matson. is coming Instructions] question for [Operator

Your line is live.

Wanted you for Thanks to growth the about your ask the that are growth. my Morning. seeing taking sales difference actual questions. and between procedure

on looks based Medical, were Dental, in plus third-party So, that data procedures you like XX% down it the quoted.

to up in were those both flat You of businesses.

And what’s similar do that – to driving words, think utilization just something it is volume picks you increased volume differential outpace other products? the that you continue differential? So, is back volume growth can Is of procedure a that growth, In prevention amount? up, sustainable? the procedure by infection

a is Yes. Mike, couple of there. pieces there

probably quarter closer business this tailwind And to chemistry business, IP&C you to beyond double-digits. it to quarter of the the this step current as really basically consumable example of that and our into Medical at that is turns some started nine example, commercial relates nearly a make aware hand if you of flat well which past was last view back, to region. XX% over business XX% and as As an executing end the our business, months couple we really we that in day, a on excellence of as was as to points and Europe up where are take right as driving an our compliance are the EMEA sort the

earlier. ASC that we our put we are feel to dodder to So, we on we points as committed in second the board year points positioned as the XXXX. the the in board well the am we half in as well not to traction, of I XQ, really gaining and and to started story of like is that surprised then on just of see expect putting be half start some back hit

little of. So that’s a bit

given time well. tailwind, the really which as story Ergo the side was well via launched Dental resonating is Medical as IP&C some there the it the the right on hitting at as obviously Soundbites on design has Harmony us piece obviously, market and Scaler

And ask did also to about I Thanks. ASCs. Okay. want

new could overall are force just an wondering are for update of there, portion hospitals? on give on top sales you that feel that you do us have you the I progress the procedures also, endoscopy So, targeting done the ASCs a and in of if was the

Yes.

are refining is there. portfolio We that’s that fitted product still best what

our of We proposition. are from It positive this getting value influence lots feedback space. to continues

the are that developing year. – of are also we So differentiate highly bookings backlog and the can that half right we was story now. part the committed confident are to is the in back direct seen growth of start build first year with We’ve to we half channel in sales a this there start of in capital the our stance the more strong aggressive that’s force

that So some continuing well. to as are and story on chemistry having capital and success consumable immediately we refine

you. Okay. Great. Thank

Thank you. you’d comments finish with? we closing you time have today. like Do Q&A to for That’s have all the any

Yes.

and everybody Obviously, prevention is we First in and longevity procedures well, our our our of think to with of results being outperform today. very to as natural believe as there call suites infection the in pleased for become products these to are and be control part as offices portfolio thank continue with dental going story expect to the on unique Cantel to to well. I that endoscopy we protocol things continue we

for you thank we being that, on with call. the So,

today's ladies you gentlemen. conclude call. and conference does Thank This

you a day. You for and wonderful phone lines time Thank have your may disconnect this participation. your at