NYSE:OMI Owens & Minor Q1 2023 Earnings Report $6.91 -0.06 (-0.86%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$6.86 -0.04 (-0.65%) As of 07:40 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Owens & Minor EPS ResultsActual EPS$0.05Consensus EPS -$0.09Beat/MissBeat by +$0.14One Year Ago EPS$0.96Owens & Minor Revenue ResultsActual Revenue$2.52 billionExpected Revenue$2.40 billionBeat/MissBeat by +$119.33 millionYoY Revenue Growth+4.80%Owens & Minor Announcement DetailsQuarterQ1 2023Date5/5/2023TimeBefore Market OpensConference Call DateFriday, May 5, 2023Conference Call Time8:30AM ETUpcoming EarningsOwens & Minor's Q1 2025 earnings is scheduled for Friday, May 2, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Owens & Minor Q1 2023 Earnings Call TranscriptProvided by QuartrMay 5, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Hello. My name is Jean Louis. Welcome to the Owens and Minor First Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:21I will now turn the conference over to Jackie Marcus of Investor Relations. Speaker 100:00:29Thank you, operator. Hello, everyone, and welcome to the Our comments on the call will be focused on the financial results for the Q1 of 2023 as well as our updated outlook for 2023, both of which are included in today's press release. The press release, along with the supplemental slides, are posted on the Investor Relations section of our website. Please note that during this call, we will make forward looking statements. The matters addressed in these statements are subject to risks and uncertainties and could cause actual results to differ materially from those projected or implied here today. Speaker 100:01:12Please refer to our SEC filings for a full description of these risks and uncertainties, including the Risk Factors section of our Annual Report, Form 10 ks and quarterly reports on Form 10 Q. In our discussion today, we will reference certain non GAAP financial measures. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I'm joined by Ed Pesicka, President and Chief Executive Officer and Alex Bruni, Executive Vice President and Chief Financial Officer. I will now turn the call over to Ed. Speaker 100:01:48Ed? Speaker 200:01:50Thank you, Jackie. Good morning, everyone, and thank you for joining us on the call today. To start, I am pleased with the performance of the business and the team's execution through the Q1 of the year. As we took the necessary steps to initiate the realignment of our business, improve our overall cost structure and leverage our strengths. And here are just a few examples. Speaker 200:02:121, in the first quarter, We generated $158,000,000 of cash from operations. This is a testament to the execution of our strategy and delivery on our commitment to further strengthen our financial profile. Having the ability to produce cash flow at these levels will allow us to allocate capital towards debt reduction and pursue initiatives that promote growth, innovation and commercial excellence. Next, Our operating model realignment program is on track to meet our target of $30,000,000 of adjusted operating income in 2023. And we are confident that we will achieve significant long term profit improvement and cost savings from these efforts. Speaker 200:02:56I'll outline these efforts in a little more detail further in my prepared remarks. Next, our Patient Direct segment continues to outpace the market deliver significant margin expansion as the strength of the Byram and Aphria brands continue to accelerate. And finally, we have already paid down $117,000,000 of debt in the Q1, which aligns with our focus on debt reduction and further improving our balance sheet, and we expect continued strong debt reduction throughout the year. Now I will provide a closer look at our segment performance, and I'll start with our Patient Direct segment. The Patient Direct segment had another strong quarter as it continued to outpace the market as revenues grew by 10.4% year over year on a pro form a basis. Speaker 200:03:45In addition, it should be noted that we again achieved Double digit growth in nearly all of our major product categories. The continued strong revenue growth was driven by: 1, Expanding use of technology to improve overall service and satisfaction and 3, the powerful combination of the Aphria and Byram brands. As expected, when we completed the Apria acquisition just over a year ago, the addition of the Apria has significantly improved Our already strong patient direct offering by broadening our product categories, expanding our services, increasing our footprint and deepening our payer and provider relationships. And we expect our Patient Direct segment to continue to deliver growth for the total company As serving the patient in the home continues to grow at a rapid pace. This rapid pace growth is due to demographics such as an aging population and the rise in the number of patients with chronic conditions, an increase in available home treatments and the growing acceptance of patient care in the home. Speaker 200:05:00It is these industry dynamics combined with our Patient Direct strength and fierce execution That leaves us thrilled about the future prospects for Patient Direct and the expectation of continued positive momentum. Now moving on to our Product and Healthcare Services segment. Our Product and Healthcare Services segment declined year over year, primarily due to extremely difficult comps coming off the tailwinds of COVID related sales in the prior year and continued headwinds related to destocking of PP in the current year. This significantly impacted both revenue and margin in our Global Products division. However, Excluding the year over impact of distributed PPE products, our medical distribution division delivered mid single digit growth for the quarter. Speaker 200:05:46This growth was a result of stronger same store sales along with the implementation of new wins offset by previous losses. We are pleased with the continued progress being made by our Medical Distribution division. And finally, related to Product and Healthcare Services segment. You may be aware of recent communications from the FDA regarding certain of our facial protection products. We are actively working with the FDA to address this issue and during this process we remain focused on customer safety and transparency. Speaker 200:06:19Moving on to our operating model realignment program. I am thrilled with the progress that has been made since the launch of this initiative about 8 weeks ago. It is progressing well and I'd like to take a moment to provide a brief update on the 4 key components of the program. First, sourcing and demand management, which includes direct materials, indirect materials and purchased finished goods. The goal of this work stream is to aggressively reduce acquisition costs and minimize waste. Speaker 200:06:49I am pleased with the progress made to identify the opportunities, but more Importantly, I'm pleased with the strategies already being implemented to deliver savings in 2023 and beyond. The implemented strategies and tools will be iterative, not just for 2023, but for years to come. 2nd, We are making progress on organizational structure redesign and to improve the efficiency throughout the business. We are assessing structure, spans, layers and activities. We have already taken action to de layer parts of the organization. Speaker 200:07:25As this work stream continues, we will further evaluate the structure, spans, layers and activities to reduce costs and deploy resources where needed for growth and to fill gaps. 3rd, network rationalization and operational excellence, which includes the optimization of our manufacturing footprint and supply chain. This is a focus for the management team as we move further into 2023. Improving our manufacturing efforts to more efficiently operate will greatly benefit us as we work to right size the business and ensure the return on capital invested is being maximized. Due to the complexity of this work stream, we are carefully assessing the options and phasing. Speaker 200:08:07However, we have already made adjustments in parts of our business to improve service, output, quality and in year cost reductions. Lastly, our commercial excellence and product profitability enhancement portion of the program is in its early stages. The primary objective for this component is twofold. 