Q4 2021 Steris plc Earnings Call
[music].
Good morning, everyone and welcome to the <unk> plc fourth quarter 2021 conference call.
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And at this time I'd like to turn the turn the conference call over to Julie Winter Investor Relations Ma'am. Please go ahead.
Jamie and good morning, everyone.
Speaking on today's call, we have Mike <unk>, our senior Vice President and CFO.
From our president and CEO and Dan Kress, our Chief operating officer.
Did you have a few words of caution before we open for kind of.
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In addition on today's call non-GAAP financial measures, including adjusted earnings per diluted share adjusted operating income constant currency organic revenue and free cash flow will the is.
Additional information regarding these measures, including definitions is available in today's release.
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Non-GAAP financial measures are presented during this call with the intent of providing greater transparency to the supplemental financial information used by management and the board of directors in their financial analysis and operational decision, making with.
With those cautions I will hand, the call over to Mike.
Thank you Julie and good morning, everyone is 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 increased <unk>, 3% as favorable pricing was somewhat offset by organic volume, which was slightly lower than last year's strong pre COVID-19 performance.
Key surgical added $32 million to revenue in the quarter, which is somewhat lower than we originally anticipated due to continued disruption the disruption from COVID-19.
You will notice that we have a small acquisition called out within a S. T. In January we completed the acquisition of 1 of our suppliers. While this is the vertical integration, we do expect revenue generation of approximately $25 million annually.
Gross margin for the quarter was flat with the prior year at 44, 3% as favorable pricing and cost management were offset by mix and currency.
EBIT margin for the quarter was $22 3 per cent of revenue an increase of 60 basis points from last year.
The adjusted effective tax rate in the quarter was 25% and 27% for the full fiscal year.
Higher the last year and higher than our expectations due to income mix from higher tax rate countries and discrete item adjustments, including stock compensation.
As we noted in the release. This morning, we have discontinued the use of LIFO. We believe that the FIFO method of accounting is preferable because of because it more closely resembles the physical flow of our inventory of lines, how we manage the business and improves comparability to other companies.
Net income in the quarter was flat at 140.
Point $3 million at earnings per share, where the dollar 63.
Our balance sheet as of continued source of strength of the company our leverage ratio at the end of the fourth quarter is below 1.9 times as we continue to pay down debt post the key surgical acquisition, considering our cash position of $220 million access to available credit lines and the low leverage ratio we have.
Our well positioned from a liquidity standpoint, following the close of Cantel medical we expect our leverage ratio to be about 3 times as we take advantage of the financing arrangements already put in place, including our first ever public debt offering.
During the fourth quarter capital of expenditures totaled $74 $8 million, while depreciation amortization was $59 million free cash flow for fiscal 'twenty. 1 was strong at 450.9 billion an increase of approximately $70 million over last year, primarily due to working cap.
Flow improvements somewhat offset by higher capital expenditures with that I'll turn the call over to Walt for his remarks.
Thanks, Mike Good morning, everyone and thank you for joining us today.
Mike has already discussed the quarter. So I will focus on the full year, and then turn the call to Dan to discuss our outlook for fiscal 'twenty 2.
Looking back on FY 'twenty, 1 stares fared better than our most positive expectations at the beginning of this unprecedented time in our history.
The commitment of our people and the resilience of our businesses allowed us to weather the storm in a positive manner from.
Remarkably our revenue was up somewhat in fiscal 2021 as our existing business was stable in total while we completed the acquisitions that added to our growth for the year.
Our net income and free cash flow, both improved double digits, as we manage costs and working capital across the business.
From a segment perspective, our life science business had another very strong year growing constant currency organic revenue, 11% as our biopharma customers used our consumables and ordered a record amount of capital equipment.
Our E. S. T segment also had a very good year ending up 7% on a constant currency organic revenue basis. Despite the slow start due to the global decline in healthcare procedure volumes.
