Good day and thank you for standing by. Welcome to the Owens and Minor Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, to Chandrika Nigam, Director, Investor Relations.
Ms. Nigam, you may begin.
Thank you, operator. Hello, everyone, and welcome to Owens and Minor's 2nd quarter 2021 earnings call. Our comments on the call will be focused on financial results for the Q2 of 2021 and our outlook for 2021 2022, all of which are included in today's press release. I'd also like to call your attention to supplemental slides related to our 2021 outlook posted on our website in the Investor Relations section. Please note that certain statements made on this call are forward looking statements, which are subject to risks and uncertainties.
These forward looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical facts, are forward looking statements and include statements regarding our anticipated financial and Operational performance. Forward looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results Predicted, assumed or implied by the forward looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including the Risk Factors section of its annual report on Form 10 ks and quarterly report on Form 10 Q.
Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward looking statements. Additionally, in our discussion today, we will reference certain non GAAP financial measures and information about these measures and reconciliations The most comparable GAAP financial measures are included in our press release and our annual report on Form 10 ks. Today, I'm joined by Ed Fusica, our President and Chief Executive Officer and Andy Long, our Executive Vice President and Chief Financial Officer. I would now like to turn the call over to Ed, who will start things off. Ed?
Thank you, Shandrika. Good morning, everyone, and thank you for taking the time to join us on the call today. I would like to start with a high level recap of the strategic priorities that the Owens and Minor leadership team and I outlined during our Investor Day meeting in late May. I spoke about our transformation based on our business blueprint that focused on 1, our culture, a culture that is based on hard work, stellar execution and an unrelenting focus on our customer, while being anchored by our mission and our ideal values. Next, our discipline, which is based upon the Owens and Minor business system that is laser focused on continuous improvement.
And third, our investments, our investments that are implemented in a disciplined manner, enabling us to achieve our strategic priorities. These three elements are ingrained in our corporate DNA, have set the foundation of our business blueprint and have enabled us to ignite long term profitable growth. As committed during the Investor Day meeting, I will provide periodic updates. Today, let me start with an update on some of our investments, which we spent time at our Investor Day These investments remain on track and are designed to provide attractive returns for our stakeholders. Let me remind you of a few.
One, we continue to expand our own manufacturing capability for nitrile gloves in our existing facility in Thailand. This will put us in an advantaged position, allowing us to have greater control and improved cost structure. Our new capacity is expected to go live in early 2022. 2, we remain focused on leveraging our manufacturing strength and brand value through the expansion of our product portfolio. During the Q2, we doubled our wound care product line and remain on track to expand our incontinence care portfolio later this year.
Furthermore, we continue to identify additional product category opportunities to expand our proprietary product offering in the future. 3, we are also diversifying into new verticals to sell specialty higher margin products into new end markets. For instance, We expanded into cleanroom glove market space under the Halyard PureZero brand. In addition, we recently launched our Safeskin consumer brand of gloves. Next, we continue to invest in technology based offerings that provide our customers with actionable data through our service solutions.
And finally, we are focused on the balance between technology and touch in our distribution centers with continued investment In automation, AI and human capital, all of which expand our leading ability to be flexible and scalable to provide best service for our changing customer demands. These initiatives are just a few examples of how we are investing to generate long term profitable growth while providing significant benefits for our customers. In addition to having the Owens and Minor business blueprint in place And the investments that I just discussed, I'm equally proud of our focus on corporate social responsibility. We are committed to delivering on both our financial and our corporate social responsibility obligations. So far this year, we have launched the Owens and Minor Foundation, which is committed to improving our communities in which we operate and live.
2, we released our first sustainability report detailing the advancement that Owens and Minor has made in ESG. And 3, we undertook a first step in reducing our carbon footprint with our electric fleet pilot initiative. Our ESG efforts, just like our business blueprint, a part of who we are and that good corporate citizenship is fundamental to our mission and values. Let me now shift gears to our 2nd quarter performance. I am extremely pleased to report another strong quarter that continues to build upon the solid performance from 2020.
