STERIS plc

Good day, everyone, and welcome to the Staris PLC third quarter 2023 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Julie Winter, Investor Relations. Ma'am, please go ahead.

Thank you, Jamie, and good morning, everyone. As usual, speaking on our call today will be Mike Tookett, our Senior Vice President and CFO, and Dan Crestio, our President and CEO. I do have a few words of caution before we open for comments. This webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission, or rebroadcast of this call without the express written consent of Staris is strictly prohibited. Some of the statements made during this review are, or may be considered, forward-looking statements. Many important factors could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, those risk factors described in Staris's securities filings. The company does not undertake to update or revise any forward-looking statements as a result of new information or future events or developments. Staris' SEC filings are available through the company and on our website. In addition, on today's call, non-GAAP financial measures including adjusted earnings per diluted share, adjusted operating income, constant currency organic revenue growth, and free cash flow will be used. Additional information regarding these measures, including definitions, is available in our release, as well as reconciliations between GAAP and non-GAAP financial measures. Non-GAAP financial measures are presented during this call with the intent of providing greater transparency to supplemental financial information used by management and the board of directors in their financial analysis and operational decision making. With those cautions, I will hand the call over to Mike.

Thank you, Julie, and good morning, everyone. It is once again my pleasure to be with you this morning to review the highlights of our third quarter performance. For the quarter, constant currency organic revenue increased 7%, driven by volume as well as 300 basis points of price. As anticipated, the divestiture of the renal care business impacted our revenue comparisons to the prior year by about $47 million, which is detailed in the press release tables. This is the last quarter of a year-over-year impact for the renal care business as we divested it in January of last year. The integration of Cantel Medical continues to go well. We achieved approximately $10 million of cost synergies in the third quarter, bringing our year-to-date total to about $45 million. We are well on track to achieve our stated goal of approximately $50 million in fiscal year 2023. As anticipated, gross margin for the quarter decreased 200 basis points compared with the prior year to 43.1% as pricing, currency, and the favorable impact from the divestiture of renal care were more than offset by lower productivity, unfavorable mix, and higher material and labor costs. Sequentially, the impact of material and labor costs have improved and totaled about $15 million in the quarter compared to the prior year. This puts us at about $75 million year-to-date, with our outlook of $90 million for the year remaining unchanged. EBIT margin declined 10 basis points to 23.9% of revenue, compared with the third quarter last year, which reflects the gross margin pressures mentioned earlier, which were partially offset by lower SG&A expenses. The adjusted effective tax rate in the quarter was 23.4%, higher than the prior year due primarily to geographic mix and favorable discrete items, which occurred in last year's third quarter. Net income in the quarter was $202.4 million, and earnings were $2.02 per diluted share, reflecting the lower anticipated volume. Capital expenditures for the first nine months totaled $290.5 million, while depreciation and amortization totaled $410.7 million. Year to date, our capital expenditure spending has been higher than anticipated, primarily due to timing of our investments within the AST segment. We still expect our full year capital expenditures to be approximately $330 million. Total debt increased slightly in the third quarter to just over $3 billion, reflecting borrowings to fund a few small acquisitions and share repurchases. Total debt to EBITDA is slightly over 2.3 times gross leverage. Free cash flow in the first nine months of the year was $263 million. Free cash flow was limited by higher than planned capital spending, mainly due to timing, and higher levels of inventory. With continued pressure on working capital, in particular inventory and now accounts receivables, We now anticipate the free cash flow for the full year will be about $500 million, or a reduction of about $100 million based on our last guidance. With that, I will turn the call over to Dan for his remarks.