Owens & minor reports third quarter 2022 financial results
Richmond, va.--(business wire)--owens & minor, inc. (nyse-omi) today reported financial results for the third quarter ended september 30, 2022, as summarized in the table below. “in the third quarter we saw greater than expected macro-economic and industry-related forces that continue to challenge our products & healthcare services segment and as the quarter progressed, we saw more of our acute care customers delay reorders utilizing their stockpiled items,” said edward a. pesicka, president & chief executive officer of owens & minor. “to better address these challenges and capitalize on opportunities, we are accelerating execution of key initiatives to improve the segment’s performance.” pesicka added, “i am very pleased with the performance and operational execution throughout all aspects of the patient direct segment, including the capture of increased cpap opportunities, and overachievement of acquisition synergies. this exceptional performance was supported by deep adoption of the owens & minor business system and led to nearly 100 basis point margin expansion sequentially and year-over-year revenue growth of 11.4% on a pro forma basis for the apria acquisition.” “overall, our core business fundamentals remain strong, we have the right strategy, and our portfolio is well positioned to capitalize on opportunities as our execution and market conditions improve,” pesicka concluded. financial summary (1) ($ in millions, except per share data) 3q22 3q21 ytd 2022 ytd 2021 revenue $2,497 $2,502 $7,404 $7,318 operating income, gaap $60.2 $62.9 $196.4 $306.5 adj. operating income, non-gaap $83.4 $79.3 $301.9 $357.5 net income, gaap $12.5 $44.1 $80.4 $179.6 adj. net income, non-gaap $31.4 $56.5 $162.5 $248.0 adj. ebitda, non-gaap $127.0 $91.7 $401.1 $394.9 net income per common share, gaap $0.16 $0.58 $1.05 $2.38 adj. net income per share, non-gaap(2) $0.41 $0.74 $2.13 $3.29 (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. (2) adjusted net income per share, non-gaap for q3 2022 was unfavorably impacted as compared to prior year by foreign currency translation in the amount of $0.04 and $0.13 for the 2022 year-to-date period. q3 results & highlights consolidated revenue of $2.5 billion patient direct revenue of $594 million, up 142%, or 11.4% on a pro forma basis for the apria acquisition unfavorable fx of $12 million patient direct revenue of $594 million, up 142%, or 11.4% on a pro forma basis for the apria acquisition unfavorable fx of $12 million adjusted ebitda of $127 million, up $35 million, with margin expansion of 140 basis points to 5.1% unfavorable fx of $5 million unfavorable fx of $5 million balance sheet and cash flow generated $69 million of cash from operations in the quarter and $238 million year-to-date free cash flow (adjusted ebitda less capital expenditures, net) of $84 million and $299 million year-to-date generated $69 million of cash from operations in the quarter and $238 million year-to-date free cash flow (adjusted ebitda less capital expenditures, net) of $84 million and $299 million year-to-date business highlights awarded vizient’s medical/surgical supplier excellence award and its committed program excellence award expanded partnership and strategic collaboration with allina health to strengthen supply chain resiliency hired snehashish sarkar as our new chief information officer. snehashish was formerly svp, cio & chief transformation officer of varian, a siemens healthcare company. awarded vizient’s medical/surgical supplier excellence award and its committed program excellence award expanded partnership and strategic collaboration with allina health to strengthen supply chain resiliency hired snehashish sarkar as our new chief information officer. snehashish was formerly svp, cio & chief transformation officer of varian, a siemens healthcare company. financial outlook the company’s outlook for 2022 is summarized below: revenue for 2022 to be in a range of $9.8 billion to $10.0 billion, reflecting: contribution in excess of $0.9 billion from apria contribution in excess of $0.9 billion from apria adjusted ebitda for 2022 to be in a range of $527 million to $537 million adjusted eps for 2022 to be in a range of $2.50 to $2.60 investor conference call for third quarter 2022 financial results owens & minor executives will host a conference call at 8:30 am. et today, november 2, 2022, to discuss the results. the live webcast will be available on owens & minor’s investor relations website in the events & presentations section. conference call participants are required to register in advance to obtain call-in information prior to the start of the call. 