Owens & Minor outlines pure-play home-based care focus with $2.76B–$2.82B 2025 revenue guidance amid major divestiture

Earnings Call Insights: Owens & Minor (OMI) Q3 2025

MANAGEMENT VIEW

* Edward Pesicka, President and CEO, announced a definitive agreement with Platinum Equity to sell the Products & Healthcare Services (P&HS) segment, including both the Medical Distribution and Global Products divisions. Pesicka stated that "P&HS will be better positioned to compete in today's evolving market under Platinum Equity's private ownership model," and confirmed Owens & Minor will retain an equity interest in the business.
* Pesicka revealed a rebranding of the public entity following the transaction, emphasizing a sharpened focus on the Patient Direct segment: "Our capital allocation, strategic priorities and execution are no longer split. They are unified around advancing the future of home-based care through Patient Direct."
* The CEO highlighted market opportunities in chronic conditions such as diabetes and sleep apnea, stating, "we will focus our investments on technology and automation, which will, one, improve the patient's experience; two, allow us to quickly scale our business; three, increase awareness; and four, further reduce our cost to serve."
* Pesicka referenced a preferred provider agreement with Optum as part of an aggressive sales strategy and affirmed that top management, including himself, CFO Jon Leon, and EVP Perry Bernocchi, will remain at the helm post-divestiture.
* CFO Jonathan Leon commented on the signed sale agreement and the company’s future as a pure-play home-based care company, expressing, "We look forward to having a simpler business model and a cleaner investment thesis."

OUTLOOK

* The company reaffirmed 2025 full-year guidance: revenue between $2.76 billion and $2.82 billion, adjusted net income between $1.02 and $1.07 per share, and adjusted EBITDA between $376 million and $382 million. Leon stated, "we expect full year revenue to come in toward the bottom of the guidance range."
* Management indicated fourth quarter revenue is expected to show a similar year-over-year growth rate but be seasonally improved from the third quarter in absolute dollar terms.
* The interest expense range has increased due to a change in allocation between continuing and discontinued operations, but EPS guidance remains unchanged.

FINANCIAL RESULTS

* Third quarter revenue from continuing operations was $697 million, compared to just under $687 million in the third quarter of last year, with key growth in sleep therapy, ostomy, and urology categories.
* Diabetes revenue was nearly flat year-over-year but improved versus the previous quarter.
* Adjusted EBITDA from continuing operations was $92 million, compared to $108 million last year; the prior year included a $6 million one-time benefit impacting the comparison.
* Adjusted net income for the quarter was $0.25 per share, compared to $0.36 per share in Q3 2024. Year-to-date adjusted net income per share was $0.80 versus $0.64 last year.
* Year-to-date revenue reached nearly $2.1 billion, up 3.4% from the prior year. Year-to-date adjusted EBITDA was $285 million, a 6.3% increase from $268 million last year.
* Stranded costs for the quarter were $11 million, consistent with the previous year and prior quarter.
* Net debt as of September 30 was $2.1 billion, with an increase attributed to costs related to the exit of the planned Rotech acquisition and new facility start-up expenses.
* Levered free cash flow from continuing operations was $28 million for Q3 and $78 million for the first nine months.

Q&A

* Daniel Christopher Clark, Leerink Partners: Asked about the durability of current trends into 2026 and the progress with selling into the Optum channel. Pesicka responded, "Selling in the Optum channel, it's new. We're -- we just recently signed the preferred provider agreement. We're tracking where we expect to track on that, but it's going to create more and more opportunities for us as we move forward." Leon noted a large customer loss in 2026 will impact the full year but expects "a fairly strong 2026" otherwise.
* Kevin Caliendo, UBS: Asked about modeling run rates and free cash flow for 2025 and beyond, and about debt covenants post-divestiture. Leon explained, "absent the exiting one customer...we'll have a pretty decent top line growth rate...some margin improvement and cash flow improvement given the absence of that loss." On covenants, Leon said, "Very comfortable in compliance, and we expect to remain comfortably compliant throughout."
* Daniel Grosslight, Citigroup: Probed on preferred vendor agreements and the impact of the Kaiser contract loss. Pesicka stated replacing the EBITDA and cash flow from the lost contract "will take very, very little additional revenue to pick up and cover that." Bernocchi described the Optum agreement as "in its early stage" with 450 salespeople marketing to over 100,000 referral sources.
* Grosslight also inquired about free cash flow headwinds related to the new kitting facility. Pesicka and Leon detailed that over-acquired inventory for the facility startup will "work itself out through the next quarter plus."

SENTIMENT ANALYSIS

* Analysts raised forward-looking questions on contract transitions, free cash flow, revenue durability, and debt covenants, indicating a pragmatic tone with a focus on operational resilience and margin sustainability. Tone was neutral to slightly cautious, particularly concerning the impact of customer transitions and divestiture execution.
* Management's tone during prepared remarks was confident and optimistic, highlighting "an exciting time in the history of Owens & Minor." In Q&A, responses were measured, emphasizing the limited earnings impact from lost contracts and a proactive approach to operational changes, with statements like "we expect a fairly strong 2026" and "Very comfortable in compliance."
* Compared to the previous quarter, analyst tone remained consistently focused on structural and financial transition questions, while management maintained a confident outlook but acknowledged upcoming challenges such as customer turnover and stranded costs.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for revenue, adjusted net income, and adjusted EBITDA for full-year 2025 remains unchanged from the previous quarter.
* Strategic focus has shifted from anticipation of the P&HS sale to a post-divestiture pure-play Patient Direct business, with increased emphasis on technology investment and rapid scaling.
* Analysts continue to focus on contract transitions, margin impacts, and stranded costs, mirroring previous quarter concerns.
* Key metric changes include a sequential improvement in diabetes revenue growth versus Q2, but overall adjusted EBITDA and net income per share declined due to the absence of the prior year's one-time benefit.
* Management confidence in a simplified business model and proactive debt management is consistent, with continued emphasis on using divestiture proceeds for debt reduction.

RISKS AND CONCERNS

* Management highlighted the upcoming loss of a large customer contract in 2026 as a known headwind but noted its limited impact on margin and cash flow.
* Stranded costs from the divestiture remain a challenge, with approximately $40 million expected on an annualized basis.
* Elevated net debt linked to transaction and facility start-up expenses is being addressed with a focus on rapid free cash flow generation and debt repayment.
* The company is collaborating with industry partners regarding potential regulatory changes in competitive bidding for home-based healthcare and DME.

FINAL TAKEAWAY

Owens & Minor's third quarter 2025 earnings call marked a significant strategic pivot, with the company advancing toward a pure-play home-based care model following the announced divestiture of its Products & Healthcare Services segment. Management reaffirmed guidance and expressed confidence in the Patient Direct segment's growth potential, supported by new preferred provider agreements and a streamlined capital allocation strategy. The upcoming loss of a large customer contract in 2026 is expected to have limited impact on profitability, with management emphasizing strong cash flow generation and proactive debt reduction as key pillars for the next phase of growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/omi/earnings/transcripts]

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