Steris Plc (NYSE:STE) Q4 2020 Earnings Conference Call - Final Transcript
May 14, 2020 • 10:00 am ET
Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question will come from Matt Mishan with KeyBanc. Please go ahead.
Great. Thank you and thanks for taking the questions, guys. The less than -- while, the less than 10% decline for April seems like remarkable, given your overall exposures, I just wanted to understand a little bit more around capital equipment and how your -- how some of your customers are kind of handling the backlog? Does it reflect like -- the backlog was up like 10%, especially in Healthcare Products. Does it reflect orders that have been pushed out, but not shipped? And like how should we be thinking about like new orders over the like the last eight weeks?
Walter M Rosebrough
Yeah. I mean, backlog has been -- is, by definition, orders coming in minus shipments going out and plus whatever was already there. So it does reflect all those kind of things. It's very common for us to have last minute pushouts for a couple of weeks or a month because their projects are not coming through on time. Typically, if you think about our capital business in health care, it's divided into what we call turn business or replacement business, where you're just ordering a new table because you want one or because you're other one broke or a new light or something as opposed to a project where they're renovating a major section of the operating room or central sterile department. And typically, that's a 60-40 split, 60% turn or replacement business and 40% project type business. We've seen this several times whenever hospitals become a bit uncertain on capital, the projects actually, if the steel is in the ground, keep moving forward because once in -- the steel is in the ground, they need to finish the project. It costs them too much to slow down or stop. On the other hand, the turn business tends to slow down a little bit until they get more visibility to what is going on. And so that's a typical thing that happens in an economic slowdown for hospitals, not necessarily the general economy, but the health care economy. We saw that -- well, we've seen it many, many times when the hospital is under some kind of financial constraint or financial pressure. If anything, we would expect to see something similar. We have not seen that to date. We've not seen significant pushouts, significant -- cancellations are super rare. We haven't seen any cancellations. And actually, orders have replicated last year for the last couple of months. So we have not seen a change in order pattern. Having said that, since our reps can't talk to hospital people face-to-face these days, I would anticipate seeing an order slowdown here in the next month or two or three, it takes time for orders to occur. But the question is, what's the magnitude of that slowdown? And the good news is we had extraordinary backlog, as you