A year ago, we were in uncharted waters due to the pandemic, But our ability to be flexible and adjust to meet the critical needs of our customers and the nation helped to establish momentum that has carried into the 2nd quarter. Additionally, we continue to find ways to keep driving efficiency and be more productive as markets begin to return to pre pandemic form. Now let me update you on the segments, and I will start with our Global Solutions segment. Within this segment, the medical distribution business performed well and posted much improved results. We continue to bring in net positive wins as a result of our market leading service, combined with the trust we gained during the pandemic.
In addition, we saw volumes associated with elective procedures Return to pre pandemic levels during the Q2. Related to our patient direct business, we continue to grow through new patient capture in this rapidly growing patient direct market. And finally, our ongoing investments in our Global Solutions segment are expected to provide continued growth and an attractive long term outlook. Moving on to the Global Products segment. This segment produced significant top line growth as sales of our surgical infection and prevention products, including PPE remained strong.
The strong sales are a result of our increased output of previously added capacity to fulfill continued high usage, Share gains made during the pandemic, stockpile fulfillment and increased elective procedures. In addition, We saw favorable timing for cost pass through on gloves adding to the top line growth. In addition to the solid performance in our 2 reporting segments, Our balance sheet remains strong with net leverage at 1.8 times and total net debt of less than $1,000,000,000 This gives us the latitude to continue to make well thought out investments to improve our operations and drive growth. Moving from the Q2 and looking to the rest of 2021 and beyond, we are excited about the long term future. We expect the rest of the year to be driven by S and IP utilization, elective procedures, opportunity pipeline, and continued strength of our Patient Direct business.
In addition to this, we will continue to have a tenacious focus on operational excellence and continuous improvements. Starting with S and IP. As we have said, we believe that the usage for S and IP products, including PPE, will be defined by the new normal, the new normal in the healthcare industry. We continue to believe that usage for many PPE Categories will settle somewhere below the peak of the COVID-nineteen outbreak, but in excess of the pre pandemic levels as a result of Established healthcare protocols, stockpile requirements and our share gains obtained during the pandemic. In addition, we expect the expansion of our PP into new markets like clean room and consumer to provide incremental opportunity.
However, as the year progresses, we expect moderation in both pricing and demand for PPE. But let's not forget another factor to consider. That is the elimination of PPE emergency use authorization, which will create opportunity for our Americas based Manufactured medical grade PPE. Let me give you a few examples. First, most recently, the FDA revoked emergency use authorization for non NIOSH approved disposable respirators, which will prohibit the use of these devices in the healthcare setting.
2nd, The CDC has recommended that healthcare facilities return to conventional practices and no longer use crisis capacity strategies, like bringing in non medical grade supplies. And 3rd, the EUA for decontamination and bioburden reduction systems has been revoked. All of these actions by the federal agencies bring to light the significance of authorized medical grade PPE in the healthcare setting. Our unique value chain of vertically integrated Americas based manufacturing footprint and supply chain will remain a distinct advantage for us as we continue to work closely with the government and industry to help address the current and future needs for PPE requirements. Next, on elective procedures.
By the end of the second quarter, we saw elective procedures return to pre pandemic And we expect this to continue through the second half of the year. This expectation is consistent with our customers' outlook and assumes COVID rates don't get markedly worse across the country. Moving on to our pipeline. Our medical distribution continues to provide best in class service and is backed by our complete suite of products and services. These together provide one of the industry leading offering to best serve our customers.
We will continue to advance with a large pipeline of opportunity while capturing net new wins. Again, our medical distribution continues to provide market leading operational performance and stability that supports our customers' need for continuity of supply and supply chain resiliency. And lastly, Our patient direct business. Our patient direct business enjoys a leading national presence as the partner of choice for referral sources. We are uniquely positioned to meet the needs of our customers in this fast growing home health space.
We expect this business to continue to grow across our major product categories with an annuity like recurring revenue model. I'd like to conclude by underscoring the success we've achieved during the quarter. Our strong second quarter gives us the confidence to affirm The range of our 2021 guidance for adjusted EPS of $3.75 to $4.25 and adjusted EBITDA of $450,000,000 to $500,000,000 as well as affirm our previously issued 2022 guidance. We continue to be excited about what's ahead. We have one of the strongest value chains in the healthcare solutions market while having the ability to be flexible and scale, along with the financial flexibility to invest as appropriate.
