Continued strength in Patient Direct with
strong organic growth and acquisition synergies on track Delivered
Q2 adjusted EBITDA of $156 million Weaker economic conditions and
hospital volumes lead to new FY22 Adj. EPS outlook of
$2.85-$3.15
Owens & Minor, Inc. (NYSE-OMI) today reported financial
results for the second quarter ended June 30, 2022, as summarized
in the table below.
"I am very pleased with our performance in the second quarter,
where the strength of our business model and the O&M business
system helped us in the face of external conditions that continued
to deteriorate over the quarter,” said Edward A. Pesicka, President
and Chief Executive Officer.
"Our Patient Direct segment again executed very well and
continues to grow as a percentage of total company profitability,
and quarterly results were driven by the consistent strength in our
Byram business that once again saw growth outpace the market. Apria
also delivered a strong quarter and integration synergies are on
track. We are strategically positioned very well to continue
capitalizing on shifting preferences toward the home. In the
Products & Healthcare Services segment, our differentiated,
vertically integrated business model has enabled us to provide
industry leading customer service levels as we continue to achieve
high quality wins," Pesicka added.
"Looking to the balance of the year, we have considered the
accelerating macroeconomic headwinds, as well as the unique labor
and product availability challenges within acute care resulting in
lower overall hospital volume. In recognition of these factors, we
have revised our full year 2022 outlook. However, in our view, the
economic landscape and industry-specific challenges will eventually
improve, returning hospital procedure volumes to normalized levels.
Because we have the right strategy and operating model, as well as
a proven business system, I am confident in our ability to
successfully manage through these challenges over time," Pesicka
concluded.
Financial
Summary(1)
($ in millions, except per share data)
2Q22
2Q21
YTD
2022
YTD
2021
Revenue
$2,500
$2,489
$4,907
$4,816
Operating income, GAAP
$75.1
$96.9
$136.1
$243.6
Adj. Operating Income, Non-GAAP
$113.6
$115.5
$218.5
$278.2
Net income, GAAP
$28.6
$65.9
$67.9
$135.5
Adj. Net Income, Non-GAAP
$58.3
$80.1
$131.0
$191.5
Adj. EBITDA, Non-GAAP
$155.6
$127.7
$274.1
$303.2
Net income per common share, GAAP
$0.37
$0.87
$0.89
$1.80
Adj. Net Income per share, Non-GAAP(2)
$0.76
$1.06
$1.72
$2.54
(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. (2) Adjusted Net Income per share, Non-GAAP for Q2
2022 was unfavorably impacted as compared to prior year by foreign
currency translation in the amount of $0.05 and $0.08 for the 2022
year-to-date period.
Q2 Results &
Highlights
- Consolidated revenue of $2.5 billion
- Patient Direct revenue of $573 million, up 145%, with Byram
revenue growth of 17% and Apria pro forma up 4.4%
- Products & Healthcare Services revenue of $1.9 billion,
impacted by lower hospital procedure volume and the reduction of
glove cost pass-through as expected
- Adjusted EBITDA of $156 million, up $28 million, with margin
expansion of 110 basis to 6.2%
- Strong first full quarter contribution from Apria
- Productivity gains derived from the Owens & Minor business
system
- Partially offset by headwinds created by macroeconomic and
industry-specific conditions, and
- Unfavorable FX of $5 million
- Balance Sheet and Cash Flow
- Generated $90 million of cash from operations in the quarter
and $170 million year-to-date
- Free cash flow (adjusted EBITDA less capital expenditures, net)
of $107 million and $214 million year-to-date
- Reduced total debt by $67 million
- Business Highlights
- Received Premier Inc.’s 2022 Supplier Legacy Award in
recognition of the value O&M provides to its members
- Broke ground on West Virginia center of excellence for medical
supply logistics
- Hired Tammy Gomez as Executive Vice President and Chief Human
Resources Officer
- Elected Rita Johnson-Mills, Terri Kline and Carissa Rollins to
our Board of Directors
Financial Outlook
The Company’s outlook for 2022 is subject to the key assumptions
below:
- Revenue for 2022 to be in a range of $9.8 billion to $10.1
billion, reflecting:
- Contribution in excess of $0.9 billion from Apria
- Now expect elective procedures for the full year to be below
pre-pandemic levels due to the slow start experienced in the first
half of 2022
- Continued expectation that PPE volumes will ease throughout the
year
- Adjusted EBITDA for 2022 to be in a range of $570 million to
$610 million, reflecting an increase related to Apria of
approximately $180 million
- Adjusted EPS for 2022 to be in a range of $2.85 to $3.15,
reflecting:
- Higher inflation and interest rates
- FX impact of $0.10, rates as of June 30, 2022
Investor Conference Call for Second
Quarter 2022 Financial Results
Owens & Minor executives will host a conference call at 8:00
am. ET today, August 3, 2022, to discuss the results. The live
webcast will be available on Owens & Minor’s Investor Relations
website in the Events & Presentations section. Conference call
participants are required to register in advance to obtain call-in
information prior to the start of the call.
