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OWENS & MINOR INC/VA/ (OMI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered modest top-line growth with consolidated revenue of $2.70B (+1.5% YoY), but GAAP results were dominated by a non-cash goodwill impairment tied to Apria; adjusted EPS was $0.55 while GAAP EPS was $(3.84) .
  • Management announced a potential sale of the Products & Healthcare Services (P&HS) segment and a $100M share repurchase authorization, positioning capital toward higher-growth Patient Direct and providing a near-term stock support catalyst .
  • 2025 guidance implies double-digit growth in adjusted EBITDA and adjusted EPS, with gross margin targeted at 20.75–21.25% and capex of $250–$270M, while debt reduction remains a priority; guidance excludes Rotech, P&HS divestiture, and buybacks .
  • Segment trends: Patient Direct grew 5% YoY but continued weakness in respiratory (NIV/oxygen) weighed; P&HS posted flat growth with medical distribution strength offset by lower glove pricing and IV fluid shortages impacting procedure volume .
  • Balance sheet execution continues: OMI reduced total debt by $244M in 2024 and $647M over two years; net debt at year-end fell to $1.80B, supporting flexibility for Rotech financing and deleveraging plans .

What Went Well and What Went Wrong

  • What Went Well

    • “We repaid $647 million of debt over the last two years” and remain committed to deleveraging; the year saw $244M debt reduction and $71M Q4 operating cash flow .
    • Patient Direct outpaced market growth mid-single-digit for the year and quarter; diabetes supplies were strong, and smaller categories achieved double-digit growth after added resources; ByramConnect digital platform was launched to enhance chronic care engagement .
    • 2025 outlook signals confidence: “double-digit adjusted EBITDA growth while improving cash flow,” with EBITDA $560–$590M and adjusted EPS $1.60–$1.85 .

  • What Went Wrong

    • Q4 GAAP results were hit by a $305M net-of-tax goodwill impairment in Apria, driven by market changes and anticipated pricing changes on a capitated contract; Q4 GAAP EPS of $(3.84) versus adjusted $0.55 highlights the magnitude .
    • P&HS margin pressure persisted: lower glove pricing and IV fluid shortages reduced procedure volumes and sales; P&HS segment operating margin was 1.29% in Q4 versus 1.67% last year .
    • Respiratory (NIV/oxygen) remained weak during 2024, though late-Q4 signs were encouraging; management needs execution to restore growth in these high-margin categories .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$2,671.0 $2,721.1 $2,696.1
Gross Profit ($USD Millions)$544.2 $559.7 $579.8
Gross Margin (%)20.4% (derived from )20.6% (derived from )21.5% (derived from )
DS&A ($USD Millions)$469.3 $469.8 $493.1
DS&A as % of Revenue17.6% (derived from )17.3% (derived from )18.3% (derived from )
Adjusted Operating Income ($USD Millions)$76.3 $84.2 $95.4
Adjusted EBITDA ($USD Millions)$126.8 $141.8 $138.2
GAAP EPS ($)$(0.42) $(0.17) $(3.84)
Adjusted EPS ($)$0.36 $0.42 $0.55
YoY ComparisonQ4 2023Q4 2024
Revenue ($USD Millions)$2,656.2 $2,696.1
Adjusted Operating Income ($USD Millions)$110.8 $95.4
Adjusted EBITDA ($USD Millions)$169.6 $138.2
GAAP EPS ($)$0.23 $(3.84)
Adjusted EPS ($)$0.69 $0.55

Segment Breakdown (Quarterly)

Segment MetricQ2 2024Q3 2024Q4 2024
P&HS Revenue ($USD Millions)$2,010.6 $2,034.3 $2,001.1
P&HS Operating Income ($USD Millions)$11.5 $4.2 $25.8
P&HS Operating Margin (%)0.57% 0.21% 1.29%
Patient Direct Revenue ($USD Millions)$660.4 $686.8 $695.0
Patient Direct Operating Income ($USD Millions)$64.8 $79.9 $69.6
Patient Direct Operating Margin (%)9.81% 11.64% 10.01%

KPIs and Cash/Leverage

KPIQ2 2024Q3 2024Q4 2024
Operating Cash Flow ($USD Millions)$116.1 $27.3 $71.0
Consolidated Capex ($USD Millions)$45.8 $61.5 $71.4
Total Debt ($USD Millions)$2,082.7 $1,885.0 $1,853.6
Net Debt ($USD Millions)$1,839.0 $1,839.5 $1,804.2