And finally, we have our great teammates that exemplify our ideal values every day and live our humble mission to empower our customers to advance healthcare as we continue to deliver on our commitments to our stakeholders. Thank you. And now I'll turn the call over to Andy for a discussion of our financial results. Andy? Thank you, Ed, and good morning, everyone.
Today, I'll review our financial results for the Q2 and the key drivers for our quarterly performance, and then I'll discuss our expectations and assumptions for the balance of the year. I'd like to start by saying that we're delighted to report A record second quarter with solid growth in revenue, EBITDA and earnings per share. We're maintaining our expectation for adjusted EPS in 2021 to be in a range of $3.75 to $4.25 and adjusted EBITDA in the range of $450,000,000 to $500,000,000 Also, we are affirming our previously announced guidance for 2022. I'll provide additional color on this later in my remarks. Let's begin with the results for the Q2.
Starting with the top line, revenue for the Q2 was $2,500,000,000 compared to $1,800,000,000 for the prior year. This represents 38% growth with strong performance in both of our segments. Top line growth in the quarter was driven by 16.1%, an improvement of 117 basis points over prior year due to revenue mix from higher margin sales In the Global Products segment and Patient Direct business, timing of the pass through of glove costs and improved operating efficiency. These were partially offset by higher commodity prices in global products and transportation costs across the business. Also compared to Q1, gross margin was lower by nearly 300 basis points due to margin compression in gloves As anticipated and discussed last quarter, we also began to see commodity and transportation inflationary pressures in the beginning of the quarter and expect this to continue through Q3.
Distribution, selling and administrative expense of $294,000,000 in the current quarter was $52,000,000 higher compared to the Q2 of 2020. The increase represents higher variable costs to support top line growth, funding of ongoing investments across all business lines and higher incentive compensation driven by our financial performance. This performance coupled with efficiency gains from enterprise wide continuous improvement led to adjusted operating income for the quarter of $116,000,000 which was $77,000,000 higher or 3 times the same period last year. Adjusted EBITDA for the Q2 was $128,000,000 which increased by $76,000,000 or over 2 times year over year. Interest expense of $12,000,000 in the 2nd quarter was down 47% or $10,000,000 compared to last year, driven by lower debt levels and effective interest rates.
On a GAAP basis, income from continuing operations for the quarter was $66,000,000 or $0.87 a share. Adjusted net income for the 2nd quarter was $80,000,000 which yielded an adjusted EPS for the quarter of 1.06 which was over 5 times our performance from Q2 of last year. The year over year foreign currency impact in the quarter was unfavorable by $0.02 In the Q2, the average diluted shares outstanding were $14,700,000 higher year over year as a result of our equity offering in the Q4 of prior year and the impact of restricted shares for compensation. Now I'll review results by segment for the Q2. Global Solutions revenue of 1 $98,000,000 was higher by $429,000,000 or 28% year over year.
The segment experienced continued growth driven by ongoing recovery in volumes associated with elective procedures of approximately $300,000,000 along with higher sales of PPE as well as continued strong growth in our patient direct business. During the quarter, elective procedures continued to move towards pre pandemic levels, while we recognize that a number of COVID hotspots remain throughout the country. Global Solutions operating income was $18,500,000 which was $29,000,000 higher than prior year as a result of higher volumes coupled with productivity and efficiency gains in our medical distribution business. In our Global Products segment, net revenue in the 2nd quarter was $689,000,000 compared to $370,000,000 last year, An increase of 86%, which was led by higher S and IP sales, particularly PPE volume, as we benefited from our previous investments to capacity and the previously discussed impact of passing through higher glove acquisition costs of approximately $200,000,000 Operating income for the Global Products segment was $95,000,000 an increase of 84% versus $52,000,000 in the Q2 last year. This was driven by higher PPE sales, favorable timing of cost pass through on gloves, productivity initiatives and improved fixed cost leverage.
These were partially offset by higher commodity prices and elevated transportation costs. Next, let's review cash flow, the balance sheet and capital structure. In the second quarter, our cash flow was negatively impacted By our investment in working capital to support top line growth, inventory build to ensure supply given numerous supplier issues, Global transportation delays and continued unfavorable payment terms with glove manufacturers. We expect working capital to improve throughout the second half of the year As global supply chain issues subside and as payment terms to glove manufacturers return to historical levels. As a result, we continue to expect 2021 cash flow to be back half loaded.
