01—Abstract
Summary
Summary of the 10-K filed May 31, 2022. Cited figures are marked; the original filing is the authoritative source.
STERIS plc (NYSE: STE) reported fiscal 2022 (year ended March 31, 2022) revenues of $4,585.1 milliona, up 47.5% from $3,107.5 million, driven mainly by the June 2, 2021 acquisition of Cantel Medical LLC, which contributed $1,073.1 million of added volume along with organic growth in Healthcare, Applied Sterilization Technologies and Life Sciences.
Operating income fell 22.4% to $425.6 millionb from $548.4 million, primarily due to acquisition and integration expenses and incremental amortization tied to Cantel, plus unplanned supply chain and inflation costs of approximately $45.0 million. Diluted EPS was $2.48 versus $4.63 in the prior year. Net income attributable to shareholders was $243.9 million, compared with $397.4 million.
Cash flow remained substantial, with net cash from operations of $684.8 millionc and free cash flow of $399.0 million, compared with $450.9 million in fiscal 2021. The company funded the Cantel acquisition with approximately $2.1 billion of new indebtedness, including $1.35 billion of Senior Public Notes issued April 1, 2021. Total long-term indebtedness was $2.9 billion at March 31, 2022, and the debt-to-total capital ratio rose to 32.1% from 29.8%.
Management also raised the quarterly dividend to $0.43d per share, the sixteenth consecutive annual increase, and resumed share repurchases in February 2022 with $308.9 million of authorization remaining. The company now reports four segments: Healthcare, Applied Sterilization Technologies, Life Sciences and Dental.
Backlog excluding Cantel was $528.3 million at March 31, 2022, up from $286.2 million a year earlier. Management expects continued supply chain and inflation pressure in fiscal 2023 and anticipates further cost synergies from the Cantel integration, with the Cantel acquisition expected to yield approximately $110 million in annualized pre-tax cost synergies within four fiscal years.
02—Key points
Key Highlights
- Revenues rose 47.5% to $4,585.1 million, with $1,073.1 million of added volume from Cantel and other recent acquisitions.
- Operating income decreased 22.4% to $425.6 million, mainly from acquisition and integration expenses and incremental amortization related to Cantel.
- Diluted EPS was $2.48 in fiscal 2022 versus $4.63 in fiscal 2021; net income attributable to shareholders was $243.9 million.
- Net cash from operations was $684.8 million and free cash flow was $399.0 million, down from $450.9 million in fiscal 2021.
- Total long-term indebtedness reached $2.9 billion at March 31, 2022, after roughly $2.1 billion of new borrowings to fund Cantel; debt-to-total capital rose to 32.1% from 29.8%.
- Backlog excluding Cantel was $528.3 million at March 31, 2022, compared with $286.2 million a year earlier.
- The quarterly dividend was increased to $0.43 per share, the sixteenth consecutive annual increase, and share repurchases resumed in February 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Steris kept $0.06.
- Revenue$4.22B100.0%
- Cost of revenue−$2.34B55.4%
- Gross profit$1.88B44.6%
- Operating costs−$1.41B33.3%
- Operating income$477.8M11.3%
- Interest, other & tax−$233.9M5.5%
- Net income$243.9M5.8%
Where FY2022 revenue went
$4.22B- Cost of revenue: $2.34B, 55% of revenue
- SG&A: $1.32B, 31% of revenue
- Net income: $243.9M, 5.8% of revenue
- R&D: $86.7M, 2.1% of revenue
- Interest, other & tax: $233.9M, 5.5% of revenue
Kept 5.8% as net incomeNet income $243.9M · 5.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed May 31, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $4.22B$3.11B | +35.9% |
| Cost of Revenue | $2.34B$1.76B | +32.6% |
| Gross Profit | $1.88B$1.34B | +40.2% |
| R&D Expenses | $86.66M$66.33M | +30.7% |
| SG&A Expenses | $1.32B$731.32M | +80.3% |
| Operating Expenses | $1.41B$794.73M | +76.8% |
| Operating Income | $477.81M$548.37M | −12.9% |
| Interest Expense | $89.49M$37.18M | +140.7% |
| Net Income | $243.90M$397.40M | −38.6% |
| EPS (Basic) | $2.50$4.66 | −46.4% |
| EPS (Diluted) | $2.48$4.63 | −46.4% |
| Shares Outstanding (Basic) | 97.53M85.20M | +14.5% |
| Shares Outstanding (Diluted) | 98.33M85.90M | +14.5% |
05—Questions
Frequently Asked Questions
What drove the large increase in revenue in fiscal 2022?
Revenues increased $1,477.5 million, or 47.5%, to $4,585.1 million. The filing attributes $1,073.1 million of the increase to added volume from Cantel and other recent acquisitions, with the remainder reflecting organic growth in Healthcare, Applied Sterilization Technologies and Life Sciences and favorable currency fluctuations.
Why did operating income decline despite higher revenue?
Operating income fell 22.4% to $425.6 million from $548.4 million. The filing cites additional acquisition and integration expenses and incremental amortization expense primarily related to the Cantel acquisition, as well as unplanned supply chain and inflation costs of approximately $45.0 million.
How did STERIS finance the Cantel acquisition?
The company incurred approximately $2.1 billion of new indebtedness, including $1.35 billion of Senior Public Notes issued April 1, 2021 and a $750 million delayed draw term loan agreement, of which $650.0 million was drawn. It also refinanced or settled approximately $1.0 billion of Cantel's long-term indebtedness.
What is the company's outlook for fiscal 2023?
Management expects to continue realizing incremental cost synergies from the Cantel integration, manage costs, invest in greater capacity, and pursue potential acquisitions. It anticipates continued supply chain and inflation pressures in fiscal 2023, and it expects to sell products without significant sourcing disruption, though costs are expected to keep rising.
Are there any notable risks tied to the Russia-Ukraine conflict?
STERIS stopped operating in Russia and Belarus and stopped purchasing cobalt-60 from its Russian supplier. A long-term disruption in that supply may negatively affect gamma processing capacity or increase costs in parts of the Applied Sterilization Technologies segment, but the filing says these impacts are not expected to be material to that segment.
06—Continue