Analyst Conference Call Summary

Cantel Medical

conference date: March 11, 2014 @ 8:00 AM Pacific Time
for quarter ending: January 31, 2014 (Q2, second quarter fiscal 2014)

Forward-looking statements

Overview: Another growth quarter, with record sales.

Basic data (GAAP):

Revenue was $119.0 million, up 0.6% sequentially from $118.3 million and up 12% from $106.4 million in the year-earlier quarter.

Net income was $11.1 million, down 1% sequentially from $11.2 million, but up 6% from $10.5 million year-earlier.

EPS (earnings per share) were $0.27, flat sequentially from $0.27, but up 8% from $0.25 year-earlier.


No specific guidance (Cantel never has provided specific guidance).

Conference Highlights:

This was the third consecutive quarter with organic sales growth of 10%. Two small strategic acquisitions were made in the quarter, Jet Prep in endoscopy and Sterilator in healthcare disposables.

The company has accelerated its investments for future growth, especially for international sales. After the quarter ended Cantel Medical entered into a $250 million credit facility.

Endoscopy segment (Medivators) revenue was a record $44.6 million, up 2% sequentially from $43.6 million, and up 13% y/y. Launching new and improved lines for 2014 and adding to sales team. Operating profit growth was about 12%. Recently acquired Jet Prep for its specialty colonoscopy catheter. Recently launched several new endoscopy product lines and expanding the sales force. Believes there is a large opportunity in international markets.

Healthcare Disposables (Crosstex and SPS) sales were $24.7 million, down sequentially from $26.2 million, up 1% from year-earlier. Hurt by weather and supply chain disruptions. Rapicide sales are doing well. Working on international sales expansion.

Water Purification and Filtration segment (Mar Cor) revenue was a record $40.7 million, up 2% sequentially from $39.8 million, and 26% y/y, or which 18% was organic growth. Central and portable water purification equipment led growth. Gross margins were higher. Backlog remained at record levels.

Therapeutic Filtration (formerly Dialysis) segment sales were down 13% y/y. Now represents only 9% of full operating profit. Still seeking growth, mainly outside the U.S.

44.0% gross margin, sequentially from 43.5%, and up from 42.4% year-earlier. This was despite the impact of the new medical device tax, which is running at about $0.9 million per quarter.

Cash and equivalents balance ended at $19.7 million, down sequentially from $28.5 million due to cash use for acquisitions. Debt ended at $74.5 million; net debt was reduced $6.1 million in the quarter. Cash flow from operations $10.8 million. Cap ex $2.2 million.

EBITDAS was $24.4 million, up sequentially from $24.1 million and up 10% from year-earlier. EBITDA was $ million. Stock based compensation was $ million.

Cost of sales was $66.7 million, leaving gross profit of $52.3 million. Operating expenses were $34.1 million consisting of: $16.1 million selling; $15.6 million general and administrative; $2.5 million research and development. Leaving operating income of $18.2 million. Interest expense $0.6 million. Income taxes $6.5 million.

36.7% effective income tax rate.

For 2014 plans substantial investments in the three major business segments. Adding international teams, notably in China, Germany and Singapore. Will continue to look for acquisitions.

Cantel Medical aspires to double sales and profits during the next five years, largely through international expansion.


China infection control strategy? Focus has been building reprocessing business, and we are the market leader already. We recently got our first chemistry approved, and we have about 5 or 6 products going through registration. We have a comprehensive Chinese strategy, including setting up a legal entity in China.

Competition like Getinga (?sp)? They are in a lot of businesses we are not in. We feel we are doing as well of better than we ever had against our competition. We are the leader in each of our major categories. But we have plenty of competitors. We stay ahead of them by investing faster in sales and new products.

About 40% of new hires have been international. The majority are in Asia.

We may act on an international acquisition some time soon. We now have the financial flexibility to proceed.

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Copyright 2014 William P. Meyers