Carefusion 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“We had a great start to the year in our Infusion business. Our pace of installations was ahead of plan, enabling us to grow revenue in the business better than our expectations.”

“Our Respiratory business declined due to the absence of a large government contract we had in the prior-year period. Our diagnostics products grew nicely following the long-anticipated SentrySuite product launch near the end of last year, and we continue to anticipate this business returning to growth during this fiscal year.”

“Turning to the Procedural Solutions segment. We continue to see nice growth across all 3 businesses, led by our clinically differentiated products like ChloraPrep and our PleurX drainage system. Our Specialty Disposables business continue to optimize its portfolio with products we manufacture that are clinically relevant or where we have a differentiated distribution relationship.”

“We are strengthening our internal foundation to improve the customer experience and simplify the company, thereby freeing resources to: number one, reinvest in innovation; number two, expand margins; and number three, grow in markets outside the U.S.”

“In Procedural Solutions, where the innovation cycles are faster, we recently completed a review of projects that will come to market during the next 18 months. One of those products is a needleless IV connector that features neutral reflux at disconnect. This product has now received 510(k) clearance and will be commercially available in December.”

“our Infusion business executed on installing our strong fourth quarter committed contracts and grew revenue by 8% in the quarter.”

“Procedural Solutions delivered another quarter of balanced growth across its portfolio. The segment continued to execute against the roadmap to drive growth in our strategic, clinically differentiated products. The results were 7% year-over-year revenue growth in the segment, including double-digit gains in Medical Specialties and Specialty Disposables.”

“Consolidated revenue of $830 million declined by 1% on a reported and constant currency basis, which was in line with our expectations. Continued revenue growth in Procedural Solutions of 7% was offset by a 5% year-over-year decline in Medical Systems. As we said would be the case on last quarter’s call, Medical Systems revenue was affected by the product line transition to our new Pyxis ES platform.”

“Procedural Solutions revenue grew to $306 million or 7% over the prior year. We saw balanced growth across geographies and in each business line. We continue to see strength in our clinically differentiated products, most notably ChloraPrep and PleurX, and they drive — and they drove the results in Infection Prevention and Medical Specialties, which respectively had 3% and 11% revenue growth in the quarter.”

“Moving to Medical Systems. Revenue was down $27 million or 5% to $524 million for the quarter. Again, that’s in line with our expectations. Within Medical Systems, Dispensing Technologies revenue was down 14% to $211 million.”

“Infusion Systems had a great start to the year. Revenue was up from $203 million to $219 million. That’s 8% growth.”

“we see in the [hospital] CapEx environment, it tends to be relatively stable from what we’ve seen in the last couple of quarters. So we’re not seeing any significant delta off of that.”

” What you tend to see when you get a new generation of products in this kind of category is that if you look out 2 years, you end up with about 75% of your new contracts that you’re writing are for that new platform.”

Carefusion FY 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“Being a hospital CEO right now has got to be one of the tougher jobs out there, right? They’ve got a shifting revenue line. They’re running multiple business models at the same time. They’re looking at the effects of external factors on their business. And quite frankly, it’s just led them to be a bit cautious in their approach. Now on the — the benefit side of it is, over the last, oh, I’d say, 6 months, 9 months, but really, it seems to have been accelerating, there seems to be more and more a real understanding that these institutions need to drive operational simplicity, and they have to do it in a way that’s not going to compromise patient safety. And every conversation — I could walk through multiple conversations I have had with CEOs of hospitals or with other senior sort of C-level administrators within these health systems. They’re trying to understand how they can drive out costs, how they can get control of their costs, how they can increase visibility of their operations, how they can reduce variability in their service lines, and do it in a way that’s profitable and do it in a way that helps improve patient safety. That’s our positioning. So what we’ve seen from a transaction perspective is it just made them a bit cautious at the moment. They are — we’re not hearing nos. I mean, competitively, we’re doing quite well, actually. These transactions are not being canceled. They’re just — they’re basically stuck on the desk, while these operations, while these leaders say, “Listen, I just need to understand my next steps better.”

“The systems business, we should all just remind ourselves that we’re a little different than what you’d call classic capital business, right? Capital businesses, when they are lumpy, they’re truly lumpy throughout the whole income statement, they’re lumpy through the cash flows, et cetera. We call it a systems business because it is a systems business. And so our — for instance, our Pyxis business, yes, when there are some elongation in the decision cycle, that may hurt the revenues — the revenue top line short-term, but that just means that they’re extending out their current operating leases, our cash flow looks great.”

“let’s put ourselves in the position of these hospital CEOs and the C-suite people. They are trying to drive down their costs. They’re trying to do it in a way — increase nurse ratios where it was 1 nurse to 4 patients. Now they want 1 nurse to 6 patients. They’re trying to control their medication expenses. And while they’re doing it, they really, really want to make sure that they’re taking care of these patients and they’re not risking them. That’s what we’re doing. That’s what our strategy is all about.”

“Hospital CEOs…they’re focused on efficiencies. They know that to succeed, they have to drive operational simplicity within their operations.”