STERIS plc (NYSE: STE) (“STERIS” or the “Company”) today
announced financial results for its fiscal 2023 fourth quarter and
full year ended March 31, 2023. Revenue as reported for the quarter
increased 14% to $1.38 billion compared with $1.21 billion in the
fourth quarter of fiscal 2022. Constant currency organic revenue
(see Non-GAAP Financial Measures) increased 16% for the fourth
quarter of fiscal 2023 as compared to the fourth quarter of fiscal
2022.
“We are pleased to end the year with strong performance,” said
Dan Carestio, President and Chief Executive Officer of STERIS. “Our
teams worked diligently to meet Customer demand in the fourth
quarter. Heading into fiscal 2024, we are optimistic that many of
the challenges we faced in fiscal 2023 are abating, including
procedure volumes and supply chain constraints. As a result, we
look forward to another year of record performance.”
Fourth Quarter and
Full Year Operating
ResultsAs reported, net income for the fourth
quarter was $187.2 million or $1.88 per share, compared with net
income of $52.3 million or $0.52 per diluted share in the fourth
quarter of fiscal 2022. Adjusted net income (see Non-GAAP Financial
Measures) for the fourth quarter of fiscal 2023 was $229.2 million
or $2.30 per diluted share, compared with the previous year’s
fourth quarter of $205.4 million or $2.04 per diluted
share.
As reported, full year net income was $107.0 million, or $1.07
per diluted share, compared with $243.9 million, or $2.48 per
diluted share in fiscal 2022. Fiscal 2023 net income was impacted
by a $490.6 million pre-tax, non-cash impairment charge recorded in
the second quarter related to the goodwill associated with the
Dental segment acquired in the June 2021 acquisition of Cantel.
Adjusted net income for fiscal 2023 was $822.2 million, or $8.20
per diluted share, compared with adjusted net income of $778.9
million, or $7.92 per diluted share in fiscal 2022.
Fourth Quarter Segment
ResultsHealthcare revenue as
reported grew 20% in the quarter to $884.6 million compared with
$738.8 million in the fourth quarter of fiscal 2022. This
performance reflected a 31% improvement in capital equipment
revenue, a 15% increase in consumable revenue and a 15% increase in
service revenue. Constant currency organic revenue increased 21%
for the quarter compared with the prior year quarter. Healthcare
operating income was $208.8 million compared with $167.2 million in
last year’s fourth quarter. This improvement was primarily
attributable to the increase in volume.
Fiscal 2023 fourth quarter revenue for Applied
Sterilization Technologies
(AST) increased 7% as reported to
$239.1 million compared with $222.9 million in the same period last
year. This performance was driven primarily by increased demand
from core medical device Customers, partially offset by continued
reduction in demand from single use bioprocessing
Customers. Constant currency organic revenue in the
quarter increased 10%. Segment operating income decreased to $105.8
million in the fourth quarter of fiscal 2023 compared with
operating income of $107.0 million in the same period last year
primarily due to higher labor and energy costs and negative foreign
currency.
Life Sciences fourth quarter revenue as
reported increased 10% to $157.5 million compared with $143.3
million in the fourth quarter of fiscal 2022. This performance
reflected a 14% increase in consumable revenue, an 8% improvement
in capital equipment revenue and a 6% increase in service revenue.
Constant currency organic revenue grew 11% in the quarter compared
with the prior year quarter. Operating income increased to $61.1
million in the fourth quarter of fiscal 2023 compared with $57.5
million in the prior year’s fourth quarter. This improvement was
primarily due to improved volume.
Dental fourth quarter revenue as reported
declined 2% to $103.6 million compared with $105.7 million in the
fourth quarter of fiscal 2022. Constant currency organic revenue
declined 1% in the quarter compared with the prior year quarter.
Operating income improved to $21.5 million in the fourth quarter of
fiscal 2023 compared with $18.8 million in the prior year’s fourth
quarter. This increase was primarily due to favorable pricing and
improved operating efficiencies.
