STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today announced
financial results for its fiscal 2021 first quarter ended June 30,
2020. Revenue as reported for the quarter decreased 4% to
$668.9 million compared with $696.8 million in the first quarter of
fiscal 2020, with growth in Life Sciences offset by declines in
Healthcare and Applied Sterilization Technologies. Constant
currency organic revenue (see Non-GAAP Financial Measures) declined
3% for the first quarter of fiscal 2021.
“We are pleased with our overall performance during such a
challenging time,” said Walt Rosebrough, President and Chief
Executive Officer of STERIS. “Our results this quarter
reflect the benefits of STERIS’s balanced and diversified business
model as well as certain non-recurring items. As anticipated,
our Healthcare segment was the most impacted by the reduction of
deferrable procedures. Our Life Sciences segment continued
its strong performance due to increased demand from pharma
Customers focused on vaccines and biologics. Due to the
continuing uncertainty we are not providing guidance for fiscal
2021.”
As reported, net income for the first quarter was $88.2 million
or $1.03 per diluted share, compared with net income of $84.6
million, or $0.99 per diluted share in the first quarter of fiscal
2020. Adjusted net income (see Non-GAAP Financial Measures)
for the first quarter of fiscal 2021 was $111.8 million, or $1.31
per diluted share, compared with adjusted net income for the
previous year’s first quarter of $105.0 million or $1.23 per
diluted share.
First Quarter Segment Results
Healthcare revenue as reported declined 10% in
the quarter to $399.7 million compared with $445.7 million in the
first quarter of fiscal 2020, with a 28% decline in consumable
revenue and 10% decline in service revenue partially offset by 6%
growth in capital equipment revenue. Capital equipment
revenue reflects a one-time benefit from the timing of revenue
recognition for operating room integration (ORI) products which
added approximately $15 million to revenue. Excluding that
benefit, capital equipment revenue would have declined 6%.
Constant currency organic revenue also declined 10% during the
quarter. Healthcare operating income was $82.4 million
compared with $90.5 million in last year’s first quarter. The
decrease in profitability was primarily due to the decline in
revenue, which was somewhat offset by lower operating expenses and
approximately $5 million one-time benefit from the timing of ORI
revenue recognition previously noted.
Fiscal 2021 first quarter revenue for Applied
Sterilization Technologies decreased 1% as reported to
$152.4 million compared with $154.3 million in the same period last
year. Constant currency organic revenue was flat, as
increased demand for personal protective equipment products offset
the impact of reduced volumes from the segment’s core medical
device Customers. Segment operating income was $64.0 million
in the first quarter of fiscal 2021 compared with operating income
of $68.0 million in the same period last year primarily due to
Customer product mix.
Life Sciences first quarter revenue as reported
grew 21% to $116.9 million compared with $96.8 million in the first
quarter of fiscal 2020, driven by 34% growth in consumable revenue,
14% growth in capital equipment revenue and 6% growth in service
revenue. Constant currency organic revenue grew 21% in the
quarter. Operating income was $48.5 million compared with
$33.0 million in the prior year’s first quarter, primarily driven
by increased volume.
Cash FlowNet cash provided by operations for
the first three months of fiscal 2021 was $134.1 million, compared
with $109.3 million in fiscal 2020. Free cash flow (see
Non-GAAP Financial Measures) for the first three months of fiscal
2021 was $67.4 million compared with $59.6 million in the prior
year period. The increase in free cash flow is primarily due
to working capital improvements during the quarter.
Board AnnouncementsSTERIS’s Board of Directors
has approved a $0.03 increase in the quarterly interim dividend to
$0.40 per share, representing the 15th consecutive year of dividend
increases. The dividend is payable September 24, 2020 to
shareholders of record at the close of business on August 27,
2020.
Effective July 28, 2020, the Company has expanded its Board to
nine members with the appointment of Christopher Holland. Mr.
Holland brings over 30 years of experience to STERIS's Board, most
recently serving as Senior Vice President and Chief Financial
Officer at C.R. Bard prior to the 2017 acquisition by Becton,
Dickinson and Company (NYSE:BDX). Previously Mr. Holland
served as Senior Vice President Finance and Treasurer at Aramark,
and spent fifteen years at JPMorgan Chase & Co., ultimately in
the role of Vice President and Medical Device Sector Head,
Investment Banking. Mr. Holland also serves on the Board of
Jabil Inc. (NYSE: JBL) and is a member of its Audit and
Cybersecurity Committees.
