Owens & Minor (OMI) 4 Nov 242024 Q3 Earnings call transcript

Good day, everyone, and thank you for standing by. Welcome to the Owens & Minor Third Quarter 2024 Earnings Conference Call. [Operator Instructions] 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. .

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

Our call XXXX posted slides on of The for section as comments press the Relations outlook on which the financial on our our with today's of third the results are the release included Investor quarter press XXXX, along are of for and in well will as website. both be release. focused supplemental the

statements. section call, uncertainties, refer these report this on from addressed we actual of during full to The that forward-looking subject Please reports and filings matters or SEC these make Form description risks XX-K results today. and note risks for Form which including of uncertainties, quarterly are statements implied XX-Q. a Factors Please our those projected materially here in will cause to and on annual to differ could our Risk the

today, will financial measures, our measures In GAAP release. non-GAAP in and about are comparable these financial information included and our we to most measures press discussion reconciliations the reference certain

am over joined and Officer. John will & Financial Minor's the our Ed Executive Officer; Today, I and Pesicka, Chief Leon, turn now I to Chief by Ed. call Owens President

the who morning, teammates you, portion were I'd on of the affected like you Hurricanes Thank call southeastern Good everyone, our for by Jackie. and today. by the remarks to thank and joining in Milton acknowledging us United begin States. Helene my

facility caused the and been were regularly which over some past to kitting was operate operations the infrastructure, our due This in operation few While deliveries. fully Carolina distribution local in unable in largely weeks. kitting delays unaffected, North region has our facilities disruptions to regional

their and in face teammates some cases, our and, unimaginable personal losses. importantly, significant More families

communities their recover. working help and them are with these teammates to We

patient services. in utilized growth direct and segments top and exceptional Turning overall to to long-term will to our our reduce cash we third as we confident some well strong pleased diabetes progress, momentum, sleep maintain flows demand quarter. segment within for supplies our that operational segments, products line and the financial in performance Also and upcoming by in the the both health greater in same-store across both sales care quarter, achieved in investments this quarter, efficiencies. we good sequential of our our as highlighted made I with cash I'm additional am to drive debt growth in leading and

customer the once strong reported Our our of Products existing growth. the and successful onboarding new revenue of strengthening Service mid-single-digit Healthcare relationships solid driven was again segment and by This performance opportunities.

continue we of prices product key to recently. Additionally, see more categories, in several including gloves stabilize our

long-term our line drive top prudent improved correct were choices indication a and to Healthcare recent segment investments product strong Our that and our performance is the in Services growth.

Turning our Patient to segment. direct

programs they well patient the it as success. the are investments resting on returns our products focused patients for demand to XXXX. diabetes notably not experience our the us supplies year, positive year-over-year examples seeing quarter, from on we Sleep to strong this our third most drive by supplies. from new journey top sleep investments of of earlier Both In Two improve in Journey making our to mid-single-digit need. sleeve as The business of growth, are were is driven which will our examples line to patients our process. indications, and our We cycle improving growth served our the obtain across further through program onboarding revenue enhancements easier delivered these

to cash coming most $XXX debt on year-to-date to and million. continuing $XXX investing quarter, We the debt are our repayment debt using recent million in bringing also with our and made products reduction total people, respect committed having progress processes. in while In sheet, hand to total approximately nearly our our reduced the balance also quarters, by we

acquisition half that is industry Healthcare health In a to Rotech documentary the for XXXX, line, common time highly additional in update Federal noting information first review Commission of the it an we like mid-October, in deal process. and for care, now shared Trade regulated to their we Holdings the to expect close materials request the

Rotech with improved Our ahead. quickly deal the the to team allows respond payers with the and and conditions. support better Most is and addition us and we Rotech patients as providers importantly, comprehensively in chronic patients, possible, remain network, working to closely though, with close months confident across additional to patients serve the offering direct FTC service will and the as offerings we for of patient product more serve and can our

have we first our X XXXX. quarters the for of on delivered summary, In commitments

ahead, us are continued ability our sequential improving cash and Looking enter to we as quarter, positioning well the in to from fourth growth XXXX. flows confident third demonstrate we

categories key and As facial industry. ahead Chinese protection the XXXX, our recognize impact will such we look to gloves tariffs as on we

However, is tariff the our well profile not China, many upcoming on positions our and unlike of footprint us This dependent manufacturing sourcing environment. in competitors.

