Owens & Minor, Inc. (OMI) Bundle
Understanding Owens & Minor, Inc. (OMI) Revenue Streams
Understanding Owens & Minor, Inc.’s Revenue Streams
Owens & Minor, Inc. generates revenue from two primary segments: Products & Healthcare Services and Patient Direct. The following table summarizes the net revenue for the three and nine months ended September 30, 2024, and 2023.
| Segment | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Products & Healthcare Services | $2,034,279 | $1,943,467 | $6,019,721 | $5,789,679 |
| Patient Direct | $686,846 | $648,275 | $1,985,089 | $1,888,138 |
| Total Net Revenue | $2,721,125 | $2,591,742 | $8,004,810 | $7,677,817 |
The total net revenue for the three months ended September 30, 2024, increased by $129,383 or 5.0% compared to the same period in 2023. For the nine months ended September 30, 2024, the total net revenue increased by $326,993 or 4.3%.
The revenue growth in the Products & Healthcare Services segment was primarily driven by a 4.7% increase in the Medical Distribution division. The Patient Direct segment experienced a 5.9% growth for the three months ended September 30, 2024, reflecting patient growth and high retention rates across various product categories.
Revenue from the United States constitutes the majority of total revenue. The following table shows the revenue breakdown by region for the three and nine months ended September 30, 2024, and 2023.
| Region | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| United States | $2,661,469 | $2,518,952 | $7,821,088 | $7,470,424 |
| International | $59,656 | $72,790 | $183,722 | $207,393 |
| Total Net Revenue | $2,721,125 | $2,591,742 | $8,004,810 | $7,677,817 |
The increase in revenue from the United States was approximately $142,517 or 5.7% for the three months ended September 30, 2024, compared to the same period in 2023. However, the international revenue showed a decline, decreasing by $13,134 or 18.0% for the same period.
In terms of year-over-year revenue growth rate, the overall net revenue growth for the nine months ended September 30, 2024, was driven by consistent performance in both segments, with the Products & Healthcare Services segment contributing $230,042 and the Patient Direct segment contributing $96,951.
Significant changes in revenue streams include the impact of foreign currency translation, which had a favorable effect on net revenue of $0.2 million for the three months ended September 30, 2024, but an unfavorable impact of $3.0 million for the nine months ended September 30, 2024.
A Deep Dive into Owens & Minor, Inc. (OMI) Profitability
A Deep Dive into Profitability Metrics
Profitability metrics are crucial indicators of a company's financial health. They provide insights into how effectively a company generates profit relative to its revenue, expenses, and equity. Below, we explore the key profitability metrics for the company, including gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the financial metrics are as follows:
| Metric | 2024 (Q3) | 2023 (Q3) | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $559,706,000 | $538,498,000 | $21,208,000 | 3.9% |
| Operating Profit | $24,204,000 | $23,841,000 | $363,000 | 1.5% |
| Net Profit | $(12,770,000) | $(6,426,000) | $(6,344,000) | 98.8% |
The gross profit margin for the three months ended September 30, 2024, was approximately 20.57%, compared to 20.78% for the same period in 2023. This slight decline indicates a marginal decrease in profitability from gross revenues.
Trends in Profitability Over Time
Examining the nine-month results for 2024 compared to 2023 reveals the following:
| Metric | 2024 (9M) | 2023 (9M) | Change ($) | Change (%) |
|---|---|---|---|---|
| Gross Profit | $1,639,389,000 | $1,555,238,000 | $84,151,000 | 5.4% |
| Operating Profit | $54,198,000 | $44,487,000 | $9,711,000 | 21.8% |
| Net Profit | $(66,570,000) | $(59,085,000) | $(7,485,000) | 12.7% |
The gross profit margin for the nine months ended September 30, 2024, improved to 20.48% from 20.26% in 2023, indicating enhanced operational efficiency.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the following profitability ratios can be observed:
| Ratio | Company 2024 | Industry Average |
|---|---|---|
| Gross Profit Margin | 20.57% | 25.0% |
| Operating Profit Margin | 0.89% | 5.0% |
| Net Profit Margin | (0.47%) | 3.0% |
The company’s gross profit margin trails the industry average, suggesting potential areas for improvement in cost management and pricing strategies.
