Good day, everyone, and welcome to the STERIS plc third quarter 2023 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, and then 1. To withdraw your questions, you may press star and 2. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Julie Winter, Investor Relations. Ma'am, please go ahead.
Thank you, Jamie. Good morning, everyone. As usual, speaking on our call today will be Mike Tokich, our Senior Vice President and CFO, and Dan Carestio, our President and CEO. 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 website. On today's call, non-GAAP financial measures, including adjusted earnings per diluted share, adjusted operating income, constant currency organic revenue growth, and free cash flow will be used. Additional information regarding these measures, including definitions, is available in our release, as well as reconciliations between GAAP and non-GAAP financial measures. Non-GAAP financial measures are presented 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. Good morning, everyone. It's once again my pleasure to be with you this morning to review the highlights of our third quarter performance. For the quarter, constant currency organic revenue increased 7%, driven by volume as well as 300 basis points of price. As anticipated, the divestiture of the Renal Care business impacted our revenue comparisons to the prior year by about $47 million, which is detailed in the press release tables. This is the last quarter of a year-over-year impact for the Renal Care business as we divested it in January of last year. The integration of Cantel Medical continues to go well. We achieved approximately $10 million of cost synergies in the third quarter, bringing our year-to-date total to about $45 million.
We are well on track to achieve our stated goal of approximately $50 million in fiscal year 2023. As anticipated, gross margin for the quarter decreased 200 basis points compared with the prior year to 43.1% as pricing, currency, and the favorable impact from the divestiture of Renal Care were more than offset by lower productivity, unfavorable mix, and higher material and labor costs. Sequentially, the impact of material and labor costs have improved and totaled about $15 million in the quarter compared to the prior year. This puts us at about $75 million year to date, with our outlook of $90 million for the year remaining unchanged.
EBIT margin declined 10 basis points to 23.9% of revenue compared with the third quarter last year, which reflects the gross margin pressures mentioned earlier, which were partially offset by lower SG&A expenses. The adjusted effective tax rate in the quarter was 23.4%, higher than the prior year, due primarily to geographic mix and favorable discrete items which occurred in last year's third quarter. Net income in the quarter was $202.4 million, and earnings were $2.02 per diluted share, reflecting the lower anticipated volume. Capital expenditures for the first nine months totaled $290.5 million, while depreciation and amortization totaled $410.7 million. Year to date, our capital expenditure spending has been higher than anticipated, primarily due to timing of our investments within the AST segment.
We still expect our full year capital expenditures to be approximately $330 million. Total debt increased slightly in the third quarter to just over $3 billion, reflecting borrowings to fund a few small acquisitions and share repurchases. Total debt to EBITDA is slightly over 2.3 times gross leverage. Free cash flow in the first nine months of the year was $263 million. Free cash flow was limited by higher-than-planned capital spending, mainly due to timing and higher levels of inventory. With continued pressure on working capital, in particular inventory and now account receivables, we now anticipate the free cash flow for the full year will be about $500 million, or a reduction of about $100 million based on our last guidance. With that, I will turn the call over to Dan for his remarks.
Thanks, Mike, and good morning, everyone. Thank you for taking the time to participate in our third quarter call. I will cover a few highlights from the quarter and then address a revised outlook for the fiscal year. Starting with healthcare, the segment grew 10% on a constant currency organic basis in the quarter. This was driven by high teens growth in capital equipment. In particular, improved shipments in our IPT business were driven by operational and supply chain improvements in core washing and steam products. We saw double-digit revenue growth in our surgical products.
Our main supply chain issue continues to be with electronic components. We are working hard to resolve these issues. As we have discussed, we are working with existing and new suppliers where possible to ensure the availability of parts in order to meet customer demand. The healthcare services business delivered double-digit constant currency organic revenue growth, driven by increased demand and improved pricing. We also saw sequential improvement in consumables. Consumables constant currency organic revenue grew low single digits compared with third quarter of last year.
