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STERIS(STE) - 2025 Q1 - Earnings Call Transcript
STESTERIS(STE)2024-08-07 15:27
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Financial Data and Key Metrics Changes - Total revenue growth for the quarter was 8%, with constant currency organic revenue growth of 6% driven by volume and a 270 basis points price increase [4] - Gross margin increased by 30 basis points to 45.1%, while EBIT margin decreased by 20 basis points to 22.3% due to increased compensation and higher insurance costs [4][5] - Net income for the quarter was 201.7million,andadjustedearningspershareincreasedby10201.7 million, and adjusted earnings per share increased by 10% to 2.03 [5] - Free cash flow for the quarter was 195.7million,impactedbythetimingofcapitalspending[5]BusinessLineDataandKeyMetricsChanges−Healthcareconstantcurrencyorganicrevenuegrewby5195.7 million, impacted by the timing of capital spending [5] Business Line Data and Key Metrics Changes - Healthcare constant currency organic revenue grew by 5%, driven by procedure volumes in the U.S. and market share gains [6] - Healthcare capital equipment revenue declined in the quarter but is expected to grow in the low single digits for the full fiscal year [6] - AST constant currency organic revenue grew by 8%, with strong performance in Europe MedTech [7] - Life Sciences constant currency organic revenue growth was 4%, driven by strong growth in consumables [7] Market Data and Key Metrics Changes - The company anticipates recurring revenue to continue growing above procedure volumes, independent of capital equipment shipments [6] - The divestiture of the CECS business impacted reported revenues, but the company remains confident in its growth outlook [7] Company Strategy and Development Direction - The company is reiterating its full-year outlook of 6% to 7% constant currency organic revenue growth and adjusted earnings per diluted share of 9.05 to 9.25[8]−Thefocusremainsonleveragingmarketsharegainsandenhancingserviceofferingstodrivegrowth[6][7]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedconfidenceintheabilitytodeliveronfull−yearguidance,citingpositivetrendsacrossallsegments[8]−Thecompanyismanaginginflationarypressures,particularlyinlaborcosts,andexpectsstabilityinstaffingandturnover[15][17]OtherImportantInformation−Thecompanyannouncedits19thconsecutiveyearofdividendincreases,raisingthequarterlydividendfrom9.25 [8] - The focus remains on leveraging market share gains and enhancing service offerings to drive growth [6][7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver on full-year guidance, citing positive trends across all segments [8] - The company is managing inflationary pressures, particularly in labor costs, and expects stability in staffing and turnover [15][17] Other Important Information - The company announced its 19th consecutive year of dividend increases, raising the quarterly dividend from 0.52 to 0.57[5]−A0.57 [5] - A 100 million restructuring plan was announced, primarily for the closure of a manufacturing facility, with benefits expected to materialize in fiscal year 2026 [33] Q&A Session Summary Question: How did the first quarter compare to internal expectations for Healthcare capital equipment? - Management indicated that results were in line with expectations, noting that Q1 is typically the slowest quarter for capital shipments [10] Question: What is driving the continued growth in services and consumables? - Management highlighted that most consumables are recurring in nature, driven by sustained growth in procedures, particularly in North America [11] Question: What are the expectations for operating margin expansion for FY 2025? - Management acknowledged increased compensation and insurance costs impacting margins but remains optimistic about achieving positive EBIT margin leverage for the full year [13] Question: What is the outlook for the Life Sciences business? - Management noted a slowdown in demand for capital products but emphasized strong growth in services and consumables, which are critical for income generation [17] Question: What are the assumptions for order growth this year? - Management expects mid-single-digit order growth and anticipates backlog to be around $350 million [27]