While global procedures are not yet back to pre COVID-19 levels. A S. T was able to grow as the year progressed because of our previous capacity expansions allowed us to process and the use products related to COVID-19 treatment testing in vaccine production.
As procedure volumes began to recover in the second half and core medical device customers increased manufacturing a S. T has returned to more historic growth rates.
Our healthcare business was clearly the most impacted by the pandemic and the related decline in procedure volumes with constant currency organic revenue down 4% for the year.
By the end of the fiscal year, our consumables were trending up nicely in line with procedures and capital equipment orders were very strong leading to our record year end backlog of over $200 million.
Our R&D teams have done a great job updating our offerings across our healthcare business the past year or so.
With the addition of key surgical in Cantel products and services, along with Saracens portfolio, we will be better positioned than ever to meet the needs of our customers going forward.
The strength of our balance sheet allowed us to operate almost normally last year, increasing our dividend investing in R&D and capital spending opportunities in all of our current businesses.
Not laying off any of our people for COVID-19 related volume reductions completing the.
The acquisition of key surgical in November and executing the merger agreement with Cantel medical.
We believe these long term oriented actions will propel future revenue and profitability growth across our business.
In support of the Cantel transaction, our people achieved another significant milestone when we completed our first public debt offering.
This was after securing investment grade ratings on our maiden voyage with all 3 rating agencies.
Once the cantel deal closes and that debt is on our books, we are committed to reducing our leverage to continue to justify those strong ratings.
We expect the strength of our balance sheet to remain a hallmark of our company going forward.
All in all considering the additional issues required by the pandemic.
Tremendous set of achievements for stare us this past year.
As you might expect this is my final stairs earnings call.
As I shift to my new role as an advisor to management and the board I am very pleased to hand, the range to the anchor Sto, who will succeed me as president and CEO.
And as of Veterans Senior executive of our company, having spent more than 2 decades of tariffs with increasing responsible leadership roles. He knows the business.
He is fortunate to be supported by an outstanding Senior management team most of whom have also been with our company for a decade or more of a success.
I am confident that our company is in very good hands with Dan and the sterile leadership team.
I wanted to take a moment also to recognize our analysts.
Several of the you have been with us for many years, Chris for 12, Larry from 9 Dave and Matt 7 years each.
Mike and Mike have picked up coverage fairly recently and we certainly value. There addition.
We appreciate all of your efforts on behalf of your clients and our long term shareholders.
And it has been my absolute pleasure to work with each of you this past decade or so.
In closing I would like to thank the people of stairs from making our company what it is today and better yet.
It will be tomorrow the.
<unk> 13000 people working every day in pursuit of our mission soon to be over 16000 are what make the company tick.
I also greatly appreciate our board members of the last 14 years I've been blessed to work with and for a talented and diverse board and 2 wonderful chairman and Jack.
And now most of the <unk>.
The sports guidance will continue to help Dan and the team move ever forward.
And I am tremendously grateful to all of our long term shareholders, who have believed in the value of our company provides to our customers our people and our shareholders.
It's been my honor and pleasure to serve as CEO of this great company for nearly 14 years and I look forward to its continued successes.
I'm, absolutely confident that the best is yet to come as you will hear next from Dan while reviewing our outlook.
Mr Crest deal.
Thanks, Walter I wanted to Echo Walt and Mike Welcome to all of you. We really appreciate you taking the time to join US today as Walt discussed stares had a great year in fiscal 2021 all things considered.
And we remain very excited about what is yet to come.
Not only do we expect a nice rebound in our base business in fiscal 2022.
But we look forward to bringing together 3 great companies stairs key surgical and soon cantel.
That does however, make modeling of stare us a bit more difficult for all of you. So I will focus my comments today on our overall outlook and then walk you through our expectations for the new fiscal year.
Including acquisitions.
We expect total revenue of approximately $4 $5 billion.
That assumes 10 months of inorganic revenue from Cantel, the remaining 7 months of key surgical before it anniversaries along with smaller E. S T supplier as inorganic contributors.
