Owens & Minor Reports First Quarter 2024 Financial Results

Gross Margin Expansion of 79 Basis Points

Adjusted EPS Growth of Nearly Four Times with GAAP EPS Loss of $(0.29) and Adjusted EPS of $0.19

Investments Outlined at 2023 Investor Day for Long-Term Growth are Ahead of Plan

Owens & Minor, Inc. (NYSE: OMI) today reported financial results for the first quarter ended March 31, 2024.

Key Highlights:

  • Consolidated revenue of $2.6 billion in the first quarter, representing year-over-year growth of 4%
  • GAAP operating margin was flat while adjusted operating margin expanded by 31 basis points versus prior year
  • Net loss per share of $(0.29) and adjusted earnings per share of $0.19 in the first quarter

“Our solid performance in the first quarter was in line with our expectations, as we delivered top-line growth in both segments, adjusted operating margin expansion, and improved year-over-year profitability. At the same time, we are making the kind of investments consistent with our strategic plan previewed at our Investor Day in December 2023,” said Edward A. Pesicka, President & Chief Executive Officer of Owens & Minor.

“In our Products & Healthcare Services segment, we onboarded new customers, grew same store sales, and invested in inventory to support our new wins and provide best-in-class service levels. On the heels of double-digit growth in the prior years, our Patient Direct segment delivered mid-single digit top-line growth while navigating the unique challenges that occurred in the quarter, demonstrating the strength of our team and the effectiveness of our go-to-market strategies,” concluded Mr. Pesicka.

Financial Summary (1)

 

 

 

 

($ in millions, except per share data)

 

1Q24

 

1Q23

 

 

 

 

 

 

Revenue

$2,613

 

$2,523

 

 

 

 

 

 

Operating income, GAAP

$9.7

 

$9.8

 

Adj. Operating Income, Non-GAAP

$57.4

 

$47.7

 

 

 

 

 

 

Net loss, GAAP

$(21.9)

 

$(24.4)

 

Adj. Net Income, Non-GAAP

$14.9

 

$3.6

 

 

 

 

 

 

Adj. EBITDA, Non-GAAP

$116.3

 

$108.7

 

 

 

 

 

 

Net loss per common share, GAAP

$(0.29)

 

$(0.32)

 

Adj. Net Income per share, Non-GAAP

$0.19

 

$0.05

 

(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

  • Consolidated revenue of $2.6 billion in the first quarter of 2024, an increase of 4% as compared to the first quarter of 2023
    • Patient Direct revenue of $638 million, up 5% compared to the first quarter of 2023
    • Products & Healthcare Services revenue of nearly $2 billion, up 3% compared to the first quarter of 2023
  • First quarter 2024 operating income of $10 million and Adjusted Operating Income of $57 million
    • On a GAAP basis operating income margins remain flat while adjusted operating income margin expanded by 31 basis points
    • Adjusted operating income of $57.4 million, up 20% compared to the prior year
    • Both Products & Healthcare Services and Patient Direct delivered increases in Segment Income year-over-year

2024 Financial Outlook

The Company’s most recent financial guidance; summarized below:

  • Revenue for 2024 to be in a range of $10.5 billion to $10.9 billion
  • Adjusted EBITDA for 2024 to be in a range of $550 million to $590 million
  • Adjusted EPS for 2024 to be in a range of $1.40 to $1.70

The Company’s outlook for 2024 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 2024 financial guidance include:

  • Gross margin rate of 21.0% to 21.5%
  • Interest expense of $141 to $146 million
  • Adjusted effective tax rate of 27.5% to 28.5%
  • Diluted weighted average shares of ~78.5 million
  • Capital expenditures of $220 to $240 million
  • Stable commodity prices
  • FX rates as of 12/31/2023

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 First Quarter 2024 Financial Results

Owens & Minor executives will host a conference call for investors and analysts on Friday, May 3, 2024, at 8:30 a.m. ET. Participants may access the call via the toll-free dial-in number at 1-888-300-2035, or the toll dial-in number at 1-646-517-7437. 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 2024 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, 2023, filed with the SEC on February 20, 2024, 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 providing essential products and services that support care from the hospital to the home. For over 100 years, Owens & Minor and its affiliated brands, Apria®, Byram® and HALYARD*, have helped to make each day better for the patients, providers, and communities we serve. Powered by more than 20,000 teammates worldwide, Owens & Minor delivers comfort and confidence behind the scenes so healthcare stays at the forefront. Owens & Minor exists because every day, everywhere, Life Takes Care™. For more information about Owens & Minor and our affiliated brands, visit owens-minor.com or follow us on LinkedIn and Instagram.