Total net debt at the end of the second quarter was $964,000,000 and total net leverage was 1.8 times Trailing 12 months adjusted EBITDA. I'd like to highlight that despite our working capital consumption, we maintained our leverage profile below 2 times adjusted EBITDA. Still, the improvements we've made to enhance our capital structure provide us with the operational flexibility and put us in a strong financial position to implement our growth strategy. Our achievement in this regard was recently rewarded with another credit upgrade from S and P last month. Finally, turning to the outlook.
Earlier today, we affirmed our guidance for 2021 2022. The confirmation of our guidance range 2021 is a result of our strong Q2 performance and improved visibility into the second half of the year. Let me provide some context on the assumptions for our outlook. Our recently installed PPD related capacity has been fully deployed and our previously announced glove manufacturing capacity expansion is on track to begin contributing to our financial results in early Q1 of next year. We now expect the full year top line impact of well cost Pass through to be in the range of $675,000,000 to $725,000,000 Any sudden unforeseen declines in the market price of gloves could result in downside to our revenue and adjusted EPS projection.
In addition, we believe our patient direct business will continue to perform At or very close to pre pandemic levels in much of the country, and we expect the trend to continue in the second half of the year. As experienced in Q2, we are now including a headwind from elevated commodity pricing and transportation costs and expect this to continue through Q3. Guidance for adjusted EPS is based on 75,500,000 shares outstanding. The increase in our dilutive share count is related to the treatment of certain performance share grants and incremental restricted stock grants, driven by our strong financial results. Even with the 6% increase in shares and new inflationary headwinds, we are confirming our outlook for 2021, 2022 and targets for 2026.
In terms of the calendarization of our guidance, starting with revenue, we expect Q3 revenue to decline slightly from Q2 as the pass through of wealth cost begins to ease. The 2021 Quarterly earnings pattern is contrary to our typical seasonality with most of the year's profitability weighted towards the first half of the year. Specifically, we continue to expect Q3 earnings to be softer than Q2 due to the timing of glove cost pass However, we expect Q4 to improve due to the seasonal impact of healthcare utilization across our businesses. Also remember that cash flow is expected to improve in the back half of the year as working capital headwinds soften as previously discussed. Please note that these key modeling assumptions for full year 2021 have been summarized on supplemental slides filed with the SEC on Form 8 ks earlier today and have been posted to the Investor Relations section of our website.
In closing, I'm delighted with another strong quarter and proud of the efforts of our teammates around the world. As we further embed our business blueprint into our day to day activities, we'll be well positioned to deliver on our long term objectives. Thank you. And with that, I'll turn the call back over to the operator to begin the Q and A session. Operator?
Thank you, sir. Please standby while we compile the Q and A roster. I show our first question comes from the line of Michael Cherny from Bank of America. Please go ahead.
Good morning and thanks for all the color so far. First, just a quick housekeeping question. I want to make sure I heard that correctly regarding The 3Q trajectory, the sequential decline that you're expecting on a year over year in terms of revenue, correct?
Can you repeat the quiet end you broke up? Sorry, Michael.
Sorry, the comment you just made about the 3Q revenue That's a sequential decline you're expecting, not year over year, so I'm
not sure
I heard that correctly.
Yes, Mike, this is Andy. That's correct. In terms of just trying to help you Look at the back half of the year in terms of our guidance, just trying to help you understand because again this year has been very atypical in terms of seasonality, but you're absolutely correct. On the Top line, we expect that to be a slight decline Q2 to Q3 sequentially.
Okay. That makes sense. I appreciate that. And so Taking a bigger picture approach, when you think about the moving pieces of your business against the backdrop of an uncertain delta variant rollout, Clearly, there could be some potential pressures on electives if we do go back to some level of increased hospitalizations. But I would assume I would think that would be offset by another potential spike in PPE demand as people worry about infection.
Are there any local pockets where you're seeing any of those trends where there is an increased delta variant approach? And how do you think about the variability in your guidance I guess the backdrop of that.
Michael, this is Ed. I'll take that one and then Andy can add some color afterwards if necessary. So We have seen pockets of it. So in Florida, we've seen some pockets of that where we have seen a drastic increase in demand For PPE from us, even from levels that were already elevated. In addition to that, we have seen some tightening on the elective procedures there.
