Owens & Minor Reports Fourth Quarter and Full Year 2022 Financial Results

• Patient Direct Q4 revenue up 135%, or 10.3% on an adjusted basis for the Apria Acquisition

• 2022 full year operating cash flow of $325 million

• Operating Model Realignment Program expected to improve profitability & cash flow by approximately:

  • $30 million of Adjusted Operating Income in 2023

  • $200 million of Adjusted Operating Income by 2025

  • $250-$400 million of working capital benefit by 2025

RICHMOND, Va., February 28, 2023--(BUSINESS WIRE)--Owens & Minor, Inc. (NYSE-OMI) today reported financial results for the fourth quarter and the year ended December 31, 2022, as summarized in the table below.

"Our Patient Direct segment capped a fantastic year with another strong quarter, and I am pleased that our medical distribution division continues to perform well, retaining and winning new business. However, overall fourth-quarter results showed that we need to move quickly to offset volume decline, cost and pricing headwinds, particularly in our global products division. It is clear that our Company’s cost structure needs to be better aligned with the evolving market," said Edward A. Pesicka, President & Chief Executive Officer of Owens & Minor.

"We have initiated a company-wide Operating Model Realignment Program with a dedicated team to accelerate profit improvement and reduce costs. We expect this program to help us quickly and sustainably drive the performance and growth of the company by delivering approximately $30 million of Adjusted Operating Income in 2023, and approximately $200 million by 2025. We believe this program will enhance our strong quality of service to our customers, increase our margins, and allow us to more rapidly reduce debt and reinvest in higher-growth and more profitable opportunities," Pesicka added.

"Leveraging his experience driving successful large-scale, profit-improvement programs at Apria, Dan Starck will lead the company-wide Operating Model Realignment Program. And building upon his years of successful leadership of our Byram division, Perry Bernocchi will be promoted, effective March 1, 2023, to CEO of the Patient Direct segment and will drive further integration of Byram and Apria to better serve our customers and drive efficiencies," Pesicka concluded.

Operating Model Realignment Program Includes:

• Sourcing and demand management

• Organizational structure redesign

• Network rationalization and operational excellence

• Commercial excellence and product profitability enhancement

Financial Summary (1)
($ in millions, except per share data)	4Q22		4Q21		FYE 2022		FYE 2021
Revenue	$2,551		$2,467		$9,955		$9,785
Operating (loss) income, GAAP	$(53.5)		$62.0		$142.9		$368.5
Adj. Operating Income, Non-GAAP	$67.2		$84.9		$369.1		$442.4
Net (loss) income, GAAP	$(58.0)		$42.0		$22.4		$221.6
Adj. Net Income, Non-GAAP	$21.7		$61.2		$184.2		$309.3
Adj. EBITDA, Non-GAAP	$116.7		$97.4		$517.8		$492.3
Net (loss) income per common share, GAAP	$(0.77)		$0.55		$0.29		$2.94
Adj. Net Income per share, Non-GAAP(2)	$0.28		$0.81		$2.42		$4.10
(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 Q4 2022 was unfavorably impacted as compared to prior year by foreign currency translation in the amount of $0.03 and, unfavorably impacted by $0.16 for the 2022 full-year period.

Results and Business Highlights

• Q4 Consolidated revenue of $2.6 billion

  • Patient Direct revenue of $617 million, up 10.3% on an adjusted basis for the Apria acquisition

  • Products & Healthcare Services revenue up 1.6% sequentially from Q3

  • Unfavorable foreign exchange (FX) impact of $10 million

• Adjusted EBITDA of $117 million for the quarter and $518 million for the full year

  • For the fourth quarter on an adjusted basis for the Apria acquisition, Patient Direct adjusted segment operating income increased by 50% year-over-year with margin rate increase of 280 basis points to 10.7%

  • Unfavorable FX impacted Adjusted Operating Income by $3 million in Q4 and $16 million for the full year

• Balance Sheet and Cash Flow

  • Reduced total debt by $61 million in Q4 and $143 million since funding the Apria acquisition

  • Generated $87 million of operating cash flow in the quarter, up 73% year-over-year and up 27% from Q3

  • Generated $325 million of operating cash flow for the full year, up 162%

• Business Highlights

  • Owens & Minor’s Supplier Diversity Award celebrated its 10^th consecutive year

  • Byram Healthcare was awarded Verywell Health’s "Best Overall Diabetic Supply Company" for the fourth year in a row

  • Owens & Minor Foundation and Ronald McDonald House Charities® partner to help build healthier communities

2023 Financial Outlook

The Company’s outlook for 2023 is summarized below:

• Revenue for 2023 to be in a range of $10.1 billion to $10.5 billion

• Adjusted EBITDA for 2023 to be in a range of $490 million to $550 million

• Adjusted EPS for 2023 to be in a range of $1.15 to $1.65

The Company’s outlook for 2023 contains assumptions, including current expectations regarding the impact of general economic conditions, including inflation, and the continuation of pressure on pricing and demand in our Products & Healthcare Services segment. Key assumptions supporting the Company’s 2023 financial guidance include:

• Adjusted operating income benefit of ~$30 million from the Operating Model Realignment Program in 2023

• Gross margin rate of ~20.5%

• Interest expense of $175 to $180 million

• Adjusted effective tax rate of 26% to 27%

• Diluted weighted average shares of ~77.5 million

• Capital expenditures of $190 to $210 million

• Stable to improving commodity prices

• FX rates as of 12/31/2022

Although the Company does provide guidance for adjusted EBITDA and adjusted EPS (which are non-GAAP financial measures), it is not able to forecast the most directly comparable measures calculated and presented in accordance with GAAP without unreasonable effort. Certain elements of the composition of the GAAP amounts are not predictable, making it impracticable for the Company to forecast. Such elements include but are not limited to restructuring and acquisition charges. As a result, no GAAP guidance or reconciliation of the Company’s adjusted EBITDA guidance or adjusted EPS guidance is provided. The outlook is based on certain assumptions that are subject to the risk factors discussed in the Company’s filings with the Securities and Exchange Commission ("SEC").

Investor Conference Call for Fourth Quarter and Full Year 2022 Financial Results

Owens & Minor executives will host a conference call for investors and analysts at 8:00 a.m. ET today, February 28, 2023. Participants may access the call via the toll-free dial-in number at 1-888-300-2035, or the toll dial-in number at 1-646-517-7437. The conference ID access code is 1058917.

All interested stakeholders are encouraged to access the simultaneous live webcast by visiting the investor relations page of the Owens & Minor website available at investors.owens-minor.com/events-presentations/. A replay of the webcast can be accessed following the presentation at the link provided above.

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 2023 financial performance, the integration of Apria transaction, including related synergies and the expected performance of the Apria business, our Operating Model Realignment program and other cost-saving initiatives, future indebtedness and growth, industry trends, 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, 2022, expected to be filed with the SEC on or around February 28, 2023, 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 December 31,
			2022				2021
Net revenue		$	2,551,107			$	2,467,146
Cost of goods sold			2,143,987				2,125,576
Gross margin			407,120				341,570
Distribution, selling and administrative expenses			455,856				267,616
Acquisition-related and exit and realignment charges			4,974				13,108
Other operating income, net			(231	)			(1,175	)
Operating (loss) income			(53,479	)			62,021
Interest expense, net			41,164				11,306
Other expense, net			783				799
(Loss) income before income taxes			(95,426	)			49,916
Income tax (benefit) provision			(37,435	)			7,941
Net (loss) income		$	(57,991	)		$	41,975
Net (loss) income per common share
Basic		$	(0.77	)		$	0.57
Diluted		$	(0.77	)		$	0.55

Owens & Minor, Inc. Consolidated Statements of Operations (unaudited) (dollars in thousands, except per share data)
		Years Ended December 31,
			2022				2021
Net revenue		$	9,955,475			$	9,785,315
Cost of goods sold			8,129,124				8,272,086
Gross margin			1,826,351				1,513,229
Distribution, selling and administrative expenses			1,633,668				1,116,871
Acquisition-related and exit and realignment charges			55,022				34,076
Other operating income, net			(5,252	)			(6,191	)
Operating income			142,913				368,473
Interest expense, net			128,891				48,090
Loss on extinguishment of debt			—				40,433
Other expense, net			3,131				3,196
Income before income taxes			10,891				276,754
Income tax (benefit) provision			(11,498	)			55,165
Net income		$	22,389			$	221,589
Net income per common share
Basic		$	0.30			$	3.05
Diluted		$	0.29			$	2.94

Owens & Minor, Inc. Condensed Consolidated Balance Sheets (unaudited) (dollars in thousands)
		December 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents		$	69,467		$	55,712
Accounts receivable, net			763,497			681,564
Merchandise inventories			1,333,585			1,495,972
Other current assets			128,636			88,564
Total current assets			2,295,185			2,321,812
Property and equipment, net			578,269			317,235
Operating lease assets			280,665			194,006
Goodwill			1,636,705			390,185
Intangible assets, net			445,042			209,745
Other assets, net			150,417			103,568
Total assets		$	5,386,283		$	3,536,551
Liabilities and equity
Current liabilities
Accounts payable		$	1,147,414		$	1,001,959
Accrued payroll and related liabilities			93,296			115,858
Other current liabilities			325,756			226,204
Total current liabilities			1,566,466			1,344,021
Long-term debt, excluding current portion			2,482,968			947,540
Operating lease liabilities, excluding current portion			215,469			162,241
Deferred income taxes			60,833			35,310
Other liabilities			114,943			108,938
Total liabilities			4,440,679			2,598,050
Total equity			945,604			938,501
Total liabilities and equity		$	5,386,283		$	3,536,551