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 2022 financial performance, the apria transaction, including related synergies and the expected performance of the apria business, as well as statements related to the company’s expectations regarding the performance of its business including its 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, 2021, filed with the sec including the sections captioned “cautionary note regarding forward-looking statements” and “item 1a. risk factors,” and subsequent quarterly reports on form 10-q and current reports on form 8-k filed with or furnished to the sec, for a discussion of certain known risk factors that could cause the company’s actual results to differ materially from its current estimates. these filings are available at www.owens-minor.com. given these risks and uncertainties, owens & minor can give no assurance that any forward-looking statements will, in fact, transpire and, therefore, cautions investors not to place undue reliance on them. owens & minor specifically disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. about owens & minor owens & minor, inc. (nyse: omi) is a fortune 500 global healthcare solutions company integrating product manufacturing and delivery, home health supply, and perioperative services to support care through the hospital and into the home. owens & minor drives visibility, control and efficiency for patients, providers and healthcare professionals across the supply chain with proprietary technology and solutions, an extensive product portfolio and an americas-based manufacturing footprint for personal protective equipment (ppe) and surgical products, as well as a robust portfolio of products and services for patients managing chronic and acute conditions in the home setting. operating continuously since 1882 from its headquarters in richmond, va., owens & minor is a 140-year-old company powered by more than 20,000 global teammates. learn more at https://www.owens-minor.com, follow @owens_minor on twitter and connect on linkedin at www.linkedin.com/company/owens-&-minor. owens & minor, inc. consolidated statements of operations (unaudited) (dollars in thousands, except per share data) three months ended september 30, 2022 2021 net revenue $ 2,497,401 $ 2,502,175 cost of goods sold 1,984,122 2,173,336 gross margin 513,279 328,839 distribution, selling and administrative expenses 445,259 262,457 acquisition-related and exit and realignment charges 8,898 6,380 other operating income, net (1,125 ) (2,873 ) operating income 60,247 62,875 interest expense, net 39,869 11,572 other expense, net 783 799 income before income taxes 19,595 50,504 income tax provision 7,098 6,375 net income $ 12,497 $ 44,129 net income per common share: basic $ 0.17 $ 0.60 diluted $ 0.16 $ 0.58 owens & minor, inc. consolidated statements of operations (unaudited) (dollars in thousands, except per share data) nine months ended september 30, 2022 2021 net revenue $ 7,404,368 $ 7,318,169 cost of goods sold 5,985,136 6,146,511 gross margin 1,419,232 1,171,658 distribution, selling and administrative expenses 1,177,812 849,255 acquisition-related and exit and realignment charges 50,048 20,967 other operating income, net (5,020 ) (5,016 ) operating income 196,392 306,452 interest expense, net 87,727 36,784 loss on extinguishment of debt — 40,433 other expense, net 2,347 2,397 income before income tax 106,318 226,838 income tax provision 25,937 47,224 net income $ 80,381 $ 179,614 net income per common share: basic $ 1.08 $ 2.47 diluted $ 1.05 $ 2.38 owens & minor, inc. condensed consolidated balance sheets (unaudited) (dollars in thousands) september 30, december 31, 2022 2021 assets current assets cash and cash equivalents $ 76,770 $ 55,712 accounts receivable, net of allowances of $11,016 and $18,003 751,970 681,564 merchandise inventories 1,508,443 1,495,972 other current assets 104,734 88,564 total current assets 2,441,917 2,321,812 property and equipment, net of accumulated depreciation of $414,920 and $334,500 575,799 317,235 operating lease assets 275,833 194,006 goodwill 1,631,336 390,185 intangible assets, net 464,077 209,745 other assets, net 149,620 103,568 total assets $ 5,538,582 $ 3,536,551 liabilities and equity current liabilities accounts payable $ 1,156,230 $ 1,001,959 accrued payroll and related liabilities 106,618 115,858 other current liabilities 339,526 226,204 total current liabilities 1,602,374 1,344,021 long-term debt, excluding current portion 2,547,059 947,540 operating lease liabilities, excluding current portion 215,022 162,241 deferred income taxes 83,473 35,310 other liabilities 123,817 108,938 total liabilities 4,571,745 2,598,050 total equity 966,837 938,501 total liabilities and equity $ 5,538,582 $ 3,536,551 owens & minor, inc. consolidated statements of cash flows (unaudited) (dollars in thousands) nine months ended september 30, 2022 2021 operating activities: net income $ 80,381 $ 179,614 adjustments to reconcile net income to cash provided by operating activities: depreciation and amortization 155,438 68,142 share-based compensation expense 15,765 19,078 loss on extinguishment of debt — 40,433 provision for losses on accounts receivable 5,289 19,270 deferred income tax expense (benefit) 2,991 (18,286 ) changes in operating lease right-of-use assets and lease liabilities 922 1,190 gain on sale and dispositions of property and equipment (17,002 ) — changes in operating assets and liabilities: accounts receivable 7,417 (84,381 ) merchandise inventories (6,823 ) (284,188 ) accounts payable 30,424 120,821 net change in other assets and liabilities (45,423 ) (8,341 ) other, net 8,666 20,484 cash provided by operating activities 238,045 73,836 investing activities: acquisition, net of cash acquired (1,684,607 ) — additions to property and equipment (109,275 ) (26,446 ) additions to computer software (5,873 ) (6,179 ) proceeds from sale of property and equipment 29,720 41 other, net (1,670 ) — cash used for investing activities (1,771,705 ) (32,584 ) financing activities: proceeds from issuance of debt 1,691,000 574,900 borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program 30,000 (90,900 ) repayments of debt (3,000 ) (553,140 ) borrowings under amended accounts receivable securitization program 697,700 — repayments under amended accounts receivable securitization program (770,700 ) — financing costs paid (42,602 ) (13,912 ) cash dividends paid — (548 ) payment for termination of interest rate swaps — (15,434 ) other, net (41,813 ) (18,188 ) cash provided by (used for) financing activities 1,560,585 (117,222 ) effect of exchange rate changes on cash, cash equivalents, and restricted cash (5,752 ) (2,454 ) net increase (decrease) in cash, cash equivalents and restricted cash 21,173 (78,424 ) cash, cash equivalents and restricted cash at beginning of period 72,035 134,506 cash, cash equivalents and restricted cash at end of period (1) $ 93,208 $ 56,082 supplemental disclosure of cash flow information: income taxes paid, net of refunds $ 33,568 $ 83,606 interest paid $ 61,889 $ 32,035 noncash investing activity: unpaid purchases of property and equipment and software at end of period $ 63,158 $ — (1) restricted cash included in other assets, net as of september 30, 2022 and december 31, 2021 primarily represents cash 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. owens & minor, inc. summary segment information (unaudited) (dollars in thousands) three months ended september 30, 2022 2021 % of % of consolidated consolidated amount net revenue amount net revenue net revenue: products & healthcare services $ 1,903,356 76.21 % $ 2,256,295 90.17 % patient