1, to ensure that the price we charge for our products and services reflect the value provided and 2, expanding our product portfolio to broaden our offering. And we have already begun to adjust our pricing to reflect the value of our services and offering. Speaker 200:08:43Overall, the operating model realignment program is on pace to achieve $30,000,000 of benefit in 2023 and exit the year with approximately $100,000,000 run rate of profit improvement. We are where we expected to be at this stage and encouraged by the path forward already identified in the quarters ahead. With our performance in Q1 and the advancement Our operating model realignment program, we are refining our guidance for 2023. Alex will talk more about the drivers contributing to these revisions in our guidance. But I'd like to briefly talk about the outlook for the remainder of the year at a high level. Speaker 200:09:22The upward revision to our guidance are supported by our confidence in our performance thus far in 2023. To reiterate, our Patient Direct segment has continued to outpace the market growth and expand margins. Our medical distribution division continues to strengthen. Our operating model realignment program is on track. We will continue to work through destocking of PPE and our exceptional cash flow generation allows us to be nimble in today's macroeconomic environment. Speaker 200:09:53I'm excited about what the future holds for Owens and Minor and we look forward to updating you on the progress through the remainder of the year. With that, I'd like to turn the call over to Alex to discuss our financial results in greater detail. Alex? Speaker 300:10:08Thank you, Ed. Good morning, everyone. I'll begin by providing an overview of our financial results and the primary factors that drove our performance in the Q1 of 2023. Following that, I'll delve into our revised expectations and assumptions for the full year outlook. And finally, I'll discuss our key guidance assumptions and Kaye's for Speaker 200:10:26the remainder of the year. Speaker 300:10:29Starting with our Q1 results, our revenue for the quarter was $2,500,000,000 which was higher than anticipated due to stronger sales in medical distribution and outperformance in the patient direct business, driven by solid results from both the Apria and Byram Brands. On a pro form a basis, our top line declined by 6% versus prior year, but this was largely due to the notable tailwind in the first The customer inventory levels. Consolidated top line results were relatively in line with the Q4 of 2022. 1st quarter gross margin was $497,000,000 or 19.7 percent of revenue compared to $373,000,000 or 15.5 percent of revenue in the Q1 of 2022. The gross margin expansion was driven by continued patient direct sales growth and the power of combining Apria and Byram as well as margin expansion in our Medical Distribution division, partially offset by the impact from lower PPE sales our Global Products division. Speaker 300:11:41Our distribution, selling and administrative expense for the quarter was $449,000,000 making up 17.8 percent of revenue. This expense increased by $179,000,000 in the quarter, primarily due to the costs associated with servicing patient direct sales growth, including the Apria acquisition. GAAP operating income for the quarter was $9,800,000 and adjusted operating income was $47,700,000 ahead of expectations for Q1. Adjusted EBITDA was also ahead of expectations for the quarter at $109,000,000 with a margin of 4.3 As I just discussed, the revenue and margin performance were key drivers in achieving these results. In addition, as Ed mentioned, We're also on pace to achieve the $30,000,000 adjusted operating income contribution for 2023 from our operating model realignment efforts. Speaker 300:12:36Accordingly, we've raised our guidance for adjusted EBITDA, which we'll discuss later in the call. Interest expense for the quarter was $42,000,000 And the GAAP effective tax rate was 27.7 percent, both in line with expectations. Our GAAP net loss for the quarter was $24,000,000 or a loss of $0.32 per common share. Adjusted net income for the quarter amounted $900,000,000 which represents a 10.2% decline versus the prior year due to tailwinds in the Q1 of 2022, driven by higher sales from COVID related products. Looking at the Patient Direct segment, we had another quarter of strong results. Speaker 300:13:26Once again, we saw growth across nearly all key product categories. Patient Direct accounted for $607,000,000 in revenue during the quarter, representing growth of 10.4% versus the Q1 of 2022 on a pro form a basis. Shifting gears, let's look at cash flow, the balance sheet and our capital structure. In the Q1, we generated $158,000,000 of cash from operations. Our business is capable of producing strong cash flow results, which is evidenced by the past few quarters. Speaker 300:13:58As Patient Direct becomes a larger part of the overall business And as we continue to optimize working capital, we expect to produce significant operating cash flow that will be used for debt reduction and reinvestment in the business. To that end, we paid down $117,000,000 of debt during the Q1, bringing total debt reduction to over $250,000,000 since The finalization of the Apria acquisition. At the end of Q1, our total debt was $2,400,000,000 We remain focused I'd now like to discuss our improved guidance for 2023. We are raising our revenue guidance to $10,200,000,000 to $10,600,000,000 representing an increase of $100,000,000 at the midpoint versus previous guidance. This reflects the encouraging trends we're currently seeing within our Patient Direct segment and Medical Distribution division. Speaker 300:14:54We're also increasing our adjusted EBITDA range to $540,000,000 to $590,000,000 reflecting an increase of $45,000,000 at the midpoint versus prior guidance, which reflects stable margins on the improved expectations for the top line And inclusive of the modifications to our adjusted EBITDA definition as detailed in our April 17, 8 ks. Finally, we're increasing the bottom end of our adjusted EPS range from $1.15 to $1.30 to reflect Q1 performance. The new range for adjusted EPS is $1.30 to $1.65 We remain enthusiastic about the outlook for the Patient Direct segment as well as the opportunities in the Products and Healthcare Services segment and the overall operating model realignment, while remaining cautious around the outlook for PPE for the remainder of the year. As we think about cadence for the year and as previously discussed, our earnings will be heavily weighted to the back half of the year. And it's reasonable to expect about 85 percent of earnings in the back half of the year due to traditional seasonality, acceleration of the operating model realignment benefits and anticipated easing of destocking later in the year. Speaker 300:16:09Overall, we're pleased with the results from the Q1 of the year And are excited about where the company is heading. Before turning the call over to the operator for Q and A, I'd like to thank all of our dedicated teammates for their efforts in enabling Owens and Minor to provide the highest quality of service to our customers. With that, I'll now turn the call over to the operator for questions. Operator? Speaker 200:16:33Actually, operator, before we start, this is Ed Pesicka. I would like to personally, on behalf of all of our teammates, And our thoughts and prayers out to the family of Gil Miner. Gil passed away earlier this week. Gil was our Chairman Emeritus and longtime CEO of Owens and Minor. His family is a namesake of Owens and Minor. Speaker 200:16:52Over Gil's life, he made a positive impact on so many people and it's great to know that his impact will continue into the future. So with that, I'll turn it back over to the operator so we can begin Q and A. Operator00:17:06Mr. Biesica, we will begin the question and answer session. Your first question comes from the line of Kevin Caliendo of UBS. Please go ahead. Speaker 400:17:21Hi, thanks for taking my question. So I wanted to talk a little bit about the Products and Healthcare Services business. It's nice to see the progression there and the progress. You talked about the visibility you had last quarter in terms of PPE inventory ordering and the like. And This week we've had sort of mixed messaging from some of the public companies who compete or work in this sector. Speaker 400:17:47Can you talk a little bit about what you're seeing in terms of utilization and demand? Is it changing by geography or customer? And Where we sit in terms of your line of sight on PPE inventory levels and reordering? Speaker 200:18:02Sure. So there's really a couple of parts to that question. Jen, one is on utilization within the hospitals. We are not seeing the utilization slowdown through As we do our checks with hospitals and I personally go out to visit those hospitals, probably the one of the products Across the portfolio where utilization is slower or I'm sorry, we should slow down slightly is N95s. But if you look at it across the board, Utilization, we believe is now consistent with where it was pre pandemic level, if not slightly elevated from that because of the protocols that are in place. Speaker 200:18:38So that's what we're seeing through conversations with our customers as well as personally visiting them. On the destocking side, We've done a couple of things. One is, obviously, we've done some checks with the market as well as had some outside help getting some checks on this. And I think it's still consistent with what we said last quarter is the fact that we still believe destocking is going to continue to occur through the first half of this year And it will start to come out in the back half of the year. So that's where we're seeing it. Speaker 200:19:08And again, back to the regionality Regional of this, we're not really seeing that. So again, to recap is, we're seeing PPE usage in the hospital Above 2019 levels and that's actually the usage in the hospital. We see the destocking continuing through the front half of the year and then easing in the back half of the year. And that's really what we're seeing in the market today. Speaker 400:19:35Okay. That's helpful. If I can ask a quick follow-up. Speaker 300:19:38Can