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OMI Owens & Minor

Participants
Chandrika Nigam Director, Investor Relations
Ed Pesicka President and Chief Executive Officer
Andy Long Executive Vice President and Chief Financial Officer
Michael Cherny Bank of America
Daniel Grosslight Citi
Jailendra Singh Credit Suisse
Robert Jones Goldman Sachs
Eric Coldwell Baird
Kevin Caliendo UBS
Michael Minchak JPMorgan
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the Owens & Minor First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to your first speaker today to Chandrika Nigam, Director, Investor Relations. Ms. Nigam, you may begin.

Chandrika Nigam

operator. you, Thank welcome earnings and & first Minor Hello, to XXXX call. quarter everyone Owens

statements included Please in to to outlook our on be ongoing your in than Our certain statements, from and posted today uncertainties. I Harbor results this All call are statements to qualify outlook made note These the comments Securities anticipated made on the regarding on will statements historical statements to of all attention forward-looking on first like are COVID-XX and and press Safe Litigation which of this for the the and XXXX, other for focused liability quarter also Reform include release. are call XXXX, statements website established to our to response Investor XXXX are risks section. pandemic financial our intended Relations the facts financial our for supplemental which forward-looking that by today’s call of our forward-looking performance. the would are call slides related of statements subject Act on operational Private XXXX.

on made are on such represent available management’s this current based time expectations statements at and the made. call information are statements Forward-looking

or of explained or risks, to SEC forward-looking its Stock by involve any company numerous has the results Except assumed as and disclaims and known intent the Annual the on law XX-K any the XX-Q. and reports statements. section Forward-looking company expressly or actual quarterly statements on that risks its forward-looking of the The some by of and uncertainties Exchange, implied Form cause any obligation from uncertainties factors New listing rules predicted, filings, Factors results update Report Risk including York our unknown guided Form statements. may other to these materially in differ

our Officer most on XX-K. call comparable Chief I discussion our will and and Executive these and included are GAAP am by measures financial to the like Andy in our Annual off. reconciliations the and financial reference press will Form start turn today, Report measures Ed, Chief Pesicka, Today, in information about our to Ed measures Additionally, we release I certain things non-GAAP Vice joined who Long, President President to Financial over Officer. would Executive and now and Ed? our

Ed Pesicka

I Thank appreciate the time everyone. you join the you, to Good Chandrika. us today. taking morning, call on

As continuing here year COVID-XX. in we COVID-XX I of reflect are to on were today & what had ago, still Minor, from the we a are battle impact pandemic But we us. back for the unsure Owens of call we store At and customers incredibly that role that we serve the so played have soon this to small is be needs. It will beyond behind proud play that us our their pandemic hope continue we in it that of will our battle. can

team very be guidance first while clear a going the strong time year. teammates, of and battle. it like foundation XXXX. we start do. quarter, which perspective, for our it until to to record should would for some what has say built on full enabled in & in am momentum the Minor to to in more maybe us normal strong with And earnings to includes the along all that we of certainly all dedication, commitment XXXX, deliver again return deliver I a This we thank we start pattern, From raised are our a to our pleased Owens meantime, winning workers frontline stepped the the solid Owens along I However, with their continuation and utilization up with XXXX. this business the a & also sacrifice the Minor

investments, long-term the with discipline core business, perform are or as our level of the customers, our and continue In business profitable sustained the And of designed and investments ingrained culture, said to whether working shareholders. foundation Minor in the drive excellence to have in the customer-centric and will we focus is provide continues The And to all we to our growth. our blueprint operational commitments suppliers, we consists I delivering The on values long-term. teammates which blueprint for at our the highest to culture our as past, Owens pay do, our fact, off. business have and constant in everything & success. on

the the should the that better expect investments with pursuit of across business stay requirements expectations everyday. of a and nonstop operational following: infrastructure excellence get You customer of regular all the to ahead cadence lines we

it’s year, business. reinvesting with early the the are in we underway in still Although well

examples. our best. for a Fifth, and expand cost technology in like invest to in existing capability few to one broader have products begun Owens Four, less and into gloves we Minor. different ensure product external as expanding a on are and own end have & as factory leveraging to our strength our portfolio Two, a to nitrile more offerings relying we we us developing myOM we verticals improved control and just are are Three, allowing new Here One across manufacturing our result, equity. structure brand are to into continue selling businesses greater QSight amongst our partners. we are the and manufacturing sell markets. manufacturing

usable, across our Our scaling and a into customers while are needs touch data that provide that ability flexible, technologies than best we and the able distribution network. be also to investing rather solution. force while finally, both managing We blend chain. meet timely with supply customers unscalable customers And and is with them the particular quickly do so technology provide important to assisting and our cookie-cutter this with our we of their are customers’ to reliable, our

the for reinvesting We to business profitable again but the year, will be throughout growth. are we sharing examples in more long-term committed

me let first quarter. bit a Now, dive the into

and playing begin out. carry would the year XXXX that is momentum would better quarter fourth fourth XXXX the great quarter, told which you to and ended call, certainly During prior is start with strong into of year quarter we is XXXX than It first see the rare. like the earnings the the that much

quarter However, very the of PPE. optimize segments, our level a Starting to production performance high to meet is Global the This strong continuing we businesses efficiency. continue of to result distribution that been Global within missing a elevated translated for as operational our cylinders. very the strong best-in-class Products Products continues we all shows of in Solutions our with excellence resilience operate first demonstrated all continue years. into recent again segment, demand service to ongoing our and had operating income hit to on And medical the business provide Global and at

business outlook e-commerce and this to stable expansion. as continue And the improving to for and procedures Byram of customer elective to our improve. With result a base, strong nicely patient investments expected execution, portfolio direct our business again, into combined operational growth grow continue once with is

this be positioned We to business very due an of continue being part and excited extremely attractive to well healthcare.

