Cantel Medical Reports Financial Results for its Third Quarter Fiscal Year 2020

In unprecedented times, Cantel continues to lead in Infection Prevention

• Net sales of $236.9M, up 3.7%
• GAAP diluted EPS of $0.37, up 85.0%
• Non-GAAP diluted EPS of $0.16, down 70.9%
• GAAP net income of $15.8M, up 93.1%
• Non-GAAP net income of $6.8M, down 70.4%
• COVID pandemic impacts final five weeks of the third fiscal quarter
• Comprehensive cash and cost saving initiatives successfully implemented
• Advancing Cantel 2.0 initiatives

LITTLE FALLS, N.J., June 4, 2020 /PRNewswire/ -- Cantel Medical Corp. (NYSE: CMD) today announced financial results for its third quarter ended April 30, 2020.

Third quarter 2020 net sales were $236.9M, up 3.7% compared to the prior year. Excluding the impact from foreign currency, net sales increased by 4.2%, primarily driven by the impact from acquisitions of 15.5% offset by an organic decline of 11.3%. The decline in organic sales was a result of the reduction of elective procedures driven by the worldwide COVID pandemic, which largely impacted the last five weeks of the Company’s fiscal quarter. The pandemic primarily impacted the Company’s Medical and Dental segments during this period.

Third quarter 2020 GAAP earnings per diluted share increased 85.0% to $0.37, compared to GAAP earnings per diluted share of $0.20 in the prior year period. While GAAP earnings per diluted share was negatively impacted by COVID and higher amortization in the period, the impacts were offset by a favorable fair value adjustment to a Hu-Friedy earnout liability.

Third quarter 2020 non-GAAP earnings per diluted share decreased 70.9% to $0.16, compared to non-GAAP earnings per diluted share of $0.55 in the prior year period. The decrease in earnings per share was driven by the impact from COVID, which significantly impacted the Company’s Medical and Dental segment revenue for the last five weeks of the quarter.

George Fotiades, President and Chief Executive Officer, stated, “The impact from the COVID pandemic has been historic for the industry, our customers, patients and our Company. I am proud of how our Company has operated through these challenges and expect that we will be in a strong position to serve our customers during the recovery. Our mission in Infection Prevention has never been more critical, as we continue to support those on the front lines of this pandemic by supplying much needed PPE, disinfectant chemistry, and other infection prevention solutions to those who need it most.”

With the acquisition of Hu-Friedy and the impact from COVID, the Company’s balance sheet has changed from historical trends. The third quarter ended with cash of $115.8M and gross debt of $976.9M, while generating EBITDAS of $43.5M and adjusted EBITDAS of $31.7M in the quarter, down 23.3%.

In the weeks following the end of its third quarter, the Company has made significant progress in solidifying its financial position. On May 11th, 2020, the Company entered into an agreement to amend its credit facilities with its lender group providing ample flexibility to manage the expected impacts of the current environment created by the COVID pandemic. Following the amendment, the Company announced the sale of $168M in aggregate value of its private offering of Convertible Senior Notes due 2025. This offering provides additional liquidity that helps enable the Company to continue to weather the pandemic, while remaining strongly positioned for the expected post-COVID recovery.

Third quarter financial results and key updates:

• Strong Life Sciences revenue performance with organic growth of +7.3% for the quarter driven by COVID-related demand for portable water systems
• Dental revenue increased 75.4%, driven by the acquisition of Hu-Friedy, while organic revenue decreased 3.1% due to deferred elective procedures which was slightly offset by strong performance in face masks, face shields, surface disinfectants and wipes
• Medical revenue decreased 21.7% on an organic basis, with most endoscopy procedures being deferred or delayed during the last five weeks of the quarter
• Management instituted key cost and cash saving measures which include the following:
  • Deployed workforce furloughs across manufacturing sites experiencing declines in demand, along with temporary furloughs and decreases in pay for administrative personnel
  • Deferred all non-essential capital expenditures
  • Cancelled all non-essential travel
  • Reduced inventory in areas where demand has decreased, including aggressive material management to limit purchasing
  • Suspended any dividend through at least October 31, 2021
  • Suspended and reduced executive salaries and Board of Directors compensation
• Operating Cash increased 42.4% sequentially to $49.3M, with an ending cash balance of $115.8M

The Company further outlined that the last five weeks of disruption due to COVID had a significant impact on their financial results, specifically in the Medical and Dental segments. For illustrative purposes, using the Company’s second quarter results as a comparable, non-COVID impacted quarter, the Medical segment declined ~60% while the Dental segment declined ~55% (down ~70% excluding PPE) in the last five weeks of the quarter. Preliminary, unaudited May revenue results showed signs of improvement, with Medical expected to recover to down ~40% and Dental down ~45% compared to the same second quarter baseline. The Company expects fourth quarter revenue to be below the third quarter, with the expectation that daily sales rates will continue to improve through the quarter.

