STERIS plc (STE) Q4 2021 Earnings Report, Transcript and Summary

Good morning, everyone and welcome to the STERIS plc Fourth Quarter 2021 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] Please also note, today's event is being recorded. And at this time, I'd like to turn the conference call over to Julie Winter, Investor Relations. Ma'am, please go ahead.

Thank you, Jamie, and good morning, everyone. Speaking on today's call we have Mike Tokich, our Senior Vice President and CFO; Walt Rosebrough, our President and CEO; and Dan Carestio, our Chief Operating Officer. 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 express 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 Web site. 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 be used. Additional information regarding these measures including definition is available on today's release. This also includes reconciliations between GAAP and non-GAAP financial measures. Non-GAAP financial measures represented during this call with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors 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 increased 0.3% as favorable pricing was somewhat offset by organic volume, which was slightly lower than last year's strong pre-COVID performance. Key Surgical added $32 million to revenue in the quarter, which is somewhat lower than we originally anticipated due to continued disruption of COVID-19. You will notice that we have a small acquisition called out within AST. In January, we completed the acquisition of one of our suppliers. While this is a 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% of revenue, an increase of 60 basis points from last year. The adjusted effective tax rate in the quarter was 25% and 20.7% for the full fiscal year. Higher than last year and higher than our expectations due to income mix from higher tax rate countries and discreet 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 it more closely resembles the physical flow of our inventory, aligns how we manage the business, and improves comparability to other companies. Net income in the quarter was flat, at $140.3 million, and earnings per share were $1.63. Our balance sheet is a continued source of strength for 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 a low leverage ratio, we are well positioned from a liquidity standpoint. Following the close of Cantel Medical, we expect our leverage ratio to be about three 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 expenditures totaled $74.8 million, while depreciation and amortization was $59 million. Free cash flow for fiscal '21 was strong at $450.9 million, an increase of approximately $70 million over last year primarily due to working capital 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 '22. Looking back on FY '21, STERIS 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 this storm in a positive manner. Remarkably, our revenue was up somewhat in fiscal 2021 as our existing business was stable in total, while we completed acquisitions that added to our growth for the year. Our net income and free cash flow both improved double digits as we managed costs and working capital across the business. From a segment perspective, our Life Sciences business had another very strong year, growing constant currency organic revenue 11% as our biopharma customers used our consumable and ordered a record amount of capital equipment. Our AST segment also had a very good year, ending up 7% on a constant currency organic revenue basis despite a slow start due to the global decline in healthcare procedure volumes. While global procedures are not yet back to pre-COVID levels, AST was able the grow as the year progressed because our previous capacity expansions allowed us to process single-use products related to COVID treatment, testing, and vaccine production. As procedures volumes began to recovery in the second-half and core medical device customers increased manufacturing, AST 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 a 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 and Cantel products and services, along with STERIS' 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 our current businesses, not laying off any of our people for COVID-related volume reductions, completing 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 rating on our maiden voyage with all three 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, a tremendous set of achievements for STERIS this past year. As you might expect, this is my final STERIS earnings call. As I shift to my new role as an Advisor to Management and the Board, I am very pleased to hand the reins to Dan Carestio, who will succeed me as President and CEO. Dan is a veteran senior executive of our company, having spent more than two decades his terrace 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 success. I am confident that our company is in very good hands with Dan and this STERIS leadership team. I want to take a moment also to recognize our analysts. Several of you have been with us for many years; Chris for 12, Larry for nine, Dave and Matt seven years each. Mike and Mike have picked up coverage fairly recently. And we certainly value their addition. We appreciate all of your efforts on behalf of your clients and our long-term shareholders. And it's 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 STERIS for making our company what it is today. And better yet, what it will be tomorrow. The 13,000 people working every day in pursuit of our mission, soon to be over 16,000 are what make the company tick. I also greatly appreciate our Board members the last 14 years. I've been blessed to work with, and for the talented and diverse Board, and two wonderful Chairman, Jack Wareham and now Mohsen Sohi. This Board's guidance will continue to help Dan and the team move ever forward. And I'm tremendously grateful to all of our long-term shareholders who have believed in the value 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 am absolutely confident that the best is yet to come. As you will hear next from, Dan, while reviewing our outlook. Mr. Carestio.