Supporting that growth, U.S. procedure volumes improved in the quarter, with recovery outside of the U.S. still lagging. The underlying dynamics of our healthcare segment remains very favorable. Hospital capital spending remains stable, as evidenced by our healthcare backlog, which totaled over $500 million at the end of the quarter. Orders for the quarter remain at approximately a 60-40 split for replacement and large projects, and we are not seeing any order cancellations at this time. Although we still have some delays, our capital shipments have improved dramatically from prior quarters. Approximately $30 million in capital equipment shipments were delayed into the fourth quarter. Overall, our third quarter healthcare performance showed nice improvement. Opportunities remain from a supply chain perspective, which we anticipate will take some time to fully work through.
Our expectations for the 4th quarter reflect a conservative outlook on how quickly we can recover from these challenges and difficult comparisons in AST and life sciences. Our AST segment grew 7% on a constant currency organic basis, despite a reduction in demand for bioprocessing disposables and delayed shipments from MEVEX, our capital equipment business. On the bioprocessing side, our 2nd quarter this year was a peak level for biopharma within AST. We are hearing from customers that they are resetting their expectations due to reduction in vaccine production. Importantly, we are not seeing declines in total revenue at this time, but rather a flattening of growth. Positively, we anticipate that our core medical device customers will benefit from improvement in procedures, which we expect will help AST continue to perform at historic levels.
Regarding MEVEX, a large E-beam capital equipment order of approximately $10 million was delayed into Q4 as our customer was not ready to receive the unit. Turning to life sciences, constant currency organic revenue was down about 1% for the quarter, with declines in capital equipment and consumables somewhat offset by growth in service. The same factors impacting the bioprocessing demand in AST are also impacting our life sciences consumables volume. In addition, we have difficult comparison with strong consumables growth in the third quarter of last year. That said, we do anticipate that this is a matter of timing as cell and gene therapies continue to increase in demand, which should help offset the reduction in vaccine production. We remain confident in the long-term growth drivers within the customer base for both AST and the life sciences segments.
In addition, life sciences had an unanticipated shipping challenge out of Europe that limited capital equipment growth in the quarter by about $10 million. Positively, backlog remains at near historic levels at over $100 million. Dental increased 1% on a constant currency organic revenue basis in the quarter. Procedure volumes remain at approximately 95% of pre-COVID levels due to the broader economic pressures impacting consumer spending. Based on market data, STERIS is performing better than market and benefiting from pricing and modest share gains. As you heard from Mike, gross margins remained under pressure as anticipated. Despite the impact of lower gross margins and increased pressure from foreign currency, we held EBIT margins about flat in the quarter as SG&A was lower than planned, largely driven by lower incentive compensation.
With added pressure on interest rates and taxes, our adjusted earnings per diluted share for the quarter came in at $2.02. A result of our performance to date and our expectations for the fourth quarter, we are revising our full year guidance. Reported, revenue is now anticipated to grow 6% compared with prior expectations of 8% growth. Based on foreign currency forward rates through March 31st, 2023, currency is now anticipated to negatively impact revenue by approximately $110 million this fiscal year, a decline from expectations of approximately $150 million. Constant currency organic revenue is now anticipated to grow approximately 7% compared with prior expectations of 10%. With one quarter left. This revision and outlook implies the challenges which limit our performance in the third quarter do continue.
Reflecting on the lower revenue, adjusted earnings per diluted share are now anticipated to be in the range of $8-$8.10. Our long-term expectations for the business remain unchanged. We continue to be very strongly confident and believe that STERIS is capable in generating mid to high single digit constant currency, organic revenue growth, and double-digit earnings growth into the future. With that, I will turn the call back over to Julie to open up for Q&A.
Thanks, Dan and Mike, for your comments. Jamie, if you'll give the instructions, we can open up for Q&A.
Ladies and gentlemen, at this time, we'll begin that question and answer session. To ask a question, please press star and then one. To remove yourself from the question queue, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the numbers to ensure the best sound quality. Once again, that is star and then one to join the queue. We'll pause momentarily to assemble the roster. Our first question today comes from Dave Turkaly from JMP Securities. Please go ahead with your question.
Great, thanks. Hey, I just wanted to confirm something here, Dan. You called out $30 million in delayed capital shipment in healthcare, I think, and then $10 million from AST, and then $10 million, I think, from life science. If I, if I look at those and add them up and get to 50, I mean, that seems to be about the mix might have been different, but about what you were shy of the Street. Are we thinking about that correctly?
Yes, you are, Dave. That's correct.