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 expectations with respect to our 2022 financial
performance, the Apria transaction, including related synergies and
the expected performance of the Apria business, as well as
statements related to the impact of COVID-19 on the Company’s
results and operations and the Company’s expectations regarding the
performance of its business including its 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, 2021,
filed with the SEC 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 integrating product manufacturing and
delivery, home health supply, and perioperative services to support
care through the hospital and into the home. Owens & Minor
drives visibility, control and efficiency for patients, providers
and healthcare professionals across the supply chain with
proprietary technology and solutions, an extensive product
portfolio and an Americas-based manufacturing footprint for
personal protective equipment (PPE) and surgical products, as well
as a robust portfolio of products and services for patients
managing chronic and acute conditions in the home setting.
Operating continuously since 1882 from its headquarters in
Richmond, Va., Owens & Minor is a 140-year-old company powered
by more than 20,000 global teammates. Learn more at
https://www.owens-minor.com, follow @Owens_Minor on Twitter and
connect on LinkedIn at
www.linkedin.com/company/owens-&-minor.
Owens & Minor, Inc. Consolidated Statements of
Operations (unaudited) (dollars in thousands, except per share
data)
Three Months Ended
June 30,
2022
2021
Net revenue
$
2,500,015
$
2,489,460
Cost of goods sold
1,967,510
2,089,392
Gross margin
532,505
400,068
Distribution, selling and
administrative expenses
452,813
294,096
Acquisition-related and exit and
realignment charges
7,602
8,624
Other operating (income) expense,
net
(2,995
)
464
Operating income
75,085
96,884
Interest expense, net
35,839
11,540
Other expense, net
783
1,028
Income before income taxes
38,463
84,316
Income tax provision
9,859
18,420
Net income
$
28,604
$
65,896
Net income per common share:
Basic
$
0.38
$
0.90
Diluted
$
0.37
$
0.87
Owens & Minor, Inc. Consolidated Statements of
Operations (unaudited) (dollars in thousands, except per share
data)
Six Months Ended
June 30,
2022
2021
Net revenue
$
4,906,967
$
4,815,994
Cost of goods sold
4,001,014
3,973,175
Gross margin
905,953
842,819
Distribution, selling and administrative
expenses
732,553
586,796
Acquisition-related and exit and
realignment charges
41,150
14,587
Other operating income, net
(3,894
)
(2,141
)
Operating income
136,144
243,577
Interest expense, net
47,858
25,212
Loss on extinguishment of debt
—
40,433
Other expense, net
1,565
1,598
Income before income taxes
86,721
176,334
Income tax provision
18,837
40,848
Net income
$
67,884
$
135,486
Net income per common share:
Basic
$
0.92
$
1.87
Diluted
$
0.89
$
1.80
Owens & Minor, Inc. Condensed Consolidated Balance
Sheets (unaudited) (dollars in thousands)
June 30,
December 31,
2022
2021
Assets
Current assets
Cash and cash equivalents
$
56,406
$
55,712
Accounts receivable, net of allowances of
$14,922 and $18,003
743,853
681,564
Merchandise inventories
1,525,331
1,495,972
Other current assets
108,612
88,564
Total current assets
2,434,202
2,321,812
Property and equipment, net of accumulated