you just Speaker 400:19:40frame for us the risk of the FDA action, like sort of what's a worst case, What's the best case and what have you assumed in your guidance around this, any potential impact from it? Speaker 200:19:52Yes. I think obviously we've got our That we have in the 10 ks that we filed this morning. And really what we're doing right now is we're just going to continue we're continuing to work with the FDA on this. We're going to work with them aggressively in the fact that we want to work with them to address the issue during the process. And again, We are our primary focus here is around customer safety and transparency. Speaker 200:20:14So it's a fluid process and that's where we are in it right now. Operator00:20:21Thank you. Your next question comes from the line of Michael Cherny of BOA. Please go ahead. Speaker 500:20:28Good morning. Thanks for taking the call and congratulations on a nice quarter. Maybe if I can unpack the guidance changes a bit As you think through maybe in particular on EBITDA, I think the EPS contributions are similar. Relative to the $30,000,000 of Operating expense savings or improvement savings, how does that factor in, in terms of realignment costs that get baked in? And Where will you be exiting the year on some of those realignment costs and that $30,000,000 as you essentially run rate into 2024 and beyond? Speaker 200:21:02Maybe I think the question in the high level is, so the expectation we have is to get set a minimum or $30,000,000 in 20 20 Actual savings to our adjusted operating income. We expect to exit the year at least at $100,000,000 run rate to that Going into 2023 I'm sorry, 2024. Cost associated with realignment would be in exit and restructuring costs in the P and L, But that's where we expect it to be from a dollar standpoint this year and there's nothing coming off of that and then going into 2024 on a run rate. I don't know if that answers the question exactly. Speaker 500:21:42No, it does. It's helpful in unpacking the pieces on the guide change. And if I could just Throw in a second one here, maybe building on Kevin's first question a bit. What do you see right now in the competitive side of your market, both I would say on core hospital distribution as well as on the patient direct side. And where do you see OMI's Strength shining through versus other opportunities you have to pick up over time? Speaker 200:22:07Sure. So I'll take the 2 different segments. So in the Product and Healthcare Services segment, we see it continue to be very competitive. We recognize that customers, And that being the IDNs and the hospitals are struggling from a financial standpoint. They're looking for ways to help them with reducing labor costs, reducing overall costs Putting additional technology in place that can help them do that. Speaker 200:22:34We're also seeing them looking to have potential more choice on what product and that is out there for them, so they have more flexibility. So that's what we're seeing in that sense. And I think a lot of the things we do within our medical distribution business fit into those categories. I'll move on to the patient direct business. In our patient direct business, look, we continue to see The fact that what our customers are looking for in that business, it's really 3 different customers. Speaker 200:23:04It's really the aspect of the customer being The patient, the provider as well as the payer. And when we think about the patient, the provider, one of the things that they're looking for is to continue To provide value to them. And one of the ways we do that and I think the numbers really just prove that out. They're looking for a commercial model that is Comprehensive focused around those three things, the patient, the provider and the payer. They're looking for technology to make their life easier And we're doing that through technology that helps the patient whether it's reorder, check their account, do that much easier. Speaker 200:23:40And then really, I think the last thing is they're looking for ways to again tie all that together. And I think that's what our Patient Direct business does. And when we added on Apria on top of our Byram business and you put those together, it really strengthened those key things about 1, our proven commercial model, which now we have across the entire business that is comprehensively focused on the patient provider and the payer and then really the technology that continues to advance and make But ultimately, we see the patient direct marketplace growing at a rapid pace, really because of demographics, The increase in home treatments and really the acceptance of patient care. Operator00:24:23Thank you. Your next question comes from the line of Daniel Grossleit of Citi. Please go ahead. Speaker 600:24:30Hi guys. Thanks for taking the question. The Products and Services business had a pretty significant beat relative to the Street's expectations and some of the directional commentary you gave on the prior earnings call. It seems like PPE destocking is kind of going as you had expected. So I'm curious if you could just spike out some of the sources of strength other than PPE destocking going as you expected that led to the significant feat this quarter. Speaker 200:25:03Sure. I think one of the things we talked a little bit about and I did my prepared remarks about the org redesign and how we've already take Some costs out and de layer the organization. That came out early in the Q1 and that was primarily part of product and healthcare services segment. So that's one aspect of it. 2 is, again, I'll go to the operating model redesign. Speaker 200:25:26Some of the stuff we've done with the network rationalization and operational excellence again was focused primarily on product and healthcare services, which enabled us to actually take some cost out of that the operations, While in the same time revenue was actually better than we had anticipated. And I tried to signal that in the fact that When you look at our product and healthcare service and you look at the medical distribution division, when you pull out the PPE distributed products Year over year, we grew that business in the same store sales in the mid single digits. So that's another reason why. So those are the couple of reasons Primarily in the product and healthcare services associated with the better than expected performance. Got it. Speaker 200:26:15And really that comes down to the strong execution By Andy, who leads that team along with his entire team. Speaker 600:26:24Yes, makes sense. If you look at It would be relative to The Street. It was about $0.14 $0.15 this quarter and then you're raising the bottom end of your guidance by around the same amount, the $0.15 Curious why you're not raising EPS more given the strength that you have seen. Was there any Non recurring items or perhaps some pull through from 2Q that may have caused some strength this quarter? Speaker 200:26:52I just think from our standpoint, it's only 1 quarter in. It's early in the year. We felt very comfortable raising the bottom based on What we did relative to our internal plan in Q1, so that's why we took the bottom up. And it's based on some of the things I just talked about, some of the Faster growth we're seeing in our medical distribution business, the cost that we're taking out in our operating model realignment. Look, I don't want to overlook the performance of our Patient Direct business in the Q1. Speaker 200:27:23I mean, just a phenomenal quarter and Speaker 600:27:25the fact that Yes, pro form Speaker 200:27:26a grew at over 10%. So again, another quarter of double digit year over year growth on a pro form a basis. And frankly, virtually every category It's growing in double digits outside of really the home respiratory side, which is coming off of some strong tailwinds of COVID last year. It's those things. And then the other thing is we didn't really talk a lot about so far is our operating cash flow and the debt pay down, Operator00:27:59Thank you. Your next question comes from the line of Eric Coldwell of Baird. Please go ahead. Speaker 700:28:11Thank you. I actually have a few and Plan to be a bit greedy this morning, if you'll allow me. First, Ed, on the last comment there on Patient Direct with every category growing double digits, but for home respiratory. I struggle with that math a bit because You're up, I mean, 10% is great, don't get me wrong. But if every category is double digits and yet the segment is at 10%, home respiratory had to be pretty low. Speaker 700:28:39Could you possibly remind us what the size of that is and what the direction was? Speaker 200:28:47Yes. So I think the way to think about it is and Eric, in all those if all the other categories are in, We say double digits, anywhere from 10% to the mid to high teens. And you have one category that is down, That's going to bring the overall down to just north of 10%. Speaker 700:29:06Right. And I'm just trying to get a sense on how much home respiratory is as a percent of your Mixed last year on a pro form a basis, Speaker 200:29:14just to add a sense. And that's something we haven't gone out and disclosed What each category makes up out of the total patient direct revenue. Speaker 700:29:26Okay. And then On the FDA portfolio, heard your comments on the call, went and looked