*Registered Trademark or Trademark of O&M Halyard or its affiliates.

Owens & Minor, Inc.

Consolidated Statements of Operations (unaudited)

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Net revenue

 

$

2,612,680

 

 

$

2,522,849

 

Cost of goods sold

 

 

2,077,151

 

 

 

2,025,542

 

Gross profit

 

 

535,529

 

 

 

497,307

 

Distribution, selling and administrative expenses

 

 

477,613

 

 

 

448,722

 

Acquisition-related charges and intangible amortization

 

 

20,313

 

 

 

22,188

 

Exit and realignment charges, net

 

 

27,356

 

 

 

15,674

 

Other operating expense, net

 

 

551

 

 

 

916

 

Operating income

 

 

9,696

 

 

 

9,807

 

Interest expense, net

 

 

35,655

 

 

 

42,198

 

Other expense, net

 

 

1,153

 

 

 

1,387

 

Loss before income taxes

 

 

(27,112

)

 

 

(33,778

)

Income tax benefit

 

 

(5,226

)

 

 

(9,360

)

Net loss

 

$

(21,886

)

 

$

(24,418

)

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

Basic

 

$

(0.29

)

 

$

(0.32

)

Diluted

 

$

(0.29

)

 

$

(0.32

)

Owens & Minor, Inc.

Condensed Consolidated Balance Sheets (unaudited)

(dollars in thousands)

 

 

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

244,866

 

$

243,037

Accounts receivable, net of allowances of $7,005 and $7,861

 

 

669,861

 

 

598,257

Merchandise inventories

 

 

1,144,597

 

 

1,110,606

Other current assets

 

 

177,020

 

 

150,890

Total current assets

 

 

2,236,344

 

 

2,102,790

Property and equipment, net of accumulated depreciation and amortization of $546,326 and $546,397

 

 

501,385

 

 

543,972

Operating lease assets

 

 

349,984

 

 

296,533

Goodwill

 

 

1,635,368

 

 

1,638,846

Intangible assets, net

 

 

342,593

 

 

361,835

Other assets, net

 

 

142,319

 

 

149,346

Total assets

 

$

5,207,993

 

$

5,093,322

Liabilities and equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

1,218,817

 

$

1,171,882

Accrued payroll and related liabilities

 

 

79,480

 

 

116,398

Current portion of long-term debt

 

 

207,658

 

 

206,904

Other current liabilities

 

 

427,136

 

 

396,701

Total current liabilities

 

 

1,933,091

 

 

1,891,885

Long-term debt, excluding current portion

 

 

1,946,005

 

 

1,890,598

Operating lease liabilities, excluding current portion

 

 

276,327

 

 

222,429

Deferred income taxes, net

 

 

34,437

 

 

41,652

Other liabilities

 

 

123,265

 

 

122,592

Total liabilities

 

 

4,313,125

 

 

4,169,156

Total equity

 

 

894,868

 

 

924,166

Total liabilities and equity

 

$

5,207,993

 

$

5,093,322

Owens & Minor, Inc.

Consolidated Statements of Cash Flows (unaudited)

(dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(21,886

)

 

$

(24,418

)

Adjustments to reconcile net loss to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

74,095

 

 

 

70,926

 

Share-based compensation expense

 

 

6,866

 

 

 

6,463

 

Provision (benefit) for losses on accounts receivable

 

 

181

 

 

 

(521

)

Loss on extinguishment of debt

 

 

 

 

 

564

 

Deferred income tax benefit

 

 

(3,659

)

 

 

(591

)

Changes in operating lease right-of-use assets and lease liabilities

 

 

1,139

 

 

 

(225

)

Gain on sale and dispositions of property and equipment

 

 

(15,619

)

 

 

(8,269

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(75,144

)

 

 

5,240

 

Merchandise inventories

 

 

(35,412

)

 

 

45,832

 

Accounts payable

 

 

52,926

 

 

 

23,082

 

Net change in other assets and liabilities

 

 

(39,617

)

 

 

36,483

 

Other, net

 

 

3,168

 

 

 

3,832

 

Cash (used for) provided by operating activities

 

 

(52,962

)

 

 

158,398

 

Investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(45,997

)

 

 

(46,150

)

Additions to computer software

 

 

(3,411

)

 

 

(5,340

)

Proceeds from sale of property and equipment

 

 

49,538

 

 

 

17,306

 

Other

 

 

(2,000

)

 

 

 

Cash used for investing activities

 

 

(1,870

)

 

 

(34,184

)

Financing activities:

 

 

 

 

 

 

Borrowings under amended Receivables Financing Agreement

 

 

205,000

 

 

 

232,100

 