In invest $XX reducing note billion, first that addition quarter below the and debt sheet to balance XXXX. proud the ended level and a off operations, million to quarter, $X us of are that we it’s grow. one to our in the lowest another since important we paid with debt, flexibility to In we provides the that

that profile our first platform significantly Xx gives below for improved, a growth. to comfortably recapitalization financial during led which has us the credit and is leverage quarter Our the

and pre-pandemic extent levels. the including the of procedures, traction of business. key Byram the rest towards the out to pipeline to demand, line and year, return elective procedures PPE elective elective patient believe less months This Related sight focusing our we outlook, and continue had opportunity consistent gain is turning will few to a on direct the good to customers’ factors, several remains with expectations Now, procedures, clear. timing normalcy our of but expectation of

QX. a elective throughout increase in this with procedure to momentum and see as quarter, continuing point, However, data March first we the an continued acceleration activity into

its towards continue and to the a we believe normal way work PPE moderate back on. new year as will demand goes will pricing Next,

the very demand but government engaged peak to be today, pre-pandemic will future strong. below the industry supply. products with and the levels. above We Also, and believe PPE PPE demand Although for ultimately manufacturing long-term remain we of the remains levels, well address still

continue manufacturing for capability advantage American North and will distinct a owned be largely Our operated to us. resources and

business, As we how medical distribution about we we are like positioned. our think

$XXX stellar this our opportunity resulted management to start customers. And continuation performance prospective larger year strategy will our year. and Within record our well first and us of been of the and as how with per regularly current new and of Our allowed The reimbursement direct be new I recent capture, of adjusted cycle with never of result share value EBITDA annual pipeline of witnessed an and has a range adjusted outlook and another execution to for the lead our couldn’t $X.XX faster and strategy patient provide strong million growing and the for our for I million. resonates quarter. execution finally, happy revenue recurring outlook The range in $X.XX guidance has breadth to earnings a healthcare, to to of operational good of patient business. part $XXX offering

suppliers talked to our we based on to operational business the blueprint strategic This all serve system, business including and Minor years culture, us Owens best Owens stakeholders, As our for before, is focused provide & I everything of shareholders. to and and teammates, customers, on excellence about have many the value investment. do Minor & on enables based come

will and to shedding why Andy believe the on call our of Thank later be this see results. I excited our so I for discussion We now, And of you a month about more Andy? all at Day our are you. light financial over will will this Investor turn we future.

Andy Long

and our results I good will for and rest of financial discuss Today, expectations and key assumptions review will the quarter XXXX. drivers and performance our our Ed you, for Thank everyone. the I first quarterly then morning

in guidance, and the announced adjusted per of We into as my compared revised top and billion quarter, to the outlook a occurred good elaborate $X.XX was million share. adjusted year to Global as income pleased to today, our I we with remainder that quarter today. year exited Beginning million the for $X.X increased segment remarks full been in $X.X XX% year. carried in for QX. our full growth of report on all achieved per projection the these prior EBITDA will we the Earlier our the momentum $X.XX first we earnings current growth strong based first which represents revenue Products are has billion primarily share of This to $XXX net QX line, our to on revenue that year. for $XXX with

to there QX, acquisition discussed, previously through, higher As as a we particular cost and glove lift but nitrile that quarter, $XXX we remind the in price due to this expected glove to impact Also, are over higher earnings be I changes positive revenue. will impact resulting in is costs year. In on largely of and million timing higher relative P&L. negative guided a to see the line And costs last quarter, was this could due any passed or experienced have have dynamic. want you the hit continue last being revenue to time, when bottom approximately minimal of to

cost raised these to the of have revenue expected million We year. for $XXX million the $XXX impact to the pass-through of increases

of comprised Distribution, fund first lines, of of gross to business quarter with margin ongoing over first year. glove support my to investments to resulting gains, a across selling structure. lower improvements resulted in of favorable from Global of the expense the pass-through Products, was quarter with million, efficiency. $XXX in gains. or across The coupled year. deployment, and productivity $XX strong QX adjusted This Adjusted $XXX result effective $X.XX $XXX our disciplined in quarter quarter elaborate compared due the to million execution debt from our represents remarks. as I for operating Products sales coupled strength a and continued was first first $XXX over fivefold approach strong mix the foreign timing million with the operations in in Interest net continuing higher year-over-year. prior $X.XX. million than all first $XXX EPS period million million, of revenue XX% quarter quarter well reduction same prior interest combination XX%, by in the capital which capital to lower top to of costs the in the or the of this business than later and of year. quarter our the the year growth $XX higher to $XX as was the down in forty-fold was currency productivity XXX from $XX will to Turning due expense income improvement million yielded basis prior for compared line of of favorable improvement rates segment and improvement was current income operating Adjusted an administrative was $XXX XXXX increase the to the million was compared of as for or year-over-year EBITDA share. quarter the growth was improved Global points which On GAAP margin, income a more basis, Xx in for higher $X.XX of impact favorable last an almost quarter million, a was quarter million the adjusted The on net of

