STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today announced
financial results for its fiscal 2020 first quarter ended June 30,
2019. Revenue as reported for the quarter increased 9% to
$696.8 million compared with $638.8 million in the first quarter of
fiscal 2019, with growth across all segments. Constant currency
organic revenue (see Non-GAAP Financial Measures) growth was 10%
for the first quarter of fiscal 2020.
“We are pleased with the strong start to our new fiscal year, as
the momentum we saw in fiscal 2019 has carried over into fiscal
2020,” said Walt Rosebrough, President and Chief Executive Officer
of STERIS. “Reflecting the out-performance in the first
quarter and our expectations for the full year, we are increasing
our fiscal 2020 outlook for both revenue and adjusted EPS.”
First Quarter 2020 Operating Results
As reported, net income for the first quarter was $84.6 million,
or $0.99 per diluted share, compared with net income of $70.0
million, or $0.82 per diluted share in the first quarter of fiscal
2019. Adjusted net income (see Non-GAAP Financial Measures)
for the first quarter of fiscal 2020 was $105.0 million, or $1.23
per diluted share, compared with adjusted net income for the
previous year’s first quarter of $85.6 million or $1.00 per diluted
share.
First Quarter Segment Results
Healthcare Products revenue as reported grew 6%
in the quarter to $309.8 million compared with $292.0 million in
the first quarter of fiscal 2019, driven by 7% growth in capital
equipment revenue, 2% growth in service revenue and 8% growth in
consumable revenue. Constant currency organic revenue growth
for Healthcare Products was 7% during the quarter. Healthcare
Products operating income was $73.7 million compared with $61.7
million in last year’s first quarter. The increase in
profitability was primarily due to increased revenue and favorable
product mix.
Fiscal 2020 first quarter revenue for Applied
Sterilization Technologies increased 11% as reported to
$154.3 million compared with $139.5 million in the same period last
year. Constant currency organic revenue increased 13%,
primarily driven by increased volume from the segment’s core
medical device Customers. Segment operating income increased
to $68.0 million in the first quarter of fiscal 2020 compared with
operating income of $56.2 million in the same period last year, due
primarily to revenue growth.
Healthcare Specialty Services as reported
revenue grew 11% in the quarter to $135.9 million compared with
$122.2 million in the first quarter of fiscal 2019. Constant
currency organic revenue growth was 13%. Healthcare Specialty
Services operating income was $16.8 million compared with $13.0
million in last year’s first quarter, benefiting from the
additional volume and improved productivity.
Life Sciences first quarter revenue as reported
grew 14% to $96.8 million compared with $85.0 million in the first
quarter of fiscal 2019, driven by 40% growth in capital equipment
revenue, 1% growth in service revenue and 9% growth in consumable
revenue. Constant currency organic revenue grew 15% in the quarter.
Operating income was $33.0 million compared with $29.9 million in
the prior year’s first quarter, primarily driven by additional
volume.
Cash FlowNet cash provided by operations for
the first three months of fiscal 2020 was $109.3 million, compared
with $100.8 million in fiscal 2019. Free cash flow (see
Non-GAAP Financial Measures) for the first three months of fiscal
2020 was $59.6 million compared with $75.8 million in the prior
year period. The decline in free cash flow is due to increased
capital spending as anticipated.
Fiscal 2020 OutlookBased on current performance
and expectations for the full fiscal year, the Company is updating
its prior outlook for revenue and adjusted earnings per diluted
share. Constant currency organic revenue growth is now
expected to be in the range of 6-7%, compared with 5-6%
previously. Reflecting June 30, 2019 forward rates, the
Company now expects that currency movements will negatively impact
reported revenue by approximately $10 million in fiscal 2020.
Adjusted earnings per diluted share are now anticipated to be in
the range of $5.38 - $5.53, compared with $5.28 - $5.43
previously. Operating profit increases due to volume and an
anticipated adjusted effective tax rate at the low-end of the
previously provided range of 19-20% are the primary drivers of the
higher earnings per diluted share range.
Capital spending is anticipated to be approximately $280 million
and free cash flow is expected to be approximately $300 million,
both unchanged from prior outlook.
Dividend and Repurchase AnnouncementSTERIS’s
Board of Directors has increased the quarterly interim dividend
from $0.34 to $0.37 per share. The dividend is payable
September 26, 2019 to shareholders of record at the close of
business on September 10, 2019.
STERIS’s Board of Directors also has approved an increase in its
May 7, 2019 share repurchase authorization of an additional $300
million (net of taxes, fees and commissions) of the Company’s
ordinary shares. Shares may be repurchased from time to time
through open market transactions, including 10b5-1 plans. Any
repurchase program may be activated, suspended or discontinued at
any time. Capital allocation priorities for the Company
remain unchanged.
Conference CallAs previously announced, STERIS
management will host a conference call tomorrow, August 6, 2019 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 6,
2019, either over the Internet at www.steris-ir.com or via
phone. To access the replay of the call, please use the
access code 10133575 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, the
re-measurement of deferred taxes and taxation of prior unremitted
earnings impacts of the TCJA, and certain other unusual or
non-recurring items. 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, 2019. 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) STERIS's ability to achieve the expected benefits
regarding the accounting and tax treatments of the Redomiciliation
transaction, (b) 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, (c) 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, (d) 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, (e) the potential for increased pressure
on pricing or costs that leads to erosion of profit margins,
(f) 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, (g) the possibility that application of or
compliance with laws, court rulings, certifications, regulations,
regulatory actions, including without limitation those relating to
FDA warning notices or letters, government investigations, the
outcome of any pending FDA requests, inspections or submissions, or
other requirements or standards may delay, limit or prevent new
product introductions, affect the production and marketing of
existing products or services or otherwise affect STERIS’s
performance, results, prospects or value, (h) 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,
(i) the possibility of reduced demand, or reductions in the
rate of growth in demand, for STERIS’s products and services,
(j) 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, (k) 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, 2019, and other securities filings, may
adversely impact STERIS’s performance, results, prospects or value,
(l) 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,
(m) 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, (n) the possibility that anticipated
financial results or benefits of recent acquisitions, or of
STERIS’s restructuring efforts, or of recent divestitures, or of
the targeted restructuring plan will not be realized or will be
other than anticipated, and (o) 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 1Q20 Financial Tables Final
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