Analyst Conference Call Summary

Cantel Medical

conference date: June 7, 2012 @ 7:00 AM Pacific Time
for quarter ending: April 30, 2012 (Q3, third quarter fiscal 2012)

Forward-looking statements

Overview: Continuing steady profit growth.

Basic data (GAAP):

Revenue was $97.2 million, down slightly sequentially from $97.3 million, but up 18% from $82.6 million year-earlier.

Net income was $8.2 million, up 12% sequentially from $7.3 million and up 64% from $5.0 million year-earlier.

EPS (earnings per share) were $0.30, up 11% sequentially from $0.27 and up 58% from $0.19 year-earlier.


Does not provide.

Conference Highlights:

Net income of $8.2 million was a record. Gross margins in Endoscopy, Disposables and Water Purification benefited reduced costs as acquisitions were integrated, along with a better mix of higher margin products. Gross margin was 43.8%, up near 6% from year-earlier.

Endoscopy segment sales increased 41% y/y with operating profits up 122%. Byrne acquisition accretive with revenues of $12.5 million, products now branded as Medivators procedural products. Equipment sales declined from last-year's record levels, but consumables grew by over 50% and parts & service grew by 20%. Continuing to invest in new production capacity.

Healthcare Disposables operating profit increased 51% on a 6% increase in sales due to improved gross margins. Higher margin products saw improved sales, and raw materials costs decreased. New non-dental markets offer growth opportunity.

Water Purification and Filtration segment revenues were up 11%, with Gambro acquisition integration allowing operating profit to grow by 73%. Dialysis related equipment, supplies and services was strong, but some fall off in industrial systems. Sold 73 systems in the quarter and booked over 80 new orders. Over half of new orders are for the newer, higher-margin systems.

Cash balance ended at $25.0 million. EBITDAS was $18.6 million. $13 million cash flow from operations. $1.3 million capital expenditures. Debt was reduced by $7.5 million to $100.5 million. Will continue to reduce debt at a significant pace.

Overall cost of sales was $54.6 million, leaving gross profit of $42.6 million. Expenses of $28.8 million included $14.2 million for sales, $12.4 million general and administrative, and $2.2 million for research and development. Interest expense was $0.9 million, income taxes $4.7 million.

To keep growth going Cantel Medical is looking at a pipeline of possible acquisitions as well as continuing its own research and development.


Revenue by segment: Endoscopy $38.6 million, water purification $26.0 million, healthcare disposables $19.3 million, dialysis $8.9 million, other $4.4 million.

Margins from here? We will continue to expand our higher margin products, best guess for coming year is this level is normal, but we will try to do better.

International expansion plans? It has been a disappointment for us so far, now at about 10% of sales. We are increasing sales teams in Asia and Europe, with Byrne products being a focus.

Seasonality in Byrne business? In general, no. We tend to have a pretty good Q4 because sales teams are driving for commissions.

Endoscopy reprocessing equipment curve? We are down slightly on sales, not on profits because consumables and services offset slower equipment sales. Some growth should resume later this year.

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Copyright 2012 William P. Meyers