equity the the prior million offering the Additionally, the more as shares quarter were fourth EPS in result in calculation quarter. from a XXXX it’s important there of than year to first remember XX.X that

results for line business, X quarter. $X.XX segment saw of of the review first selling higher fewer along the The year-over-year essentially was negatively Solutions with distribution. having flat segment quarter. direct in at our through impacted Now continued in as top medical Global day result Revenue I’ll a year-over-year sales was billion. by patient revenue growth PPE

to volume as Additionally, exited we quarter. the improve procedures elective with began associated

in was XX.X% million, to medical efficiency our $X.X business. million in operating year year. back cost Solutions we increase of it productivity base result was stable an on slightly our still distribution the of as last were However, of behind and where gains compared of first QX largely last income of quarter the a in Global $X.X

resulting Operating $XX increase attributable Turning Global fixed expansion, prior the to capacity significant lower of expense to by the an in $XXX versus higher was previously of productivity and cost favorable by discussed eightfold favorable first timing compared gloves, Products of million, segment $XXX quarter. leverage revenue the improved net product Global from in our including mix, in was impact million higher Products first for quarter nearly the impact $XXX million prices, year’s which an PPE, procedures. increase million the slightly last revenue to is operating increase The on pass-through of segment, year, discipline. was electric PPE XX.X%, initiatives, offset cost glove driven income growth

currency favorable Foreign impact year-over-year million. was basis by a $X on

generated structure. primarily cash than focus the due $XX levels Now the was our sheet business. period In flow, and $XX let’s which turn same quarter, of cash to million to capital lower the the balance capital year, of higher operating we to flow, in last million working support growth

XXXX. maturity flexibility our These financial $XXX as amending $XXX the milestone notes During million our by until senior facility XXXX additional successfully new of and another quarter, financing in provide we X-year million maturities a entering into our strategic issuing X-year lower our million receivable revolving in actions while liquidity $XXX accounts enhances that achieved facility. and cost unsecured credit operational and strategy as securitization well due with debt no extending profile

structure focus X agencies end upgraded leverage further significantly the quarter of million, profile we to million resulted capital credit associated EBITDA. and credit expect on improved were has top the the end. debt despite debt $XXX load quarter during by a continued like lower well Our total at was line Accordingly, maintain all and versus to the in of first our with note I’d enhancing ratings. We able Xx during growth, the year. our first reduction $XX the upgrades working below year were that capital requirements

invest are by positioned to growth across well continuing very strategy businesses. our our financially to We execute

the third visibility our for into the as earlier upwards quarter for revised year, improved. this guidance to guidance Turning our we morning, XXXX

$X.XX the share, range per EBITDA of adjusted EPS guidance $X.XX to range in $XXX is adjusted revised is guidance and million to now $XXX the of million. in Our

visibility Let into me quarter. market have now driven be of PPE our of third improved billion, walk now will range you We $X.X developing the to went through We to billion revenue guidance. several the by the assumptions $XX factors. in into that expect the which be

levels levels than to higher the timing yet protocols volume PPE is what post-pandemic post-COVID to care experienced and in the pandemic we peak regulations, health pre in the we uncertain, changes during continue lower normalize practices While to expect due than industry. at

achieve capacity PPE our year, to financial our manufacturing announced is Our utilization expected during capacity results begin recently the and recently to QX half the of expansion full contributing in early installed year. glove first next should of

Continued offerings, second demand the forecast. BXB strong exceed could be Byram, our investments in expect to levels year, and continued pent-up as upside for return strength there levels, and procedures to during to pre-pandemic patient and elective business our our our of pre-pandemic direct half the should benefits to BXC a we of of result improve electives the to growth

it and adjusted the on will the million this million. could projection. to million be year, based result be downside expect price EBITDA, to $XXX range on $XX benefit for to expected the gloves million expect of year. our expense range the externally million the million $XXX range further full is glove debt EPS the We portion million $XXX between of to half. year guidance $XXX EPS increased declines market in XX $XX now we that of of from headwind in be these cost we for EPS the is increases be to pass-through lower is margin in recent reflecting expected and Starting timing have on of is Fluidity shares Gross in and to providing on expected XXXX. outstanding. expected Interest in our quarter, pass-through be the unexpected to guidance we costs levels the XX.X% to and debt gloves our adjusted cost in of rate of refinancing. XX.X% the Sudden our the source to second a for in

about calendarization earnings like you the Finally, to remind in of I would XXXX.

we see expect guided, previously pattern seasonal the earnings. As of don’t typical to

Please Specifically, on for that modeling we with to the be full section half earlier on assumptions weighted year. slides summarized expect these year the today Form X-K our towards posted adjusted first the to supplemental key the been EPS been have Investor website. have SEC of note Relations of and XXXX filed

enhancing several business we profile results the financial consistently last deliver the improved demonstrated ability financial have and challenging despite our environment. Over quarters, to our

that, make progress I are Thank the Operator? positioned session. Q&A call the continue well in and turn to we our And to strategic operator We future. goals, will the growth begin for the over back with to on you.

Operator

show first the Please go Bank comes our from I Michael Instructions] from [Operator of of question America. line Cherny ahead.