Cash Flow Net cash provided by operations for
fiscal 2023 was $756.9 million, compared with $684.8 million in
fiscal 2022. Free cash flow (see Non-GAAP Financial Measures) for
fiscal 2023 was $409.6 million compared with $399.0 million in the
prior year period. Cash flow was limited during fiscal 2023 by
higher working capital requirements, in particular accounts
receivable and inventory, as well as approximately $75 million in
increased capital spending.
Fiscal 2024
OutlookFor fiscal 2024, as reported revenue is
expected to increase 7-8%, reflecting the anticipated positive
impact of foreign currency fluctuations based on forward rates
through March 31, 2024. Constant currency organic revenue growth is
anticipated to increase 6-7%. Adjusted earnings per diluted share
are anticipated to be in the range of $8.55 to $8.75, with an
effective tax rate of approximately 23%. Capital expenditures are
anticipated to be approximately $375 million and free cash flow is
expected to be approximately $700 million.
Conference Call As previously announced, STERIS
management will host a conference call tomorrow, May 11, 2023 at
9:00 a.m. ET. The conference call can be heard 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. ET tomorrow either at
www.steris-ir.com or via phone. To access the replay of the call,
please use the access code 1246295 and dial 1-877-344-7529 in the
United States or 1-412-317-0088 internationally.
About STERIS STERIS is a leading global
provider of products and services that support patient care with an
emphasis on infection prevention. WE HELP OUR CUSTOMERS CREATE A
HEALTHIER AND SAFER WORLD by providing innovative healthcare, life
sciences and dental products and services. For more
information, visit www.steris.com.
Company Contact: Julie Winter,
Vice President, Investor Relations and Corporate
CommunicationsJulie_Winter@steris.com
Non-GAAP Financial MeasuresAdjusted net income,
adjusted income from operations, 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 and adjusted income from operations exclude
the amortization of intangible assets acquired in business
combinations, acquisition and divestiture related transaction
costs, integration costs related to acquisitions, tax restructuring
costs, 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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATIONThe 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, 2022 and subsequently filed Quarterly
Reports on Form 10-Q. 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 or similar public health crises on
STERIS’s operations, supply chain, material and labor costs,
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, (d) STERIS’s ability to successfully
integrate the businesses of Cantel Medical into our existing
businesses, including unknown or inestimable liabilities, or
increases in expected integration costs or difficulties in
connection with the integration of Cantel Medical, (e) 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, (f) 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, (g) the
potential for increased pressure on pricing or costs that leads to
erosion of profit margins, including as a result of inflation, (h)
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, (i) the possibility that application of or
compliance with laws, court rulings, certifications, regulations or
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, the outcome of any pending or threatened litigation
brought by private parties, 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, result in costs to STERIS that may not be covered by
insurance or otherwise affect STERIS’s performance, results,
prospects or value, (j) the potential of international unrest,
including the Russia-Ukraine military conflict, 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, (k) the possibility of reduced demand,
or reductions in the rate of growth in demand, for STERIS’s
products and services, (l) the possibility of delays in receipt of
orders, order cancellations, or delays in the manufacture or
shipment of ordered products, due to supply chain issues or
otherwise, or in the provision of services, (m) 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, 2022, and other securities filings, may
adversely impact STERIS’s performance, results, prospects or value,
(n) 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, (o) 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, (p)
the possibility that anticipated financial results or benefits of
recent acquisitions, including the acquisition of Cantel Medical
and Key Surgical, or of STERIS’s restructuring efforts, or of
recent divestitures, including anticipated revenue, productivity
improvement, cost savings, growth synergies and other anticipated
benefits, will not be realized or will be other than anticipated,
(q) the increased level of STERIS’s indebtedness incurred in
connection with the acquisition of Cantel Medical limiting
financial flexibility or increasing future borrowing costs, (r)
rating agency actions or other occurrences that could affect
STERIS’s existing debt or future ability to borrow funds at rates
favorable to STERIS or at all, (s) the potential impact of the
acquisition of Cantel Medical on relationships, including with
suppliers, Customers, employees and regulators, and (t) the effects
of changes in credit availability and pricing, as well as the
ability of STERIS’s Customers and suppliers to adequately access
the credit markets, on favorable terms or at all, when needed.
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