Owens & Minor, Inc. (OMI) is a global healthcare solutions company that has been at the forefront of the healthcare industry for over a century. Founded in 1882 and headquartered in Richmond, Virginia, the company has evolved from a regional medical supply distributor to a comprehensive provider of healthcare logistics, manufacturing, and patient-focused services.
Business Overview and History
Owens & Minor's journey began in 1882 when it was established as a small medical supply distributor in Richmond, Virginia. The company has operated continuously from its Richmond headquarters since its founding, steadily growing and expanding its reach over the decades. In 1926, Owens & Minor was incorporated, marking a significant milestone in its development.
Throughout its history, Owens & Minor has pursued a strategy of organic growth and strategic acquisitions to strengthen its position in the healthcare market. This approach has enabled the company to achieve international scale, serving healthcare industry customers in approximately 80 countries. Owens & Minor's services have expanded beyond distribution to include product manufacturing, distribution support, and innovative technology services, all aimed at delivering value across the healthcare supply chain.
The company's growth trajectory accelerated in the late 20th and early 21st centuries. In 2017, Owens & Minor made a significant move by acquiring Halyard Health, Inc., which expanded its manufacturing and sourcing capabilities. This acquisition allowed the company to produce a wide range of medical products, including surgical drapes, gowns, and face masks, further diversifying its product portfolio and strengthening its position in the healthcare market.
In recent years, Owens & Minor has focused on optimizing its operations and driving efficiencies across its business segments. The company has made substantial progress in capturing savings and reinvesting those funds into further operational improvements. These initiatives have included advancing its proprietary product portfolio, enhancing distribution center automation, and consolidating its kitting footprint. These efforts have been aimed at improving the company's long-term competitiveness, particularly in its Products & Healthcare Services segment.
Financial Performance and Ratios
Financials
Owens & Minor's financial performance has been characterized by a mix of growth and operational challenges. The company's revenue has shown steady growth, with reported figures of $9.96 billion in 2022, $10.33 billion in 2023, and $10.70 billion in 2024. For 2025, the company expects revenue in the range of $10.85 billion to $11.15 billion.
The company's profitability, however, has fluctuated. In 2022, Owens & Minor reported a net income of $22.39 million, followed by a net loss of $41.30 million in 2023. For 2024, the company reported a net loss of $362.69 million, primarily due to a $307.11 million goodwill impairment charge related to its Apria reporting unit, as well as higher teammate benefit costs and competitive pricing pressures.
In the most recent quarter (Q4 2024), Owens & Minor reported revenue of $2.696 billion, an increase of 1.5% year-over-year. However, the company recorded a net loss of $296.12 million for the quarter, largely due to the aforementioned goodwill impairment charge.
Owens & Minor's cash flow has also been impacted by these challenges. For the fiscal year 2024, the company reported annual operating cash flow of $161.50 million and negative annual free cash flow of $66.67 million.
Liquidity
Owens & Minor's financial ratios reflect its current financial position. As of December 31, 2024, the company's debt-to-equity ratio stood at 0.5869, indicating a relatively balanced capital structure. The company's liquidity position remained stable, with a current ratio of 1.0786 and a quick ratio of 0.4745.
Cash and cash equivalents totaled $49.38 million as of December 31, 2024. Additionally, Owens & Minor had access to $419 million under its Revolving Credit Agreement, providing the company with financial flexibility to pursue its strategic initiatives.
Operational Highlights and Strategies
Owens & Minor's business is divided into two main segments: Products & Healthcare Services (P&HS) and Patient Direct.
The P&HS segment includes the company's medical distribution and global products divisions. In 2024, this segment generated $8.02 billion in net revenue, representing 75% of the company's total consolidated net revenue. The segment's operating income was $53.01 million, a slight decline from $57.81 million in the prior year, primarily due to increased teammate benefit costs and competitive pricing pressures, partially offset by revenue growth and savings from sourcing initiatives.
The Global Products division within the P&HS segment is vertically integrated, starting with North America-based manufacturing using proprietary technology, teammates, and owned or leased production facilities. This division manufactures and sources a portfolio of branded and proprietary medical and surgical supplies, including products for infection prevention, across acute, alternate site, and consumer channels. The company has recognized brands across its Global Products portfolio, such as sterilization wrap, surgical drapes and gowns, facial protection, protective apparel, medical exam gloves, and custom and minor procedure kits.