Michael Cherny

morning Good quarter. very solid and on congratulations another

I want future. as in So, just think on dive to have and commentary you this on you the about PPE

with questions, the and means? trying of and answer a of you whether of I future what of that like prospects state that now, might in conversations terms be, post-COVID many so And your but comfortable – Owens that this the some foresee So whatever & with look think, others how sell masks, you in gets both you are level? are well as about you all is having PPE pre-COVID think whatever does what it’s it being they are products the the world, customers you they in above you that telling to and gloves, used gowns, that Minor

Ed Pesicka

Ed. is this Mike, Okay.

today. for joining thanks thanks us question, So the for and

PPE believe place usage it utilization healthcare they is just in matter was things that are daily So, think remain those in expect for during problem amount to The this above PPE, amount is put they that reduced the hospital. of what our what of high has spend a is level. you infection drastically we and the that listening they other to and been to be are in solve year, again, place spread, hearing a protocols And of is they high we now thing telling a of customers. the us that couple changes they have at proven that pre-pandemic. no the of of doing significantly have protocols PPE And I where continues pandemic the time of do critical which significant are to

that. to using some to certain of now from customers to going In aspects shortage they certain that, say the they we get it had have are while disposable reusing – lasted, the have now me, more they because ability back that excuse away and more of that PPE getting were addition reusing

of It So, it’s that’s we was will and where stockpile lines. at slightly be to are building for – think it still was that’s part we the peak. in stockpiling them we because the going believe why is creating below stockpiles continuing think slightly than peak, drastically higher to we it that build be stockpiling lower that believe or going or – see we But is production are we why be in than it pre-pandemic. customers to reason idle we capacity our would

pandemic, there have be another the the So, provide them. that ability for products way, should we to

The continue field. once and other over or to for think with not whether industries, satisfied There long-term. are we about aspect adjacent is their it, this, if more – we move retail, the consumers. to Currently, is start healthcare you get customers product, that’s with beyond of non-healthcare that too. think the They to international verticals new opportunities us or our completely into PPE selling

Michael, if in validated infection. healthcare can you it are the Those constantly changed. as for place. you as it’s X changed It’s really the clinicians reduce drastically appropriately hospitals, of the anybody drastically. back and fact well think, the It’s to, use I hey, It entering that use protocols combination of protocols things. have the spread the PPE So

to those higher to to expect that’s be and it where we used expect than We continue, much be.

continue need to for medical-grade PPE. have the you think I

being that reused no reused. You longer have stuff was being

pre-pandemic healthcare to beyond to part expect we we of above what in well that us continue have want that’s the future. that’s use stuff emergency other – this medical-grade. they now authorization that markets, that demand And seeing. are that’s more expand You be for And to being into that, was opportunities removed levels why the

Michael Cherny

have company given you in How position think think this COVID, right the you the that you where into point window Global the given incremental that about time? have opportunities do do essentially, you portfolio? had the in those business other about your clients’ to in strong infrastructure, along your especially is value drive building just particular, versus could time. as especially how out about lines, think at And now And during you financial portfolio over Products sits

Ed Pesicka

– right. That’s are talk Investor exactly Really, drivers a going about one our on forward, to that’s virtual that us and bet. And you of exactly on to for we growth key lot May focus ignite that Day. XX going that’s Michael, the at that portfolio expansion.

multiple We the brands great have got in market.

Halyard. got have We We got MediChoice.

on have brands. going to forward. be to it’s that’s the going We portfolio product and with ability brands growth May much ignite that that But joining teaser drive to plan to Day, virtual Chris going leave where greater other And got our detail. the business, there, runs into is go our out broaden just please significant Lowery, Investor to move who in XX this at us

Michael Cherny

the for Thanks Yes. questions.

Operator

of line our from go Grosslight from the comes Citi. Please you. next ahead. show I question Daniel Thank

Daniel Grosslight

anticipating. the for guys. basis Hi, on much are margins continued here. and up Street better come we continued around and momentum Product Thanks than The taking sequentially. question XXX in points congrats It’s the to

ended year You last curious finer a as much And should point we if mentioned the products mismatch about margin? of quarter, you in the margin where cost price you outperformance How we run year, some rest the drivers think was about quarter? glove rate was I closer think this this particulars to to the that could of due but put this outperformance on there. that of of

Ed Pesicka

start, at let will end. Andy then will the I color and Great. add I Sure. some

Andy Long

Daniel. morning Good

I very, of talked about, that were margin saw full more lot So of put have basis yes, PPE into continuation of investments strong the of QX margins QX of year capacity the we and line up as over very going approach utilization prior the of in we And momentum that we this with quarter where of that terms XXX in our of points into in performance, expansion. the place overall as is, from gross coming terms out a a sequentially we bottom QX. we think gross

quarter business. the quarter, cost you continuing So, are the the this of the is get from the we leverage the come in in we as manufacturers our we to where benefits first gloves change from efficiencies and have – have products manufacture is passed the don’t actually internally. to through fixed impact the us the do where and that in started in being to costs we the another of dynamic see through that really glove quarter piece out, that pointed volume the are purchase the And

And quicker than is changes market much changes. their inventory. dynamic and the there be way then price take so Remember, changes the in they changes can to market can effect cost the that overseas delivery cost – price take of the because through times the have the work time

effect. delayed a is there So,

our full guidance those of margin So, year, the the cost timing the of point that to to key first the year the looking long-term, reflects half the all, pass-through really will that on gross even year. I would in And are X benefit that of second factors contributing you for the sequential margin glove range. really gross improvement. out And fact mid-XX% in the then

kind be provided. that more view, long-term of think towards the guidance looking of I that we that would So,