It also assumes about 15 million favorability from foreign currency.
Underlying that growth will be constant currency organic revenue growth of 8% to 9% for legacy stairs.
That growth rate will be driven by a significant rebound in our healthcare segment the.
The ongoing success of a S T and.
And lower than normal growth versus comparisons to fiscal 'twenty 'twenty. 1 is very strong performance for the life Sciences segment.
Before moving on to profitability I wanted to take a moment to discuss the upcoming changes to our segments. Following the completion of the Cantel acquisition.
Today Cantel has 4 major businesses medical dental life Sciences and dialysis.
Medical and dialysis will become part of stair says healthcare segment.
As we have said previously we anticipate the dental will be its own segment.
The more closely align with stair assist customers, we will split can't health life Sciences business with the renal business about 85% of their revenue going to our healthcare segment and the balance going to our life Science segment.
From a total revenue split perspective.
The net impact of all of these moves will leave us with the following segment breakdown Hell.
Healthcare, 63% of revenue.
S T 17% of revenue.
Life Sciences, 11% of revenue and dental 9% of revenue.
Operating margins are expected to improve but they will be tempered a bit as we expect operating expenses, such as travel and sales and marketing to come back closer to normal in particular in the second half of the year.
We continue to believe that the cost synergies of $110 million are achievable for cantel with about 50% of that total recognized in the first 24 months.
Our fiscal 'twenty 'twenty 2 outlook includes approximately $25 million of these cost synergies.
Adjusted earnings per diluted share are anticipated to be in the range of $7 40.
To $7 65.
Which assumes an adjusted effective tax rate of 21% to 22% and of share count of approximately 99 million diluted shares.
The share count assumes that can't tells convertible notes are converted and settled in cash.
We would expect stronger revenue in the second half of our fiscal year within with earnings in line with our traditional 45 55 split.
From a balance sheet perspective, as Mike discussed our leverage will initially be a bit higher than normal for stairs. Following the close of cantel.
We are committed to debt repayment as a priority over the next couple of years and would expect to be back closer to our normal sweet spot in the mid twos within that timeframe.
As <unk> continues to invest in a S. T facility expansions and outsourced reprocessing centers and assuming about $50 million of Capex for Cantel. Our total capital spending is anticipated to be approximately $320 million in fiscal 2022.
Free cash flow will be impacted by the integration and deal related costs of approximately $200 million and in total is anticipated to be approximately $380 million.
You will recall that we do not adjust free cash flow for deal integration costs.
Other than focusing on repaying debt or capital spending priorities will be the same dividends investing in our current businesses tuck in M&A and share buybacks.
We are confident we have the cash generation capacity to invest appropriately in our growth priorities and reduce our debt in the coming years.
I would be remiss, if I did not take this opportunity to thank Walt today.
While it has been a mentor to me and the rest of the stairs leadership team for many years and I would not be prepared to step into the CEO role without his support and counsel over these past years. Thank you all for everything you've done to get stairs, where we are today.
Great company consistently improving to meet the needs that are evolving for our customers staff by associates, who of safe and rewarding work and generating above market returns for our investors as they have come to expect.
With that I will turn the call back over to Julie to open up for Q&A Julie.
Thanks, everyone for your comments, Jamie if you could just give the infection, we can get into Q&A.
Okay.
Ladies and gentlemen at this time, we'll begin the question and answer session.
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Our first question today comes from David Kelley from JMP Securities. Please go ahead with your question.
Great, Thanks, and what was sort of.
The mission of time does fly.
Okay, Great run now.
Maybe I can just start with the.
The guidance of the assumption.
I know when you bought cantel.
You gave us a backwards look at EBIT contribution, but obviously that was the kind of.
Year that had some special impacts so.
I was wondering if you might just talk a little bit about what that contribution you think that will be now obviously the guide looks like theres. Some accretion in there from cantel and I'm. Just curious if you might want to share some of the details around kind of.