Owens his the last years, I and congratulate as Minor working to I member as his the over on a take Financial Before been appointment official look & X over, to Leon CFO. call in Chief of him want I John role critical Officer. forward John turn to the team here with a has moment at

more will our I turn discuss quarter the in performance that, third call over to now detail. to financial John? With John

as our our year. the I will review of of well our and by and of start morning, overview good for Ed, Thanks, the as of quarter providing outlook remainder drivers key an some financial the results everyone. third performance

the saw solid year. this was to across growth both up X% $X.X billion, Once compared Our segments. prior again, revenue quarter we for

year accounted grew basis this compared gains day segment's segment overall of seen driven of X% growth. XXX X% by Medical There quarter same-store our Services Distribution XXXX, to QX compared points the the with Healthcare to year. we've in which more sales and Products third growth year-over-year The the as one as nearly throughout XXXX was selling division, for

in Direct growth categories therapy compared X% backlog decline. the such and of grew remains to Oxygen pending expected XXXX. new of the delays continue experienced patient eligibility the of spring. of supplies growth patient levels verification, largely as NIV levels shrink with diabetes last quarter and number attractive to to in to the nearly a we eligibility patients in reduced growth year. starts by timing to has therapies most due This again, third confident we throughout to reasonable quarter to been are Within and steadily begin half to slowly are as Once in Patient well. saw led continue to continue Patient and the Respiratory issue, the and sleep peak return revenue lag will the and Direct,

third year about $XXX lower expanded basis net million the in of and year's by Gross XX quarter. basis points XX quarter was or of points than profit revenue. were second XX.X% about this from quarter third Margins last the

You last margin. credit year's had and significant LIFO due that this may a in recall that at in drove third inventory time, a the to quarter, drop year-over-year gross we decline large current

was to quarter about distribution, $XXX due million, third revenue and when XX% was year's increase XX% of quarter also revenue. of sales million, prior XX% income in and from the million dollar flat was the were the Our XXXX. million, for of the and operating adjusted of XXXX second primarily quarter The administrative income last higher up year $XX.X for GAAP at DS&A quarter $XX.X $XXX with selling expenses the was quarter up growth. operating third than slightly from

interest to million quarter by year Interest million, compared under higher $X.X down debt $XX this XXXX, continuing offset about third expense last just the reduction, versus for rates was quarter drove of change. the third partially

GAAP tax effective tax was and for Our was effective rate third the the rate XX.X%. X.X% quarter adjusted

for a or per the compared quarter to net $X.X per or loss of share or million third was Adjusted share. year. of or net income share the the last quarter share compared $XX.X $X.XX million year $XX.X net $XX.X $X.XX million loss $X.XX when last $X.XX GAAP Our was million loss quarter for to per the per

year. flow August. reflecting reported in in generated third $XXX X% the quarter-to-quarter the We operating we Adjusted quarter, back lumpiness million, million expect cash in million we and $XX the cash this EBITDA over was operating $XXX the quarter up quarter, during mentioned last fourth better versus flow

was pleased we as $XX well which $XXX retirement our to was of the also have the included the cash that permanent that of importantly, billion notes are on Apria with worth debt. first in closed down $X.XX XXXX over by acquisition, debt million quarters the in million, as reduced of our paid delivered performance million almost term noting $XXX we the X Overall, More XXXX. It's through now reductions financial remaining of expected loans. since have we

and shape of I as year, end look Now seasonal are good to benefits. the segments the the in realize toward expect

consider. There headwinds we are, have however, few a to

onboard many within services, manage problems care backlog cost example, has volume continue For around and health we eliminated in Patient improvements, those hurricane-related cost Direct which damage, stemming despite time from we of eligibility to also recent have infrastructure among to our contributing had results. by patient hoped and Also, procedural incur our and delay the customers. manufacturer this have in to customers chain products supply to