Ed Pesicka

And And also. for comments are the first, thanks Daniel, those I call add on will joining X today spot us – on.

we You to produce and that year manufacturing projections how as more continuing margin system progresses, efficient talked as simple through more that fix it of get to have in continuing push coming to – this, really get as make that we ways the you I leverage lines, additional timing But the shines are for are as our full have the think can. really about when well there leveraged other also as amount the to we it. Owens on we out we have our balance the cost the that factories, much be And will productive have obviously, To of our find and we efficiencies. amount disclosed. we to day, as operating is as quarter we drive better and we in is whether the Frankly, to continuing and side volume gloves products every off learn the year about & PPE. continuous and possibly first products that think Minor our through the business that I of improvement. single

Daniel Grosslight

it. Got

capital Okay. capital thinking the capital your the your in are versus business? and investing How investment this for and you increase the in deployment you on about a repurchase mentioned business priorities, you pay-down year on And working of continued then those next. versus of in philosophy are share inventory. Curious deployment that priorities dividend debt in outside

Ed Pesicka

want to business, investment outside investment. in capital and then about at talk deployment I least will a Yes. the little bit the the we cover

I what’s not are think, get understand we important continues is to to going the caught do as to is what market adjust. flat-footed Daniel,

were March, up. operational as be to because and we there anticipated expertise procedures to did operational start that clear. we in we inventory that. March. in deliver the well accelerated inventory to have right elective the at and right We they the ramp end to able And exactly invested back investments sure as So, in They really that’s what we made on

partnership, put long-term and that build to customer trust key long-term a continues the priority profitable as to growth for provide because business. we So, that continues

about to we capital of way the this will it side investment going lot, we a On I the about deployment – talked capital approach. disciplined has is obviously, it, Andy think a are think have

primary to long-term to it dividend, tremendous are have opportunities we think opportunities are I there to way the we to more levels. about couple the within focus. forward. long-term that related me And of a for business. debt comments see turn add we and right can provide to growth believe we maybe going be to going And debt on let to We at how amount that that, of now, our profitable over that’s leverage invest invest growth focus progress, our it going Andy high think profitable on With

Andy Long

Yes, absolutely. you, Thank Ed.

I very So had and – said, in I process and deployment our terms with strategy as of, agree capital disciplined Ed. being

we P&L, in itself reinvesting business will the our the you in and think did operating see priorities increase hitting business, the as both in you quarter, notice the in will I the manifests on well in as for guidance are that if year. through investments expenditures expense the operating, capital that

both flow business and do generated the plan think make have continue will to expand the be looking will to on in sheet. improvements the to cash cash left that flow investments ample – have And over seen fronts. funds I business our being fund that’s have to the still those our balance investments we So, long-term, with in we

be at short-term that long very are that range to of Xx in frankly, end still the to range, leverage is the realistic and targeting and We being lower in quite term. Xx

Daniel Grosslight

it. Got guys. Thanks

Operator

the line show Credit I Please you. next Thank Singh Jailendra from of ahead. Suisse. comes question from go our

Jailendra Singh

And drove revenues to of of that decline that some business in cost glove you in the year-over-year, X% Thank understand quarter. good want you Can flat on actually sequentially pass-through, Global factors down for in I morning. good excluding Congrats at revenue in trends a but and sequential rest that quarter provide the impact coming of grow Solutions you to the business? the expect better do sequentially. XXXX?

Ed Pesicka

the Jailendra, is us on Thanks So call. this for Ed. joining

direct So that made foremost, negatively day X was year. of Byram versus year were I medical patient It’s our both last QX less businesses affected up QX business, and so billing distribution this items. business, think in X by and and our our of business those first really

the that impacts one So, it. was on of

it’s the have based If you days, days, quarter think you about less you billing less it, in less if consumer business, revenue. a have

to – net there medical new that should is continue with business, of look a to wins. at seeing that clear think – business the in I to expectation, grow. business That say and lot are sitting be we when there we a already, that for that are I distribution, business continue We that ways. able business

net many we new got implement. So to that wins those beginning aside, are the end We implement to QX. started we of have PPE at of

ability In to earlier, on that, haven’t are well sure that to have elective capitalize in addition talked as like I to March, I make the to procedures reality just continue X you this, are the The spoke X months to expect of ready I year. more for our probably we the to starting they where procedures we positioned to through continue ramp, we medical that to And ramp are have been elective greater to it’s that months about start seen and serve. we capture do, opportunity wins. X us capture opportunities then have those. it in distribution implement here. is start any you to but of years takes my been to There is pipeline new until and our in that though than on those

So, those would be late as in possible. year the

in you in when have so with that customers our contracts that risk continue that we renew advance way, to it’s expiration, the of to don’t out there. addition In work Global to Solutions,

direct our at relationships look our them. business patient what continue it, do of we part to with broaden our we for you existing and that’s customers grow If

we new expand opportunities into that entering our currently support. existing various are We in relationships chronic conditions market to

patient we pursuit to that, invested addition under-penetrated in have in our areas. growth in organic business of direct In

So, had first you why And again as we quarter be of and day result X the think really it. expect a look the at strengthen year to progresses. to slight those less it that is year-over-year continue – a are reasons segment impact if I again, on all the this strong billing year-over-year,

Jailendra Singh

is I can Actually, further And your direct much a talk patient be kind the are in of Can focused outperformance and that Byram drive what comments you that of business? there how drivers more maybe some key sustainable? you growth Yes. like on about to follow-up have specific, are initiatives driving around business?