Conference CallAs previously announced, STERIS
management will host a conference call tomorrow, August 4, 2020 at
10:00 a.m. Eastern time. The conference call can be heard
live over the Internet at www.steris-ir.com or via phone by dialing
1-833-535-2199 in the United States or 1-412-902-6776
internationally, then asking to join the conference call for STERIS
plc.
For those unable to listen to the conference call live, a replay
will be available beginning at 12:00 p.m. Eastern Time on August 4,
2020, either over the Internet at www.steris-ir.com or via
phone. To access the replay of the call, please use the
access code 10145793 and dial 1-877-344-7529 in the United States
or 1-412-317-0088 internationally.
About STERISSTERIS’s MISSION IS TO HELP OUR
CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing
innovative healthcare and life science product and service
solutions around the globe. For more information, visit
www.steris.com.
Investor Contact:Julie Winter, Senior Director,
Investor Relations and Corporate
CommunicationsJulie_Winter@steris.com
+1 440 392 7245
Media Contact:
Stephen Norton, Senior Director, Corporate
CommunicationsStephen_Norton@steris.com+1 440 392 7482
Non-GAAP Financial MeasuresAdjusted net income,
free cash flow and constant currency organic revenue are non-GAAP
measures that may be used from time to time and should not be
considered replacements for GAAP results. Non-GAAP financial
measures are presented in this release with the intent of providing
greater transparency to supplemental financial information used by
management and the Board of Directors in their financial analysis
and operational decision making. These amounts are disclosed so
that the reader has the same financial data that management uses
with the belief that it will assist investors and other readers in
making comparisons to our historical operating results and
analyzing the underlying performance of our operations for the
periods presented. The Company believes that the presentation
of these non-GAAP financial measures, when considered along with
our GAAP financial measures, provides a more complete understanding
of the factors and trends affecting our business than could be
obtained absent this disclosure.
Adjusted net income excludes the amortization of intangible
assets acquired in business combinations, acquisition related
transaction costs, integration costs related to acquisitions,
redomiciliation and tax restructuring costs, COVID-19 incremental
costs, and certain other unusual or non-recurring items. COVID-19
incremental costs includes the additional costs attributable to
COVID-19 such as enhanced cleaning protocols, personal protective
equipment for our employees, event cancellation fees, and payroll
costs associated with our response to COVID-19, net of any
government subsidies available. STERIS believes this measure is
useful because it excludes items that may not be indicative of or
are unrelated to our core operating results and provides a baseline
for analyzing trends in our underlying businesses.
The Company defines free cash flow as cash flows from operating
activities less purchases of property, plant, equipment and
intangibles, plus proceeds from the sale of property, plant,
equipment, and intangibles. STERIS believes that free cash
flow is a useful measure of the Company’s ability to fund future
principal debt repayments and growth outside of core operations,
pay cash dividends, and repurchase ordinary shares.
To measure the percentage organic revenue growth, the Company
removes the impact of significant acquisitions and divestitures
that affect the comparability and trends in revenue. To measure the
percentage constant currency organic revenue growth, the impact of
changes in currency exchange rates and acquisitions and
divestitures that affect the comparability and trends in revenue
are removed. The impact of changes in currency exchange rates
is calculated by translating current year results at prior year
average currency exchange rates.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies’ non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered
in isolation or as a substitute for reported sales, gross profit,
operating income, net earnings and net earnings per diluted share,
the most directly comparable GAAP financial measures. These
non-GAAP financial measures are an additional way of viewing
aspects of the Company’s operations that, when viewed with GAAP
results and the reconciliations to corresponding GAAP financial
measures below, provide a more complete understanding of the
business. The Company strongly encourages investors and
shareholders to review its financial statements and publicly-filed
reports in their entirety and not to rely on any single financial
measure.
Forward-Looking StatementsThis release and the
referenced conference call may contain statements concerning
certain trends, expectations, forecasts, estimates, or other
forward-looking information affecting or relating
to STERIS or its industry, products or activities that
are intended to qualify for the protections afforded
“forward-looking statements” under the Private Securities
Litigation Reform Act of 1995 and other laws and regulations.
