01—Abstract
Summary
Summary of the 10-Q filed August 8, 2023. Cited figures are marked; the original filing is the authoritative source.
STERIS plc (STE) reported its first-quarter fiscal 2024 results for the three months ended June 30, 2023 in this Form 10-Q filed August 8, 2023.
Total revenues rose 11.1% to $1,284.5 milliona from $1,156.5 million, driven mainly by higher volume and pricing, particularly in the Healthcare segment, which grew 17.2% to $818.9 million. Gross profit percentage slipped to 44.6% from 44.8% as pricing (150 basis points) was more than offset by material and labor inflation (170 basis points). Income from operations increased to $188.9 million from $158.4 million, while net income attributable to shareholders was $123.6 million, or $1.25 per diluted share, versus $111.3 million, or $1.10 per diluted share, a year earlier.
Interest expense rose $9.7 million to $32.4 millionb, mainly from higher rates on floating rate debt. Cash flow improved, with net cash from operating activities of $281.1 million and free cash flow of $214.5 million, compared with $231.7 million and $117.1 million a year earlier. Capital expenditures fell to $66.6 million from $115.9 million, and the company repaid $15.0 million of term loans and made net payments of $144.7 million under credit facilities.
Total debt was $2.92 billionc at June 30, 2023, down from $3.08 billion at March 31, 2023, and the debt-to-total capital ratio was 32.2%. The board authorized a new share repurchase program of up to $500,000 thousand on May 3, 2023, under which no shares had been repurchased as of June 30, 2023. After the quarter end, on June 20, 2023, STERIS agreed to purchase surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company for $540.0 million, funded entirely with additional debt.
The transaction was completed on August 2, 2023, and the assets will be integrated into the Healthcare segment. The company stated that it cannot yet provide the purchase price allocation at the time of filing.
02—Key points
Key Highlights
- Total revenues increased 11.1% to $1,284.5 million, led by Healthcare revenues, which rose 17.2% to $818.9 million.
- Gross profit percentage declined to 44.6% from 44.8%, as pricing benefits of 150 basis points were more than offset by 170 basis points of material and labor inflation.
- Income from operations rose to $188.9 million from $158.4 million, and diluted EPS was $1.25 versus $1.10 a year earlier.
- Net cash provided by operating activities was $281.1 million, and free cash flow was $214.5 million, up from $117.1 million.
- Interest expense increased $9.7 million to $32.4 million, primarily due to higher rates on floating rate debt.
- Total debt declined to $2.92 billion from $3.08 billion at March 31, 2023, and the debt-to-total capital ratio improved to 32.2% from 33.6%.
- A $540.0 million acquisition of surgical and laparoscopic instrumentation assets from Becton, Dickinson and Company was agreed on June 20, 2023 and completed on August 2, 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Steris kept $0.10.
- Revenue$1.18B100.0%
- Cost of revenue−$654.4M55.3%
- Gross profit$529.0M44.7%
- Operating costs−$331.2M28.0%
- Operating income$197.8M16.7%
- Interest, other & tax−$74.2M6.3%
- Net income$123.6M10.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed August 8, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $1.18B$1.05B | +12.5% |
| Cost of Revenue | $654.38M$577.82M | +13.3% |
| Gross Profit | $529.00M$473.82M | +11.6% |
| R&D Expenses | $24.69M$24.75M | −0.2% |
| SG&A Expenses | $306.53M$334.63M | −8.4% |
| Operating Expenses | $331.24M$359.40M | −7.8% |
| Operating Income | $197.76M$158.40M | +24.9% |
| Interest Expense | $32.36M$22.67M | +42.7% |
| Net Income | $123.55M$111.26M | +11.0% |
| EPS (Basic) | $1.25$1.11 | +12.6% |
| EPS (Diluted) | $1.25$1.10 | +13.6% |
| Shares Outstanding (Basic) | 98.71M100.08M | −1.4% |
| Shares Outstanding (Diluted) | 99.24M100.72M | −1.5% |
05—Questions
Frequently Asked Questions
How did STERIS perform in the first quarter of fiscal 2024?
Revenues grew 11.1% to $1,284.5 million, and income from operations rose to $188.9 million from $158.4 million. Net income attributable to shareholders was $123.6 million, or $1.25 per diluted share, compared with $111.3 million, or $1.10 per diluted share, in the prior-year quarter. Growth was driven by higher volume and pricing, partly offset by inflation in materials and labor.
What drove the change in gross margin?
Gross profit percentage was 44.6% compared with 44.8% a year earlier. The filing attributes the decline to pricing gains of 150 basis points being more than offset by unfavorable material and labor inflation of 170 basis points. Product gross margin fell to 47.2% from 47.8%, while service gross margin rose to 41.5% from 41.1%.
How is the company's debt position and cash usage changing?
Total debt was $2.92 billion at June 30, 2023, down from $3.08 billion at March 31, 2023, after the company repaid $15.0 million of term loans and made net payments of $144.7 million under credit facilities. Outstanding borrowings under the Credit Agreement were $158.2 million. Cash dividends paid totaled $46.4 million, or $0.47 per share.
What is the status of the new share repurchase authorization?
On May 3, 2023, the board terminated the previous program and authorized a new one for up to $500,000 thousand, net of taxes, fees and commissions, with no specified expiration date. As of June 30, 2023, no shares had been repurchased under the new program. The company had repurchased shares under the prior program in the year-earlier quarter, but none in the first quarter of fiscal 2024.
What is the significance of the Becton, Dickinson acquisition?
STERIS agreed on June 20, 2023 to buy surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company for $540.0 million, funded entirely with additional debt. The assets will be integrated into the Healthcare segment, and the transaction closed on August 2, 2023. The company expects a tax benefit from tax-deductible goodwill with a present value of approximately $60.0 million, but the purchase price allocation was not yet available at filing.
06—Continue