depreciation of $373,954 and $334,500
595,888
317,235
Operating lease assets
278,291
194,006
Goodwill
1,656,308
390,185
Intangible assets, net
462,444
209,745
Other assets, net
128,145
103,568
Total assets
$
5,555,278
$
3,536,551
Liabilities and equity
Current liabilities
Accounts payable
$
1,137,337
$
1,001,959
Accrued payroll and related
liabilities
97,829
115,858
Other current liabilities
334,198
226,204
Total current liabilities
1,569,364
1,344,021
Long-term debt, excluding current
portion
2,565,613
947,540
Operating lease liabilities, excluding
current portion
220,504
162,241
Deferred income taxes
107,181
35,310
Other liabilities
133,957
108,938
Total liabilities
4,596,619
2,598,050
Total equity
958,659
938,501
Total liabilities and equity
$
5,555,278
$
3,536,551
Owens & Minor, Inc. Consolidated Statements of
Cash Flows (unaudited) (dollars in thousands)
Six Months Ended June
30,
(in
thousands)
2022
2021
Operating activities:
Net income
$
67,884
$
135,486
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization
97,286
45,501
Share-based compensation expense
11,210
13,040
Loss on extinguishment of debt
—
40,433
Provision for losses on accounts
receivable
4,512
15,777
Deferred income tax expense (benefit)
1,601
(11,293
)
Changes in operating lease right-of-use
assets and lease liabilities
606
826
Loss on sale and dispositions of property
and equipment
226
—
Changes in operating assets and
liabilities:
Accounts receivable
16,275
(57,256
)
Merchandise inventories
(24,438
)
(298,294
)
Accounts payable
12,349
127,473
Net change in other assets and
liabilities
(23,945
)
(3,363
)
Other, net
5,958
4,076
Cash provided by operating
activities
169,524
12,406
Investing activities:
Acquisition, net of cash acquired
(1,684,607
)
—
Additions to property and equipment
(62,236
)
(14,630
)
Additions to computer software
(3,463
)
(4,051
)
Proceeds from sale of property and
equipment
5,846
22
Other, net
(839
)
—
Cash used for investing
activities
(1,745,299
)
(18,659
)
Financing activities:
Proceeds from issuance of debt
1,691,000
500,000
Borrowings under revolving credit
facility, net and accounts receivable securitization program
30,000
5,000
Repayments of debt
(1,500
)
(523,140
)
Borrowings under amended accounts
receivable securitization program
347,800
—
Repayments under amended accounts
receivable securitization program
(402,800
)
—
Financing costs paid
(41,479
)
(12,868
)
Cash dividends paid
—
(364
)
Payment for termination of interest rate
swaps
—
(15,434
)
Other, net
(42,388
)
(17,982
)
Cash provided by (used for) financing
activities
1,580,633
(64,788
)
Effect of exchange rate changes on
cash, cash equivalents and restricted cash
(3,864
)
(1,718
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
994
(72,759
)
Cash, cash equivalents and restricted
cash at beginning of period
72,035
134,506
Cash, cash equivalents and restricted
cash at end of period (1)
$
73,029
$
61,747
Supplemental disclosure of cash flow
information:
Income taxes paid, net of refunds
$
25,782
$
68,030
Interest paid
$
32,417
$
17,768
Noncash investing activity:
Unpaid purchases of property and equipment
at end of period
$
56,429
$
—
(1) Restricted cash included in Other assets, net as of June 30,
2022 and December 31, 2021 primarily represents cash 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.