Specifically that contribution.
Yeah day. This this is Mike. So obviously, if you look at our guidance, including Cantel from from an EBIT contribution stab quite they'll have similar EBIT margins are.
The legacy stairs has and that EBIT margin dollars will be of right around 230 $240 million contribution for the for the 10 months of fiscal year 'twenty 2.
Got it and then maybe just as a quick follow up.
And the debt congrats on the offering.
Could you just tell us.
I guess the interest assumptions maybe either.
For the year I imagine you may pay some down as you go along but.
Maybe sort of the aggregate amount of debt and sort of the interest expense you expect to incur thanks a lot.
Certainly so we did as Walt and I. Both mentioned, we did do our first public debt offering for $1.35 billion. We did a 2 tranches of 10 year end of 30 year.
Split equally so about $675 million each that debt combined is about 3 point to 2 5%.
And then obviously the rest of the debt that we have will be.
Between our private placements term loans and whatever we draw on our revolving credit facility. So what we are projecting is all in.
From a rate standpoint about 2.5 per cent for the year and just under $4 billion.
When we start with can't tell me close Cantel, and then obviously, we anticipate paying some of that down.
Throughout the remainder of this fiscal year and as Dan and I. Both mentioned, we have the mindset to get back into the the low to mid twos.
Sometime within the next few years.
Thank you.
Our next question comes from Matthew <unk> from <unk>.
The bank. Please go ahead with your question.
Great. Thanks for the again for taking the questions. Walt we will definitely Miss you I always appreciated your candor and insight. Thank you very much.
Just a follow up on the modeling questions.
Are you still planning to bucket healthcare and life Sciences with capital equipment.
Consumables and service.
And then as far as interest expense interest expense tax and share count could you kind of break out the <unk> 21.
The the first quarter contribution versus the full year, given given the mid quarter close.
Yeah. So so first of all to answer your question about the segments. Matt We are going to continue to report capital consumables and services our service for both healthcare and life Sciences.
It obviously services for just a S T as we as we typically have done.
The 1 factor that we are looking at is dental is how to break that out we know it's going to be a separate segment. We've got a little bit of work to do in order to figure out what what particular breakout we want to go to out of there. They do have a lot of instruments, especially around the hue free D standpoint, so so more to come on that.
And then Matt I don't think we're going to get into that level of detail on the quarterly breakouts.
We're about $99 million.
Shares for for the year, obviously can't tells adding almost $15 million of those 1 when we close.
So that's about as much detail as I think where we're going to give at this point.
Okay, and then just a question around.
Around the key surgical.
I think you had previously thought that the comp.
The pluses and minuses kind of even themselves out and in that business.
From the disruption from from COVID-19.
Has anything kind of changed there and for next year does that grow in line with the company on an on an organic basis for key surgical.
Yeah. This is Dan Matt So what I would say is the long term view of key is still incredibly positive and the.
They are highly procedurally, driven and if you recall who will be spoken before.
They have much more opportunity in Europe, but they also complementary have much more exposure in terms of COVID-19 and COVID-19 had a much more significant effect in the in the winter months in Europe than what we had initially anticipated now as we continue to see recovery both in the U S or north American market and the European <unk>.
So we're seeing the positive trends of key and we're confident it'll come back to track with stair says normal procedure rate driven type businesses.
And then big picture, you've seen a couple of your competitors across your businesses go public.
And previously more under the radar areas.
Does that change the competitive landscape for you or is it or is the validation of the opportunity in those areas.
It doesn't change anything in terms of competitive landscape I would say.
Okay. Thank you very much.
Our next question comes from Mike Matson from Needham <unk> Company. Please go ahead with your question.
Hi, yes, thanks for taking my questions and Walt Congrats on the retirement I know I've only cover the company about a year or so but joy the interacting with you over that time and learning about the company. So thanks.
So I guess first I tried to back into kind of what the guidance is implying for cantel revenue.