Thanks, Walt. I want to echo Walt and Mike's welcome to all of you. We really appreciate you taking the time to join us today. As Walt discussed, STERIS 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 three great companies STERIS, Key Surgical and soon Cantel. That does, however, make modeling the STERIS 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 seven months of Key Surgical before anniversaries, along with smaller AST supplier as inorganic contributors. It also assumes about $15 million favorability from foreign currency. Underlying net growth will be constant currency organic revenue growth of 8% to 9% for legacy STERIS. That growth rate will be driven by significant rebound in our healthcare segment, the ongoing success of AST. And while with a normal growth versus comparisons to fiscal 2021 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 four major businesses, Medical, Dental, Life Sciences and Dialysis. Medical and dialysis will become part of STERIS' healthcare segment. As we have said previously, we anticipate that dental will be its own segment. To more closely in line with STERIS' customers we will split Cantel's 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 these moves will leave us with the following segment breakdown; Healthcare, 63% of revenue; AST, 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 2022 outlook includes approximately $25 million of these cost synergies. Adjusted earnings per diluted share are anticipated to be in the range $7.40 to $7.65 which assumes an adjusted effective tax rate of 21 to 22% and a share count of approximately $99 million diluted shares. This share count assumes that Cantel's convertible notes are converted and settled in cash. We would expect stronger revenue in the second-half of our fiscal year 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 STERIS 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 2s within that timeframe. As STERIS continues to invest in AST 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 cost of approximately $200 million. And in total is anticipated to be approximately $380 million. You'll recall that we do not adjust free cash flow for deal integration cost. Other than focusing on repaying debt, our capital spending priorities will be the same; dividend, 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. Walt has been a mentor to be and the rest of the STERIS' 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, Walt for everything you have done to get STERIS where we are today. A great company consistently improving to meet the needs that are evolving for our customers, staffed by associates who have safe and rewarding work, and generating above market returns for our investors as they have come to expect. With that, I would turn call back over to Julie to open up for Q&A. Julie?

Thanks everyone for comments. Jamie, if you could just give the instructions, we can get into Q&A.

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Dave Turkaly from JMP Securities. Please go ahead with your question.

Great, thanks. And Walt, we will certainly miss you. Time does fly. Done a great run though. Maybe I could just start with the guidance, the assumption. I know when you bought Cantel, you gave us a backwards look at EBIT contribution, but obviously that was a kind of a year that had some special impact. 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 there's some accretion in there from Cantel, and I'm just curious if you might want to share some of the details around specifically that contribution?

Yes, Dave, this is Mike. So, obviously, if you look at our guidance, including Cantel, from an EBIT contribution standpoint they'll have similar EBIT margins that legacy STERIS has, and that EBIT margin dollars will be right around $230 million-$240 million contribution for the 10 months of fiscal year '22.

Got it. And maybe just as a quick follow-up, you mentioned the debt. Congrats on the offering. Could you just tell us sort of, I guess, the interest assumptions, maybe there 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.

Yes, certainly. So, we did -- as Walt and I both mentioned, we did do our first public debt offering for $1.35 billion. We did two tranches, a 10-year and a 30-year, split equally, so about $675 million each. That debt combined is about 3.225%, 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 evolving credit facility. So what we are projecting is, all in, from a rate standpoint about 2.5% for the year, and just under $4 billion when we start with Cantel and we 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 low-to-mid twos some time within the next few years.

Thank you.

Our next question comes from Matthew Mishan from KeyBanc. Please go ahead with your question.

Great, thank you for taking the questions. Walt, we will definitely miss you, and 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 tax and share count, could you kind of break out the 1Q '21 or the first quarter contribution versus the full-year given the mid-quarter close?

Yes, so first of all, to answer your question about the segments, Matt. We are going to continue to report capital consumables and services or service for both Healthcare and Life Sciences, and obviously services for just AST as we typically have done. The one 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 particular breakout we want to go down there. They do have a lot of instruments, especially around the Hu-Friedy standpoint, 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 the year. Obviously, Cantel is adding almost 15 million of those when we close. So, that's about as much detail as I think we're going to give at this point.

Okay. And then just a question around Key Surgical, I think you had previously thought that the pluses and the minuses can even themselves out in that business from the disruption from COVID-19. Has anything kind of changed there? And for next year, does that grow in line with the company on an organic basis for Key Surgical?

Yes, this is Dan, Matt. So, what I would say is the long-term view of Key is still incredibly positive. And they are highly procedurally driven. And if you recall when we've spoken before, they have much more opportunity in Europe, but they also, complimentary, have much more exposure in terms of COVID. And COVID had a much more significant affect 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 markets, we're seeing the positive trends of Key, and we're confident it will come back to track with STERIS' normal procedure rate-drive type businesses.

And then big picture, you've seen a couple of your competitors across your businesses go public in previously more under-the-radar areas. Does that change the competitive landscape for you or is it a 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 & Company. Please go ahead with your question.

Hi, thanks for taking my questions, and Walt, congrats on the retirement. I know I've only covered the company about a year or so but enjoyed 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 $1.1 billion. Again, that's for the full year. I know you're not going to have it in your numbers for the full year, but that's a little bit below. I think we're modeling around -- we were modeling around $1.2 billion. So -- and it also sort of implies a flat growth from the prior sort of 12-month period. Is that right, and why aren't you assuming better growth there if it is right?