Relations million and adjusted to earnings passage this of share reside to to full adjusted overall range and assumptions guidance $XX.X $X.XX the key This the filed assumptions Form billion to be X-K Of with were $XXX We revenue of range range the modeling the time, and Investor modeling information per now course, in $XXX now in our to to under other be and million of billion, the website. are our expect refine the we with $X.XX. on of EBITDA section for year. of able $XX.X morning

we this of close Rotech want now to to remind half that XXXX. acquisition Again, which impact you first of any excludes the expect guidance the during I

like operator over I'd the to to Q&A call the for Now session. turn Operator? the

[Operator Instructions]

the with line question Caliendo Kevin of first from comes Our UBS.

Great.

those, I you made was affected eligibility patient by like chains, impact the us magnitude of was comment maybe a First maybe we around think Can the you give just, and guidance each when direct. what supply some manufacturing volumes in guidance timing changed about of each talk patient how that? meaningful one, essence, your of those that procedural about of guess, Jonathan, EBITDA

about it, -- they continue. need costs Yes. tell and to what A -- It's think been the Kevin. Certainly, the to for about volume we you continue talk customers they incurring to procedure for of ranking to lot get surgical our the can't of have if throughout want quarter. procedures -- kind

us So could be. the probably that unexpected we I take rest the sight driver that don't will have that's light made thought around back but year, the come into an second quickly, very of of little a just would for a that really say what guidance

the living at with year, that Patient to really the Direct been of better. we've get most Now backlog for continues

in a fourth customer quarter. you way to need positively start disproportionately We at QX, health in expect better positive during with that we get changing will a get again insurance Obviously, the if the of is they expect. lot level. providers really customers the But the to through that in be procedural to I and provider going the getting get bigger online would volume our impact cost we back and getting distribution say

working quarter volume. And back as a product and shortages hospitals manufacturers quarter the to online has slows indirectly leaders largest one And if seasonality and is there that in little John can products I'll perspective, they some fourth they've down, quarter the are it on that really about procedural to more anticipate across procedural you I that, talked of is to hard the from talked it's as various in right and the IDNs an I a be the the that back serve the hurricane-related procedural across had in extent, we the that directly know . Again, and impact think could But color the issues volume the caused from just And the and that get have business to largest because that U.S. you volume would about add PNHS that out delays to generally both is patients. as to industry. business. volume able

If I follow-up. quick it. ask Got a can

XQ was and guidance have your the on And trying guidance to this the and So Like eligibility issue, we procedural would issues? weather any impact or higher anything didn't would been what have understand your sort impact Just the direct patient patient same, was lower? magnitude if there the this what else? been volume of weather XQ? of and of did this have ex there

the where I maybe Kevin. would but certainly the sure come think a little been, It at would down -- have I'm that guidance. not midpoint we been we have reported were we when closer bit, last would to

bit that, some we and EPS little maybe change year. to had We've last issues we've time. than little -- what have may been saw acknowledged not an a that a EBITDA from we've all obviously, So lighter guidance perspective, much been

put than higher So out what this . we morning.

the Our next Partners. from Michael comes Leerink of question Cherny with line

ahead appreciate point to as any of XQ. about we takes, pieces, and lot especially regarding how A up us in today, moving think and should potential set you closing, jumping Rotech off you will How those the mentioned. more XXXX I see can as you here of the sit 'XX. detail puts acquisition give you operational on takes where puts any into macro the color

Sure. I John can can then information. start, add additional and some

make XXXX think we've to I journey direct as supplies to as sleep easier have easier several patients get renewed. will in all into the patient make it the impacts first. that as worked patients about those can the well talk work if the throughout quarters sure making onboard we us new to their about businesses, So last it on positive Obviously, put

system, Once is that on in as just then the base somewhat annuity. continues it

January some Healthcare all procedure QX segment, volume which the and what procedures, the saw issue into quarter X, the January shortages, Product into On work of because normally on will reset it additional business again segment, put kind is or product So and those of on X, our on why they deductibles, people Services there. XXXX. the their is we reset should deductibles of hit of have beginning start so all as within biggest some Patient continue that volume that in procedural this our direct