Estimates vs. Actuals

  • S&P Global consensus estimates for Q4 2024 were unavailable at the time of query; comparisons to estimates are not provided. Values would have been retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2024$10.5–$10.9 $10.6–$10.8 Narrowed range
Adjusted EBITDA ($M)FY 2024$550–$590 $540–$550 Lowered
Adjusted EPS ($)FY 2024$1.40–$1.70 $1.45–$1.55 Narrowed/higher low end
Revenue ($B)FY 2025N/A$10.85–$11.15 New
Adjusted EBITDA ($M)FY 2025N/A$560–$590 New
Adjusted EPS ($)FY 2025N/A$1.60–$1.85 New
Gross Margin (%)FY 2025N/A20.75–21.25 New
Interest Expense ($M)FY 2025N/A$138–$142 New
Adj. Effective Tax Rate (%)FY 2025N/A29.0–30.0 New
Diluted Shares (mm)FY 2025N/A~80 New
Gross Capex ($M)FY 2025N/A$250–$270 New
Share Repurchase AuthorizationN/AN/AUp to $100M over 24 months New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
AI/Technology initiativesIT systems conversion costs in exit/realignment IT strategic initiatives maintained Launched ByramConnect digital health coach for diabetes; continued tech investments Increasing digital engagement
Supply chain & product availabilityStable commodities; operational realignment Medical distribution strength; some LIFO charges IV fluid shortages impacted procedure volume and sales; $10M LIFO credit in Q4 Mixed; temporary headwinds
Tariffs/macroInflation assumptions in outlook Inflation and pricing pressure in P&HS Low exposure to Mexico tariffs (~1.5% of P&HS revenue); China glove tariffs less impactful to OMI Manageable exposure
Product performance (Patient Direct)Diabetes/sleep supplies growth; respiratory weakness Patient Direct up 6%; continued NIV/oxygen weakness Patient Direct +5% YoY; late-Q4 starts improved in NIV/oxygen Improving in 2025
Regulatory/legalOne-time $17M tax charge (NOPA) in Q2 Litigation charges in Apria Goodwill impairment at Apria; capitation contract repricing risk discussed Elevated in Q4
Strategic portfolio actionsRotech acquisition agreement announced Deleveraging and revised 2024 guidance Active sale process for P&HS; $100M buyback; Rotech closing expected H1 2025 Accelerating portfolio shift

Management Commentary

  • CEO Ed Pesicka: “We have been actively engaged in robust discussions regarding the potential sale of our Products & Healthcare Services segment” and remain “very bullish on the future of [Patient Direct]” given demographics and home treatment expansion .
  • CFO Jonathan Leon: “Adjusted net income for the quarter was $43 million or $0.55 per share… Adjusted EBITDA was $138 million… we recorded a $305 million net of tax goodwill impairment charge in the fourth quarter” .
  • Capital allocation tone: “Primary objective… continue to pay down debt… should the stock continue to be meaningfully undervalued we would be opportunistic [with buybacks]” .
  • Rotech synergies: “Our previously discussed cost synergy projections of $50 million in year 3 is conservative in both terms of value and time” .

Q&A Highlights

  • Rotech: No surprises vs the deal model; 75/25 legislation roll-off in 2024 affected reimbursement; synergy estimate likely higher and earlier than initially modeled .
  • Capital deployment: Debt reduction remains priority; $100M buyback used opportunistically given perceived undervaluation; cadence mindful of trading volume constraints .
  • Tariffs: Minimal Mexico exposure (~1.5% of P&HS revenue); majority of products not made in China, moderating tariff impact .
  • Respiratory trends: NIV/oxygen starts improved late-Q4; 2025 plan to regain growth in these high-margin categories .
  • LIFO: $10M credit in Q4; small charge expected in 2025 .
  • P&HS sale timing: Multiple inbound interests triggered a broader process; aim for transparent and expedited decision-making .

Estimates Context

  • Consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at the time of query; as a result, beat/miss analysis vs Wall Street estimates is not provided. Values would have been retrieved from S&P Global.

Key Takeaways for Investors

  • Portfolio inflection: A potential P&HS sale and Rotech integration would concentrate OMI in Patient Direct, a higher-growth, higher-margin platform that management expects to outgrow the market with digital engagement (ByramConnect) and therapy mix improvements .
  • 2025 setup: Guidance implies 10% adjusted EBITDA and ~13% adjusted EPS growth, with gross margin expansion and improved free cash flow; management targets ≥$200M for debt reduction in 2025 .
  • Near-term catalysts: Formal launch of P&HS sale process, $100M buyback authorization, and H1 2025 Rotech closing—each can drive stock narrative and rerating as visibility improves .
  • Execution watchpoints: Respiratory category recovery, containment of DS&A inflation, and managing capitation contract economics in Apria; IV fluid supply normalization should support P&HS volumes .
  • Non-GAAP vs GAAP: The goodwill impairment masks operational progress; adjusted metrics better reflect underlying performance, but sustained margin and FCF improvement need to show through 2025 .
  • Balance sheet discipline: With net debt at $1.80B and two-year debt reduction of $647M, OMI’s deleveraging path is credible; investors should monitor capital structure post-Rotech financing .
  • Trading implications: Headlines around portfolio actions and buybacks, plus quarterly confirmation of respiratory recovery and cash generation, are likely to be primary stock drivers in the near term .