Cantel Medical Corp. (NYSE:CMD) Q4 2020 Earnings Conference Call - Final Transcript
Sep 17, 2020 • 08:30 am ET
George L. Fotiades
we except to gradually improve our EBITDAS margin from the first quarter to the fourth quarter, so that we exit the fiscal year at 19-plus percent, which is the same EBITDAS margin with which we entered the COVID impact earlier in calendar 2020.
We will also continue to execute on cash management and pay down debt as practical. Finally, we will fund and execute several growth projects, which Peter will cover in some detail.
Before turning it over to Shaun, I want to underscore a key takeaway about our future. While COVID has had a near-term impact on procedures and revenue, we are seeing how COVID is elevating the importance and relevance of Cantel's offering to customers, a factor that will be with us for the longer term.
In our Medical and Dental businesses, we provide infection prevention product and solutions, education, training and on-the-ground support that are instrumental to providers being able to deliver care in this fast developing new normal. We are gearing up the service demand, as you will hear more about.
So, with that, Shaun.
Thanks, George, and good morning, everyone. I'm going to go through our key financial results with brief commentary. Following that, like last quarter, I'd like to provide additional context to the financial results during COVID.
I will begin with the year-over-year comparisons; and given the volume impact, I will close with specific references to more relevant sequential comparison to 3Q 2020, as well as provide some insight into the first part of 2021. Of course, the standard reported financial details are available on the earnings deck for you to follow along, and we can cover any additional questions you may have during the Q&A.
Net sales decreased 2.5% year-over-year in the fourth quarter '20 versus the prior year and negative 2.7% on a constant currency basis. M&A accounted for 15.7% growth, which was offset by an organic decline of negative 18%. This exceeded our Q4 expectations with procedural volumes in both Medical and Dental recovering faster in June and July.
Overall, our Life Sciences and Dialysis segments have remained resilient during the pandemic with Life Sciences growing 0.7% and Dialysis relative flat as expected. The Dental segment grew 59% on a reported basis, driven by the acquisition of Hu-Friedy, but declined negative 20.6% on an organic basis, primarily due to the negative impact of COVID-related deferrals of routine dental procedures.
Finally, the Medical segment decreased by negative 24.8% on an organic basis in the quarter, also driven by COVID-related procedural declines. Capital equipment decreased approximately 36% with recurring revenue declining approximately 22% in the quarter versus the prior year.
Sequentially from Q3, recurring revenue in the fourth quarter actually increased approximately 4% as elective procedures returned in June and July.
Turning to consolidated margins. Our GAAP gross margins contracted by negative 320 basis points to 43% versus 46.2% in the fourth quarter 2019, while non-GAAP gross margins declined by 340 basis points year-over-year to 43.7%.
If you recall in the third