We other is going a you that tailwind it tariff is remarks. is I we XX% and out on prepared and could and create it really have coming think talked it, XXXX. January little also a think little have surgical effective going that headwind That bit board. tariff have to because us could to on we a bit manufacturing the in of the our talked tariffs and a there that medical about are in facial have a X, it wildcard about gloves a XX% but our about protection the industry, XXXX, footprint. If sourcing for

So an segment. impact that on PNHS have could the

So on about procedure of we've January the -- in carries X in journey of all done QX the things. momentum work the cycle, shortfalls, that XX is XXXX, res think volumes should just into because the some One with X. down our you on that sleep slow product resets

an the And degree impact. tariffs can that's to have will be It's just yet what have then -- seen. to

if then And I could more. just ask X

the least base point, the opportunities low the care on where services of some is previously had share And the commented walking in your of dynamics side at for mentioned know like Ed, I a away as feel base business. gains, press the health market. dynamics give exit gain from recent where release customer your that you on share latter some a the best about sense share lower-margin that now you done? margin you're across is recently pickup. Can you do your point at been little on product point especially of You of incremental has seeing

would that year, them year and we'll in that is create of The X-year QX, through never don't we're to X QX profitable Generally It's in say, would you But I out biggest say we're headwind think Like I here I in business on that onboarding. on pretty getting X does there's There's X a -- want the the a say onboarding, our much wrap on dynamic customer. and onboarded assessing we as still on. speaking, up finite. the least also the customers, a deal. I of done. still that. bring

talked impact and which bit big the move I is year expand got onboarding, PNH this in footprints. a should talking opportunities that opportunity of XXXX. into product X glove create our of really . From an we've since gloves in business. that portfolio One opportunities about little we there's full opportunity standpoint, about we're as think spots So our I to

tariffs create business. an to some new it as place, these into for of some think go us does I opportunity win

we winning business at business, outside channel. distribution at it's the business so distribution think the or whole, the get whether winning but existing on winning on as of segment product a channel or inside fixated I we much of look customer

our being that XXXX opportunity So an not that, us we products think coming creates these in of for footprints China. tariffs and out

Our next from with comes Allen America. question the Bank Lutz line of . of

this talked know commercial nice moving margin Can moving we of that work in trend you're still the really margin Direct. talk part margins about still here? should strong. Really I in the sustainability performance of you in about backlog to go, were about from through and through quarter some just to think and there's Patient that, the forward? you trying the investing think How

the OpEx two, getting onboarding us it this our practice. it so wait you as I they're effort cost the tell expansion dig on nice can longer it both it I fixed faster. on can need, that because you an came make putting to products The it's about shown onboard streamline as on business, has how onboard put to the way tore in XXXX business. think apart patient And we patients year of of do into and into understand has optimize has amount that you you overall continuing the takes, that longer really but about really impact as we the over because an not they We business, we onboard patients. we One, impact The the or we amount how if easier, deeper into know journey. it's on business. margin. talked X sleep effort that gross margin our leverage we're times, now that to it here X I've the well of

the an into And making product available with opportunity to it's thing same is to sure XXXX. patients continue that get the that the them. product renewal, when So

So of high that can way, service. the again, have they level

through of we ultimately, it the end think our is the customer cut I all really in as patient. direct business, patient

