Gross Margin Expansion of 79 Basis Points
Adjusted EPS Growth of Nearly Four Times with
GAAP EPS Loss of $(0.29) and Adjusted EPS of $0.19
Investments Outlined at 2023 Investor Day for
Long-Term Growth are Ahead of Plan
Owens & Minor, Inc. (NYSE: OMI) today reported financial
results for the first quarter ended March 31, 2024.
Key Highlights:
- Consolidated revenue of $2.6 billion in the first quarter,
representing year-over-year growth of 4%
- GAAP operating margin was flat while adjusted operating margin
expanded by 31 basis points versus prior year
- Net loss per share of $(0.29) and adjusted earnings per share
of $0.19 in the first quarter
“Our solid performance in the first quarter was in line with our
expectations, as we delivered top-line growth in both segments,
adjusted operating margin expansion, and improved year-over-year
profitability. At the same time, we are making the kind of
investments consistent with our strategic plan previewed at our
Investor Day in December 2023,” said Edward A. Pesicka, President
& Chief Executive Officer of Owens & Minor.
“In our Products & Healthcare Services segment, we onboarded
new customers, grew same store sales, and invested in inventory to
support our new wins and provide best-in-class service levels. On
the heels of double-digit growth in the prior years, our Patient
Direct segment delivered mid-single digit top-line growth while
navigating the unique challenges that occurred in the quarter,
demonstrating the strength of our team and the effectiveness of our
go-to-market strategies,” concluded Mr. Pesicka.
Financial
Summary (1)
($ in millions, except per share data)
1Q24
1Q23
Revenue
$2,613
$2,523
Operating income, GAAP
$9.7
$9.8
Adj. Operating Income, Non-GAAP
$57.4
$47.7
Net loss, GAAP
$(21.9)
$(24.4)
Adj. Net Income, Non-GAAP
$14.9
$3.6
Adj. EBITDA, Non-GAAP
$116.3
$108.7
Net loss per common share, GAAP
$(0.29)
$(0.32)
Adj. Net Income per share, Non-GAAP
$0.19
$0.05
(1) Reconciliations of the differences
between the non-GAAP financial measures presented in this release
and their most directly comparable GAAP financial measures are
included in the tables below.
Results and Business
Highlights
- Consolidated revenue of $2.6 billion in the first quarter of
2024, an increase of 4% as compared to the first quarter of 2023
- Patient Direct revenue of $638 million, up 5% compared to the
first quarter of 2023
- Products & Healthcare Services revenue of nearly $2
billion, up 3% compared to the first quarter of 2023
- First quarter 2024 operating income of $10 million and Adjusted
Operating Income of $57 million
- On a GAAP basis operating income margins remain flat while
adjusted operating income margin expanded by 31 basis points
- Adjusted operating income of $57.4 million, up 20% compared to
the prior year
- Both Products & Healthcare Services and Patient Direct
delivered increases in Segment Income year-over-year
2024 Financial Outlook
The Company’s most recent financial guidance; summarized
below:
- Revenue for 2024 to be in a range of $10.5 billion to $10.9
billion
- Adjusted EBITDA for 2024 to be in a range of $550 million to
$590 million
- Adjusted EPS for 2024 to be in a range of $1.40 to $1.70
The Company’s outlook for 2024 contains assumptions, including
current expectations regarding the impact of general economic
conditions, including inflation, and the continuation of pressure
on pricing and demand in our Products & Healthcare Services
segment. Key assumptions supporting the Company’s 2024 financial
guidance include:
- Gross margin rate of 21.0% to 21.5%
- Interest expense of $141 to $146 million
- Adjusted effective tax rate of 27.5% to 28.5%
- Diluted weighted average shares of ~78.5 million
- Capital expenditures of $220 to $240 million
- Stable commodity prices
- FX rates as of 12/31/2023
Although the Company does provide guidance for adjusted EBITDA
and adjusted EPS (which are non-GAAP financial measures), it is not
able to forecast the most directly comparable measures calculated
and presented in accordance with GAAP without unreasonable effort.
Certain elements of the composition of the GAAP amounts are not
predictable, making it impracticable for the Company to forecast.