Owens & Minor, Inc. Summary Segment Information
(unaudited) (dollars in thousands)
Three Months Ended June
30,
2022
2021
% of
% of
consolidated
consolidated
Amount
net revenue
Amount
net revenue
Net revenue:
Products & Healthcare Services
$
1,927,388
77.10
%
$
2,255,820
90.61
%
Patient Direct
572,627
22.90
%
233,640
9.39
%
Consolidated net revenue
$
2,500,015
100.00
%
$
2,489,460
100.00
%
% of segment
% of segment
Operating income:
net revenue
net revenue
Products & Healthcare Services
$
61,243
3.18
%
$
101,229
4.49
%
Patient Direct
52,332
9.14
%
14,305
6.12
%
Intangible amortization
(30,888
)
(10,026
)
Acquisition-related and exit and
realignment charges
(7,602
)
(8,624
)
Consolidated operating income
$
75,085
3.00
%
$
96,884
3.89
%
Depreciation and amortization:
Products & Healthcare Services
$
19,209
$
18,847
Patient Direct
53,952
3,753
Consolidated depreciation and
amortization
$
73,161
$
22,600
Capital expenditures:
Products & Healthcare Services
$
18,418
$
11,806
Patient Direct
36,320
252
Consolidated capital expenditures
$
54,738
$
12,058
Owens & Minor, Inc. Summary Segment Information
(unaudited) (dollars in thousands)
Six Months Ended June
30,
2022
2021
% of
% of
consolidated
consolidated
Amount
net revenue
Amount
net revenue
Net revenue:
Products & Healthcare Services
$
4,061,429
82.77
%
$
4,365,265
90.64
%
Patient Direct
845,538
17.23
%
450,729
9.36
%
Consolidated net revenue
$
4,906,967
100.00
%
$
4,815,994
100.00
%
% of segment
% of segment
Operating income:
net revenue
net revenue
Products & Healthcare Services
$
150,325
3.70
%
$
251,647
5.76
%
Patient Direct
68,125
8.06
%
26,569
5.89
%
Intangible amortization
(41,156
)
(20,052
)
Acquisition-related and exit and
realignment charges
(41,150
)
(14,587
)
Consolidated operating income
$
136,144
2.77
%
$
243,577
5.06
%
Depreciation and amortization:
Products & Healthcare Services
$
38,203
$
38,007
Patient Direct
59,083
7,494
Consolidated depreciation and
amortization
$
97,286
$
45,501
Capital expenditures:
Products & Healthcare Services
$
29,061
$
18,270
Patient Direct
36,638
411
Consolidated capital expenditures
$
65,699
$
18,681
Owens & Minor, Inc. Net Income per Common Share
(unaudited) (dollars in thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
Net income
$
28,604
$
65,896
$
67,884
$
135,486
Weighted average shares outstanding -
basic
74,710
72,818
74,158
72,474
Dilutive shares
1,587
2,987
2,011
2,791
Weighted average shares outstanding -
diluted
76,297
75,805
76,169
75,265
Net income per common share:
Basic
$
0.38
$
0.90
$
0.92
$
1.87
Diluted
$
0.37
$
0.87
$
0.89
$
1.80
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 income and net income per share to non-GAAP
measures used by management.
Three Months Ended
June 30,
Six Months Ended June
30,
2022
2021
2022
2021
Operating income, as reported (GAAP)
$
75,085
$
96,884
$
136,144
$
243,577
Intangible amortization (1)
30,888
10,026
41,156
20,052
Acquisition-related and exit and
realignment charges(2)
7,602
8,624
41,150
14,587
Operating income, adjusted (non-GAAP)
(Adjusted Operating Income)
$
113,575
$
115,534
$
218,450
$
278,216
Operating income as a percent of net
revenue (GAAP)
3.00
%
3.89
%
2.77
%
5.06
%
Adjusted operating income as a percent of
net revenue (non-GAAP)
4.54
%
4.64
%
4.45
%
5.78
%
Net income, as reported (GAAP)
$
28,604
$
65,896
$
67,884
$
135,486
Intangible amortization (1)
30,888
10,026
41,156
20,052
Income tax benefit (5)
(7,408
)
(2,411
)
(9,986
)
(5,197
)
Acquisition-related and exit and
realignment charges(2)
7,602
8,624
41,150
14,587
Income tax benefit (5)
(1,823
)
(2,073
)
(9,985
)
(3,780
)
Loss on extinguishment of debt (3)
—
—
—
40,433
Income tax benefit (5)
—
—
—
(10,477
)
Other (4)
525
570
1,049
1,140
Income tax benefit (5)
(127
)
(137
)
(254
)
(295
)
Tax adjustment (7)
—
(402
)
—
(402
)
Net income, adjusted (non-GAAP) (Adjusted
Net Income)
$
58,261
$
80,093
$
131,014
$
191,547
Net income per diluted common share, as
reported (GAAP)
$
0.37
$
0.87
$
0.89
$
1.80
Intangible amortization (1)
0.30
0.10
0.41
0.20
Acquisition-related and exit and
realignment charges(2)
0.08
0.09
0.41
0.14
Loss on extinguishment of debt (3)
—
—
—
0.40
Other (4)
0.01
0.01
0.01
0.01
Tax adjustment (7)
—
(0.01
)
—
(0.01
)
Net income per diluted common share,
adjusted (non-GAAP) (Adjusted EPS)
$
0.76
$
1.06
$
1.72
$
2.54
Owens & Minor, Inc. GAAP/Non-GAAP Reconciliations
(unaudited), continued (dollars in thousands)
The following tables provide reconciliations of net income and
total debt to non-GAAP measures used by management.