Repayments under amended Receivables Financing Agreement

 

 

(139,300

)

 

 

(328,100

)

Repayments of term loans

 

 

(4,625

)

 

 

(26,500

)

Other, net

 

 

(7,755

)

 

 

(4,989

)

Cash provided by (used for) financing activities

 

 

53,320

 

 

 

(127,489

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(618

)

 

 

284

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(2,130

)

 

 

(2,991

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

272,924

 

 

 

86,185

 

Cash, cash equivalents and restricted cash at end of period(1)

 

$

270,794

 

 

$

83,194

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Income taxes paid, net

 

$

2,365

 

 

$

2,405

 

Interest paid

 

$

18,211

 

 

$

32,536

 

Noncash investing activity:

 

 

 

 

 

 

Unpaid purchases of property and equipment and computer software at end of period

 

$

69,368

 

 

$

64,658

 

(1) Restricted cash as of March 31, 2024 and December 31, 2023 was $25.9 million and $29.9 million and, includes amounts 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, as well as restricted cash deposits received under the Master Receivables Purchase Agreement to be remitted to a third-party financial institution.

Owens & Minor, Inc.

Summary Segment Information (unaudited)

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

 

 

 

% of

 

 

 

 

% of

 

 

 

 

 

consolidated

 

 

 

 

consolidated

 

 

Amount

 

net revenue

 

Amount

 

net revenue

Net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

1,974,837

 

 

75.6

%

 

$

1,915,489

 

 

75.9

%

Patient Direct

 

 

637,843

 

 

24.4

%

 

 

607,360

 

 

24.1

%

Consolidated net revenue

 

$

2,612,680

 

 

100.0

%

 

$

2,522,849

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% of segment

 

 

 

 

% of segment

Operating income:

 

 

 

 

net revenue

 

 

 

 

net revenue

Products & Healthcare Services

 

$

11,486

 

 

0.58

%

 

$

1,820

 

 

0.10

%

Patient Direct

 

 

45,879

 

 

7.19

%

 

 

45,849

 

 

7.55

%

Acquisition-related charges and intangible amortization

 

 

(20,313

)

 

 

 

 

 

(22,188

)

 

 

 

Exit and realignment charges, net

 

 

(27,356

)

 

 

 

 

 

(15,674

)

 

 

 

Consolidated operating income

 

$

9,696

 

 

 

 

 

$

9,807

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

23,366

 

 

 

 

 

$

18,566

 

 

 

 

Patient Direct

 

 

50,729

 

 

 

 

 

 

52,360

 

 

 

 

Consolidated depreciation and amortization

 

$

74,095

 

 

 

 

 

$

70,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

Products & Healthcare Services

 

$

8,250

 

 

 

 

 

$

6,332

 

 

 

 

Patient Direct

 

 

41,158

 

 

 

 

 

 

45,158

 

 

 

 

Consolidated capital expenditures

 

$

49,408

 

 

 

 

 

$

51,490

 

 

 

 

Owens & Minor, Inc.

Net Loss Per Common Share (unaudited)

(dollars in thousands, except per share data)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

Net loss

 

$

(21,886

)

 

$

(24,418

)

 

 

 

 

 

 

 

Weighted average shares outstanding - basic

 

 

76,319

 

 

 

75,177

 

Dilutive shares

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

 

76,319

 

 

 

75,177

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

Basic

 

$

(0.29

)

 

$

(0.32

)

Diluted

 

$

(0.29

)

 

$

(0.32

)

Share-based awards for the three months ended March 31, 2024 and 2023 of approximately 1.6 million and 1.7 million shares were excluded from the calculation of net loss per diluted common share as the effect would be anti-dilutive.

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 loss and net loss per common share to non-GAAP measures used by management.

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

2023

 

Operating income, as reported (GAAP)

 

$

9,696

 

 

$

9,807

 

 

Acquisition-related charges and intangible amortization (1)

 

 

20,313

 

 

 

22,188

 

 

Exit and realignment charges, net (2)

 

 

27,356

 

 

 

15,674

 

 

Operating income, adjusted (non-GAAP) (Adjusted Operating Income)

 

$

57,365

 

 

$

47,669

 

 

Operating income as a percent of net revenue (GAAP)

 

 

0.37

%

 

0.39

%

Adjusted operating income as a percent of net revenue (non-GAAP)

 

 

2.20

%

 

1.89

%

 

 

 

 

 

 

 

 

Net loss, as reported (GAAP)

 

$

(21,886

)

 

$

(24,418

)

 

Pre-tax adjustments:

 

 

 

 

 

 

 

Acquisition-related charges and intangible amortization (1)

 

 