Ed Pesicka

Yes.

before. couple briefly I of, on I just So cover just will a which touched

have in did already in are we call organization at under-penetrated. there So, in payers. the new commercial those we were, and we pockets share an U.S. U.S. with looked we where different where recognize capture to areas across our resources commercial we it, invested And some we – relationships parts the actually did analysis of the we were And

investment. of example a one that’s So, simple

our be growing you Another is seeing that chronic a of products – brought fastest then an one an growth. And and where insured able to fast and And the diabetes, new significant we to line ability contracts It at existing can pace. that in is to category to in just going strong look that of going at you very the presence is have line it’s to as a XX% health. pandemic proven that the also within level, to we grow has grows we driving of grow. a The lastly, expansion in thing with one relationships, from with we think it’s diabetes, presence macro the was we to have home and continue then is home we Jailendra, – ability And here in. are more a that – believe Americans believe additional there we was it that areas of we impact grow. on because health stay. were that’s healthcare about And our

Jailendra Singh

to are growth in still And last and you EPS quick growth here, half half growth half color decline comfortable are XXXX? double-digit you indicating Maybe from year seems compared next year, run there? this the sequential one the with EPS the imply Okay. one Because which to would just guidance much double-digit rate. with higher in to second first second quick the provide imply,

Ed Pesicka

Yes.

later in and XXXX happen the disclosed haven’t yet, that guidance will We year.

Jailendra Singh

Okay. Thank you.

Operator

next question from Sachs. comes Please you. from of I Jones Thank our Robert the go line ahead. Goldman show

Robert Jones

sight posted some of you the to but line peak that. the about you think was I you you back interested of expecting question. of over regarding ahead beyond we it quarter? to point bit couldn’t sounded those a Good behind how to And comments. help, levels. sight detail notice Obviously, in improved levels guidance part obviously little challenging, Are It the few morning. balance PPE go at seeing just but guess, PPE mentioned maybe things XXXX? you in peak taking volumes times window relative Ed, today pandemic to the some this like results more a obviously raise. this that around Could trend of share at the rationale the Thanks normalizing a are as for line of is

Ed Pesicka

right think are are peak where Yes. about we as we would say I a that now, probably if at level. I company,

of gloves. running are machines – Our outside

So, let conversation. me separate this gloves in

is of are is the the own – still investments think why all we with us still we have the So manufacture companies at continues we strong we running capacity, made, And one other it product. think demand. of we what’s that are this our few aspect actually I

one companies are We that scale. the manufacture of few on

companies We the one of are of based portfolio few line that the suite PPE. entire manufacture broad of

to work So NXX, we become for location one smaller can you get provide all product needed having with come or so those to XX the important can XX all that’s of and manufacturers. because fit tested different versus

worked because why support with some peak customers see support something at our term plus with we’ve and think the longer of work of ourselves extending we that the all – the the extended for period pandemic. that’s an relationships time, we provided of during all I them we

say So is no manufacturing. our I that’s critical. The area one would glove one

a So we talked last in quarter doing investment Thailand factory to that are gloves. our we in significant our expand

continuing a investment too. employee our In enhance part we’re workspace, to is addition, of doing we’re that

constraints, setting So that there demands. to still manufacturing where area own really one is growth and fill some help the of the for those That’s of up of we’re our it ability gloves. gives us

peak. space not PPE So still that’s at that is And I see gloves forward. would going how its say we that

Robert Jones

Day probably Analyst helpful. will big sheet question, the a we as and feeling And for I prepared you I Andy balance improving this. clearly, and one that’s has No, the discussed But wait on picture the guess have for a big just maybe been in remarks. more focus,

within trend you normalized and recover, peak that as but investment, you distribution thinking As you the historical when operate you you that it would really imagine, two the And below stool? is adding think deployment businesses a like about obviously level think the the Or Do today? then more you obviously, recovers. leg side. currently industry third are where think PPE on that to about utilization about and capital above and will about

Ed Pesicka

Yes.

going of a with that deployment, to strategy take be to we’re are will investments into in cover period holding if a then into of we until it in. to would invest it let’s hold May it going I our where XX, talk But are it starting but but We we more May detail us going what M&A here, businesses because to when can to little investing. we prefer get our as long as well time, about on think XX I capital

Robert Jones

fair. That’s

to it. forward Ed. Looking Thanks,

Ed Pesicka

Yes.

Operator

question Thank line you. Baird. Please from next go Coldwell comes show Eric our ahead. the from I of

Eric Coldwell

quickly you cash see just phasing quarter influences hoping of could a the flow hit the I the through morning. I And on follow-ups. then how couple cash year? Thanks. flow, Good have was you in and Thanks.

