Accendra Health (ACH) Q4 2017 earnings summary

Executive summary

• FY17 revenue fell 4.2% YoY to $9.318B; reported operating earnings were $89.3M and net income was $72.8M, while adjusted operating earnings were $179.8M and adjusted net income was $97.5M.

• Strategic transformation and diversification included the Byram Healthcare acquisition and the pending $710M Halyard Surgical & Infection Prevention deal; management cited a challenging year amid cost and competitive pressures.

Financial highlights

• FY17 revenue was $9.318B vs. $9.723B in FY16; reported operating earnings were $89.3M vs. $199.6M, and net income was $72.8M vs. $108.8M.

• Reported diluted EPS was $1.20 vs. $1.76; adjusted EPS was $1.61 vs. $2.17, including adjustment for acquisition-related amortization, restructuring, SaaS costs and tax reform.

• Q4 revenue was $2.390B, gross margin $315.2M, net income $23.0M and diluted EPS $0.38; quarterly results included $24.7M after-tax acquisition and realignment charges and a $34.6M tax benefit.

Outlook and guidance

• Gross margin pressure was expected to continue into 2018, and competitive margin pressure was expected to persist through 2018.

• Halyard S&IP acquisition for $710M cash was expected to close early in Q2 2018; additional realignment costs were anticipated as transformation actions continue.

• First-quarter 2018 dividend was set at $0.26/share, up 1.0% from 2017; quarterly dividends were expected to continue, subject to board discretion and financial conditions.