But here's the other thing we saw. So during the pandemic, we worked with our customers for some unique solutions. And we have subscription based models where customers have access to product as they need it. So we can since we're producing it ourselves, We're producing stuff like N95s in Texas as well as in Lexington, North Carolina. They've called in on their subscription model and We need a triple of what our use is, for example, and we've been able to fulfill that.
So you're absolutely right. Delta variant does increase and actual hospitalizations increase, which is what we're seeing. We are seeing that increase in demand for that PPE. Again, what makes us unique, Michael versus others, is we're making the fabric in the United States. We're finishing that PPE all relatively speaking close where it can be delivered by a truck, All of the fabric based stuff.
So we have been able to flex very quickly as this delta variant has hit And has certain locations in the United States have needed the product. And then Mike, it's Andy just to take the second part of your Question on the implications for the full year forecast. Regarding elective procedures, so we did see elective procedures get back to near pre pandemic levels in Q2 as we And the balance of the year contemplates really staying at that level of near pandemic levels. We do not have an anticipation or we've not built into the forecast Any downside due to the delta variance in terms of elective procedures. But on the other hand, on the other side of PPE, we have not built in a significant spike in demand.
So should those occur, we would see those adjust accordingly in our forecast. But we pretty much assume pandemic or elective Seizures at pre pandemic levels and no spike in PPT.
And then one more just quick housekeeping question. Can you remind us what your share count guidance was before? It looks like it went higher despite EPS not moving. So just curious what it was Prior to today?
Yes, Mike. So the last guidance we gave was 71,000,000 shares and the current guidance is 75,500,000 shares. And again, that's really the increase is really due to the result of the treatment of restricted shares as well as the issuance of So additional restricted share grants, performing shares. Performance shares.
No, helpful to understand against the maintaining EPS guidance. So thanks so much.
Thank you. I show our next question comes from the line of Daniel Grosslide from Citi. Please go ahead.
Hi, guys. Thanks for taking the question. I was hoping you could put a finer point on the quarterly cadence of the glove pass through and the relative benefit in the first half of this year versus the second half. I think you mentioned $200,000,000 of top line benefit this quarter, and you're still seeing some positive Timing benefit to the EBIT line. Can you help quantify the EBIT benefit this quarter and your quarterly for the remainder of the year and if you still expect a net neutral impact from that pass through for the full year.
Sure, Daniel. This is Andy. Happy to take that question. So just to ground you and just make sure we're at a level set What we know at this point. So we did change our full year top line revenue guidance.
It used to be $700,000,000 to $800,000,000 We've now fine tuned that to about $675,000,000 to $725,000,000 And we've done that as a result of seeing some cost pressures starting to ease in the marketplace. And in the quarter, we recognized about $200,000,000 of higher cost pass through on the top line. And as a reminder, in Q1, that equivalent number was about $160,000,000 So year to date, we've seen about $360,000,000 on the top line. So roughly halfway through the year, we're roughly at the midpoint of our full year guidance. And in terms of the impact on the bottom line, So you're right.
In Q1, we did see a favorable impact. As I talked about how the price impact of raising prices is realized Sooner than the cost impact as costs have to work their way through inventory. And again, as we discussed on the Q1 call, we set the expectation that in Q2, those costs We'll catch up, we'll begin to catch up and we did see that in Q2. And albeit we still had some favorability in the quarter, but it was at a much Lower rates, right, with much lower level. And you could see the 300 basis point decline sequentially in our gross margins.
And then going forward into our forecast, I would say Q3 would be the most significant impact of costs. So I would expect gross margins and adjusted operating Margins to decline further in Q3. You'll see that in the Global Products segment. And then as we get to Q4, I would expect a slight improvement. And really by the end of the year, we expect to be pretty well worked through the issue of the cost price Dynamics, that would be our expectation.
Thanks. Very helpful. And As you have new glove capacity come online in the Q1 of 'twenty two,
can you help us
think about what the margin profile Those gloves will be relative to your overall products margin profile?
So again, we don't really give guidance in specific margins by product. But what I will say is that As we made that investment to expand gloves, we've done that within the four walls of our existing facility. And so again, like the capacity that we've added during the course of 2020 to expand PPE production in our Americas based facilities. The capacity we're bringing on with gloves should benefit from some fixed Cost leverage again because we're not adding additional square footage to produce those flubs. Dan, this is adding 2 things.