Such elements include, but are not limited to, restructuring and
acquisition charges, which could have a significant and
unpredictable impact on our GAAP results. As a result, no GAAP
guidance or reconciliation of the Company’s adjusted EBITDA
guidance or adjusted EPS guidance is provided. The outlook is based
on certain assumptions that are subject to the risk factors
discussed in the Company’s filings with the SEC.
Investor Conference Call for First
Quarter 2024 Financial Results
Owens & Minor executives will host a conference call for
investors and analysts on Friday, May 3, 2024, at 8:30 a.m. ET.
Participants may access the call via the toll-free dial-in number
at 1-888-300-2035, or the toll dial-in number at 1-646-517-7437.
The conference ID access code is 1058917.
All interested stakeholders are encouraged to access the
simultaneous live webcast by visiting the investor relations page
of the Owens & Minor website available at
investors.owens-minor.com/events-and-presentations/. A replay of
the webcast can be accessed following the presentation at the link
provided above.
Safe Harbor
This release is intended to be disclosure through methods
reasonably designed to provide broad, non-exclusionary distribution
to the public in compliance with the SEC's Fair Disclosure
Regulation. This release contains certain ''forward-looking''
statements made pursuant to the Safe Harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements
include, but are not limited to, the statements in this release
regarding our future prospects and performance, including our
expectations with respect to our 2024 financial performance, our
Operating Model Realignment Program and other cost-saving
initiatives, future indebtedness and growth, industry trends, as
well as statements related to our expectations regarding the
performance of its business, including the results of our Operating
Model Realignment Program and our ability to address macro and
market conditions. Forward-looking statements involve known and
unknown risks and uncertainties that may cause our actual results
in future periods to differ materially from those projected or
contemplated in the forward-looking statements. Investors should
refer to Owens & Minor’s Annual Report on Form 10-K for the
year ended December 31, 2023, filed with the SEC on February 20,
2024, including the sections captioned “Cautionary Note Regarding
Forward-Looking Statements” and “Item 1A. Risk Factors,” and
subsequent quarterly reports on Form 10-Q and current reports on
Form 8-K filed with or furnished to the SEC, for a discussion of
certain known risk factors that could cause the Company’s actual
results to differ materially from its current estimates. These
filings are available at www.owens-minor.com. Given these risks and
uncertainties, Owens & Minor can give no assurance that any
forward-looking statements will, in fact, transpire and, therefore,
cautions investors not to place undue reliance on them. Owens &
Minor specifically disclaims any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future developments or otherwise.
About Owens & Minor
Owens & Minor, Inc. (NYSE: OMI) is a Fortune 500 global
healthcare solutions company providing essential products and
services that support care from the hospital to the home. For over
100 years, Owens & Minor and its affiliated brands, Apria®,
Byram® and HALYARD*, have helped to make each day better for the
patients, providers, and communities we serve. Powered by more than
20,000 teammates worldwide, Owens & Minor delivers comfort and
confidence behind the scenes so healthcare stays at the forefront.
Owens & Minor exists because every day, everywhere, Life Takes
Care™. For more information about Owens & Minor and our
affiliated brands, visit owens-minor.com or follow us on LinkedIn
and Instagram.
*Registered Trademark or Trademark of O&M Halyard or its
affiliates.
Owens & Minor, Inc.