On an annualized basis. It seems like it's around 1 point of $1 billion again, that's for the for the full year.
I know youre not going to have it in your numbers for full year, but that's a little bit below I think we're modeling around where more of modeling around 1 2 billion.
So it also sort of implies the flat growth from the prior 12 month period.
That rate and why are you assuming kind of better growth there if it is right.
It is right that's what we're modeling now.
Can't tell was the beneficiary of a lot of PPE sales.
And especially in the late summer early fall months of this year and those are of the.
Those were obviously pandemic driven.
And likely not to stick around so we've appropriately removed.
Any assumptions on high our continued sustained levels of PPE.
And the go forward model.
And relative to stare us they are more even more heavily procedural driven in particularly elective procedures of dental is largely the elective procedure space and as a result.
Probably a little slower to come back in our thinking but again as Dan has mentioned on key we don't see any difference the long term of that and it's very very much like our modeling that we put in place when we did the deal.
Okay. Thanks, and then just on the the transition from LIFO to FIFO is there any kind of financial impact from that too.
EPS or cash flow or anything.
Mike There is but it's not material at all and get going forward. The LIFO has become a very small percentage of our inventory pool.
So we will we did restate the quarters looking back we will do the same thing and give more detail India in the 10-K, when we file it at the end of this month, but but nothing material that I would say is going to change directionally.
The company or the outlook for the company, but I think Mike mentioned it was <unk> of this past year that gives you that gives you an order of magnitude, it's not not a big deal.
Okay got it sorry, I missed that thanks guys.
Our next question comes from Chris Cooley from Stephens incorporated please go ahead.
And the crew closer to the 2.
Can you hear me now.
Yes, I'm sorry.
Yes. Good morning, Thanks for taking the questions and Walter just want to say, it's been a true pleasure to work with you. These last 12 years of accomplishments here of.
And the tremendous I wish you all of the best going forward.
Really in the mine can Danielle we're stuck with middle of scope of 13 Hum.
Yeah.
My My my questions here this morning.
I want to first start on the cash flow guidance for the full year.
It's impressive when we look at the 380.
Obviously inclusive of the 200 million in charges, if we kind of make that adjustment you are looking at roughly 13%.
Of the reported revenue guide.
But when I think about that helped me kind of.
Unpack, what the underlying assumptions all of our when we think about the margin structure because of this most recent quarter.
On the <unk> side, obviously, you had a record.
Operating margin contribution familiar of S T.
Life science tapered a little bit with the consumables coming down just want to try and make sure I'm understanding kind of what the underlying assumptions are their own.
Getting to that 3 of them.
For the whole year, but I have a quick follow up thank you.
Yeah, Yeah, certainly obviously, the the deal related and the integration costs of $200 million, we were anticipating.
Off of off of free cash flow, we are once again, increasing our capex pretty substantially both not not only on the the the stirrer.
Terra side in particular for a S. T facility expanses, but also continued operating room our OFC.
Spansion reprocessing expansions within particularly North America, and then we do of about $50 million of Capex identified specifically for Cantel medical.
1 of the things that we continue to see and Dan talked about it a little bit is a net income standpoint, we are anticipating that both travel sales of marketing will be up significantly year over year. In addition, R&D continued R&D spend will also increase so that's definitely going to have a an impact not only on the net.
Income side, but also on the free cash flow standpoint.
And then the other thing we've done a really nice job on this year is improving of driving improvements in working capital and we continue to think that we can do that and then obviously I think there's some opportunity longer term with with cantel on a standalone basis to drive that but that's going to take us a little bit of time as we integrate the companies to get those benefits Chris.
Yeah, you know Mike 1 of their comment too on that as we build an awful lot of inventory this year.
Just for our fears around supply chain of surety and things like that and we're still sitting on an awful lot of that in that inventory and as as we are optimistic that supply chains will get better in the next 6 months, we'll probably go back to a more of a leaner mindset in terms of inventory management, but.