Ed Pesicka

let Shall one. take Andy that

Andy Long

Eric. good Yes, morning,

and foremost, this million, So first time, factors flow, in we than were at I’d driving investment. flow cash flow about that last say, And generated is and quarter yes, year lower is that cash as capital probably, working and at $XX cash number there was a we lower of look the figure. really where

continuing So invest with working we’re to in the capital. in business, growth

news I is that we we accounts is, expected. to as line performing wanted think good be. with are the Days receivable where is in

aging a is is customer Inventory available, new want consuming tick maintain is elective sure We wins. service pick were of to ready that’s very up. advance in in That’s inventory they inventories it. proactive, right? is Our profile in we inventory And procedures put when for meaningful to up, to make should did again, talked But cash. want want that levels. investment We We good. up. about,

happening investment. and for So when say drain that, I’d is purposeful is, not key you of get gloves. back driver nice historically, that’s us. probably really we’re comes the on working a very up, a it payable. inventory And that’s accounts in all offset to capital intended – your And

impact glove a have influence manufacturers, they third-party Asia, the talked influence You’ve they the terms. on also But in that that seen have payment had manufacturers of lot. we’ve the pricing, on about

the manufacturers. United the the West The caused into of capital. get we’re in bit of some cases, that’s a been the so fact in, we’re getting the combination product drain that cycle to as has ports accelerating what then has Coast backups little is with the the glove to Eric, working payments, longer two, delayed the time to cash led seeing delay. seeing So cycle product States times. caused we’re And a And really on that’s a that in collection

the certainly and quarter. over out the factor big out in we work that through year, move expect to but improve we time, that again, even played first and as Now a

another Just gloves. comment to on cash unrelated that’s flow

also increase note that capital did to tail-end-loaded. capital expenditures, that be on while we our will Just investment, very guidance

the $XX $XX guidance million our in So the for year. to million is

less I the $X spent in million $X think first or quarter. we million than

the So year. of in second a expect half that the to have drain

Eric Coldwell

That’s Thanks answer. for that. a great

don’t Global the be actual want to do finer little to Products in to I the actual margin neutral or very would one I see nitrile We The to helpful expected if on profit if the had think pressure gloves of influence it just on QX. dollar remaining influence other maybe helpful timing profit understand increase putting everyone. would more is you that actually know but in would to net that, quantify in of you be terms the operating was the or to point I impact of the over little a realize on the however, percent be, all time. quarter. But that

Andy Long

Sure, Eric.

guess the full guidance points impact be the impact. to top $XXX of $XXX and line I to tried that million the quarter the year would the $XXX again, to we’ve I So the million million, two on data would the point of in that provide you

segment Products just while our to change of the terms margin many pull-through So any really of that’s drivers I disclosed saw in would point that the the turn we in margins, is one one we to sequentially. looking that Global And at profit XX% QX of QX, haven’t point. data the gross the probably improvement, sequential from

over up catches that price we total in those the And to a in quantify you’re So But data of year that that half as long-term, that long normalize, prices period as become the tailwind point be to headwind we impact that the and that, expect the correct over help the period, impact. second with absolutely cost expect increases. minimal. very be will another might costs

Ed Pesicka

with that we’re out extremely that, front confident half in through even versus new of put we And year, there. back comfortable that the and range our half the still year, balancing and

Eric Coldwell

great. No, that’s Yes.

somewhat to Global half absent assume have to this margin impact? similar would second been unreasonable ‘XX not So Products

Andy Long

I that’s I think reasonable. modeling for purposes, think

Eric Coldwell

appreciate it. I guys. much very Thanks Yes.

Operator

Thank UBS. Caliendo from ahead. of you. I show our next question comes go Kevin Please from the line

Kevin Caliendo

to to volumes? business basis basis? a the than the And some progression? is you talk a a increased quarter-by-quarter I one-time Thanks solutions course there for for similar just it modeling year of question. year-over-year. my I’m I trying margin saw Is there it, forward. the would know about affected absolute sort the about to expect of that we know think terms the of some improvement there to about should Thanks. this points improvements. bit other margin margin. we the You sort anything how nature operating Was of seasonality I what about we and said understand – think should year-over-year in year. going wanted improve talk over taking little how it on of the that to in

Andy Long

it’s again, for Kevin, you joining morning. Good today. thank us And Andy.

looking associated the payer, back through risk And invest business shifts the payer with that. payment again, normalizes the to you your then And yet year is, the the in of margins volume. easing the because with Global weighted an as line. you we business, we specifically you and it’s a slight drive our that’s mix Solutions of So, opposed towards payer. eases pandemic it the mix, as in particular, as and the key for payer, productivity. Solutions That’s towards element year, by the drop a volumes. seasonality drivers. the at the see see of patient the you collection met at there it mix is Also, – driven of see the corresponding direct to margin as change result seasonality into right? And in QX sequentially more get Byram individual deductibles. from the Global shift, looking and consumer their And also that’s And towards QX, key Again, and did drivers, that of historical more or the quarter change has the individual business. payer in reason one as is quarter to the and then appropriately you off a first the you move that or first so continue and volume see reserve So top on that sequentially the not in for that just QX

at to very those drive business, and think we perform in direct business. are that look dynamics at business that the distribution to look continues the as that and term, So strong I really that four again, patient sequentially. then business medical longer the drive continues solid margins that And

As we’ve we cost cost volumes So it’s business. the can leverage through fixed should leverage in said, really put business gain, that it’s that generate additional fixed that right? additional a