Consolidated Statements of Operations
(unaudited)
(dollars in thousands, except per share
data)
Three Months Ended March
31,
2024
2023
Net revenue
$
2,612,680
$
2,522,849
Cost of goods sold
2,077,151
2,025,542
Gross profit
535,529
497,307
Distribution, selling and administrative
expenses
477,613
448,722
Acquisition-related charges and intangible
amortization
20,313
22,188
Exit and realignment charges, net
27,356
15,674
Other operating expense, net
551
916
Operating income
9,696
9,807
Interest expense, net
35,655
42,198
Other expense, net
1,153
1,387
Loss before income taxes
(27,112
)
(33,778
)
Income tax benefit
(5,226
)
(9,360
)
Net loss
$
(21,886
)
$
(24,418
)
Net loss per common share:
Basic
$
(0.29
)
$
(0.32
)
Diluted
$
(0.29
)
$
(0.32
)
Owens & Minor, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(dollars in thousands)
March 31, 2024
December 31, 2023
Assets
Current assets
Cash and cash equivalents
$
244,866
$
243,037
Accounts receivable, net of allowances of
$7,005 and $7,861
669,861
598,257
Merchandise inventories
1,144,597
1,110,606
Other current assets
177,020
150,890
Total current assets
2,236,344
2,102,790
Property and equipment, net of accumulated
depreciation and amortization of $546,326 and $546,397
501,385
543,972
Operating lease assets
349,984
296,533
Goodwill
1,635,368
1,638,846
Intangible assets, net
342,593
361,835
Other assets, net
142,319
149,346
Total assets
$
5,207,993
$
5,093,322
Liabilities and equity
Current liabilities
Accounts payable
$
1,218,817
$
1,171,882
Accrued payroll and related
liabilities
79,480
116,398
Current portion of long-term debt
207,658
206,904
Other current liabilities
427,136
396,701
Total current liabilities
1,933,091
1,891,885
Long-term debt, excluding current
portion
1,946,005
1,890,598
Operating lease liabilities, excluding
current portion
276,327
222,429
Deferred income taxes, net
34,437
41,652
Other liabilities
123,265
122,592
Total liabilities
4,313,125
4,169,156
Total equity
894,868
924,166
Total liabilities and equity
$
5,207,993
$
5,093,322
Owens & Minor, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(dollars in thousands)
Three Months Ended March
31,
2024
2023
Operating activities:
Net loss
$
(21,886
)
$
(24,418
)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization
74,095
70,926
Share-based compensation expense
6,866
6,463
Provision (benefit) for losses on accounts
receivable
181
(521
)
Loss on extinguishment of debt
—
564
Deferred income tax benefit
(3,659
)
(591
)
Changes in operating lease right-of-use
assets and lease liabilities
1,139
(225
)
Gain on sale and dispositions of property
and equipment
(15,619
)
(8,269
)
Changes in operating assets and
liabilities:
Accounts receivable
(75,144
)
5,240
Merchandise inventories
(35,412
)
45,832
Accounts payable
52,926
23,082
Net change in other assets and
liabilities
(39,617
)
36,483
Other, net
3,168
3,832
Cash (used for) provided by operating
activities
(52,962
)
158,398
Investing activities:
Additions to property and equipment
(45,997
)
(46,150
)
Additions to computer software
(3,411
)
(5,340
)
Proceeds from sale of property and
equipment
49,538
17,306
Other
(2,000
)
—
Cash used for investing
activities
(1,870
)
(34,184
)
Financing activities:
Borrowings under amended Receivables
Financing Agreement
205,000
232,100
Repayments under amended Receivables
Financing Agreement
(139,300
)
(328,100
)
Repayments of term loans
(4,625
)
(26,500
)
Other, net
(7,755
)
(4,989
)
Cash provided by (used for) financing
activities
53,320
(127,489
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(618
)
284
Net decrease in cash, cash equivalents
and restricted cash
(2,130
)
(2,991
)
Cash, cash equivalents and restricted
cash at beginning of period
272,924
86,185
Cash, cash equivalents and restricted
cash at end of period(1)
$
270,794
$
83,194
Supplemental disclosure of cash flow
information:
Income taxes paid, net
$
2,365
$
2,405
Interest paid
$
18,211
$
32,536
Noncash investing activity:
Unpaid purchases of property and equipment
and computer software at end of period
$
69,368
$
64,658
(1) Restricted cash as of March 31, 2024
and December 31, 2023 was $25.9 million and $29.9 million and,
includes amounts held in an escrow account as required by the
Centers for Medicare & Medicaid Services (CMS) in conjunction
with the Bundled Payments for Care Improvement (BPCI) initiatives
related to wind-down costs of Fusion5, as well as restricted cash
deposits received under the Master Receivables Purchase Agreement
to be remitted to a third-party financial institution.
Owens & Minor, Inc.
