Steris Plc (NYSE:STE) Q4 2020 Earnings Conference Call - Final Transcript

Good day, and welcome to the STERIS Plc Fourth Quarter 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Julie Winter with Investor Relations. Please go ahead.

Thank you, Chad. And good morning, everyone. As usual, on today's call, we have Walt Rosebrough, our President and CEO; and Mike Tokich, our Senior Vice President and CFO. And I do have a few words of caution before we open for comments.

This webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission or rebroadcast of this call without the expressed written consent of STERIS is strictly prohibited. Some of the statements made during this review are or may be considered forward-looking statements. Many important factors could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, those risk factors described in STERIS' securities filings. The Company does not undertake to update or revise any forward-looking statements as a result of new information or future events or developments. STERIS' SEC filings are available through the Company and on our website.

In addition, on today's call, non-GAAP financial measures, including adjusted earnings per diluted share, segment operating income, constant currency organic revenue growth and free cash flow will be used. Additional information regarding these measures, including definitions, is available in today's release, along with reconciliations between GAAP and non-GAAP financial measures. Non-GAAP financial measures are presented during this call with the intent of providing greater transparency to supplemental financial information used by management and the Board in their financial analysis and operational decision-making.

With those cautions, I will hand the call over to Mike.

Thank you, Julie. And good morning, everyone. It's once again my pleasure to be with you this morning to review the highlights of our fourth quarter performance. For the quarter, constant currency organic revenue growth was 8%, driven by volume and 50 basis points of price. We continue to experience strong underlying growth from our customers and success with new products. A total of $14 million from tuck-in acquisitions is included in constant currency organic revenue growth, primarily in health care products, spread across capital, consumables and service.

Given the timing of our year-end, we were fortunate to have had a relatively limited impact on our business due to COVID-19 during the fourth quarter. We estimate that revenue was negatively impacted by approximately a net $10 million. Gross margin for the quarter increased 60 basis points to 44.4% and was impacted favorably by price, productivity and somewhat offset by higher labor costs. EBIT margin for the quarter was 21.8% of revenue, a decrease of 30 basis points from the fourth quarter last year, due, in part, to an increase in expenses relating to higher incentive compensation related to our strong performance and an increase in R&D spending. The adjusted effective tax rate in the