Owens & Minor, Inc. Consolidated Statements of Cash Flows (unaudited) (dollars in thousands)
		Three Months Ended December 31,
			2022				2021
Operating activities:
Net (loss) income		$	(57,991	)		$	41,975
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			73,229				22,479
Share-based compensation expense			5,228				5,938
Deferred income tax benefit			(29,352	)			(11,450	)
(Benefit) provision for losses on accounts receivable			(1,974	)			1,888
Changes in operating lease right-of-use assets and lease liabilities			(569	)			273
Gain on sale and dispositions of property and equipment			(9,258	)			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			(6,316	)			82,180
Merchandise inventories			173,382				20,749
Accounts payable			(16,772	)			(117,273	)
Net change in other assets and liabilities			(46,121	)			9,033
Other, net			3,475				(5,451	)
Cash provided by operating activities			86,961				50,341
Investing activities:
Additions to property and equipment			(48,815	)			(14,539	)
Additions to computer software			(2,619	)			(2,526	)
Proceeds from sale of property and equipment			18,663				(41	)
Other, net			—				(3,940	)
Cash used for investing activities			(32,771	)			(21,046	)
Financing activities:
Borrowings (repayments) under revolving credit facility, net and accounts receivable securitization program			—				(12,300	)
Repayments of debt			(1,500	)			—
Borrowings under amended accounts receivable securitization program			324,600				—
Repayments under amended accounts receivable securitization program			(385,600	)			—
Cash dividends paid			—				(183	)
Other, net			(980	)			227
Cash used for financing activities			(63,480	)			(12,256	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			2,267				(1,086	)
Net (decrease) increase in cash, cash equivalents and restricted cash			(7,023	)			15,953
Cash, cash equivalents and restricted cash at the beginning of the period			93,208				56,082
Cash, cash equivalents and restricted cash at end of the period(1)		$	86,185			$	72,035
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds		$	405			$	15,974
Interest paid		$	45,133			$	6,682
Noncash investing activity:
Unpaid purchases of property and equipment and software at end of period		$	67,852			$	—
(1) Restricted cash as of December 31, 2022 and 2021 represents $16.7 million and $16.3 million, primarily 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. Consolidated Statements of Cash Flows (unaudited) (dollars in thousands)
		Years Ended December 31,
			2022				2021
Operating activities:
Net income		$	22,389			$	221,589
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			228,667				90,621
Share-based compensation expense			20,993				25,016
Loss on extinguishment of debt			—				40,433
Deferred income tax benefit			(26,361	)			(29,736	)
Provision for losses on accounts receivable			3,315				21,158
Changes in operating lease right-of-use assets and lease liabilities			353				1,463
Gain on sale and dispositions of property and equipment			(26,260	)			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			1,101				(2,201	)
Merchandise inventories			166,559				(263,439	)
Accounts payable			13,652				3,548
Net change in other assets and liabilities			(91,544	)			692
Other, net			12,142				15,033
Cash provided by operating activities			325,006				124,177
Investing activities:
Acquisition, net of cash acquired			(1,684,607	)			—
Additions to property and equipment			(158,090	)			(40,985	)
Additions to computer software			(8,492	)			(8,705	)
Proceeds from sale of property and equipment			48,383				—
Other, net			(1,670	)			(3,940	)
Cash used for investing activities			(1,804,476	)			(53,630	)
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				(103,200	)
Repayments of debt			(4,500	)			(553,140	)
Borrowings under amended accounts receivable securitization program			1,022,300				—
Repayments under amended accounts receivable securitization program			(1,156,300	)			—
Financing costs paid			(42,602	)			(13,912	)
Cash dividends paid			—				(731	)
Payment for termination of Interest rate swaps			—				(15,434	)
Other, net			(42,793	)			(17,961	)
Cash provided by (used for) financing activities			1,497,105				(129,478	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(3,485	)			(3,540	)
Net increase (decrease) in cash, cash equivalents and restricted cash			14,150				(62,471	)
Cash, cash equivalents and restricted cash at beginning of year			72,035				134,506
Cash, cash equivalents and restricted cash at end of year (1)		$	86,185			$	72,035
Supplemental disclosure of cash flow information:
Income taxes paid, net of refunds		$	33,973			$	99,400
Interest paid		$	107,022			$	38,717
Noncash investing activity:
Unpaid purchases of property and equipment and software at end of period		$	67,852			$	—
(1) Restricted cash as of December 31, 2022 and 2021 represents $16.7 million and $16.3 million, primarily 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)
...