The Patient Direct segment provides delivery of disposable medical supplies sold directly to patients and home health agencies, and is a leading provider of integrated home healthcare equipment and related services in the U.S. This segment offers a comprehensive range of products and services for in-home care and delivery across diabetes treatment, home respiratory therapy, obstructive sleep apnea treatment, and other home medical equipment and patient care product lines. In 2024, the Patient Direct segment generated $2.68 billion in net revenue, representing 25% of the company's total consolidated net revenue. Operating income for this segment was $260.15 million, an increase from $246.86 million in the prior year, driven by revenue growth, cost savings from IT initiatives, and a benefit related to the Philips Respironics recall, partially offset by increased teammate benefit costs and unfavorable changes in revenue mix.
Owens & Minor's strategic priorities include
1. Optimizing the P&HS segment: The company is actively engaged in discussions regarding the potential sale of its P&HS segment, as it looks to focus on the higher-growth and higher-margin Patient Direct business.
2. Leveraging the Apria acquisition: Owens & Minor is working to integrate Apria's operations and capitalize on the growing demand for home-based healthcare services.
3. Enhancing financial flexibility: The company has been actively reducing its debt levels, with a total debt reduction of $647 million over the past two years. This deleveraging strategy has improved the company's financial position and provided it with greater flexibility to pursue strategic initiatives.
4. Driving profitable growth: Owens & Minor is committed to delivering sustainable growth and profitability, with a focus on expanding its market share, improving operational efficiency, and developing innovative solutions for its healthcare customers.
5. Geographic expansion: While 97.7% of revenue is currently generated in the United States, the company is exploring opportunities to expand its international presence, which currently accounts for 2.3% of revenue.
Risks and Challenges
Owens & Minor operates in a highly competitive and rapidly evolving healthcare industry, which presents several risks and challenges:
1. Pricing pressure and margin compression: The company faces ongoing pricing pressure from its customers, including group purchasing organizations (GPOs) and healthcare providers, which can put strain on its profit margins.
2. Regulatory and compliance risks: As a healthcare-focused company, Owens & Minor is subject to a complex web of federal, state, and local regulations, which can increase its operational costs and expose it to potential legal and reputational risks.
3. Supply chain disruptions: The company's manufacturing and distribution operations can be impacted by global supply chain challenges, such as raw material shortages, transportation delays, and geopolitical tensions.
4. Goodwill impairment: Owens & Minor's recent $307.11 million goodwill impairment charge related to its Apria subsidiary highlights the potential for future impairment charges, which can adversely affect the company's financial performance.
5. Integration and execution risks: The successful integration of acquisitions, such as Apria, is critical to Owens & Minor's growth strategy, and any missteps in this process could negatively impact the company's financial and operational performance.
Outlook and Conclusion
Despite the challenges faced by Owens & Minor, the company's strategic transformation and focus on higher-growth, higher-margin businesses position it for long-term success. The potential sale of the P&HS segment and the integration of the Apria acquisition are key milestones that could unlock significant value for the company and its shareholders.
Owens & Minor's 2025 guidance reflects its commitment to profitable growth. The company forecasts revenue in the range of $10.85 billion to $11.15 billion, with a midpoint of $11.0 billion, representing mostly mid-single-digit percentage growth in the Patient Direct segment. Adjusted EBITDA is expected to be between $560 million and $590 million, with a $575 million midpoint, representing approximately 10% growth over 2024. The company also projects adjusted EPS in the range of $1.60 to $1.85 per share, with a midpoint of $1.73, representing approximately 13% growth.
Furthermore, Owens & Minor expects to have at least $200 million available for debt reduction in 2025, driven by EBITDA growth, lower cash spend on exit/realignment items, and working capital improvements. The company's Board has also authorized a $100 million share repurchase program, which management plans to use opportunistically if the stock remains undervalued.
It's important to note that the current guidance does not include any impact from the proposed acquisition of Rotech, which is expected to close in the first half of 2025, or any potential impact from a sale of the P&HS segment, which the company is actively evaluating.
Owens & Minor's focus on enhancing its financial flexibility, optimizing its operations, and expanding its patient-centric offerings should help it navigate the evolving healthcare landscape and capitalize on the growing demand for home-based care and integrated healthcare solutions. The company's performance in 2024, which included mid-single-digit top-line growth and 13% growth in adjusted EPS, while continuing to reinvest in the business, demonstrates its ability to execute on its strategic initiatives.
As Owens & Minor continues to execute on its strategic initiatives, investors will be closely watching the company's ability to maintain its momentum, address its operational challenges, and deliver sustainable long-term value. The company's strong position in the Patient Direct segment, which outpaced market growth with mid-single-digit growth for both the quarter and the full year in 2024, provides a solid foundation for future growth. With its comprehensive range of healthcare products, services, and solutions aimed at reducing costs and optimizing performance across the healthcare supply chain, Owens & Minor is well-positioned to capitalize on the evolving needs of the healthcare industry.