Owens & Minor’s Strategic Shift in Earnings Call

Owens & Minor ((OMI)) has held its Q2 earnings call. Read on for the main highlights of the call.

Owens & Minor’s recent earnings call highlighted a strategic shift towards becoming a pure-play Patient Direct business. The sentiment was generally positive, focusing on growth in specific categories and effective working capital management. However, the company faces challenges such as costs from the Rotech acquisition, disruptions in the diabetes segment, and potential increases in stranded costs.

Focus on Patient Direct Business

Owens & Minor is making a strategic transition to a pure-play Patient Direct business, emphasizing home-based care. The company projects revenue between $2.76 billion and $2.82 billion and adjusted EBITDA of $376 million to $382 million for 2025, underscoring its commitment to this new direction.

Revenue and EBITDA Growth

The company reported a revenue of $682 million for the quarter, marking a 3.3% increase from the previous year. Adjusted EBITDA also saw a rise to $96.6 million from $91.1 million, driven by volume growth, improved collection rates, and productivity gains.

Strong Performance in Sleep and Other Categories

Owens & Minor experienced robust growth in sleep supplies, ostomy, and urology categories, achieving double-digit growth in some segments, which contributed significantly to the company’s overall performance.

Successful Working Capital Management

The company achieved a significant reduction in working capital by nearly $94 million during the quarter. This was primarily due to lower inventory levels and improved collection rates, enhancing financial flexibility.

Rotech Acquisition Costs

The termination of the Rotech acquisition led to $80 million in expenses and $18 million in related financing costs, presenting a financial challenge for the company.

Diabetes Segment Challenges

Revenue growth in the diabetes segment was below expectations due to supplier disruptions and a shift from DME to pharmacy, impacting the overall growth rate.

Potential Stranded Costs Increase

The divestiture of the P&HS segment may lead to a temporary rise in stranded costs, affecting profitability in the short term before these costs decline.

Interest Expense and Tax Rate Increase

Interest expenses for continuing operations saw a slight increase, and the adjusted effective tax rate rose to 32.5%, impacting the company’s financials.

Forward-Looking Guidance

Looking ahead, Owens & Minor provided guidance for the remainder of 2025, focusing on the Patient Direct business post-divestiture of the Products & Healthcare Services segment. The company expects revenue between $2.76 billion and $2.82 billion, with adjusted EBITDA of $376 million to $382 million. Key growth drivers include the Sleep Journey program and strong performance in certain categories, while addressing challenges in the diabetes segment and managing stranded costs.

In conclusion, Owens & Minor’s earnings call reflected a strategic focus on transitioning to a Patient Direct business, with positive growth in specific areas and effective capital management. Despite facing challenges such as acquisition costs and diabetes segment disruptions, the company remains optimistic about its future trajectory, driven by key growth initiatives and financial strategies.