at the 10 Q. I didn't see any numbers in there. And it looks like there's a comment that you are unable to reasonably estimate the amount of any possible loss or range of possible losses. So I think the question maybe again is twofold if you could. Speaker 700:29:531, could you possibly size these categories that are affected by Not a recall, but the FDA Communications. And then 2, with your guidance, I'm curious how you Treated guidance for potential losses. Them in the 10 Q, but I'm curious what you've embedded in the outlook, if anything? Speaker 200:30:20Yes. So let me just talk a little bit about it. And obviously, We are continuing to work with the FDA to address the issue. This has been a process that's going to continue and but we're going to I will say from a current status, I mean, the reality is From a historical revenue status and even currently as I stated earlier, the N95s, which is one of the areas that we talked about those prospective revenues are probably back to 2019 levels, which are very, very, very low. So that's the way we think about that. Speaker 200:30:59And again, with us continuing to work with them on testing and the reason there's not a range is, It could be 0 or it could be something else. And we're continuing to work with them. And it just depends on where we end up with this. And regarding our guidance, we continue to our guidance continues to assume that our products are we stand behind our products, they're great products and we're going to continue to move forward with them. But again, we're working closely with the FDA to make sure that we get through all of this Over the next, I don't know, we can't even put a timeline on it yet. Operator00:31:40Thank you. Your next question comes from the line of Lisa Gill of JPMorgan. Please go ahead. Speaker 400:31:46Hi, good morning. Speaker 800:31:47This is John Stansil on for Lisa. Just a quick, maybe a bit more granular question. I know you've changed your methodology around how you're calculating EBITDA Going forward, I think looking at the Q1, there's about $11,000,000 of incremental adjustments for stock comp and LIFO. I guess, can you just size how much of the increased guidance is around changes in methodology? And then kind of following that through to the raised guidance elsewhere, How your expectations for margins have changed a little bit or not at all? Speaker 800:32:16Thank you. Speaker 300:32:19Thank you. Good morning. This is Alex Bruning. Yes. So in our guidance, we've assumed about $30,000,000 of benefit from the definition change. Speaker 300:32:28And I'm sorry, I kind of missed the second part of your question there. Can you repeat that? Speaker 800:32:33Yes, sure. Just how that flows through to the margin assumptions given the other guidance increases. Seems like you're probably just maintaining them relatively stable or anything else notable? Speaker 300:32:44Yes. I mean the guidance change is really For adjusted EBITDA reflects that definition change as well as the pull through of the Q1 beat. Speaker 800:32:54Okay, great. Thank you very much. Operator00:33:00Thank you. Your next question comes from the line of Eric Coldwell from Baird. Please go ahead. Speaker 300:33:06I can't let you off the hook that easy. Speaker 200:33:09Sorry about that, Eric. No, go ahead. Speaker 700:33:13Thank you. The last 2 parter here that I wanted to hit on was the distribution that wins Communications and how that was part of the ex PPE growth in core medical product distribution. I'm curious what portion of your recent wins have fully onboarded at this point? Where are you in Ramping some of those wins you were alluding to last year, have there been new wins of size recently? And I'm just curious if you could give us a better sense of what your ex PPE growth might have been If your net wins and losses position was neutral, I. Speaker 700:33:56E, what you would have just natural market growth ex share capture would be great. Speaker 200:34:02And Eric, the mid single digit is same store sales. It's not any channel swap. That's just Accounts we had last year versus accounts we had this year. Speaker 700:34:12Okay. I misunderstood. That's great. Speaker 200:34:14That's okay. I apologize. It's a good clarification on my point from my standpoint here. And then the other side of it is, Of our wins, they are starting to ramp. Like our largest win last year just started to generate revenue in December of last And in March, I don't have the final April numbers yet, but on March, it was Probably about 80% of what the run rate should be. Speaker 200:34:40That was our largest one last year. And then the other ones from last year are also ramping, Which is also why as we look to the back half of the year and our calendarization, it addresses a portion of that. New wins that are potentially in the pipeline, No, the reality is our pipeline is large as it has ever been. We have a dedicated business development team that does an incredible job going out and Talking about the value that the Owens and Minor Medical Distribution division brings in and that is starting to resonate and has resonated with customers. We did have another recent one in the Q4, which was not necessarily a new win, but it was a customer where we had half of their business And they did self distribution on the other half of their business. Speaker 200:35:25It was one of our very large customers. They liked what they saw from us and our ability And they've now moved away from self distribution and we've taken that on. And that's one that will transition a little quicker. That has started already. I was actually at the on the first day when we kicked off the transition about a month ago. Speaker 200:35:44So those are a couple of examples for it. But look, I mean the market is competitive and we have to continue to Make sure we're doing everything we can to protect our base business and then continue to grow our share of wallet at those customers And then drive business development. And I would tell you, under Andy's leadership, there is a tremendous focus around that that continues forward. Speaker 700:36:05And then last one for me. It sounds like there aren't many in queue here. Free cash flow, I don't believe you guide to cash flow. If I missed it in the looking at the slides quickly, I apologize. What is your outlook for free cash flow this year with and without the patient CapEx impact, if you don't mind? Speaker 300:36:29Sure. Hi, Alex. Yes. Thanks, Ed. Good morning, Eric. Speaker 300:36:32Good morning. Yes. So while we haven't guided on cash flow, just a few comments on that. We are pleased with our ability to pay down $117,000,000 here in Q1. We do expect to continue to pay down significant debt throughout the year. Speaker 300:36:46We did talk about on the last call that we expect operating cash flow to be in line at least with 2022. And the operating model realignment as We continue to focus in addition to the work streams on working capital benefits there that we think will aid in Speaker 200:37:04our efforts here from a cash Operator00:37:12Thank you. There are no further questions at this time. I'll return the call over to John for closing remarks. Speaker 200:37:20Actually, this is Seth. I will close it out. So first of all, I want to thank everyone for joining on the call today. It's greatly appreciated and we value that your interest in the company. But as I think and look forward, there are a lot of things that We are excited about in the company going forward in the year and as the year continues on and even beyond that. Speaker 200:37:42It starts with our Patient Direct segment that it's continued to outpace market growth. We only talk about market growth, but it also has driven significant margin expansions within that segment. In addition to that, our operating I'm sorry, Medical Distribution Division, it continues to strengthen as we talked about today in the prepared remarks and in the Q and A. Our operating model realignment, Extremely excited about that. It's on track. Speaker 200:38:05It's already taking hold. We know it's going to ramp in the back half of the year as we gain traction on the initiatives. We're going to continue to aggressively work through the destocking PPE. And what you saw in this quarter was exceptional cash flow. And we expect that exceptional cash flow To continue through the remainder of the year, which enables us to be nimble and deploy capital to both pay down debt as well as invest in opportunities for strong growth. Speaker 200:38:29So with that, I thank everyone for the time on the call today, and we look forward to talking to you at the end of the next quarter. Thank you. Operator00:38:36This concludes today's conference call. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallOwens & Minor Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Owens & Minor Earnings Headlines3 Reasons OMI is Risky and 1 Stock to Buy InsteadApril 25 at 8:47 AM | finance.yahoo.comOwens & Minor plans opening, sues WestRidge to void original leaseApril 25 at 3:47 AM | yahoo.comTrump’s Secret Social Security Plan?In less than a decade, Social Security could be out of money. But a surprising plan from Trump’s inner circle may not just save the system — it could unlock a major opportunity for savvy investors. Financial insider Jim Rickards calls it “Social Prosperity,” and says those who act now could see the biggest gains.April 28, 2025 | Paradigm Press (Ad)Owens & Minor, Inc. (NYSE:OMI) Given Average Recommendation of "Hold" by AnalystsApril 25 at 2:13 AM | americanbankingnews.comOwens & Minor (OMI) to Release Quarterly Earnings on FridayApril 25 at 1:05 AM | americanbankingnews.comOwens & Minor: Lots Of Moving PartsApril 24, 2025 | seekingalpha.comSee More Owens & Minor Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Owens & Minor? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Owens & Minor and other key companies, straight to your email. Email Address About Owens & MinorOwens & Minor (NYSE:OMI) is a healthcare solutions company, which engages in the product manufacturing and delivery, home health supply, and perioperative services to support care through the hospital and into the home. It operates through the Products and Healthcare Services, and Patient Direct segments. The Products and Healthcare Services segment includes medical distribution, the outsourced logistics and value-added services business, and global products, which manufacture and source medical surgical products through the production and kitting operations. The Patient Direct segment includes the home healthcare business, Byram and Apria. The company was founded by Otho O. Owens and G. 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There are 9 speakers on the call. Operator00:00:00Hello. My name is Jean Louis. Welcome to the Owens and Minor First Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Operator00:00:21I will now turn the conference over to Jackie Marcus of Investor Relations. Speaker 100:00:29Thank you, operator. Hello, everyone, and welcome to the Our comments on the call will be focused on the financial results for the Q1 of 2023 as well as our updated outlook for 2023, both of which are included in today's press release. The press release, along with the supplemental slides, are posted on the Investor Relations section of our website. Please note that during this call, we will make forward looking statements. The matters addressed in these statements are subject to risks and uncertainties and could cause actual results to differ materially from those projected or implied here today. Speaker 100:01:12Please refer to our SEC filings for a full description of these risks and uncertainties, including the Risk Factors section of our Annual Report, Form 10 ks and quarterly reports on Form 10 Q. In our discussion today, we will reference certain non GAAP financial measures. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I'm joined by Ed Pesicka, President and Chief Executive Officer and Alex Bruni, Executive Vice President and Chief Financial Officer. I will now turn the call over to Ed. Speaker 100:01:48Ed? Speaker 200:01:50Thank you, Jackie. Good morning, everyone, and thank you for joining us on the call today. To start, I am pleased with the performance of the business and the team's execution through the Q1 of the year. As we took the necessary steps to initiate the realignment of our business, improve our overall cost structure and leverage our strengths. And here are just a few examples. Speaker 200:02:121, in the first quarter, We generated $158,000,000 of cash from operations. This is a testament to the execution of our strategy and delivery on our commitment to further strengthen our financial profile. Having the ability to produce cash flow at these levels will allow us to allocate capital towards debt reduction and pursue initiatives that promote growth, innovation and commercial excellence. Next, Our operating model realignment program is on track to meet our target of $30,000,000 of adjusted operating income in 2023. And we are confident that we will achieve significant long term profit improvement and cost savings from these efforts. Speaker 200:02:56I'll outline these efforts in a little more detail further in my prepared remarks. Next, our Patient Direct segment continues to outpace the market deliver significant margin expansion as the strength of the Byram and Aphria brands continue to accelerate. And finally, we have already paid down $117,000,000 of debt in the Q1, which aligns with our focus on debt reduction and further improving our balance sheet, and we expect continued strong debt reduction throughout the year. Now I will provide a closer look at our segment performance, and I'll start with our Patient Direct segment. The Patient Direct segment had another strong quarter as it continued to outpace the market as revenues grew by 10.4% year over year on a pro form a basis. Speaker 200:03:45In addition, it should be noted that we again achieved Double digit growth in nearly all of our major product categories. The continued strong revenue growth was driven by: 1, Expanding use of technology to improve overall service and satisfaction and 3, the powerful combination of the Aphria and Byram brands. As expected, when we completed the Apria acquisition just over a year ago, the addition of the Apria has significantly improved Our already strong patient direct offering by broadening our product categories, expanding our services, increasing our footprint and deepening our payer and provider relationships. And we expect our Patient Direct segment to continue to deliver growth for the total company As serving the patient in the home continues to grow at a rapid pace. This rapid pace growth is due to demographics such as an aging population and the rise in the number of patients with chronic conditions, an increase in available home treatments and the growing acceptance of patient care in the home. Speaker 200:05:00It is these industry dynamics combined with our Patient Direct strength and fierce execution That leaves us thrilled about the future prospects for Patient Direct and the expectation of continued positive momentum. Now moving on to our Product and Healthcare Services segment. Our Product and Healthcare Services segment declined year over year, primarily due to extremely difficult comps coming off the tailwinds of COVID related sales in the prior year and continued headwinds related to destocking of PP in the current year. This significantly impacted both revenue and margin in our Global Products division. However, Excluding the year over impact of distributed PPE products, our medical distribution division delivered mid single digit growth for the quarter. Speaker 200:05:46This growth was a result of stronger same store sales along with the implementation of new wins offset by previous losses. We are pleased with the continued progress being made by our Medical Distribution division. And finally, related to Product and Healthcare Services segment. You may be aware of recent communications from the FDA regarding certain of our facial protection products. We are actively working with the FDA to address this issue and during this process we remain focused on customer safety and transparency. Speaker 200:06:19Moving on to our operating model realignment program. I am thrilled with the progress that has been made since the launch of this initiative about 8 weeks ago. It is progressing well and I'd like to take a moment to provide a brief update on the 4 key components of the program. First, sourcing and demand management, which includes direct materials, indirect materials and purchased finished goods. The goal of this work stream is to aggressively reduce acquisition costs and minimize waste. Speaker 200:06:49I am pleased with the progress made to identify the opportunities, but more Importantly, I'm pleased with the strategies already being implemented to deliver savings in 2023 and beyond. The implemented strategies and tools will be iterative, not just for 2023, but for years to come. 2nd, We are making progress on organizational structure redesign and to improve the efficiency throughout the business. We are assessing structure, spans, layers and activities. We have already taken action to de layer parts of the organization. Speaker 200:07:25As this work stream continues, we will further evaluate the structure, spans, layers and activities to reduce costs and deploy resources where needed for growth and to fill gaps. 3rd, network rationalization and operational excellence, which includes the optimization of our manufacturing footprint and supply chain. This is a focus for the management team as we move further into 2023. Improving our manufacturing efforts to more efficiently operate will greatly benefit us as we work to right size the business and ensure the return on capital invested is being maximized. Due to the complexity of this work stream, we are carefully assessing the options and phasing. Speaker 200:08:07However, we have already made adjustments in parts of our business to improve service, output, quality and in year cost reductions. Lastly, our commercial excellence and product profitability enhancement portion of the program is in its early stages. The primary objective for this component is twofold. 