Forward-looking statements speak only as to the date the statement
is made and may be identified by the use of forward-looking terms
such as “may,” “will,” “expects,” “believes,” “anticipates,”
“plans,” “estimates,” “projects,” “targets,” “forecasts,”
“outlook,” “impact,” “potential,” “confidence,” “improve,”
“optimistic,” “deliver,” “orders,” “backlog,” “comfortable,”
“trend”, and “seeks,” or the negative of such terms or other
variations on such terms or comparable terminology. Many important
factors could cause actual results to differ materially from those
in the forward-looking statements including, without limitation,
disruption of production or supplies, changes in market conditions,
political events, pending or future claims or litigation,
competitive factors, technology advances, actions of regulatory
agencies, and changes in laws, government regulations, labeling or
product approvals or the application or interpretation thereof.
Other risk factors are described in STERIS’s other securities
filings, including Item 1A of our Annual Report on Form 10-K
for the year ended March 31, 2020. Many of these important factors
are outside of STERIS’s control. No assurances can be provided as
to any result or the timing of any outcome regarding matters
described in STERIS’s securities filings or otherwise with respect
to any regulatory action, administrative proceedings, government
investigations, litigation, warning letters, cost reductions,
business strategies, earnings or revenue trends or future financial
results. References to products are summaries only and should not
be considered the specific terms of the product clearance or
literature. Unless legally required, STERIS does not
undertake to update or revise any forward-looking statements even
if events make clear that any projected results, express or
implied, will not be realized. Other potential risks and
uncertainties that could cause actual results to differ materially
from those in the forward-looking statements include, without
limitation, (a) the impact of the COVID-19 pandemic on STERIS’s
operations, performance, results, prospects, or value, (b) STERIS's
ability to achieve the expected benefits regarding the accounting
and tax treatments of the redomiciliation to Ireland
(“Redomiciliation”), (c) operating costs, Customer loss and
business disruption (including, without limitation, difficulties in
maintaining relationships with employees, Customers, clients or
suppliers) being greater than expected following the
Redomiciliation, (d) STERIS’s ability to meet expectations
regarding the accounting and tax treatment of the Tax Cuts and Jobs
Act (“TCJA”) or the possibility that anticipated benefits resulting
from the TCJA will be less than estimated, (e) changes in tax
laws or interpretations that could increase our consolidated tax
liabilities, including changes in tax laws that would result in
STERIS being treated as a domestic corporation for United States
federal tax purposes, (f) the potential for increased pressure
on pricing or costs that leads to erosion of profit margins,
(g) the possibility that market demand will not develop for
new technologies, products or applications or services, or business
initiatives will take longer, cost more or produce lower benefits
than anticipated, (h) the possibility that application of or
compliance with laws, court rulings, certifications, regulations,
regulatory actions, including without limitation any of the same
relating to FDA, EPA or other regulatory authorities, government
investigations, the outcome of any pending or threatened FDA, EPA
or other regulatory warning notices, actions, requests, inspections
or submissions, or other requirements or standards may delay, limit
or prevent new product or service introductions, affect the
production, supply and/or marketing of existing products or
services or otherwise affect STERIS’s performance, results,
prospects or value, (i) the potential of international unrest,
economic downturn or effects of currencies, tax assessments,
tariffs and/or other trade barriers, adjustments or anticipated
rates, raw material costs or availability, benefit or retirement
plan costs, or other regulatory compliance costs, (j) the
possibility of reduced demand, or reductions in the rate of growth
in demand, for STERIS’s products and services, (k) the
possibility of delays in receipt of orders, order cancellations, or
delays in the manufacture or shipment of ordered products or in the
provision of services, (l) the possibility that anticipated
growth, cost savings, new product acceptance, performance or
approvals, or other results may not be achieved, or that
transition, labor, competition, timing, execution, regulatory,
governmental, or other issues or risks associated with STERIS’s
businesses, industry or initiatives including, without limitation,
those matters described in our Annual Report on Form 10-K for the
year ended March 31, 2020, and other securities filings, may
adversely impact STERIS’s performance, results, prospects or value,
(m) the impact on STERIS and its operations, or tax
liabilities, of Brexit or the exit of other member countries from
the EU, and the Company’s ability to respond to such impacts,
(n) the impact on STERIS and its operations of any
legislation, regulations or orders, including but not limited to
any new trade or tax legislation, regulations or orders, that may
be implemented by the U.S. administration or Congress, or of any
responses thereto, (o) the possibility that anticipated
financial results or benefits of recent acquisitions, or of
STERIS’s restructuring efforts, or of recent divestitures, or
of restructuring plans will not be realized or will be other
than anticipated, and (p) the effects of contractions in
credit availability, as well as the ability of STERIS’s Customers
and suppliers to adequately access the credit markets when
needed.
- STERIS Financial Tables Q1FY21
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