direct 594,045 23.79 % 245,880 9.83 % consolidated net revenue $ 2,497,401 100.00 % $ 2,502,175 100.00 % % of segment % of segment operating income: net revenue net revenue products & healthcare services $ 23,781 1.25 % $ 64,415 2.85 % patient direct 59,666 10.04 % 14,865 6.05 % intangible amortization (14,302 ) (10,025 ) acquisition-related and exit and realignment charges (8,898 ) (6,380 ) consolidated operating income $ 60,247 2.41 % $ 62,875 2.51 % depreciation and amortization: products & healthcare services $ 19,121 $ 18,868 patient direct 39,030 3,774 consolidated depreciation and amortization $ 58,151 $ 22,642 capital expenditures: products & healthcare services $ 9,743 $ 13,498 patient direct 39,706 446 consolidated capital expenditures $ 49,449 $ 13,944 owens & minor, inc. summary segment information (unaudited) (dollars in thousands) nine months ended september 30, 2022 2021 % of % of consolidated consolidated amount net revenue amount net revenue net revenue: products & healthcare services $ 5,964,784 80.56 % $ 6,621,560 90.48 % patient direct 1,439,584 19.44 % 696,609 9.52 % consolidated net revenue $ 7,404,368 100.00 % $ 7,318,169 100.00 % % of segment % of segment operating income: net revenue net revenue products & healthcare services $ 174,108 2.92 % $ 316,062 4.77 % patient direct 127,791 8.88 % 41,434 5.95 % intangible amortization (55,459 ) (30,077 ) acquisition-related and exit and realignment charges (50,048 ) (20,967 ) consolidated operating income $ 196,392 2.65 % $ 306,452 4.19 % depreciation and amortization: products & healthcare services $ 57,325 $ 56,874 patient direct 98,113 11,268 consolidated depreciation and amortization $ 155,438 $ 68,142 capital expenditures: products & healthcare services $ 38,804 $ 31,768 patient direct 76,344 857 consolidated capital expenditures $ 115,148 $ 32,625 owens & minor, inc. net income per common share (unaudited) (dollars in thousands, except per share data) three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 net income $ 12,497 $ 44,129 $ 80,381 $ 179,614 weighted average shares outstanding - basic 74,905 73,215 74,376 72,649 dilutive shares 1,510 2,743 1,835 2,754 weighted average shares outstanding - diluted 76,415 75,958 76,211 75,403 net income per common share: basic $ 0.17 $ 0.60 $ 1.08 $ 2.47 diluted $ 0.16 $ 0.58 $ 1.05 $ 2.38 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 income and net income per share to non-gaap measures used by management. three months ended september 30, nine months ended september 30, 2022 2021 2022 2021 operating income, as reported (gaap) $ 60,247 $ 62,875 $ 196,392 $ 306,452 intangible amortization (1) 14,302 10,025 55,459 30,077 acquisition-related and exit and realignment charges(2) 8,898 6,380 50,048 20,967 operating income, adjusted (non-gaap) (adjusted operating income) $ 83,447 $ 79,280 $ 301,899 $ 357,496 operating income as a percent of net revenue (gaap) 2.41 % 2.51 % 2.65 % 4.19 % adjusted operating income as a percent of net revenue (non-gaap) 3.34 % 3.17 % 4.08 % 4.89 % net income, as reported (gaap) $ 12,497 $ 44,129 $ 80,381 $ 179,614 intangible amortization (1) 14,302 10,025 55,459 30,077 income tax benefit (5) (2,878 ) (2,729 ) (12,948 ) (7,864 ) acquisition-related and exit and realignment charges(2) 8,898 6,380 50,048 20,967 income tax benefit (5) (1,791 ) (1,736 ) (11,686 ) (5,483 ) loss on extinguishment of debt (3) — — — 40,433 income tax benefit (5) — — — (10,574 ) other (4) 525 570 1,574 1,709 income tax benefit (5) (107 ) (155 ) (368 ) (447 ) tax adjustment (7) — — — (402 ) net income, adjusted (non-gaap) (adjusted net income) $ 31,446 $ 56,484 $ 162,460 $ 248,030 net income per diluted common share, as reported (gaap) $ 0.16 $ 0.58 $ 1.05 $ 2.38 intangible amortization (1) 0.15 0.09 0.56 0.29 acquisition-related and exit and realignment charges(2) 0.09 0.06 0.50 0.21 loss on extinguishment of debt (3) — — — 0.40 other (4) 0.01 0.01 0.02 0.02 tax adjustment (7) — — — (0.01 ) net income per diluted common share, adjusted (non-gaap) (adjusted eps) $ 0.41 $ 0.74 $ 2.13 $ 3.29 owens & minor, inc. gaap/non-gaap reconciliations (unaudited), continued (dollars in thousands) the following tables provide reconciliations of net income and total debt to non-gaap measures used by management. three months ended september 30, nine months ended september 30, trailing twelve months ended september 30, 2022 2022 2021 2022 2021 net income, as reported (gaap) $ 12,497 $ 44,129 $ 80,381 $ 179,614 $ 122,356 income tax provision 7,098 6,375 25,937 47,224 33,877 interest expense, net 39,869 11,572 87,727 36,784 99,033 intangible amortization (1) 14,302 10,025 55,459 30,077 65,189 other depreciation and amortization (6) 43,849 12,617 99,979 38,066 112,726 ebitda (non-gaap) $ 117,615 $ 84,718 $ 349,483 $ 331,765 $ 433,181 acquisition-related and exit and realignment charges (2) 8,898 6,380 50,048 20,967 63,156 loss on extinguishment of debt (3) — — — 40,433 — other (4) 525 570 1,574 1,709 2,144 ebitda, adjusted (non-gaap) (adjusted ebitda) $ 127,038 $ 91,668 $ 401,105 $ 394,874 $ 498,481 three months ended september 30, 2022 nine months ended september 30, 2022 ebitda, adjusted (non-gaap) (adjusted ebitda) $ 127,038 $ 401,103 capital expenditures, net (8) (42,803 ) (102,430 ) free cash flow (non-gaap) $ 84,235 $ 298,673 september 30, 2022 total debt, as reported (gaap) $ 2,561,779 cash and cash equivalents 76,770 net debt (non-gaap) $ 2,485,009 owens & minor, inc. gaap/non-gaap reconciliations (unaudited), continued the following items have been excluded in our non-gaap financial measures: (1) intangible amortization includes amortization of intangible assets established during purchase accounting for business combinations. 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 and the results of our peers. (2) acquisition-related charges were $6.9 million and $45.2 million for the three and nine months ended september 30, 2022 as compared to no acquisition-related charges for the three and nine months ended september 30, 2021. acquisition-related costs in 2022 consisted primarily of costs related to the apria acquisition. acquisition-related charges for the twelve months ended september 30, 2022 were $48.2 million and consisted primarily of costs related to the apria acquisition. exit and realignment charges were $2.0 million and $4.9 million for the three and nine months ended september 30, 2022 and consisted primarily of severance and other charges associated with the reorganization of our segments. exit and realignment charges were $6.4 million and $21.0 million for the three and nine months ended september 30, 2021 and consisted primarily of an increase in reserves associated with certain retained assets of fusion5, it restructuring charges and other costs related to the reorganization of our u.s. operations. exit and realignment charges for the twelve months ended september 30, 2022 were $15.0 million and consisted of costs associated with our strategic organizational realignment, wind-down costs related to fusion5, it restructuring charges and other items. (3) loss on extinguishment of debt for the nine months ended september 30, 2021 includes the write-off of deferred financing costs and third party fees associated with the debt financing in march 2021 of $15.3 million and amounts reclassified from accumulated other comprehensive loss as a result of the termination of our interest rate swaps of $25.1 million. (4) other includes interest costs and net actuarial losses related to our retirement plans for the three and nine months ended september 30, 2022 and 2021, as well as the twelve months ended september 30, 2022. (5) 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. (6) other depreciation and amortization includes depreciation expense for property and equipment and amortization for capitalized computer software. (7) includes tax adjustments associated with the estimated benefits under the tax cuts and jobs act and the coronavirus aid, relief, and economic security (cares) act. (8) capital expenditures, net is defined as capital expenditures less the net book value of dispositions of property and equipment during the accounting period. 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.