1, to ensure that the price we charge for our products and services reflect the value provided and 2, expanding our product portfolio to broaden our offering. And we have already begun to adjust our pricing to reflect the value of our services and offering. Speaker 200:08:43Overall, the operating model realignment program is on pace to achieve $30,000,000 of benefit in 2023 and exit the year with approximately $100,000,000 run rate of profit improvement. We are where we expected to be at this stage and encouraged by the path forward already identified in the quarters ahead. With our performance in Q1 and the advancement Our operating model realignment program, we are refining our guidance for 2023. Alex will talk more about the drivers contributing to these revisions in our guidance. But I'd like to briefly talk about the outlook for the remainder of the year at a high level. Speaker 200:09:22The upward revision to our guidance are supported by our confidence in our performance thus far in 2023. To reiterate, our Patient Direct segment has continued to outpace the market growth and expand margins. Our medical distribution division continues to strengthen. Our operating model realignment program is on track. We will continue to work through destocking of PPE and our exceptional cash flow generation allows us to be nimble in today's macroeconomic environment. Speaker 200:09:53I'm excited about what the future holds for Owens and Minor and we look forward to updating you on the progress through the remainder of the year. With that, I'd like to turn the call over to Alex to discuss our financial results in greater detail. Alex? Speaker 300:10:08Thank you, Ed. Good morning, everyone. I'll begin by providing an overview of our financial results and the primary factors that drove our performance in the Q1 of 2023. Following that, I'll delve into our revised expectations and assumptions for the full year outlook. And finally, I'll discuss our key guidance assumptions and Kaye's for Speaker 200:10:26the remainder of the year. Speaker 300:10:29Starting with our Q1 results, our revenue for the quarter was $2,500,000,000 which was higher than anticipated due to stronger sales in medical distribution and outperformance in the patient direct business, driven by solid results from both the Apria and Byram Brands. On a pro form a basis, our top line declined by 6% versus prior year, but this was largely due to the notable tailwind in the first The customer inventory levels. Consolidated top line results were relatively in line with the Q4 of 2022. 1st quarter gross margin was $497,000,000 or 19.7 percent of revenue compared to $373,000,000 or 15.5 percent of revenue in the Q1 of 2022. The gross margin expansion was driven by continued patient direct sales growth and the power of combining Apria and Byram as well as margin expansion in our Medical Distribution division, partially offset by the impact from lower PPE sales our Global Products division. Speaker 300:11:41Our distribution, selling and administrative expense for the quarter was $449,000,000 making up 17.8 percent of revenue. This expense increased by $179,000,000 in the quarter, primarily due to the costs associated with servicing patient direct sales growth, including the Apria acquisition. GAAP operating income for the quarter was $9,800,000 and adjusted operating income was $47,700,000 ahead of expectations for Q1. Adjusted EBITDA was also ahead of expectations for the quarter at $109,000,000 with a margin of 4.3 As I just discussed, the revenue and margin performance were key drivers in achieving these results. In addition, as Ed mentioned, We're also on pace to achieve the $30,000,000 adjusted operating income contribution for 2023 from our operating model realignment efforts. Speaker 300:12:36Accordingly, we've raised our guidance for adjusted EBITDA, which we'll discuss later in the call. Interest expense for the quarter was $42,000,000 And the GAAP effective tax rate was 27.7 percent, both in line with expectations. Our GAAP net loss for the quarter was $24,000,000 or a loss of $0.32 per common share. Adjusted net income for the quarter amounted $900,000,000 which represents a 10.2% decline versus the prior year due to tailwinds in the Q1 of 2022, driven by higher sales from COVID related products. Looking at the Patient Direct segment, we had another quarter of strong results. Speaker 300:13:26Once again, we saw growth across nearly all key product categories. Patient Direct accounted for $607,000,000 in revenue during the quarter, representing growth of 10.4% versus the Q1 of 2022 on a pro form a basis. Shifting gears, let's look at cash flow, the balance sheet and our capital structure. In the Q1, we generated $158,000,000 of cash from operations. Our business is capable of producing strong cash flow results, which is evidenced by the past few quarters. Speaker 300:13:58As Patient Direct becomes a larger part of the overall business And as we continue to optimize working capital, we expect to produce significant operating cash flow that will be used for debt reduction and reinvestment in the business. To that end, we paid down $117,000,000 of debt during the Q1, bringing total debt reduction to over $250,000,000 since The finalization of the Apria acquisition. At the end of Q1, our total debt was $2,400,000,000 We remain focused I'd now like to discuss our improved guidance for 2023. We are raising our revenue guidance to $10,200,000,000 to $10,600,000,000 representing an increase of $100,000,000 at the midpoint versus previous guidance. This reflects the encouraging trends we're currently seeing within our Patient Direct segment and Medical Distribution division. Speaker 300:14:54We're also increasing our adjusted EBITDA range to $540,000,000 to $590,000,000 reflecting an increase of $45,000,000 at the midpoint versus prior guidance, which reflects stable margins on the improved expectations for the top line And inclusive of the modifications to our adjusted EBITDA definition as detailed in our April 17, 8 ks. Finally, we're increasing the bottom end of our adjusted EPS range from $1.15 to $1.30 to reflect Q1 performance. The new range for adjusted EPS is $1.30 to $1.65 We remain enthusiastic about the outlook for the Patient Direct segment as well as the opportunities in the Products and Healthcare Services segment and the overall operating model realignment, while remaining cautious around the outlook for PPE for the remainder of the year. As we think about cadence for the year and as previously discussed, our earnings will be heavily weighted to the back half of the year. And it's reasonable to expect about 85 percent of earnings in the back half of the year due to traditional seasonality, acceleration of the operating model realignment benefits and anticipated easing of destocking later in the year. Speaker 300:16:09Overall, we're pleased with the results from the Q1 of the year And are excited about where the company is heading. Before turning the call over to the operator for Q and A, I'd like to thank all of our dedicated teammates for their efforts in enabling Owens and Minor to provide the highest quality of service to our customers. With that, I'll now turn the call over to the operator for questions. Operator? Speaker 200:16:33Actually, operator, before we start, this is Ed Pesicka. I would like to personally, on behalf of all of our teammates, And our thoughts and prayers out to the family of Gil Miner. Gil passed away earlier this week. Gil was our Chairman Emeritus and longtime CEO of Owens and Minor. His family is a namesake of Owens and Minor. Speaker 200:16:52Over Gil's life, he made a positive impact on so many people and it's great to know that his impact will continue into the future. So with that, I'll turn it back over to the operator so we can begin Q and A. Operator00:17:06Mr. Biesica, we will begin the question and answer session. Your first question comes from the line of Kevin Caliendo of UBS. Please go ahead. Speaker 400:17:21Hi, thanks for taking my question. So I wanted to talk a little bit about the Products and Healthcare Services business. It's nice to see the progression there and the progress. You talked about the visibility you had last quarter in terms of PPE inventory ordering and the like. And This week we've had sort of mixed messaging from some of the public companies who compete or work in this sector. Speaker 400:17:47Can you talk a little bit about what you're seeing in terms of utilization and demand? Is it changing by geography or customer? And Where we sit in terms of your line of sight on PPE inventory levels and reordering? Speaker 200:18:02Sure. So there's really a couple of parts to that question. Jen, one is on utilization within the hospitals. We are not seeing the utilization slowdown through As we do our checks with hospitals and I personally go out to visit those hospitals, probably the one of the products Across the portfolio where utilization is slower or I'm sorry, we should slow down slightly is N95s. But if you look at it across the board, Utilization, we believe is now consistent with where it was pre pandemic level, if not slightly elevated from that because of the protocols that are in place. Speaker 200:18:38So that's what we're seeing through conversations with our customers as well as personally visiting them. On the destocking side, We've done a couple of things. One is, obviously, we've done some checks with the market as well as had some outside help getting some checks on this. And I think it's still consistent with what we said last quarter is the fact that we still believe destocking is going to continue to occur through the first half of this