An abundance of caution not to stock out for our customers, we've been running of a little heavier than normal.
The next.
Makes sense and I appreciate all the color there.
And then just interest lastly from me when I think about just maybe bigger picture looking at the integration going forward, obviously rolling in key surgical and about 2 <unk>.
Close here on the Cantel acquisition, when we look at the guide there seems to be some changes versus the last kind of range or acquisition. The company did and I'm thinking back to the synergy.
When you think about the related contribution from growth.
And then similarly from margin help me just think of little bit, though about kind of of how youre approaching us.
Kind of where you see the kind of key milestones.
And also I think it's getting maybe getting lost a little bit to the small, but you did step up the course terrace and the organic guide.
Versus kind of what we've historically seen here you know.
Help us kind of think about again, what what you see there an implicit in the guide and what's a little bit different this time, when youre doing the integration versus versus sort of generalize your different businesses, but.
Just trying to think of a little bit about where the challenges lie.
And where you have added confidence thanks, so much and again won't all of the best.
Yeah.
What I'd say is it's a very different.
The minimum.
And the synergy was more of a complementary revenue play opportunity with a little bit of cost out.
Because they were largely present in Europe, where we had less presence and there.
There wasn't much overlap between the 2 in the in the case of Cantel.
There is significant cost out opportunity that's why we've identified the $110 million.
<unk> that we're going after.
And in a lot of that a lot of that is in some of the leadership compensation in and sort of where we have redundancy amongst executives and folks within the organization. So.
So we're actively working on day, 1 now if you will all of the messaging.
All of the mapping of who's reporting to who and getting the structure is aligned and working with the cantel teams to get there.
But so that's that's the difference between the 2 deals in terms of where we are and.
And we do believe there's probably going to be some rent of revenue synergies out of the complementary crop portfolio offering, but clearly we're focused on the cost outpaced early on.
In terms of you know the other question I think around the margins, we do believe that as procedures come back to normal.
That will drive continue to drive growth in our ASD business and in our reoccurring revenue consumables businesses, especially in the healthcare segment, which tend to be.
The higher margin consumable type of annuity businesses.
And we do think that as we get back to pre COVID-19 levels in the back half of our fiscal year.
We will see the significant benefit from that and our overall margin structure.
Chris I would add.
Yeah.
The comment on debt the same thing Dan talked about.
This being a much more.
Much more cost out.
Type of the deal.
First of all were for.
Fortunate in that I mean, he used the word fortunate and kind of an odd way.
COVID-19 caused both of us to put hiring freezes across much of the company and so big.
A big piece of those cost synergies are going to be.
Handled by not hiring people, the 1 or both of US would have higher because we have people from the 2 companies. So a piece of this will go easier the normal we haven't built that into our model in terms of the.
The cost of synergies we've included our what I'll call a normal cost of the synergies we could get a break on that depending on how that works out. Unfortunately, you know people have to be in the right place at the right time in their career and all those things, but I think that the real opportunity for us and we were quite good about using people.
And that laying people off just to hire somebody else and so I think that's a real positive and in the second.
Ponant.
As if you look at our history, we eventually get a revenue synergies, we always get our cost synergies and so if I were a betting person on Mr. Crestview of Mr took its being able to get $110 million I'd take the bed all day long after as big of a bet you want to make.
Thank you.
Yes.
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Our next question comes from Michael <unk> from Baird. Please go ahead with your question.
Hey, good morning. Thank you for taking the question I have a couple.
The follow the synergy thread there.
I'm curious the $200 million of deal and integration related expenses. This year can you help frame the the potential tail to that into the next.
Fiscal year end within the 200, what portion of that do you consider truly 1 time and deal related consulting legal.
The transaction expenses and what portion of that is investment youre, making to to capture of the the guided cost synergies.
Yeah, Mike So I mean, I would say that.
By our math, there, they're fairly equal 100, and 100 million of 102 to obtain cost synergies.