I'll add on to that 2 things. 1, Andy covered, you're right. Absolutely, we're going to get fixed cost leverage on that because we're able to put it in our existing facilities. But second, we have we'll have the capability to make a more technical glove there, whether that's for surgery, whether that's chemo rated and other aspects of a glove That inherently within those gloves also have a different margin profile versus just your standard glove.
Got it. Very helpful. Thanks for all the color, guys.
Thank you. I show our next question comes from the line of Eric Coldwell from Baird. Please go ahead.
Thanks very much. Sticking with the Glove's question, dollars 2 $100,000,000 in revenue this quarter, $160,000,000 last. You said it was still positive on profit, but less so than Q1. I think what We're probably going to get the most questions on today is the operating margin in Global Products, 25% last quarter, 14% this quarter. What can you give us any sense what the underlying base might have been Absent the gloves.
And then I guess when I think about the margin being down 11 points quarter over quarter, How much of that was related to the cost pass through or the cost increase, I mean, to say in commodity costs, transportation costs Versus mix shift in your product lines or changes in the glove pass through impact? And then I have one more follow-up. Thanks.
Yes, Eric, this is Andy. So I'll try to address that. So you're right, sequentially as expected, with that increase of cost being recognized, We did see about an 11 percentage point drop sequentially in the Global Products segment. And I still expect Q3 to see an even greater Impact due to the higher cost in gloves as those work their way through and we try to normalize throughout the year. So I would expect margins to drop further in Q3 from where we are in Q4.
And then as we go into Q4, I would expect that to rebound slightly and then start to stabilize. Well, we're not giving exact guidance on quarterly margin rates, but I would say that, that will largely be working its way through the system and Going into 2022, as I said, not talking about glove pass through timing issues.
So could you give us a sense on the impact of the commodity cost increases and transportation cost increases that you mentioned on the call?
Sure. Yes. So again, when we talk commodity cost increases, we're specifically referring to the polypropylene. And again, polypropylene is what's used in the manufacturing of some of our key garments and masks. And as we started to see some of that impact, Eric, in the first Quarter towards the end.
But by the time we got to the end of the second quarter, we had seen prices of this commodity almost double. And we expect that to continue into the Q3 and start to see some easing as we go into the Q4. But It's big enough to call out, Eric. We don't quantify that, but it was I think it was worth mentioning. But I think the important thing to note is that Overall, with the inflationary guidance that we did experience in freight and commodities as well as the share count change that we are able to maintain our full year guidance For adjusted EPS in 2022 guidance given the strength in other areas of the business.
My other question is a bit off the quarter, but you had your IR Day in late May and then in early June, your Closest market peer Medline was received an investment by a consortium of really highly respected PE firms Valuing that company at $34,000,000,000 that's 8x your enterprise value. I'm I'm 100% certain Medline is an 8 times larger than you. I'm probably 99% certain they're not 8 times more profitable. I know they don't rank 8 times better in our survey work. So I'm just hopeful you could do a compare and contrast of your offering versus that Close competitor.
It's sort of a quiet company. People don't know much about them. I'm wondering if you could provide any thoughts on the impact of that deal to you, whether That might be fundamental, if you see any fundamental impact or regarding your thoughts on maximizing shareholder value. I mean, it's just it's such a stunning Comparison to how the market values OMI, I'd love to get your insights if possible.
Sure. So I'll take that one. So let me talk about, I think, what makes us unique and what makes us different versus them. And I think the pandemic has proven that out. So Eric, the last month, I spent a tremendous amount of time back on the road because I've been able to go visit customers, I've been out in our distribution centers.
And here's what's made us different, which I think is unique and I think is extremely valuable to our customers and then extremely valuable to Shareholders, so it's really our vertical integration from manufacturing all the way to delivery of the product and then even on to the home. Ian, that's a little bit different. I think others in the market talk about themselves being manufacturing. They manufacture, but the reality is primarily most Their products are made overseas and then their labels are put on them. First, as you take our PPE, the bulk of our PPE, we're making it ourselves in our factories And with our products, with our raw materials, our quality control, with our regulatory affair, so with our teammates, so that way we have great control over it.