Ed Pesicka

in I’ll inventory not add and wins. to we a And ramp just I elective two, little some new of for working up; expense and about investments. comment bit one, only operating for it procedures also capital, just on some we invest those do And talked earlier, invest

implementations it all time. picked an had in the out execution implementation So put expense the and we of us saw we customers somebody of win, that they Owens new when the to everything up, – will was put needed. showed how in, make And in truck happened we three where and reach [indiscernible] were we had Minor wanted in make and of complimenting that did are expense on to to do only prepped, showed first advance we the thing next needed, did sure back the the stuff but actually up & was day, went those It flawless. us have the sure implementations they the we quarter, a they those – else’s, several product got accurately advance was so way, we we’ve the they flawless

that investments we in make those in So some did QX. will of advance, and we

Kevin Caliendo

to just think think quick that’s about over about talked think higher? about the versus over longer if impact rest sort great. and year. the in that lower? we a of the forward the that of But about impact similar it XQ it net gloves gloves going for term? And How the Is That’s that net is the we the follow-up, rest the how the PP&E? quarter so the of year, course normalizing going Is of you margin to net, pull-through saw this and expected we normalization should the normalize the we business, your of if

Andy Long

within or Global about have within really even talked We margin any of Yes. Products. profiles commentary categories within specific Global lines Products, or PPE product specifically, not on

Kevin Caliendo

your sort with of we’ve try PP&E. Is If the that what in kind of it it I’m I it out Not the it lower I’m of the so the Well, gloves to say pull-through expectation? your if we all glove But for PP&E is but business think margin and help be past the sort quarter, us rest would wondering seeing – kind – the it. been. than breakeven? what pull-through okay. can rest that business? rest of positive any back XX% was if to you the still done numbers, of of to this tried be to or into you’re on it’s you year, giving would think higher think just of to do figure the about is Like margin, of part margin PP&E think typical

Andy Long

described. I’d than side. here point out full knowing our to to Global really, to, Products pull-through QX Global would in Solutions say segment help only to just dynamic to guidance, the that’s is Global fluctuation year the attributable the that normal. QX the that Products the And we probably happen I to I thing opposed largely say would the gross going margin Yes. look And then in you would could as to was I big sequentially be higher

Ed Pesicka

been over balanced too. think time, out I it’s And all

Andy Long

periods dynamic of even that long Over out. time, should

Ed Pesicka

balancing light back and it half. our put that we’re extremely new that in still And in even the we confident of that, light even in range out comfortable of of out there, – in that’s

Kevin Caliendo

Appreciate much, Thanks No. That’s guys. it. helpful. so

Operator

ahead. you. And last of Minchak go comes from from Please the question, our line Thank JPMorgan. I Michael show

Michael Minchak

and Yes. for questions. taking thanks the morning Good

what talk begin in the you’re putting categories? respect aside dynamics prices levels? to you with seeing your understand just pandemic supply at guess there? see spot to Do still PPE to pre with could the play spot other respect go to dynamics are demand see relative assumptions gloves, trying And pricing can does I for the normalize, current So to about pricing to exam historical ultimately we elevated Just you better the once trends levels? where around market what unique relative

Ed Pesicka

Yes.

this pricing, tried we’ve coming We have, do our see the – fourth what we spot to we So with pricing below spot And out spot in our pandemic live going are spot based fourth by quarter through pricing, of relationships see be pricing, pricing contractual customers about are still talked spot but the from on we’re have adjusting fluid. continuing which we going quarter. is in because the processes, to about that contract we – peak versus and the pricing to whatever price. honor we down

go drastically. So gloves we did are We down. up them seeing come see

at usage outlier think and demand which us before. remain higher will the that out. to was see I probably think is than critical was be it for significant pricing, to throughput as profitable that. demand But and facilities. starting which to and it continue again, anticipate it we was gloves it pandemic the is what’s the And the we in higher we expect, on balance get PPE will We’re to But right exception post continue we pre to our to profitable would much much adjust before, business pandemic in than now, again, This go obviously, post pandemic pricing, be leverage enables manufacturing forward.

Michael Minchak

a relative around those And maybe and your question you I the maybe out impacts contract Can those to sort quick what renewals? how guess, talk renewals. about That’s of seen how helpful. in past you just see that GPO Got it. results, then you’ve around playing

Ed Pesicka

Yes.

That’s X-year a renewed recently Vizient. we renewal. So

Premier. relationships and key And GPOs, We’re two with Trust we’ve Health to them. with work continuing look, got other great

we help to strengthened all pandemic everything of that during did the members. we’ve I their relationship. think really We could

continue We move work expect with to to forward. them and

Michael Minchak

it. Got Thanks the for comments.

Operator

Thank you. turn session. to call back That like Pesicka, At the concludes time, Mr. our Q&A and CEO, President Ed closing for to I’d this over remarks.

Ed Pesicka

call everyone Well, thanking us joining today. first start the let for on by me

or May with, we’re into then that into And when side-by-side. X everyone Minor really future. forward. side-by-side remiss & over will have lot I – still to going of COVID-XX to to to by close the XX the pleased we we all the last effort I this of deeper hope cause ahead years this started, hopefully, hard way our had over out Let like of and me with that see continue have and done work see would XX, would the left teammates successful that Minor and QX and lastly, and last front to Owens privilege of they with a to dive a be workers possibly we May was the ignite go growth the which year not we the also And us fight who move to I to everyone who frontline us, and the year work thank the add support what could do to to really started done XX basically virtually the a & as QX a XX teammates thank but comment Owens close work amount lot I’ll how the in months year in do of expect everything be have battle. and adding we this,

So thank you.

Operator

Thank conference concludes call. participating. for you This today’s

disconnect. now may You