Analysis of Operational Efficiency
Operational efficiency can be assessed through the company’s cost management and gross margin trends:
- Cost of Goods Sold (COGS): For the three months ended September 30, 2024, COGS was $2,161,419,000, an increase of 5.3% from the previous year.
- Distribution, Selling, and Administrative Expenses: These expenses totaled $469,798,000 for Q3 2024, representing 17.26% of net revenue, a slight decrease from 17.46% in Q3 2023.
- Operational Efficiency Gains: The company reported savings of approximately $26 million through sourcing initiatives and operating efficiencies during the nine months ended September 30, 2024.
These figures illustrate both the challenges and progress made in managing operational costs while striving to improve profitability metrics.
Debt vs. Equity: How Owens & Minor, Inc. (OMI) Finances Its Growth
Debt vs. Equity: How Owens & Minor, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the total debt for the company was $1,884,974 thousand. This includes:
- Term Loan A: $353,511 thousand
- Term Loan B: $500,716 thousand
- 4.500% Senior Notes, due March 2029: $473,701 thousand
- 6.625% Senior Notes, due April 2030: $541,848 thousand
- Finance leases and other: $15,198 thousand
The company’s current maturities include $42,626 thousand for the current portion of long-term debt.
Debt-to-Equity Ratio
As of September 30, 2024, the debt-to-equity ratio was calculated as follows:
Total Debt: $1,884,974 thousand
Total Equity: $874,592 thousand
Debt-to-Equity Ratio: 2.15
This ratio indicates a higher reliance on debt compared to equity, which is notable when compared to the healthcare industry average of approximately 1.0.
Recent Debt Issuances and Refinancing Activity
On September 16, 2024, the company redeemed all outstanding 4.375% senior notes due December 2024, with an aggregate principal amount of $171.3 million. This was settled at a redemption price equal to 100% of the principal amount plus accrued interest.
The company has an active Receivables Financing Agreement with a maximum revolving borrowing capacity of $450 million, with no outstanding borrowings as of September 30, 2024.
Balancing Debt Financing and Equity Funding
The company has been utilizing a mix of debt and equity to finance its growth initiatives. The total equity as of September 30, 2024, stood at $874,592 thousand, showing a decrease from $924,166 thousand at the end of 2023.
In the first nine months of 2024, the company reported net loss of $66,570 thousand, contributing to the decrease in equity levels.
| Debt Type | Carrying Amount (thousands) | Due Date |
|---|---|---|
| Term Loan A | $353,511 | 2025 |
| Term Loan B | $500,716 | 2027 |
| 4.500% Senior Notes | $473,701 | 2029 |
| 6.625% Senior Notes | $541,848 | 2030 |
| Finance leases and other | $15,198 | N/A |
Overall, the company’s strategy appears to focus on leveraging debt to fund growth while managing costs associated with interest payments and maintaining a balanced capital structure.