Dave, I would also add in there the reduction in bioprocessing was another $10 million, roughly, and that was split about evenly between AST and life sciences, just so that we're all on the same page.
No, I appreciate that. I guess one for Dan, too. I mean, obviously, you know, the good news is this is not a common occurrence with you guys. If we look at this, the bio, you know, the I think it even said growth in bioprocessing customers. You explained that the vaccine was the main driver. How does that sort of, I guess, like, what is the lead time there? How does it sort of maybe sneak up on probably not the right word, but on you so that, you know, we didn't know this last quarter and now we do?
Let me give you a little background. You know, our customers are typically, at least in AST, where we took the biggest hit, are typically the manufacturers of single-use technologies that are sterile technologies that are used in the aseptic manufacturing for vaccines and biopharmaceuticals. What we have seen for the last couple years is high double-digit growth on a year-over-year basis in that sector within AST. It's been one of our larger growers and, depending on the quarter, it's contributed anywhere from 1.5% - 2.5% growth, you know, on top of the normal growth that we've seen in AST. That peaked in Q2, which would be, you know, at the end of the summer, early fall, which would be logical going into high vaccine production sort of season.
Our customers had built a lot of inventory, with the slowdown in either vaccine reluctancy or just vaccine production in general, they were stranded with a lot of inventory. Consequently, our volumes in Q3 went down significantly. We started to see it in the beginning of Q3. At that point, there's nothing we could do to adjust. We think this is something that will work its way through as the inventory's burned down. The underlying supporting growth for single-use technologies and bioprocessing remains. It's once we work through the tough comparison of the vaccine spike that was anticipated.
Thank you.
Our next question comes from Matthew Mishan from KeyBanc Capital Markets. Please go ahead with your question.
Hey, morning, Dan. Mike, Julie. I just wanna take a step back. Dan, could you just kind of frame for us what you think the normalized growth profile for STERIS is over the next several years? I imagine you really don't think it's a 10%, 11% grower, and where you're coming in this year is probably more in line with the, you know, kind of longer term, how you look at the business.
Yeah. I mean, our stated objective is to grow high single digits on the top line and low double digits on the bottom line. We believe with a high degree of confidence, that's something we can continue to do, even in the current market conditions over the long haul.
Then as you think about going out to next year versus that high single digits, what looks, I guess, better or worse as you think about next year?
Well, Matt, we've got to get through Q4 at this point. We're not doing any guidance for next fiscal year. You know, a few comments I would say that are, this is preliminary but encouraging is, you've heard some of our other medtech peers mention that they're optimistic about procedural recovery in the second half of the calendar year. We believe things started in Q3 to recover back to pre-COVID levels in healthcare, particularly in the US. It's still lagging pretty significantly outside of the US. Assuming that holds and improves in the second half of the calendar year, since we're largely a procedure-driven company, that would be beneficial to us.
Matt, I would just also add, obviously our backlog remains, at least at healthcare, at record levels and within life sciences, near record levels. You have seen that we are getting through some of the supply chain constraints. We did ship more sequentially. That $30 million of c apital deferral in healthcare was $60 million last quarter. I mean, we are seeing progression there. That, that does give us, as we look out further, more confidence for next year.
Okay. I guess just the last one, just on the order environment. I mean, your backlog did go up sequentially. It typically does on a seasonal basis. As you're shipping out, you know, more from supply chain, you know, improving, you know, how should we think about the order environment and your ability to kind of replenish those?
It's remained very strong at this point, which I know is a bit in the face of everything we read about the financial performance of a lot of the hospital systems these days. They seem to be still willing to significantly invest in the future capacity requirements for procedures. You know, keep in mind, largely everything that we sell in terms of of capital into hospital systems, it's almost like infrastructure. In order for them to perform at a higher rate of sort of volume, they've got to have more sterilizers, they've got to have more washers, they have to have more OR tables and lights. You know, I think our equipment is not it's not a luxury, it's a utility in many respects.
I'll jump back in the queue. Thank you .
Our next question comes from Jacob Johnson from Stephens. Please go ahead with your question.
Hey, thanks. Good morning. A couple on the bioprocessing market. First, Mike, if I heard you correctly, $10 million headwinds, in 3Q, is that the right way to think about 4Q? As I kind of listen to what your customers are talking about, you know, they're seeing some near-term headwinds from COVID, and inventories, but they're kind of looking to the back half of this calendar year where things will normalize again. Is that maybe the right way to think about it for you all, or is there some kind of lag in terms of what they're seeing versus when the demand comes to you all?