Summary Segment Information
(unaudited)
(dollars in thousands)
Three Months Ended March
31,
2024
2023
% of
% of
consolidated
consolidated
Amount
net revenue
Amount
net revenue
Net revenue:
Products & Healthcare Services
$
1,974,837
75.6
%
$
1,915,489
75.9
%
Patient Direct
637,843
24.4
%
607,360
24.1
%
Consolidated net revenue
$
2,612,680
100.0
%
$
2,522,849
100.0
%
% of segment
% of segment
Operating income:
net revenue
net revenue
Products & Healthcare Services
$
11,486
0.58
%
$
1,820
0.10
%
Patient Direct
45,879
7.19
%
45,849
7.55
%
Acquisition-related charges and intangible
amortization
(20,313
)
(22,188
)
Exit and realignment charges, net
(27,356
)
(15,674
)
Consolidated operating income
$
9,696
$
9,807
Depreciation and amortization:
Products & Healthcare Services
$
23,366
$
18,566
Patient Direct
50,729
52,360
Consolidated depreciation and
amortization
$
74,095
$
70,926
Capital expenditures:
Products & Healthcare Services
$
8,250
$
6,332
Patient Direct
41,158
45,158
Consolidated capital expenditures
$
49,408
$
51,490
Owens & Minor, Inc.
Net Loss Per Common Share
(unaudited)
(dollars in thousands, except per share
data)
Three Months Ended March
31,
2024
2023
Net loss
$
(21,886
)
$
(24,418
)
Weighted average shares outstanding -
basic
76,319
75,177
Dilutive shares
—
—
Weighted average shares outstanding -
diluted
76,319
75,177
Net loss per common share:
Basic
$
(0.29
)
$
(0.32
)
Diluted
$
(0.29
)
$
(0.32
)
Share-based awards for the three months ended March 31, 2024 and
2023 of approximately 1.6 million and 1.7 million shares were
excluded from the calculation of net loss per diluted common share
as the effect would be anti-dilutive.
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations
(unaudited)
(dollars in thousands, except per share
data)
The following table provides a
reconciliation of reported operating income, net loss and net loss
per common share to non-GAAP measures used by management.
Three Months Ended March
31,
2024
2023
Operating income, as reported (GAAP)
$
9,696
$
9,807
Acquisition-related charges and intangible
amortization (1)
20,313
22,188
Exit and realignment charges, net (2)
27,356
15,674
Operating income, adjusted (non-GAAP)
(Adjusted Operating Income)
$
57,365
$
47,669
Operating income as a percent of net
revenue (GAAP)
0.37
%
0.39
%
Adjusted operating income as a percent of
net revenue (non-GAAP)
2.20
%
1.89
%
Net loss, as reported (GAAP)
$
(21,886
)
$
(24,418
)
Pre-tax adjustments:
Acquisition-related charges and intangible
amortization (1)
20,313
22,188
Exit and realignment charges, net (2)
27,356
15,674
Other (3)
430
1,129
Income tax benefit on pre-tax adjustments
(4)
(11,348
)
(10,977
)
Net income, adjusted (non-GAAP) (Adjusted
Net Income)
$
14,865
$
3,596
Net loss per common share, as reported
(GAAP)
$
(0.29
)
$
(0.32
)
After-tax adjustments:
Acquisition-related charges and intangible
amortization (1)
0.20
0.21
Exit and realignment charges, net (2)
0.28
0.15
Other (3)
—
0.01
Net income per common share, adjusted
(non-GAAP) (Adjusted EPS)
$
0.19
$
0.05
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations
(unaudited), continued
(dollars in thousands)
The following tables provide
reconciliations of net loss and total debt to non-GAAP measures
used by management.
Three Months Ended March
31,
2024
2023
Net loss, as reported (GAAP)
$
(21,886
)
$
(24,418
)
Income tax benefit
(5,226
)
(9,360
)
Interest expense, net
35,655
42,198
Acquisition-related charges and intangible
amortization (1)
20,313
22,188
Exit and realignment charges, net (2)
27,356
15,674
Other depreciation and amortization
(5)
48,014
49,991
Stock compensation (6)
6,176
6,350
LIFO charges (7)
5,438
4,940
Other (3)
430
1,129
Adjusted EBITDA (non-GAAP)
$
116,270
$
108,692
March 31,
December 31,
2024
2023
Total debt, as reported (GAAP)
$
2,153,663
$
2,097,502
Cash and cash equivalents
(244,866
)
(243,037
)
Net debt (non-GAAP)
$
1,908,797
$
1,854,465
The following items have been excluded in
our non-GAAP financial measures:
(1) Acquisition-related charges and
intangible amortization includes no acquisition-related charges for
the three months ended March 31, 2024 and $1.3 million in
acquisition-related charges for the three months ended March 31,
2023, as well as amortization of intangible assets established
during acquisition method of accounting for business combinations.