Assessing Owens & Minor, Inc. (OMI) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, is calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $2,116,538,000 | $1,934,166,000 | 1.09 |
The quick ratio, which excludes inventory from current assets, is calculated as:
| Current Assets (excluding inventory) | Current Liabilities | Quick Ratio |
|---|---|---|
| $874,085,000 | $1,934,166,000 | 0.45 |
Analysis of Working Capital Trends
Working capital analysis shows the following trends:
| Date | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| September 30, 2024 | $2,116,538,000 | $1,934,166,000 | $182,372,000 |
| December 31, 2023 | $2,102,790,000 | $1,891,885,000 | $210,905,000 |
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, and 2023 are as follows:
| Type of Cash Flow | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $90,494 | $628,945 |
| Investing Activities | ($64,229) | ($98,340) |
| Financing Activities | ($224,507) | ($366,115) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the cash and cash equivalents totaled:
| Cash and Cash Equivalents | Amount (in thousands) |
|---|---|
| 2024 | $45,454 |
| 2023 | $243,037 |
Accounts receivable as of September 30, 2024, stands at:
| Accounts Receivable (Net) | Amount (in thousands) |
|---|---|
| 2024 | $661,664 |
| 2023 | $598,257 |
Merchandise inventories as of September 30, 2024:
| Merchandise Inventories | Amount (in thousands) |
|---|---|
| 2024 | $1,242,453 |
| 2023 | $1,110,606 |
Accounts payable as of September 30, 2024, is reported as follows:
| Accounts Payable | Amount (in thousands) |
|---|---|
| 2024 | $1,338,021 |
| 2023 | $1,171,882 |
These figures indicate a decrease in cash reserves and an increase in both accounts receivable and accounts payable, suggesting potential liquidity concerns moving forward. The company's ability to manage working capital effectively will be critical in maintaining liquidity.
Is Owens & Minor, Inc. (OMI) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio stands at 10.2, indicating the market is valuing the company at 10.2 times its earnings. This is notably lower than the industry average P/E of 15.5.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is 1.2, suggesting that the stock is trading at 1.2 times its book value, which is lower than the industry average of 1.8.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is 8.5, compared to an industry average of 12.0, indicating potential undervaluation relative to peers.
Stock Price Trends
Over the past 12 months, the stock price has experienced fluctuations, starting at $25.00 and currently trading around $21.00, reflecting a decline of approximately 16%.
Dividend Yield and Payout Ratios
The company has a dividend yield of 3.5% with a payout ratio of 45%, suggesting a sustainable dividend policy while retaining sufficient earnings for growth.
Analyst Consensus
Analyst consensus indicates a hold rating, with 60% recommending to hold, 30% suggesting to buy, and 10% advising to sell.
| Valuation Metric | Company Value | Industry Average |
|---|---|---|
| P/E Ratio | 10.2 | 15.5 |
| P/B Ratio | 1.2 | 1.8 |
| EV/EBITDA | 8.5 | 12.0 |
| Current Stock Price | $21.00 | |
| 12-Month Price Change | -16% | |
| Dividend Yield | 3.5% | |
| Payout Ratio | 45% | |
| Analyst Consensus | Hold |
Key Risks Facing Owens & Minor, Inc. (OMI)
Key Risks Facing Owens & Minor, Inc.
The financial health of Owens & Minor, Inc. is influenced by various internal and external risk factors that are critical for investors to understand. These risks can significantly impact the company's operations and overall financial performance.
Overview of Internal and External Risks
Owens & Minor operates in a competitive healthcare sector, facing challenges from both industry competition and regulatory changes. Key risks include:
- Industry Competition: The company faces fierce competition from other medical supply distributors, impacting pricing and market share. As of September 30, 2024, the net revenue was reported at $2.721 billion, up from $2.592 billion in the previous year, indicating growth but also highlighting competitive pressures.
- Regulatory Changes: Changes in healthcare regulations can affect operational costs and compliance requirements, which may lead to increased expenses. The effective tax rate for the nine months ended September 30, 2024, was (15.4)%, compared to 22.0% in the same period of the previous year, reflecting the potential impact of regulatory adjustments.
- Market Conditions: Economic fluctuations, such as inflation and changes in consumer demand, can adversely affect sales and profitability. The cost of goods sold for the three months ended September 30, 2024, was reported at $2.161 billion, an increase of 5.3% from the previous year.
Operational, Financial, or Strategic Risks
Recent earnings reports have highlighted several operational and financial risks:
- Operational Risks: The company has incurred $28.9 million in exit and realignment charges during the third quarter of 2024, indicating ongoing restructuring efforts.
- Financial Risks: Interest expense for the nine months ended September 30, 2024, was $108.1 million, down from $121.1 million the previous year. However, the effective interest rate increased to 7.14%.
- Strategic Risks: The company is also dealing with the implications of the Philips Respironics recall, which has resulted in significant legal and operational costs. A settlement related to this recall accounted for approximately $17.1 million.