It's Reduced substantially recalls. It's created our ability to service the customers at a greater level. So I've had several customers over the last month. And here's what they were surprised at and they told me is that our service level for core products was at 99.8% on average last During the pandemic, again, during the pandemic, we were able to get the customers what they needed, when they needed, on time delivery 99.9 Our accuracy, 99.8 to 99.9. So that's really what's made us different.
And in full transparency here, We weren't that way in 2017 20182016. We changed the business in 2019 with this tremendous focus continuous improvement with our blueprint to improve the way we operate and that's been a result All of that hard work and then capitalizing on our strengths during the pandemic. That has created goodwill. You see in this quarter the improvement of our Global Solutions business. From a profitability standpoint, A 29% growth or 28% growth year over year, that's both in medical distribution and in our patient direct business.
So all of that Has really changed the trajectory of where we're going. And look, they got their valuation is what their valuation is. I think from our standpoint in our company, what we do is unique. What we do is different. We operate with great values and a So those are some of the differentiators is really we're a manufacturer, we're a distributor, we have this great home health business.
Antiverse is really just primarily being more sourcing company. We do sourcing. We do that to mitigate risk and reduce some of that risk. But in the same sense, it played out. Our service levels were significantly stronger than most During the pandemic.
So I'm not an investment banker. I'm not somebody who's making those decisions on what multiple to pay for a company. But I think our company is extremely valuable. And we talked about this in Investor Day. You put those pieces together as well as the bright future we have, There's tremendous opportunities for us to continue to grow.
So you probably hear in my voice, I get excited about what we do. I'm passionate about it. Our team is passionate about it. And these are those are the reasons why I think we are tremendously valuable, not just today, but for the long term. Thanks, Ed.
Thank you. Our next question comes from the line of Jalendra Singh from Credit Suisse. Please go ahead.
Yes. Thank you. Just trying to better understand your comments around second half outlook versus first half reported numbers. Are you implying that Trends you saw on revenue and margins in Global Solutions Business in first half continue in second half, but majority of decline you're I want to make sure I understand the comment.
Good morning, Jalendra. It's Andy. I'll take that question. So in Global Solutions, you saw significant growth year over year, about 28% increase. And as you recall last quarter when I talked to you that Q2 of last year as we elective procedures dropped significantly and we talked about A $300,000,000 estimated decline as a result of that.
So with $400,000,000 almost $430,000,000 increase year over year, Happy to say that we've made up for that shortfall and really continued to grow on top of that. So real strong performance on the top line. So that certainly we're not going to grow 30% continue because our comps obviously get tougher in the second half of the year. But I would expect that to level off, but you're absolutely correct. In terms of global products in the second half of the year profitability, Yes.
So our profit is going to be more weighted towards the first half of the year, which is very atypical of the seasonality of this business, but it's And largely driven by the fact that the timing of the glove cost pass through with the favorability being recognized more in Q1 in A little bit in Q2 and then the unwinding of that in Q3 and Q4. So you can expect the low point of the margins for the business, which is driven by Global products to occur in Q3.
Okay. And then going back to the Delta variant impact, I understand No, you're not having anything in the numbers right now. But are you seeing any implications on your customers or potential customers In terms of their willingness to come out with RFPs with respect to your Global Solutions business right now?
No. We have not seen the delta variant impact that
Okay. And then one last one on the BiRAM business. I mean, can you provide any color like what's that a Significant contributor to the margin trend in the quarter and what are your expectations there for the second half?
Yes. I'd say our Patient Direct business I made the comment earlier, I think from Eric's question is, we saw the Global Solutions segment grow at 28%, Very strong segment. The bulk of that growth came from Global Solutions, but another significant portion of very, very, very strong growth also came from our Patients rec business. So you don't post up a 28% growth in the segment without both of those businesses performing extremely well. That business continues to perform well.
They've expanded the relationships, got relationships with other Suppliers as well as we continue to win new business in that patient direct business. So frankly, I believe they're growing at rates Well above what the market rate is growing today in that space. So really excited about the future of that business too.
Great. Thanks a lot.
Thank you. Our next question comes from the line of Kevin Caliendo from UBS. Please go ahead.
Thanks. Can you talk a little bit you mentioned it briefly in your prepared remarks about net customer wins And Global Solutions, is that showing up in 2021? And what do you anticipate for 2022? At this point, I'm think most of the RFP activity is probably completed.