Acquisition-related charges consist primarily of one-time costs
related to the acquisition of Apria, Inc., including transaction
costs necessary to consummate the acquisition, which consisted of
investment banking advisory fees and legal fees and director and
officer tail insurance expense, as well as transition costs, such
as severance and retention bonuses, information technology (IT)
integration costs and professional fees. These amounts are highly
dependent on the size and frequency of acquisitions and are being
excluded to allow for a more consistent comparison with forecasted,
current and historical results.
(2) During the three months ended March
31, 2024, exit and realignment charges, net were $27.4 million.
These charges primarily related to our (1) Operating Model
Realignment Program of $33.5 million, including professional fees,
severance, and other costs to streamline functions and processes
and (2) costs related to IT strategic initiatives such as
converting certain divisions to common IT systems of $1.2 million
partially offset by (3) a $7.4 million gain on the sale of our
corporate headquarters. During the three months ended March 31,
2023, exit and realignment charges, net consisted of severance,
professional, and other fees primarily associated with our
Operating Model Realignment Program. These costs are not normal
recurring, cash operating expenses necessary for the Company to
operate its business on an ongoing basis.
(3) For the three months ended March 31,
2024 and 2023, other includes interest costs and net actuarial
losses related to our frozen noncontributory, unfunded retirement
plan for certain retirees in the United States (U.S.).
Additionally, for the three months ended March 31, 2023, other
includes loss on extinguishment of debt for the write-off of
deferred financing costs of $0.6 million associated with early
principal payments.
(4) These charges have been tax effected
by determining the income tax rate depending on the amount of
charges incurred in different tax jurisdictions and the
deductibility of those charges for income tax purposes.
(5) Other depreciation and amortization
relates to property and equipment and capitalized computer
software, excluding such amounts captured within exit and
realignment charges, net or acquisition-related charges.
(6) Stock compensation includes
share-based compensation expense related to our share-based
compensation plans, excluding such amounts captured within exit and
realignment charges, net or acquisition-related charges.
(7) LIFO charges includes non-cash
adjustments to merchandise inventories valued at the lower of cost
or market, with the approximate cost determined by the last-in,
first-out (LIFO) method for distribution inventories in the U.S.
within our Products & Healthcare Services segment.
Use of Non-GAAP
Measures
This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles (GAAP). In general, the measures exclude items and
charges that (i) management does not believe reflect Owens &
Minor, Inc.’s (the Company) core business and relate more to
strategic, multi-year corporate activities; or (ii) relate to
activities or actions that may have occurred over multiple or in
prior periods without predictable trends. Management uses these
non-GAAP financial measures internally to evaluate the Company’s
performance, evaluate the balance sheet, engage in financial and
operational planning and determine incentive compensation.
Management provides these non-GAAP financial measures to
investors as supplemental metrics to assist readers in assessing
the effects of items and events on its financial and operating
results and in comparing the Company’s performance to that of its
competitors. However, the non-GAAP financial measures used by the
Company may be calculated differently from, and therefore may not
be comparable to, similarly titled measures used by other
companies.
The non-GAAP financial measures disclosed by the Company should
not be considered substitutes for, or superior to, financial
measures calculated in accordance with GAAP, and the financial
results calculated in accordance with GAAP and reconciliations to
those financial statements set forth above should be carefully
evaluated.
OMI-CORP
OMI-IR
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240503879329/en/
Investors Alpha IR Group
Jackie Marcus or Nick Teves OMI@alpha-ir.com
Jonathan Leon SVP Finance & Treasurer
Investor.Relations@owens-minor.com
Media Stacy Law
media@owens-minor.com
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