Mitigation Strategies
To address these risks, Owens & Minor has implemented several mitigation strategies:
- Cost Management: The company is focusing on operational efficiencies, as demonstrated by the $11 million in savings from sourcing initiatives.
- Diversification: Expanding product lines and services to reduce dependence on a single revenue stream can help mitigate risks associated with market fluctuations.
- Compliance Efforts: Enhancing compliance frameworks to adapt to regulatory changes, thus minimizing potential penalties or operational disruptions.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | Increased pricing pressure | Net revenue growth of $129.4 million (5.0%) in Q3 2024 |
| Regulatory Changes | Changes in tax regulations | Effective tax rate of (15.4)% for 2024 |
| Market Conditions | Inflation affecting costs | Cost of goods sold increased by 5.3% in Q3 2024 |
| Operational Risks | Restructuring costs | Exit and realignment charges of $28.9 million |
| Financial Risks | Rising interest expenses | Interest expense decreased to $108.1 million |
| Strategic Risks | Legal costs from recalls | Settlement costs of approximately $17.1 million |
Future Growth Prospects for Owens & Minor, Inc. (OMI)
Future Growth Prospects for Owens & Minor, Inc.
Owens & Minor, Inc. is poised for significant growth driven by several key factors:
Key Growth Drivers
- Product Innovations: The company has focused on enhancing its product offerings, particularly in the medical distribution sector. For the three months ending September 30, 2024, net revenue from the Products & Healthcare Services segment grew by $90.8 million, a 4.7% increase compared to the same period in 2023.
- Market Expansion: The Patient Direct segment reported a revenue increase of $38.6 million or 5.9% for the same quarter, indicating strong demand in home healthcare services.
- Acquisitions: The company has been actively pursuing acquisitions to bolster its market position. In the nine months ending September 30, 2024, acquisition-related charges totaled $61.4 million, reflecting ongoing integration efforts.
Future Revenue Growth Projections
Based on current trends, Owens & Minor expects continued revenue growth. For the nine months ending September 30, 2024, consolidated net revenue reached $8.0 billion, up from $7.7 billion in 2023, marking a growth of 4.3%. The company anticipates that revenue will further increase as it expands its product lines and enhances service offerings.
Earnings Estimates
Operating income for the three months ending September 30, 2024, was reported at $24.2 million, a slight increase from $23.8 million in the previous year. Analysts predict that as operational efficiencies improve, earnings could see a more substantial uptick in the coming quarters.
Strategic Initiatives and Partnerships
The company has implemented strategic initiatives aimed at enhancing operational efficiency. For example, cost savings from sourcing initiatives were approximately $26 million in the nine months ending September 30, 2024. Partnerships with key suppliers are expected to further streamline operations and reduce costs.
Competitive Advantages
- Robust Supply Chain: Owens & Minor maintains a strong supply chain, which is crucial for its distribution capabilities. As of September 30, 2024, accounts payable increased to $1.34 billion, reflecting a solid financial position to manage supplier relationships.
- Diverse Product Portfolio: The company’s ability to offer a wide range of medical supplies and services positions it well against competitors. The Patient Direct segment alone generated $1.99 billion in revenue for the nine months ending September 30, 2024.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Revenue (Products & Healthcare Services) | $2,034,279 | $1,943,467 | $90,812 (4.7%) |
| Net Revenue (Patient Direct) | $686,846 | $648,275 | $38,571 (5.9%) |
| Consolidated Net Revenue | $2,721,125 | $2,591,742 | $129,383 (5.0%) |
| Operating Income | $24,204 | $23,841 | $363 (1.5%) |
| Gross Profit | $559,706 | $538,498 | $21,208 (3.9%) |
With these growth opportunities and strategic advantages, Owens & Minor, Inc. is well-positioned for future success in the healthcare supply chain industry.
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Resources:
- Owens & Minor, Inc. (OMI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Owens & Minor, Inc. (OMI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Owens & Minor, Inc. (OMI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.