Three Months Ended
June 30,
Six Months Ended June
30,
Trailing Twelve Months
Ended
June 30, 2022
2022
2021
2022
2021
Net income, as reported (GAAP)
$
28,604
$
65,896
$
67,884
$
135,486
$
153,988
Income tax provision
9,859
18,420
18,837
40,848
33,154
Interest expense, net
35,839
11,540
47,858
25,212
70,736
Intangible amortization (1)
30,888
10,026
41,156
20,052
60,912
Other depreciation and amortization
(6)
42,273
12,575
56,131
25,448
81,494
EBITDA (non-GAAP)
$
147,463
$
118,457
$
231,866
$
247,046
$
400,284
Acquisition-related and exit and
realignment charges (2)
7,602
8,624
41,150
14,587
60,639
Loss on extinguishment of debt (3)
—
—
—
40,433
—
Other (4)
525
570
1,049
1,140
2,188
EBITDA, adjusted (non-GAAP) (Adjusted
EBITDA)
$
155,590
$
127,651
$
274,065
$
303,206
$
463,111
Three Months Ended
June 30, 2022
Six Months Ended June 30,
2022
EBITDA, adjusted (non-GAAP) (Adjusted
EBITDA)
$
155,590
$
274,065
Capital expenditures, net (8)
(48,666
)
(59,627
)
Free Cash Flow (non-GAAP)
$
106,924
$
214,438
June 30,
2022
Total debt, as reported (GAAP)
$
2,576,428
Cash and cash equivalents
56,406
Net debt (non-GAAP)
$
2,520,022
Owens & Minor, Inc.
GAAP/Non-GAAP Reconciliations (unaudited), continued
The following items have been excluded in our non-GAAP financial
measures:
(1) Intangible amortization includes amortization of intangible
assets established during purchase accounting for business
combinations. 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 and the results of our peers.
(2) Acquisition-related charges were $6.4 million and $38.3
million for the three and six months ended June 30, 2022 as
compared to no acquisition-related charges for the three and six
months ended June 30, 2021. Acquisition-related costs in 2022
consisted primarily of costs related to the Apria acquisition.
Acquisition-related charges for the twelve months ended June 30,
2022 were $41.4 million and consisted primarily of costs related to
the Apria acquisition. Exit and realignment charges were $1.2
million and $2.9 million for the three and six months ended June
30, 2022 and consisted primarily of severance and other charges
associated with the reorganization of our segments. Exit and
realignment charges were $8.6 million and $14.6 million for the
three and six months ended June 30, 2021 and consisted primarily of
an increase in reserves associated with certain retained assets of
Fusion5, IT restructuring charges and other costs related to the
reorganization of our U.S. operations. Exit and realignment charges
for the twelve months ended June 30, 2022 were $19.2 million and
consisted of costs associated with our strategic organizational
realignment, wind-down costs related to Fusion5, IT restructuring
charges and other items.
(3) Loss on extinguishment of debt for the six months ended June
30, 2021 includes the write-off of deferred financing costs and
third party fees associated with the debt financing in March 2021
of $15.3 million and amounts reclassified from accumulated other
comprehensive loss as a result of the termination of our interest
rate swaps of $25.1 million.
(4) Other includes interest costs and net actuarial losses
related to our retirement plans for the three and six months ended
June 30, 2022 and 2021, as well as the twelve months ended June 30,
2022.
(5) These charges have been tax effected in the preceding table
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.
(6) Other depreciation and amortization includes depreciation
expense for property and equipment and amortization for capitalized
computer software.
(7) Includes tax adjustments associated with the estimated
benefits under the Tax Cuts and Jobs Act and the Coronavirus Aid,
Relief, and Economic Security (CARES) Act.
(8) Capital expenditures, net is defined as capital expenditures
less the net book value of dispositions of property and equipment
during the accounting period.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220803005240/en/
Alex Jost, CPA Director, Investor Relations
Investor.Relations@owens-minor.com
Owens and Minor (NYSE:OMI)
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