Fotiades added, “While the deferral of elective procedures over the last five weeks of our third quarter have resulted in lower performance, we are encouraged that preliminary sales results for May are showing signs of recovery. We continue to invest in critical aspects of Cantel 2.0. and have been making progress on our previously announced initiatives, which I look forward to discussing more over the next few months.”

Conference Call Information:
The Company will hold a conference call to discuss the results for its third quarter ended April 30, 2020 on Thursday, June 4, 2020 at 8:30 a.m. Eastern Time.

To participate in the conference call, dial 1-844-369-8770 (US & Canada) or 1-862-298-0840 (International) approximately 5 to 10 minutes before the beginning of the call. If you are unable to participate, a digital replay of the call will be available from Thursday, June 4, 2020 through midnight on July 3, 2020 by dialing 1-877-481-4010 (US & Canada) or 1-919-882-2331 (International) and using conference ID #: 34733.

An audio webcast will be available via the Cantel website at www.cantelmedical.com. A replay of the presentation will be archived on the Cantel website for those unable to listen live. In addition, the Company will provide a supplemental presentation to complement the conference call. The presentation can be accessed on Cantel’s website in the Investor Relations section under presentations.

About Cantel Medical:
Cantel Medical is a leading global company dedicated to delivering innovative infection prevention products and services for patients, caregivers, and other healthcare providers which improve outcomes, enhance safety and help save lives. Our products include specialized medical device reprocessing systems for endoscopy and renal dialysis, advanced water purification equipment, sterilants, disinfectants and cleaners, sterility assurance monitoring products for hospitals and dental clinics, disposable infection control products primarily for dental and GI endoscopy markets, instruments and instrument reprocessing workflow systems serving the dental industry, dialysate concentrates, hollow fiber membrane filtration and separation products. Additionally, we provide technical service for our products.

For further information, visit the Cantel website at www.cantelmedical.com.

Our estimated unaudited financial results presented above are preliminary and are subject to the close of the quarter, completion of our quarter-end closing procedures and further financial review. The preliminary financial and business information presented herein has been prepared by and is the responsibility of our management and is based upon information available to us as of the date hereof. Our independent registered public accounting firm has not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial information. Accordingly, our independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto. These estimates are not a comprehensive statement of our financial results for this period and should not be viewed as a substitute for interim financial statements prepared in accordance with generally accepted accounting principles. Our actual results may differ from these estimates as a result of the completion of our quarter-end closing procedures, review adjustments and other developments that may arise between now and the time our financial results for the period are finalized. As a result, investors should exercise caution in relying on this information and should not draw any inferences from this information regarding financial or operating data not provided..

This press release contains “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995 and other securities laws. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on current expectations, estimates, or forecasts about our businesses, the industries in which we operate, and the current beliefs and assumptions of management; they do not relate strictly to historical or current facts. Without limiting the foregoing, words or phrases such as “expect,” “anticipate,” “goal,” “project,” “intend,” “plan,” “believe,” “seek,” “may,” “could,” “aspire,” and variations of such words and similar expressions generally identify forward-looking statements. In addition, any statements that refer to predictions or projections of our future financial performance, anticipated growth, strategic objectives, performance drivers and trends in our businesses, the impacts and recovery from the COVID pandemic, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions about future events, activities or developments and are subject to numerous risks, uncertainties, and assumptions that are difficult to predict, including the impacts of the COVID-19 pandemic on our operations and financial results, general economic conditions, technological and market changes in the medical device industry, our ability to execute on our strategy, risks associated with operating our international business, including limited operating experience and market recognition in new international markets, changes in United States healthcare policy at both the state and federal level, product liability claims resulting from the use of products we sell and distribute, and risks related to our intellectual property and proprietary rights needed to maintain our competitive position. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made. For a further list and description of these and other important risks and uncertainties that may affect our future operations, see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Quarterly Reports on Form 10-Q we have filed or will file hereafter, as further updated by our Current Report on Form 8-K dated May 12, 2020. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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SOURCE Cantel Medical Corp.

Company Codes: NYSE:CMD