year And it will start to come out in the back half of the year. So that's where we're seeing it. Speaker 200:19:08And again, back to the regionality Regional of this, we're not really seeing that. So again, to recap is, we're seeing PPE usage in the hospital Above 2019 levels and that's actually the usage in the hospital. We see the destocking continuing through the front half of the year and then easing in the back half of the year. And that's really what we're seeing in the market today. Speaker 400:19:35Okay. That's helpful. If I can ask a quick follow-up. Speaker 300:19:38Can you just Speaker 400:19:40frame for us the risk of the FDA action, like sort of what's a worst case, What's the best case and what have you assumed in your guidance around this, any potential impact from it? Speaker 200:19:52Yes. I think obviously we've got our That we have in the 10 ks that we filed this morning. And really what we're doing right now is we're just going to continue we're continuing to work with the FDA on this. We're going to work with them aggressively in the fact that we want to work with them to address the issue during the process. And again, We are our primary focus here is around customer safety and transparency. Speaker 200:20:14So it's a fluid process and that's where we are in it right now. Operator00:20:21Thank you. Your next question comes from the line of Michael Cherny of BOA. Please go ahead. Speaker 500:20:28Good morning. Thanks for taking the call and congratulations on a nice quarter. Maybe if I can unpack the guidance changes a bit As you think through maybe in particular on EBITDA, I think the EPS contributions are similar. Relative to the $30,000,000 of Operating expense savings or improvement savings, how does that factor in, in terms of realignment costs that get baked in? And Where will you be exiting the year on some of those realignment costs and that $30,000,000 as you essentially run rate into 2024 and beyond? Speaker 200:21:02Maybe I think the question in the high level is, so the expectation we have is to get set a minimum or $30,000,000 in 20 20 Actual savings to our adjusted operating income. We expect to exit the year at least at $100,000,000 run rate to that Going into 2023 I'm sorry, 2024. Cost associated with realignment would be in exit and restructuring costs in the P and L, But that's where we expect it to be from a dollar standpoint this year and there's nothing coming off of that and then going into 2024 on a run rate. I don't know if that answers the question exactly. Speaker 500:21:42No, it does. It's helpful in unpacking the pieces on the guide change. And if I could just Throw in a second one here, maybe building on Kevin's first question a bit. What do you see right now in the competitive side of your market, both I would say on core hospital distribution as well as on the patient direct side. And where do you see OMI's Strength shining through versus other opportunities you have to pick up over time? Speaker 200:22:07Sure. So I'll take the 2 different segments. So in the Product and Healthcare Services segment, we see it continue to be very competitive. We recognize that customers, And that being the IDNs and the hospitals are struggling from a financial standpoint. They're looking for ways to help them with reducing labor costs, reducing overall costs Putting additional technology in place that can help them do that. Speaker 200:22:34We're also seeing them looking to have potential more choice on what product and that is out there for them, so they have more flexibility. So that's what we're seeing in that sense. And I think a lot of the things we do within our medical distribution business fit into those categories. I'll move on to the patient direct business. In our patient direct business, look, we continue to see The fact that what our customers are looking for in that business, it's really 3 different customers. Speaker 200:23:04It's really the aspect of the customer being The patient, the provider as well as the payer. And when we think about the patient, the provider, one of the things that they're looking for is to continue To provide value to them. And one of the ways we do that and I think the numbers really just prove that out. They're looking for a commercial model that is Comprehensive focused around those three things, the patient, the provider and the payer. They're looking for technology to make their life easier And we're doing that through technology that helps the patient whether it's reorder, check their account, do that much easier. Speaker 200:23:40And then really, I think the last thing is they're looking for ways to again tie all that together. And I think that's what our Patient Direct business does. And when we added on Apria on top of our Byram business and you put those together, it really strengthened those key things about 1, our proven commercial model, which now we have across the entire business that is comprehensively focused on the patient provider and the payer and then really the technology that continues to advance and make But ultimately, we see the patient direct marketplace growing at a rapid pace, really because of demographics, The increase in home treatments and really the acceptance of patient care. Operator00:24:23Thank you. Your next question comes from the line of Daniel Grossleit of Citi. Please go ahead. Speaker 600:24:30Hi guys. Thanks for taking the question. The Products and Services business had a pretty significant beat relative to the Street's expectations and some of the directional commentary you gave on the prior earnings call. It seems like PPE destocking is kind of going as you had expected. So I'm curious if you could just spike out some of the sources of strength other than PPE destocking going as you expected that led to the significant feat this quarter. Speaker 200:25:03Sure. I think one of the things we talked a little bit about and I did my prepared remarks about the org redesign and how we've already take Some costs out and de layer the organization. That came out early in the Q1 and that was primarily part of product and healthcare services segment. So that's one aspect of it. 2 is, again, I'll go to the operating model redesign. Speaker 200:25:26Some of the stuff we've done with the network rationalization and operational excellence again was focused primarily on product and healthcare services, which enabled us to actually take some cost out of that the operations, While in the same time revenue was actually better than we had anticipated. And I tried to signal that in the fact that When you look at our product and healthcare service and you look at the medical distribution division, when you pull out the PPE distributed products Year over year, we grew that business in the same store sales in the mid single digits. So that's another reason why. So those are the couple of reasons Primarily in the product and healthcare services associated with the better than expected performance. Got it. Speaker 200:26:15And really that comes down to the strong execution By Andy, who leads that team along with his entire team. Speaker 600:26:24Yes, makes sense. If you look at It would be relative to The Street. It was about $0.14 $0.15 this quarter and then you're raising the bottom end of your guidance by around the same amount, the $0.15 Curious why you're not raising EPS more given the strength that you have seen. Was there any Non recurring items or perhaps some pull through from 2Q that may have caused some strength this quarter? Speaker 200:26:52I just think from our standpoint, it's only 1 quarter in. It's early in the year. We felt very comfortable raising the bottom based on What we did relative to our internal plan in Q1, so that's why we took the bottom up. And it's based on some of the things I just talked about, some of the Faster growth we're seeing in our medical distribution business, the cost that we're taking out in our operating model realignment. Look, I don't want to overlook the performance of our Patient Direct business in the Q1. Speaker 200:27:23I mean, just a phenomenal quarter and Speaker 600:27:25the fact that Yes, pro form Speaker 200:27:26a grew at over 10%. So again, another quarter of double digit year over year growth on a pro form a basis. And frankly, virtually every category It's growing in double digits outside of really the home respiratory side, which is coming off of some strong tailwinds of COVID last year. It's those things. And then the other thing is we didn't really talk a lot about so far is our operating cash flow and the debt pay down, Operator00:27:59Thank you. Your next question comes from the line of Eric Coldwell of Baird. Please go ahead. Speaker 700:28:11Thank you. I actually have a few and Plan to be a bit greedy this morning, if you'll allow me. First, Ed, on the last comment there on Patient Direct with every category growing double digits, but for home respiratory. I struggle with that math a bit because You're up, I mean, 10% is great, don't get me wrong. But if every category is double digits and yet the segment is at 10%, home respiratory had to be pretty low. Speaker 700:28:39Could you possibly remind us what the size of that is and what the direction was? Speaker 200:28:47Yes. So I think the way to think about it is and Eric, in all those if all the other categories are