So service. have we to an impeccable have

customer -- maintain high of as customers. As we'll those the to level that base long opportunity maintain that additional up we creates service, pick and

it and I sure the we is example say sure already our tearing And on to a journey relentlessness, not the the rest our and making direct we've in for going forward. of that, it's of laurels again, a it how we've great accomplished. patient patients done sleep making So easier would business it, have part what

area other of margin the starting cash line. The have rigorous and that's on on is you collection, to revenue area worked -- cycle relentlessly and a benefit. don't of expansion we up dollar bottom the we collect $X lower around really this ends making and revenue process, see that Every sure year being another that

helped also. us that's So

So type margin is, would the you've years, just business. expect margin in year-over-year in some to of expectation the like the seen expansion, get we past overall expansion

to also volume think because that year that the the we half of and And back business the I business. year front overall we have the versus of normally seasonal, the of the half in in see recognize the improvement the is seasonality

on work the ultimately team patient. user our our really of patient excited which end XXXX really improve and improve to direct about what in the the that being the So done has do bullish to our processes, in to continue -- service can our we business to

John the line of Our comes JPMorgan. Stansel from question with next

line. think to Products wanted the on and Healthcare growth Just top through Services

forward of new as the distribution kind just contributed called you're about give of And out how of growth Positive as sales. 'XX? XXX from the of global jump well Can medical you you that to extra working into then as thinking the how off day. same-store contributing the about we kind as kind points basis products kind think color some wins I in going quarter? commentary

segment Yes. continue the though, saw global we I the from we again, well, are for we -- together. standpoint, business, within stabilization -- mean Overall, holistically product global really one, X gloves. about think pricing in and the intertwined a

that important because categories. is of that's X think bigger our I

on impacting segment. I into there's and that lot pricing part of with gloves the and movement we tariffs potentially look other of think things as future, a the

slow bringing that see, our to continue market. We albeit products new growth of we're into

a in. as do been as done continue and we we it the products something learning We're really this. to hasn't owns minor It's bring that

product inventory So for sure to continues we well. we're stock go starting do that a we're the and portfolio, ready to have example, as in making launch new to

we've international comment, the year. as seen of then international And improvement our sequential the our business a during overall, just third in would that has part also and I general improved business say in some quarter,

And Great. quick X one. then just

margin operating to the for down Is normal contribution PHS, just course? there, of there a anything on just basis. note from step profit particularly or XQ Within kind

quarter, couple exchange. X John, of popped during No, certainly. the are a foreign will things up there that Big be

strengthened You us USD, would significantly currencies operating the few dollars compared have there. during quarter seen so cost of million to both Malaysia the a income that and potential

and profitable . And as As well, over to we most months ramp costs. saw Ed transportation several increases new customers, aren't time. storage the in of onboarding first and those profitability mentioned earlier, up tends

from the comes of Stephanie next Davis Barclays. with question Our line

still I cash in Jonathan, just official. flow with of that the call moderated are hoping that expecting or macro. the and bit? of this for and making of the could a quarter, it puts mind, with you out And free free we positive congrats weather moving takes on some flow pieces year? some given cash was

lot kind the are. we soft, the Yes, I a inventory the XX bit the during as snapshot better third build down be a reflect the mean always will Cash allowed quarter. necessarily the doesn't would that of quarter during debt. it the Actually, we quarter at to expected of during quarter. us September little on going was And a what's flows pay

a from to the, notes, payables QX surprised getting not with extent. the we the inventory free call compared into and that to the get QX we're in cash it, we that certain beyond we expect late debt in expectation do much quarter. that. pay expect free rise do as but a But as flow quarter. I'll to softness the to down we by saw debt to fourth did 'XX still past for . We really We incremental improve cash also flow And had and this change relative better QX, no quarter

So You guess, there flows AP improving to talked like there improve cash bunch quarter, that, . did about a AR on and updates up you last managing Is any you can I ramps, terms. following give out of call initiatives right? inventory us