20,313

 

 

 

22,188

 

 

Exit and realignment charges, net (2)

 

 

27,356

 

 

 

15,674

 

 

Other (3)

 

 

430

 

 

 

1,129

 

 

Income tax benefit on pre-tax adjustments (4)

 

 

(11,348

)

 

 

(10,977

)

 

Net income, adjusted (non-GAAP) (Adjusted Net Income)

 

$

14,865

 

 

$

3,596

 

 

 

 

 

 

 

 

 

 

Net loss per common share, as reported (GAAP)

 

$

(0.29

)

 

$

(0.32

)

 

After-tax adjustments:

 

 

 

 

 

 

 

Acquisition-related charges and intangible amortization (1)

 

 

0.20

 

 

 

0.21

 

 

Exit and realignment charges, net (2)

 

 

0.28

 

 

 

0.15

 

 

Other (3)

 

 

 

 

 

0.01

 

 

Net income per common share, adjusted (non-GAAP) (Adjusted EPS)

 

$

0.19

 

 

$

0.05

 

 

Owens & Minor, Inc.

GAAP/Non-GAAP Reconciliations (unaudited), continued

(dollars in thousands)

 

The following tables provide reconciliations of net loss and total debt to non-GAAP measures used by management.

 

 

 

 

 

 

Three Months Ended March 31,

 

2024

2023

Net loss, as reported (GAAP)

$

(21,886

)

$

(24,418

)

Income tax benefit

 

(5,226

)

 

(9,360

)

Interest expense, net

 

35,655

 

 

42,198

 

Acquisition-related charges and intangible amortization (1)

 

20,313

 

 

22,188

 

Exit and realignment charges, net (2)

 

27,356

 

 

15,674

 

Other depreciation and amortization (5)

 

48,014

 

 

49,991

 

Stock compensation (6)

 

6,176

 

 

6,350

 

LIFO charges (7)

 

5,438

 

 

4,940

 

Other (3)

 

430

 

 

1,129

 

Adjusted EBITDA (non-GAAP)

$

116,270

 

$

108,692

 

 

March 31,

December 31,

 

2024

2023

Total debt, as reported (GAAP)

$

2,153,663

 

$

2,097,502

 

Cash and cash equivalents

 

(244,866

)

 

(243,037

)

Net debt (non-GAAP)

$

1,908,797

 

$

1,854,465

 

The following items have been excluded in our non-GAAP financial measures:

 

(1) Acquisition-related charges and intangible amortization includes no acquisition-related charges for the three months ended March 31, 2024 and $1.3 million in acquisition-related charges for the three months ended March 31, 2023, as well as amortization of intangible assets established during acquisition method of accounting for business combinations. Acquisition-related charges consist primarily of one-time costs related to the acquisition of Apria, Inc., including transaction costs necessary to consummate the acquisition, which consisted of investment banking advisory fees and legal fees and director and officer tail insurance expense, as well as transition costs, such as severance and retention bonuses, information technology (IT) integration costs and professional fees. 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.

 

(2) During the three months ended March 31, 2024, exit and realignment charges, net were $27.4 million. These charges primarily related to our (1) Operating Model Realignment Program of $33.5 million, including professional fees, severance, and other costs to streamline functions and processes and (2) costs related to IT strategic initiatives such as converting certain divisions to common IT systems of $1.2 million partially offset by (3) a $7.4 million gain on the sale of our corporate headquarters. During the three months ended March 31, 2023, exit and realignment charges, net consisted of severance, professional, and other fees primarily associated with our Operating Model Realignment Program. These costs are not normal recurring, cash operating expenses necessary for the Company to operate its business on an ongoing basis.

 

(3) For the three months ended March 31, 2024 and 2023, other includes interest costs and net actuarial losses related to our frozen noncontributory, unfunded retirement plan for certain retirees in the United States (U.S.). Additionally, for the three months ended March 31, 2023, other includes loss on extinguishment of debt for the write-off of deferred financing costs of $0.6 million associated with early principal payments.

 

(4) These charges have been tax effected 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.

 

(5) Other depreciation and amortization relates to property and equipment and capitalized computer software, excluding such amounts captured within exit and realignment charges, net or acquisition-related charges.

 

(6) Stock compensation includes share-based compensation expense related to our share-based compensation plans, excluding such amounts captured within exit and realignment charges, net or acquisition-related charges.

 

(7) LIFO charges includes non-cash adjustments to merchandise inventories valued at the lower of cost or market, with the approximate cost determined by the last-in, first-out (LIFO) method for distribution inventories in the U.S. within our Products & Healthcare Services segment.

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.

OMI-CORP

OMI-IR

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