in, We say double digits, anywhere from 10% to the mid to high teens. And you have one category that is down, That's going to bring the overall down to just north of 10%. Speaker 700:29:06Right. And I'm just trying to get a sense on how much home respiratory is as a percent of your Mixed last year on a pro form a basis, Speaker 200:29:14just to add a sense. And that's something we haven't gone out and disclosed What each category makes up out of the total patient direct revenue. Speaker 700:29:26Okay. And then On the FDA portfolio, heard your comments on the call, went and looked at the 10 Q. I didn't see any numbers in there. And it looks like there's a comment that you are unable to reasonably estimate the amount of any possible loss or range of possible losses. So I think the question maybe again is twofold if you could. Speaker 700:29:531, could you possibly size these categories that are affected by Not a recall, but the FDA Communications. And then 2, with your guidance, I'm curious how you Treated guidance for potential losses. Them in the 10 Q, but I'm curious what you've embedded in the outlook, if anything? Speaker 200:30:20Yes. So let me just talk a little bit about it. And obviously, We are continuing to work with the FDA to address the issue. This has been a process that's going to continue and but we're going to I will say from a current status, I mean, the reality is From a historical revenue status and even currently as I stated earlier, the N95s, which is one of the areas that we talked about those prospective revenues are probably back to 2019 levels, which are very, very, very low. So that's the way we think about that. Speaker 200:30:59And again, with us continuing to work with them on testing and the reason there's not a range is, It could be 0 or it could be something else. And we're continuing to work with them. And it just depends on where we end up with this. And regarding our guidance, we continue to our guidance continues to assume that our products are we stand behind our products, they're great products and we're going to continue to move forward with them. But again, we're working closely with the FDA to make sure that we get through all of this Over the next, I don't know, we can't even put a timeline on it yet. Operator00:31:40Thank you. Your next question comes from the line of Lisa Gill of JPMorgan. Please go ahead. Speaker 400:31:46Hi, good morning. Speaker 800:31:47This is John Stansil on for Lisa. Just a quick, maybe a bit more granular question. I know you've changed your methodology around how you're calculating EBITDA Going forward, I think looking at the Q1, there's about $11,000,000 of incremental adjustments for stock comp and LIFO. I guess, can you just size how much of the increased guidance is around changes in methodology? And then kind of following that through to the raised guidance elsewhere, How your expectations for margins have changed a little bit or not at all? Speaker 800:32:16Thank you. Speaker 300:32:19Thank you. Good morning. This is Alex Bruning. Yes. So in our guidance, we've assumed about $30,000,000 of benefit from the definition change. Speaker 300:32:28And I'm sorry, I kind of missed the second part of your question there. Can you repeat that? Speaker 800:32:33Yes, sure. Just how that flows through to the margin assumptions given the other guidance increases. Seems like you're probably just maintaining them relatively stable or anything else notable? Speaker 300:32:44Yes. I mean the guidance change is really For adjusted EBITDA reflects that definition change as well as the pull through of the Q1 beat. Speaker 800:32:54Okay, great. Thank you very much. Operator00:33:00Thank you. Your next question comes from the line of Eric Coldwell from Baird. Please go ahead. Speaker 300:33:06I can't let you off the hook that easy. Speaker 200:33:09Sorry about that, Eric. No, go ahead. Speaker 700:33:13Thank you. The last 2 parter here that I wanted to hit on was the distribution that wins Communications and how that was part of the ex PPE growth in core medical product distribution. I'm curious what portion of your recent wins have fully onboarded at this point? Where are you in Ramping some of those wins you were alluding to last year, have there been new wins of size recently? And I'm just curious if you could give us a better sense of what your ex PPE growth might have been If your net wins and losses position was neutral, I. Speaker 700:33:56E, what you would have just natural market growth ex share capture would be great. Speaker 200:34:02And Eric, the mid single digit is same store sales. It's not any channel swap. That's just Accounts we had last year versus accounts we had this year. Speaker 700:34:12Okay. I misunderstood. That's great. Speaker 200:34:14That's okay. I apologize. It's a good clarification on my point from my standpoint here. And then the other side of it is, Of our wins, they are starting to ramp. Like our largest win last year just started to generate revenue in December of last And in March, I don't have the final April numbers yet, but on March, it was Probably about 80% of what the run rate should be. Speaker 200:34:40That was our largest one last year. And then the other ones from last year are also ramping, Which is also why as we look to the back half of the year and our calendarization, it addresses a portion of that. New wins that are potentially in the pipeline, No, the reality is our pipeline is large as it has ever been. We have a dedicated business development team that does an incredible job going out and Talking about the value that the Owens and Minor Medical Distribution division brings in and that is starting to resonate and has resonated with customers. We did have another recent one in the Q4, which was not necessarily a new win, but it was a customer where we had half of their business And they did self distribution on the other half of their business. Speaker 200:35:25It was one of our very large customers. They liked what they saw from us and our ability And they've now moved away from self distribution and we've taken that on. And that's one that will transition a little quicker. That has started already. I was actually at the on the first day when we kicked off the transition about a month ago. Speaker 200:35:44So those are a couple of examples for it. But look, I mean the market is competitive and we have to continue to Make sure we're doing everything we can to protect our base business and then continue to grow our share of wallet at those customers And then drive business development. And I would tell you, under Andy's leadership, there is a tremendous focus around that that continues forward. Speaker 700:36:05And then last one for me. It sounds like there aren't many in queue here. Free cash flow, I don't believe you guide to cash flow. If I missed it in the looking at the slides quickly, I apologize. What is your outlook for free cash flow this year with and without the patient CapEx impact, if you don't mind? Speaker 300:36:29Sure. Hi, Alex. Yes. Thanks, Ed. Good morning, Eric. Speaker 300:36:32Good morning. Yes. So while we haven't guided on cash flow, just a few comments on that. We are pleased with our ability to pay down $117,000,000 here in Q1. We do expect to continue to pay down significant debt throughout the year. Speaker 300:36:46We did talk about on the last call that we expect operating cash flow to be in line at least with 2022. And the operating model realignment as We continue to focus in addition to the work streams on working capital benefits there that we think will aid in Speaker 200:37:04our efforts here from a cash Operator00:37:12Thank you. There are no further questions at this time. I'll return the call over to John for closing remarks. Speaker 200:37:20Actually, this is Seth. I will close it out. So first of all, I want to thank everyone for joining on the call today. It's greatly appreciated and we value that your interest in the company. But as I think and look forward, there are a lot of things that We are excited about in the company going forward in the year and as the year continues on and even beyond that. Speaker 200:37:42It starts with our Patient Direct segment that it's continued to outpace market growth. We only talk about market growth, but it also has driven significant margin expansions within that segment. In addition to that, our operating I'm sorry, Medical Distribution Division, it continues to strengthen as we talked about today in the prepared remarks and in the Q and A. Our operating model realignment, Extremely excited about that. It's on track. Speaker 200:38:05It's already taking hold. We know it's going to ramp in the back half of the year as we gain traction on the initiatives. We're going to continue to aggressively work through the destocking PPE. And what you saw in this quarter was exceptional cash flow. And we expect that exceptional cash flow To continue through the remainder of the year, which enables us to be nimble and deploy capital to both pay down debt as well as invest in opportunities for strong growth. Speaker 200:38:29So with that, I thank everyone for the time on the call today, and we look forward to talking to you at the end of the next quarter. Thank you. Operator00:38:36This concludes today's conference call. You may now disconnect.Read morePowered by