It is right, that's what we're modeling now. Cantel was a beneficiary of a lot of PPE sales, and especially in the late summer-early fall months of this year, and those were obviously pandemic-driven and likely not to stick around. So, we've appropriately removed any assumptions on high or continued sustained levels of PPE in the go-forward model.

And relative to STERIS, they are even more heavily procedurally driven and particularly elective procedures. And dental is largely an 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 much like our modeling that we put in place when we did the deal.

Okay, thanks. And then just on the transition from LIFO to FIFO is there any kind of financial impact from that to EPS or cash flow or anything?

Yes, Mike, there is but it's not material at all. And going forward, LIFO has become a very small percentage of our inventory pool. So, we will -- actually we did restate the quarters looking back, we will do the same thing and give more detail in the 10-K when we file it at the end of this month. But nothing material that I would say is going to change directionally the company or the outlook for the company.

And I think Mike mentioned it was $0.03 this past year. That gives you an order of magnitude; it's not a big deal.

Okay, got it. Sorry, I missed that. Thanks, guys.

Our next question comes from Chris Cooley from Stephens Inc. Please go [technical difficulty] --

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 12 years, your accomplishments here have been tremendous and I wish you all the best going forward. Julie, and Mike and Daniel are stuck with me; let's go for 13.

All right.

Yes. My questions here this morning, if you may, I want to first start on the cash flow guide for the full-year. It's impressive. When we look at the $380 million, obviously inclusive of $200 million in charges if we make -- connect that adjustment you're looking at roughly 13% of the reported revenue guide. But when I think about that, help me kind of unpack what the underlying assumptions are when we think about the margin structure, because in this most recent quarter, on the core STERIS side, obviously you had a record operating margin contribution from AST, Life Science tapered a little with the consumables coming down. Just want to try and make sure I'm understanding kind of what the underlying assumptions are there on getting to that $380 million for the full year. Then I had a quick follow-up. Thank you.

Yes, certainly. Obviously, the deal-related and the integration cost, that $200 million we're anticipating off of free cash flow, we are once again increasing our CapEx pretty substantially both not only on the STERIS side in particular for AST facility expansions, but also continued operating room or ORC expansions, reprocessing expansions within particularly North America. And then we do have about $50 million of CapEx identified specifically for Cantel Medical. But one of the things that we continue to see and Dan talked about it a little bit is on the net income standpoint, we are anticipating that both travel sales and marketing will be up significantly year-over-year. In addition continued R&D spend will also increase, so that's definitely going to have 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, and driving improvements in working capital. And we continue to think that we can do that, and then obviously I think there is some opportunity longer term 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.

One other comment too, and that is, we built an awful lot of inventory this year, and just for our fears around supply chain assurity and things like that. And we're still sitting on an awful lot of that inventory. And as we are optimistic that supply chains will get better in the next six months, we'll probably go back to our moral leaner mindset in terms of inventory management, but in an abundance of caution not to stock out for our customers, we've been running a little heavier than normal.

Make sense. And I appreciate all the color there. And then just lastly for me, when I think about just maybe bigger picture looking at the integration going forward, obviously willing in key surgical and about to close here on the Cantel acquisition. When we look at the guide, there seems to be some changes versus the last kind of major acquisition the company did. And I'm thinking back to synergy, when we think about the related contribution from growth, and similarly from margin, help me just think a little bit though about kind of how you're approaching this kind of where you see the kind of key milestones. And also I think it's getting -- maybe getting lost a little bit here this morning, that he did step up the core STERIS organic guide versus kind of what we've historically seen here, help us kind of think about again what you see there and implicit in the guide, and what's a little bit different this time when you're doing integration versus synergy. And I realize they're different businesses, but just trying to think a little bit about where the challenges lie, and where you had that had competence? Thanks so much, and again, Walt, all the best.

Yes, Chris, what would I say is it's a very different synergy was more of a complimentary revenue play opportunity with a little bit of cost out, because they were largely present in Europe where we had less presence, and there wasn't much overlap between the two. In the case of Cantel, there is significant cost out opportunity. That's why we identified the $110 million target that we're going after. And a lot of that is in some of the leadership compensation and sort of where we have redundancy amongst executives and folks within the organization. So, we're actively working on day one now if you will, all the messaging, all the mapping of who's reporting to who and getting the structures aligned and working with the Cantel teams to get there. So that's the difference between the two deals in terms of where we are. And we do believe there's probably going to be some revenue synergies out of the complimentary portfolio offering, but clearly we're focused on the cost out piece early on. In terms of the other question I think around the margins, we do believe as procedures come back to normal that will continue to drive growth in our AST business and in our reoccurring revenue consumables businesses, especially in the healthcare segment, which tend to be higher margin consumable type annuity businesses. And we do think that as we get back to pre-COVID levels in the back half of our fiscal year, we'll see a significant benefit from that in our overall margin structure.

