Owens & Minor Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kevin Caliendo - UBS Group AG - Analyst : Good morning, guys. Thanks for taking my question and thanks for all the details. I guess why don't we start first with Rotech? Because I think when the deck came out, the 8-K came out, I think people were a little bit alarmed to see some of the trends at Rotech. And I just want to ask you, knowing what you know now versus knowing what you knew when the deal was announced, is there anything surprising in the Rotech results over the last

Question: Kevin Caliendo - UBS Group AG - Analyst : Okay. That's helpful. If I can ask a follow-up on the free cash flow. I appreciate that the $200 million expected that you can redeploy back for debt repayment. And you also have a $100 million share repurchase. Should we be thinking about those in conjunction? Like how should we think about that $100 million of buyback? Is that the priority first or is it something over the course of time? And should we just assume the $175 million to $200 million of free cash flow goes to pay down debt and the buyback is more opportunistic? Just help me understand what -- how you're thinking about deploying that capital this year.

Question: Kevin Caliendo - UBS Group AG - Analyst : Okay, thanks. I'll go back in queue.

Question: Michael Cherny - Leerink Partners LLC - Analyst : Good morning. Thank you for taking the question. Maybe if we can just start on Patient Direct and some of the underlying trends. John, you talked

Question: Michael Cherny - Leerink Partners LLC - Analyst : Appreciate that. And maybe a follow-up to Kevin's question regarding capital deployment and the buyback. Very much appreciate the dynamic of instituting a new buyback given the recent performance of the stock. That being said, you obviously talked about at the beginning of the year being a use of cash component, assuming, as you've said that the Rotech deal closes, you'll be taking on a meaningful amount of debt near term as you work to pay that down. How should we think about the cadence potential? I know it's not in guidance of the buyback against your cash flow needs, and why is $100 million the right number given where you see the dislocation in the stock currently?

Question: Michael Cherny - Leerink Partners LLC - Analyst : Helpful, John. Thank you.

Question: John Stansel - JPMorgan Chase & Co - Analyst : Great, thanks for taking my question. Just want to quickly touch, I don't know if you framed it completely, but on tariffs, I appreciate the commentary changes by the day, but is there anything you can just help size impact potentially from Mexico-based tariffs? Thank you.

Question: John Stansel - JPMorgan Chase & Co - Analyst : Great. And if I can just slide one more in. The -- looks like SG&A is roughly flat as a percent of sales for '25 based on the guidance (inaudible) with gross margins and adjusted EBITDA kind of stepping up relatively proportionately. Is there anything you should call out about how you're thinking about investment and kind of your SG&A spend for next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 28, 2025 / 1:30PM, OMI.N - Q4 2024 Owens & Minor Inc Earnings Call

Question: Daniel Grosslight - Citigroup Inc - Analyst : Hi, sorry about that. Thanks for taking the question, guys. Just a high-level one on the P&HS sale process, completely yet that you're redeploying capital to higher margin, higher growth of Patient Direct. But I'm curious why now is the right time to do this? And then as we think about a few years down the line, are you going to be 100% dedicated to Patient Direct or are there other areas you may look to deploy capital into? Thank you.

Question: Daniel Grosslight - Citigroup Inc - Analyst : And then as you think about kind of where do you deploy capital next more so in the medium term, will you be dedicated 100% to Patient Direct or are you thinking about other areas of potentially getting into?

Question: Daniel Grosslight - Citigroup Inc - Analyst : Got it. Okay. And then on your commentary around the $50 million of cost synergy from the Rotech deal being conservative in year three. I'm curious if there's going to be any pull forward of that to years one and two? And if there's any change in how you're thinking about accretion from REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 28, 2025 / 1:30PM, OMI.N - Q4 2024 Owens & Minor Inc Earnings Call the deal in year one and year two, I think previously you said it was neutral in year one and $0.15 accretive in year two. Any changes in how you're thinking about that?

Question: Daniel Grosslight - Citigroup Inc - Analyst : Got it. Thank you.

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : Thanks very much. First one on the Apria capitated contract. John, I heard you say that you don't expect it to have an overly material impact on 2025. So my question is, is that because the pricing change happens later in the year, so it's more of a '26 impact or just that the pricing change anticipated or maybe it's already in effect is just not that material in aggregate? I'm just hoping to get more details on that as well as any discussion you can provide on the size of that contract or how much capitated revenue you have Patient Direct today overall, what the mix is?

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : Fair enough. And then on the two segments for 2025 continuing ops guidance here. Can you give us any framework on what you're thinking for top line and EBITDA performance across the two segments? Any loose ballpark on gross margin profile.

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : And I know the way you treat LIFO charges and credit has an impact on your reported EBITDA. I think what was, a $10 million credit this quarter, if I'm remembering? Sorry, I'm talking --

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : Okay, can I keep going?

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : All right. Sorry, apologies to the others. Would you be willing to share last 12-month adjusted EBITDA in the P&HS segment? I mean we've tried to ballpark an estimate, but there are clearly some uncertainties between what's reported in your filings versus what you give in your press releases and allocations of certain expenses, et cetera. So I'm just curious if you could give us your framework of what LTM EBITDA was in P&HS?

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : Great. Okay. And -- yeah, that's about in line. And then last one for me for now is you willing to talk about how your debt financing roadshow went, what you're anticipating for debt cost on Rotech? Has that changed from the expectations that were set in what was it July of last year?

Question: Eric Coldwell - Robert W. Baird & Co Inc - Analyst : Okay, thanks very much guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 28, 2025 / 1:30PM, OMI.N - Q4 2024 Owens & Minor Inc Earnings Call

Question: Allen Lutz - BofA Securities Inc - Analyst : Good morning and thanks for taking the questions. John, you mentioned some encouraging signs in the fourth quarter around NIV and oxygen. Can you unpack that a little bit? What are you seeing or what did you see in 4Q, early in 2025? And what needs to happen to get those categories back to growth?

Question: Allen Lutz - BofA Securities Inc - Analyst : Thanks for that. And then last question for me. Lower glove pricing has obviously been a focal point over the past few years. I guess where are we in that cycle today? And what's embedded in the guide for glove pricing in 2025? Thanks.

Question: Allen Lutz - BofA Securities Inc - Analyst : Thanks, Ed. I appreciate it.