I would somewhat say Certainly, it's on manufacturer is side, going the our expected. driver, inventory on are as supplier biggest we partners. dependent which our

delivered So and we than will manage that at quarter how when plan quarter, things like the said, process but XX. it get better dictate was the actually was, where we I to land September the of looks the it on end

cash you'll fairly for buying had And during required actually Thanksgiving year-end fourth the come have planning as flow by we for manufacturer improved that in we result to operating see a through you'll quarter. the get hand. much more working think the the XX, I management effective fruition We and I well get that think and And see of December holidays we quarter. shutdowns, the the capital time to

question next line the comes of . Our Coldwell Baird. with Eric from

times, sleep directionally? X strong mentioned at care growth diabetes categories, rates a growth you've the few So quantify to in those would you and those least in but

better were, way. know, still lead talked but but don't diabetes there. disclose would size we really to business that And the strong strong. growth the we us, again, Ed know, you I And don't as even mentioned, clears, also as verification about, I as No. certainly stronger. know, supplies has Sleep very you seeing little given diabetes say that, gets for that a of as patient the and margin eligibility category, that's we're backlog continues

pleased where oxygen. well mentioned, to of not I we NIV all we're be doing be in smaller other categories, . the wound it But the urology, still the categories, time. same really on still at as whether need we're And with ostomy, very

that. is to is opposed a trying it whatever the is, growth, through on whatever backlog share capture, as real-time was the market more strong demand? of how working current much sense to describing I and/or it get

in. third was demand. we're the high-grade I would suggest more problem demand real-time incremental a backlog and market quarter clearing It's comes while a that

So day. demand we're with that every working we're -- incremental to backlog, but the we clear it's pleased also see furiously that

patient earlier I Change the built on backlog And some think the Healthcare. that in was year,

heard then is to sleep in factors my that also than And the expected to the the last through taking factors? follow-up it the longer what Or get were of you patient rumblings why spring other about over. drove some inability product that? is Were We work there backlog? main

Yes. I some of offer would say your functionality, issues. longer the chain part a be of loss on no change manual the still supply we to It's the of needs issue, question, that change work required, first did that that no have.

of some demand the the due delay is, incremental quite to seeing. frankly, And that we're

queue a have we So of backlog.

queue new a day. constant of have starts every We

need and we to So something again, . have. through, a work manage but a bit of high-grade problem to

. question of Grosslight Citi. Daniel next line with Our Instructions] the comes [Operator from

of that to taking with current XXXX, perhaps coming tariffs some make, footprint. are I'm manufacturing of the need advantage there effect about think or position plant CapEx effect. you do share just are good that increasing to a the once are into to in those terms you whether a current investments any of your to need whole you'll that if in anything take lines additional tariffs in be plants, in As perhaps new it's curious at

Yes.

there is produce be to capital not to an we products to we to continue think able is the incremental increment, spend need I there need.

capacity. can large facility do back at added run XX If additional factory, investment lines, did XX/X our a recall, XXXX in glove you that to related we

availability. as in as have has Carolina facial to North well protection that as well protection for our We the as also continue operations facial Texas, capacity fabric for

about thinking how move So we as this that's we're forward.

investment would required. be really incremental that there So isn't any capital

it. Got

were costs transportation in you're that where the maybe or costs there that increase deeper a cost you're mentioned handling you shipping? just and you if John, the bit seeing And little biggest the so? this in . Okay. increase that Is year quarter transportation into can unexpectedly. how of some dig for Or in next

that secondly, well transportation it's I to match we storage the make over months, several and QX account from us a increased inventory It little as into ocean risen XXXX. shipping have bit fluctuates, and place We're is into for mean have storage news, ground as everything but as really And last for that. through to new has have we seeing not on Yes. in costs. freight the capacity we well. that as sure to

have over . time. Ed this closing any will at We the I back further turn now remarks. for no call Pesicka questions to

operator. well obviously, our by to as impacted thank you, as Thank want were who And our hurricanes teammates, the supported the that them. I teammates teammates

a adversity yet in overcome we could I'm & to incredibly impact you business, and the future, the Minor, think journey about continuing integration of for quarter. to patient come our well greater sleep they about . When approval rev as impacted that our into excited that today as third drive as direct both our as the in the Rotech had efficiencies I direct in Patient to heard across cycle Owens in the business. that management, from what's way well of that So about us the lot

early going making, together to about talk XXXX. look where XXXX the out close and in I define we're with everyone forward next to year getting we're in Finally, progress clearly

you, thank So everyone.

for all you Thank call. conference today's your participation. conclude will This

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