Owens & Minor, Inc. (NYSE: OMI)today reported financial results for the second quarter ended June 30, 2023.
Second Quarter Key Highlights:
- Consolidated revenue of $2.56 billion
- Net loss per common share of $(0.37) and adjusted net income per common share of $0.18
- $49.3 million in debt pay down and $269 million reduction in net debt
“The second quarter of 2023 shows a continuation of our Patient Direct segment’s exceptional performance, with another quarter of double-digit growth and strength across the major categories that we serve. Our Products and Healthcare Services segment demonstrated resilience during the quarter with sales growth in the Medical Distribution division, but the segment experienced continued revenue headwinds in our higher margin Global Products division. In addition, the progress we have made in the Operating Model Realignment Program is encouraging, and we are beginning to see financial benefits from the work already completed,” said Edward A. Pesicka, President & Chief Executive Officer of Owens & Minor.
Pesicka concluded, “The fluid acute care market continues to impact our Surgical & Infection Prevention (S&IP) products within the Product and Healthcare Services segment, and as a result we remain cautious for the remainder of the year. The continued strength of the Patient Direct segment, combined with overall strong operating cash flow provides flexibility to invest and strengthen our balance sheet.”
Financial Summary (1) | |||||||
($ in millions, except per share data) | 2Q23 | 2Q22 | YTD 2023 | YTD 2022 | |||
Revenue | $2,563 | $2,500 | $5,086 | $4,907 | |||
Operating income, GAAP | $10.8 | $75.1 | $20.6 | $136.1 | |||
Adj. Operating Income, Non-GAAP | $62.0 | $113.6 | $109.7 | $218.5 | |||
Net (loss) income, GAAP | $(28.2) | $28.6 | $(52.7) | $67.9 | |||
Adj. Net Income, Non-GAAP | $14.2 | $58.3 | $17.8 | $131.0 | |||
Adj. EBITDA, Non-GAAP | $112.8 | $163.4 | $221.5 | $285.9 | |||
Net (loss) income per common share, GAAP | $(0.37) | $0.37 | $(0.70) | $0.89 | |||
Adj. Net Income per share, Non-GAAP | $0.18 | $0.76 | $0.23 | $1.72 |
(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
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Consolidated revenue of $2.56 billion in the second quarter of 2023, an increase of 2.5% as compared to the second quarter of 2022
- Patient Direct revenue of $633 million, up 10.5% compared to the second quarter of 2022
- Products & Healthcare Services revenue of $1.93 billion was virtually flat versus the prior year period as growth in the Medical Distribution division of 5.1% was nearly offset by lower S&IP product sales
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Second quarter 2023 operating income of $10.8 million and Adjusted Operating Income of $62.0 million
- Represents sequential margin expansion of 3 basis points on a GAAP basis and expansion of 53 basis points on an adjusted basis as compared to the first quarter of 2023
- Reduced total debt by $49.3 million and net debt by $269 million in the second quarter
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Generated $313 million of operating cash flow in the second quarter
- Up nearly 3.5x as compared to the second quarter of 2022
- Inclusive of $115 million of net proceeds from AR Sales
- Published 2022 Environmental, Social, and Governance Report outlining certifications and commitments to reduce emissions
- Awarded Commodity and Clinical Preference Supplier of the Year at Captis Conference
2023 Financial Outlook
The Company revised its outlook for 2023; summarized below:
- Revenue for 2023 to be in a range of $10.2 billion to $10.5 billion
- Adjusted EBITDA for 2023 to be in a range of $535 million to $575 million
- Adjusted EPS for 2023 to be in a range of $1.30 to $1.55
The Company’s outlook for 2023 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 2023 financial guidance include:
- Adjusted operating income benefit of $30 million from the Operating Model Realignment Program
- Gross margin rate of ~20.3%
- Interest expense of $160 to $165 million
- Adjusted effective tax rate of 27% to 28%