Yes. So to that, Kevin, I think a couple of things. It is starting to show up in 2021. This was some business we actually won during the pandemic where customers were looking at their options and Saying, hey, you guys have the ability to support us. Let's move the business.
So there were several customers you could add up that we won late last That started into this year. The expectation is those continue and then actually more momentum into 2022. As I've talked in the past, we've streamlined down our ability to onboard customers for less than 90 days. Probably depending on the size and complexity, we've seen that as much as a year, down to I think where we come in to be able to do it in 90 days. We're already starting to see that and we expect to see that as we continue through the year.
Okay. Thank you. Also, Arun, in terms of your capacity, excluding the incremental glove capacity, which you talked about already, When we talk about the manufacturing increases and getting into some higher specialty products And the like that you talked about in your opening remarks. Can you go a little deeper and help us understand sort of what that means, the potential for that? My guess is 2022, it's not going to be incredibly meaningful, but help us understand Sort of the opportunity set to TAM, how big in terms of revenue potential this could be and how we should think about it when modeling?
From a modeling standpoint, let me just first go back to where it is. So we talked a little bit about in the speech and we talked about it in the Investor Day. It's a mix of 2 things on this, Kevin. 1, it's a mix of existing products we have today with some unique Packaging to go into other markets and other industries. We talked about the consumer or the retail market.
We just launched our Safeskin Pop and Go gloves. That is a different margin profile than what we provide into the acute care space, and it's actually from a positive standpoint, from a margin standpoint. That opportunity is going to continue to grow. We also have the ability with that for in the retailer consumer market to also private label it for big box brands, which we're in process of it today. And then in addition to that, it's other new products that we've launched, not just wound care incontinence, But additional products within our own manufacturers like gloves, where we have, as I mentioned earlier, whether it's a chemo rated glove, Surgeons' gloves, other unique gloves that we have the ability to go out and launch, and we continue to do that.
We haven't For the market yet, we haven't gone out publicly with that yet. So from a modeling standpoint, I think the way to just think about it is Those are incremental dollars at much higher pull through than what we have today.
Great. All right. Thank you very much.
I'll add one last thing as I think about a little further too is really think about 2026. That's kind of we gave the targets for 2026. That's a good view of where our margin profile would be as these become involved or developed and included More broadly into our overall revenue targets.
Thank you. I'm showing no further questions in the queue at this time. I'd like to turn the call back over to Mr. Ed Pesicka for closing comments. Please go ahead.
Thank you. Let me just first discuss one thing and then I'll close this. I know we spent a lot of time today talking about glove cost pass through. I think the way to really think about that is, and at the highest macro level, is first half of the year, we had favorability In that from both a revenue and a pull through, the back half of the year, that will be primarily offset. Even in light of that positive in the first half, negative in the second half, Balancing out kind of on a go forward basis, we're still generating between $3.75 and $4.25 adjusted earnings per share.
I think thinking that in the context is, yes, sequentially there'll be an impact on it. But overall, even with that netting out in essence over time, This year, we're still at the 3.75 to 4.25. And in addition also to the share count still at the 3.75 to 4.25, Which is really where I would close on is, this is why I look at the robust performance, I look at the strength that we've shown in Global Solutions Sequential growth, I look at overall revenue and the operational efficiencies driven in our global products business and our patient direct business As well as our Global Solutions Medical Distribution business. That's why I can't I am so excited about where we are, what's ahead This year and even beyond this year, I had the opportunity to talk a little about it with a question from Eric. We believe and we've proven that we have one of the strongest value chains in the health Now that we have a strong value chain, right now we have the ability to flex and scale very quickly Because we still have a quickly changing marketplace.
And then finally, what we haven't had and we have now is the financial flexibility. We're down at a 1.8 debt to EBITDA ratio, which enables us to continue to invest in our business and invest wisely and diligently To provide that long term growth. At Investor Day, we talked about 2026. I'm excited to get there. I don't want to live my life and pass it over very quickly, I'm excited of where we are and where we're going.
So that's what really gives us the excitement about what we have into the future. So I appreciate the time from everybody today. I look forward to talking to you over the next few months and for sure in the next quarter at the earnings call. So thank you everyone.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Good day.