Owens & Minor Earnings Call Flags Tough 2026

Owens & Minor ((ACH)) has held its Q4 earnings call. Read on for the main highlights of the call.

Owens & Minor’s latest earnings call painted a cautiously neutral picture, mixing solid strategic progress with meaningful near-term headwinds. Management highlighted the benefits of a major divestiture, stronger cash generation and a clearer deleveraging path. Yet a large payer contract loss, margin pressure and one-time costs are set to weigh on revenue and earnings through 2026.

Strategic Divestiture Creates Leaner Home-Care Platform

The company closed the sale of its Products & Healthcare Services unit to Platinum Equity on December 31, 2025, netting $342 million with another $12–$15 million expected. Proceeds are being used to reduce debt, including $66 million tied to an AR securitization, leaving Owens & Minor as a more focused, higher-margin home-based care player.

Moderate Full-Year Revenue Growth in 2025

For 2025, consolidated revenue reached nearly $2.8 billion, a little more than 3% higher year over year. Growth was led by sleep therapy, ostomy and urology, underscoring the resilience of core chronic-care categories even as broader pricing and payer dynamics turned tougher.

Sleep Category Delivers Strong, Recurring Growth

Sleep supplies remained a standout, with sales rising about 8%–9% in both the fourth quarter and full year. Management credited the “Sleep Journey” initiative and better recurring revenue capture, suggesting ongoing strength in this high-margin, adherence-driven category.

Cash Generation from Continuing Operations Improves

Continuing operations generated $135 million of operating cash in Q4 2025, versus $68 million for the total company including discontinued operations. For the full year, continuing operations produced $154 million of operating cash and $98 million of free cash flow, with Q4 free cash flow at $18 million, reinforcing the company’s cash-focus narrative.

Deleveraging Momentum and Solid Liquidity

Net debt stood at $1.8 billion at year-end, down $315 million since September 30 and $46 million year over year. Owens & Minor closed 2025 with about $282 million of cash, roughly $220 million of revolver availability and $16 million under its amended AR securitization, while targeting a long-term leverage level of about three times adjusted EBITDA.

2026 EBITDA Outlook Skews to Back Half

Management guided 2026 adjusted EBITDA to a range of $335 million to $355 million, with a midpoint near $345 million, below 2025’s $375 million. They expect roughly 60% of 2026 EBITDA to land in the second half as cost cuts mature, replacement volumes ramp and stranded costs fade.

Technology and Operational Investments Aim to Lower Costs

The company is investing in automation for payer qualification, revenue cycle enhancements and customer-facing tools like the MyApria app launching in Q2 2026. These initiatives, building on the existing MyByram platform, are intended to boost collection rates, improve patient adherence and reduce the cost to serve.

Large Commercial Payer Loss Drives Revenue Headwind

A previously disclosed loss and repricing of a major commercial payer knocked about 1% off Q4 revenue growth, which would have exceeded 3% without the change. Management now expects this payer shift to cut roughly $300 million of revenue in 2026 versus 2025 and about $40 million more in 2027 before fully lapping by the end of Q1 2027.

Q4 Adjusted EBITDA Declines on Costs and Pricing

Fourth-quarter 2025 adjusted EBITDA fell to $90 million from $102.5 million a year earlier, a drop of around 12.2%. The decline reflected lower payment prices, higher inflationary product costs, elevated health benefit expenses and stranded costs tied to recent portfolio moves.

Inflation and Pricing Pressure Squeeze Margins

Management cited inflationary increases in product costs and lower payment rates across several major categories as key margin headwinds. The company is pursuing manufacturer negotiations and refining pricing models to defend profitability, but acknowledged that these factors will weigh on near-term margins.

Collection Rates Lag 2024 but Expected to Recover

Collection rates were somewhat weaker in 2025 compared with an unusually strong performance in 2024, limiting top-line growth. Leadership linked the dip largely to ongoing technology investments and expressed confidence that collections should improve in 2026 as new systems stabilize and automation ramps.

Stranded and One-Time Costs Depress Near-Term Cash

Stranded costs reached $12 million in Q4 and $36.5 million for the full year, adding friction to earnings. In addition, continuing-operations cash flow absorbed $98 million of cash outlays to terminate the Rotech acquisition and fund separation-related items, temporarily pressuring free cash flow.

Near-Term Outlook Shows Revenue and EBITDA Pressure

The company’s 2026 revenue guidance of $2.55 billion to $2.65 billion marks a step down from roughly $2.8 billion in 2025, reflecting the large payer loss. Adjusted EBITDA guidance of $335 million to $355 million is also below 2025’s $375 million, and management flagged Q1 2026 as the weakest quarter despite cost and growth remediation plans.

Capital-Intensive Equipment Model Persists

Patient equipment remains a significant cash user, with capital spending of $45 million in Q4 and $189 million in 2025. Management expects patient equipment to account for about 95% of future capital expenditures, emphasizing the ongoing capital intensity embedded in Owens & Minor’s home-based care model.

Guidance Signals Transitional 2026 with Cash Focus

For 2026, Owens & Minor guided to net revenue of $2.55–$2.65 billion and adjusted EBITDA of $335–$355 million, with levered free cash flow at or above $100 million at the plan midpoint. The company outlined the payer loss cadence across quarters and reiterated that, despite the revenue reset, stronger cash generation, cost actions and divestiture proceeds support a gradual path toward its leverage target.

Owens & Minor’s call underscored a transition year ahead, as the company trades near-term earnings pressure for a streamlined, cash-generative home-care platform. Investors will watch how quickly management backfills lost payer volume, executes cost and technology initiatives and continues to chip away at leverage to unlock upside beyond 2026.