Chris, I would add just a comment on that, the same thing Dan talked about, this being a much more cost out type of a deal. First of all, we're fortunate in that. I mean fortunate in kind of an odd way, COVID caused both of us to put hiring freezes across much of the company. And so a big piece of those cost synergies are going to be handled by not hiring people that one or both of us would have hired because we have people from the two companies. So, a piece of this will go easier than normal. We haven't built that into our model in terms of the cost of synergies, we've included our -- what I call normal cost of synergies, we could get a break on that, depending on how that works out. Unfortunately, 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're quite good about using people and not laying people off just to hire somebody else. And so I think that's a real positive. And then the second component is, if you look at our history, we eventually get our revenue synergies, we always get our -- got synergies. And so, if I were a betting person, Mr. Carestio and Mr. Tokich has been able to get $110 million, I'd take the bet all day long, for as bigger bet you want to make. Q – Chris Cooley: Thank you.

[Operator Instructions] Our next question comes from Michael Polark from Baird. Please go ahead with your question.

Hey, good morning. Thank you for taking the question. I have a couple, will follow the synergy thread there, I'm curious, the $200 million of deal and integration related expenses this year, can you help frame the potential tail to that into the next fiscal year and within the $200 million, what portion of that do you consider truly, one-time and deal related consulting legal transaction expenses, and what portion of that as investment you're making to capture the guided cost synergies?

Yes, Mike. So I mean, I would say that our math, they're fairly equal $100 million to obtain cost synergies, and then $100 million for the cost of the deal related obviously, the Attorney's fees, the bankers fees, the accountants fees, the banks themselves going through everything we've done from a financing standpoint, so those are about equal, the bulk of the deal costs should be done, obviously this fiscal year would be our guess. And we'll have a little bit of a tail as we continue to gain some synergies, cost synergies, we'll have to pay for that. Remember, our mindset was, when we did the announcement and our assumptions were in order to obtain that $110 million of cost synergies, it was going to cost us about one for one, from a cost standpoint to attain those synergies, so that's what that $200 million represents.

Got it. Just scribbling down notes here.

That's fine.

Yes, thank you for that, Mike. On the comment on ORC influence on the CapEx step-up caught my ear, I know it's a small piece of the business, don't hear a ton about it. But I'd imagine you're not putting dollars into the ground and hoping customers come, so are there wins there to talk about that are driving the CapEx comment for ORCs?

This is Dan. Michael, I would say they're not. They're not material in terms of the broader picture of STERIS. But it does cost some capital, similar to an AST type location and that there is a start-up ramp-up period where it may be initially a bit dilutive until the volume grows. But we build those not on speculation, but on relationship and contracts with our customers. And we're 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, three more quick ones, I promise the AST supplier, acquisition supplier of what?

They make our e-beam, X-ray equipment, and conveyance systems and control systems for the non-isotope radiation.

Helpful. What's the latest thinking on the vaccine as a catalyst in life sciences, the equipment number was quite strong in the quarter, I continue to over model the consumables piece and so as we sit here with the U.S. vaccination progress demonstrable mid-May, World's catching-up or ex-U.S. is catching-up like what's the vibe there, what's your view on the near-term sequential direction of some of those numbers within life sciences?

Yes, I go back to what we've talked about in the past and we got a lift on COVID in life sciences, consumables, but much of it was pre-buying from our customers. It wasn't necessarily attributed to COVID, COVID vaccine demand, there were some, I mean we did get some tailwinds from it, but really it was the buy ahead on products that weren't necessarily relative to COVID 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 were specifically for vaccine type start-up facilities that they were putting up quickly. Yes, long-term, it's not a negative, I can tell you that. But since you're not going to see, I would assume that we've hit the plateau off the peak and we'll 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 vaccines.

Yes.

And with dense modestly grow, it is our fastest growing business, modestly grow as it relates to being a life science business that does consumables.

Last one, I promise probably for Mike. So, a couple of questions on the debt and interest expense, so appreciate the comments so far. My question is really narrow for the June quarter, I think you put this debt in place at the very beginning of this quarter, correct me if I'm wrong, I'll call it April 1 give or take I was looking through the prior press releases. 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, you're right, we did put that financing in place in April. So that is in FY '22 and we'll not be adjusting any of that out. Obviously, it's a two month overhang, if you will, for putting that in place. So you should expect a full-year of the higher interest expense for the Cantel acquisition.

All right, thank you very much.

You're welcome.

Ladies and gentlemen, I'm 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. I look forward to catching up with many of you in the coming days.

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.