And then of $100 2 for the cost of the deal related obviously, the attorney's fees. The bankers' fees. The accounts fees. The banks themselves are going through everything we've done from a financing standpoint. So so those are about equal the bulk of the deal costs should be done obviously this fiscal year would be our guests and will have a.
Little bit of of tail as we continue to gain some synergies cost synergies, we will have to pay for that remember our mindset was when we did.
The announcement of our assumptions were.
In order to obtain that $110 million of cost synergies it was going to cost us about 1 for 1 of <unk>.
The cost standpoint to attain those synergies so that that's what that $200 million represent.
Yeah.
Got it just scribbling down notes here.
Thank you yeah. Thank you for that Mike on the the comment on <unk> as an influence on the Capex step up caught my ear, we don't I know, it's a small piece of.
The business don't hear a ton about it but I would imagine youre not putting dollars into the ground and helping customers come. So are there wins there to talk about.
That are driving the capex comment for overseas.
This is Dan Michael I would say, they're not they're not material in terms of the broader picture of stairs.
But it does cause some capital at similar to an a S. T type location and the there is a startup ramp up period, where.
It may be initially of bit dilutive until the volume growth, but no we build those not on speculation, but on relationship and contracts with our customers.
And we are very confident that when we're putting brick and mortar in the ground that we're in a market with committed contracts and customers yes.
3 more quick ones I promise, the Asp's supplier acquisition supplier of what.
What.
Oh.
Our E beam and X ray equipment, and conveyance systems and control systems for.
For further than the non radiate from the non isotope of radiation.
Helpful.
What's the latest thinking on the.
The vaccine as a catalyst in the life Sciences. The equipment number was quite strong in the quarter I continue to.
Over model of the consumables piece and so as we sit here with the U S vaccination progress demonstrable.
Mid mid may the world's catching up or ex U S is catching up like what's the vibe there whats your view on the.
Near term sequential direction of some of those numbers within life Sciences.
Yeah I'll go back to what we've talked about in the past and you know we got a lift on COVID-19 and life Sciences consumables, but much of it was was pre buying from our customers it wasn't necessarily attributed to COVID-19.
COVID-19 vaccine demand there was some I mean, and we did get some some tailwind from it but.
But really it was it was the buy ahead on products that weren't necessarily relative to COVID-19 vaccine manufacturing now we do think that it did have some positive impact on our capital equipment business and we saw a number of units sold into Asia in particular that we're specifically for per vaccine type of startup facilities that we're putting up quickly.
Yeah.
Yeah Walter.
Long term, it's not a negative I can tell you that but youre not going to see it.
I'd assume that we've hit the plateau off the peak and will will modestly grow from there as opposed to continuing to grow off of the trajectory that we expected to see as it relates specifically to COVID-19 vaccines yep.
But the <unk> modestly grow.
It is our fastest growing expense.
The modest we'd go as it relates to being a life science business that does consumables alright, okay.
Last 1 I promise probably for Mike. So a couple of questions on the debt and interest expense. So I appreciate the comments. So far my my question is really.
Narrow.
The June quarter, I think you put this debt in place at the very beginning of this quarter correct me if I'm wrong on that call. It April 1 give or take I was looking through the prior press releases.
For the for the reporting of adjusted EPS are you going to exclude the interest expense related to the financing until the cantel deal closes or would we expect a full quarter of interest expense in this June quarter.
Michael Youre right, we did put debt financing in place in April so that it is in FY 'twenty, 2 and we will not be adjusting any of that out obviously, it's just it's a 2 month overhang if you will.
We're putting that in place of you eat what you should expect the full year of <unk>.
Of the higher interest expense.
For the Cantel acquisition.
Alright, Thank you very much.
Youre welcome.
And ladies and gentlemen, im showing no additional questions I'd like to turn the floor back over to the management team for any closing remarks.
Thanks, Jamie and thanks, everybody for taking the time to join US and look forward to catching up with many of you in the coming day.
And ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.