- Diluted weighted average shares of ~77.5 million
- Capital expenditures of $200 to $220 million
- Stable commodity prices
- FX rates as of 6/30/2023
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 Second Quarter 2023 Financial Results
Owens & Minor executives will host a conference call for investors and analysts at 8:30 a.m. ET on the same day. Participants may access the call via the toll-free dial-in number at 1-888-696-1070, or the toll dial-in number at 1-646-394-9850. 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 2023 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, 2022, 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, an Americas-based manufacturing footprint for personal protective equipment 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, | |||||||
2023 | 2022 | ||||||
Net revenue | $ | 2,563,226 | $ | 2,500,015 | |||
Cost of goods sold | 2,043,794 | 1,967,510 | |||||
Gross margin | 519,432 | 532,505 | |||||
Distribution, selling and administrative expenses | 455,030 | 421,925 | |||||
Acquisition-related charges and intangible amortization | 22,203 | 37,276 | |||||
Exit and realignment charges | 28,963 | 1,214 | |||||
Other operating expense (income), net | 2,397 | (2,995 | ) | ||||
Operating income | 10,839 | 75,085 | |||||
Interest expense, net | 40,728 | 35,839 | |||||
Other expense, net | 1,072 | 783 | |||||
(Loss) income before income taxes | (30,961 | ) | 38,463 | ||||
Income tax (benefit) provision | (2,720 | ) | 9,859 | ||||
Net (loss) income | $ | (28,241 | ) | $ | 28,604 | ||
Net (loss) income per common share: | |||||||
Basic | $ | (0.37 | ) | $ | 0.38 | ||
Diluted | $ | (0.37 | ) | $ | 0.37 | ||
Owens & Minor, Inc. Consolidated Statements of Operations (unaudited) (dollars in thousands, except per share data) | |||||||
Six Months Ended June 30, | |||||||
2023 | 2022 | ||||||
Net revenue | $ | 5,086,075 | $ | 4,906,967 | |||
Cost of goods sold | 4,069,336 | 4,001,014 | |||||
Gross margin | 1,016,739 | 905,953 | |||||
Distribution, selling and administrative expenses | 903,752 | 691,397 | |||||
Acquisition-related charges and intangible amortization | 44,392 | 79,410 | |||||
Exit and realignment charges | 44,637 | 2,896 | |||||
Other operating expense (income), net | 3,312 | (3,894 | ) | ||||
Operating income | 20,646 | 136,144 | |||||
Interest expense, net | 82,926 | 47,858 | |||||
Other expense, net | 2,458 | 1,565 | |||||
(Loss) income before income taxes | (64,738 | ) | 86,721 | ||||
Income tax (benefit) provision | (12,079 | ) | 18,837 | ||||
Net (loss) income | $ | (52,659 | ) | $ | 67,884 | ||
Net (loss) income per common share: | |||||||
Basic | $ | (0.70 | ) | $ | 0.92 | ||
Diluted | $ | (0.70 | ) | $ | 0.89 | ||
Owens & Minor, Inc. Condensed Consolidated Balance Sheets (unaudited) (dollars in thousands) | |||||
June 30, | December 31, | ||||
2023 | 2022 | ||||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | $ | 286,307 | $ | 69,467 | |
Accounts receivable, net of allowances of $9,270 and $9,063 | 672,511 | 763,497 | |||
Merchandise inventories | 1,168,227 | 1,333,585 | |||
Other current assets | 135,409 | 128,636 | |||
Total current assets | 2,262,454 | 2,295,185 | |||
Property and equipment, net of accumulated depreciation of $510,394 and $450,286 | 559,508 | 578,269 | |||
Operating lease assets | 292,809 | 280,665 | |||
Goodwill | 1,637,149 | 1,636,705 | |||
Intangible assets, net | 403,020 | 445,042 | |||
Other assets, net | 133,060 | 150,417 | |||
Total assets | $ | 5,288,000 | $ | 5,386,283 | |
Liabilities and equity | |||||
Current liabilities | |||||
Accounts payable | $ | 1,194,173 | $ | 1,147,414 | |
Accrued payroll and related liabilities | 92,264 | 93,296 | |||
Other current liabilities | 405,204 | 325,756 | |||
Total current liabilities | 1,691,641 | 1,566,466 | |||
Long-term debt, excluding current portion | 2,309,853 | 2,482,968 | |||
Operating lease liabilities, excluding current portion of $86,437 and $76,805 | 214,905 | 215,469 | |||
Deferred income taxes | 55,354 | 60,833 | |||
Other liabilities | 120,018 | 114,943 | |||
Total liabilities | 4,391,771 | ||||