I think what you're going to see as it relates to bioprocessing is you're going to see pretty tough comps leading up to Q2 of this past year, the year that we're currently in. I think as we burn those down and get back to what is the normalized growth rate for bioprocessing, which is still in the, you know, mid to higher double digits, you know, it's, but it's going to take some time to burn through the inventory and to burn through what was a spike in vaccine production demands.
Okay. Thanks for that, Dan. My follow-up, which you may have answered, but I'll check, is just on the AST side of things, does this slowdown due to COVID impact any of your kind of capital allocation plans, especially as I think about X-ray capacity?
No. I mean, it's, you know, we're obviously looking at our capital spending and adjusting the timing of, you know, when we build and add this, you know, the infrastructure into our capacity. The market and just the inconvenience of supply chain and construction has helped us defer capital a bit just because it's been a challenging time to build anything. No, our plans remain, you know, largely unchanged. Maybe different prioritizations of what comes online first, but other than that, the projects are still in play, and we're very confident about those.
Got it. I'll leave it there. Thanks.
Our next question comes from Mike Matson from Needham & Company. Please go with your question.
Yeah, good morning. Thanks for taking my questions. I want to ask one about the backlog, you know, in healthcare. I understand you don't want to give guidance for 2024 yet, but, you know, without specifying a timeframe, I guess it just seems like, you know, you kind of expected some above normal growth this year and given the backlog and that didn't happen mainly because of the supply chain, I guess. You know, is there still potential for you to, you know, as you catch up on sort of that backlog to see above normal growth in the healthcare business at some point?
I mean, what I would yes, at some point, we're not defining that point at this time. We expect sequential improvement in our, you know, capital shipments as we look to the quarter that we're in currently. As we look into next fiscal year, we continue to believe things are improving, and that would lead one to believe that we will deliver a disproportionate amount of capital in that backlog in the first half of the year. We have not modeled that out, and we have not done our planning yet on that.
No, I understand. Just as far as pricing, I mean, good to see that the 300 basis points, again, without asking for a specific number for 2024, but, you know, just I'm wondering about the sustainability of kind of that higher level of price increases. Is that, you know, with your contracting and everything that's in place, I mean, is that something that's got some legs to it that could continue for a while, or is it more of like a 1-year bump and then kind of goes back to, like, normal levels?
I think that largely is determined by what happens or continues to happen with inflationary pressures. To the extent that we need to push through pricing and it makes sense to do so, in order to protect our margins, and still remain competitive in the marketplace, that's something that we'll do and we have always done consistently at STERIS.
Okay, got it. My final question is just on the AST business. Just given what's happened with your primary competitor there, with all the EO litigation and everything, I wanted to see if you'd seen any sort, I'm not asking about the litigation specifically, but just, you know, have you seen any kind of movement away from them or, you know, any impact on your business because of what's happened with them?
No, I wouldn't say so. I mean, the current situation in the, in the industry is the capacity is pretty tight, especially as it relates to ethylene oxide here in the U.S. You know, we have strong partners across med tech. We're always striving to take a little more share wallet wherever we can do that.
Okay. Got it. Thank you. Our next question comes from Jason Bednar from Piper Sandler. Please go ahead with your question.
Hey, good morning. Thanks for taking our questions. First one, I'll follow up on Matt Mishan's question earlier, but maybe take a different stab at this. You know, I wanted to come back to some questions around guidance. A lot of things that are understandably outside your control. We've seen that here this year, but, you know, guidance is in your control, and, you know, this is the second time in 3 quarters where we've seen guidance lowered. Since we're sitting just a few months away from fiscal 2024 guidance, I guess, what learnings can you say that you've taken from this year that can help inform how you set your outlook for fiscal 2024?
I know a few others have asked, but I guess, you know, just any early puts and takes we should be considering as we work through our models for next year, particularly on the equipment side.
Yeah, Jason, I'll make one comment, and then I'll, like, let Mike add a few comments as well. You know, I think we came into the year when we did our planning and our guidance with an awfully large backlog and just. We're under the impression because we had navigated COVID incredibly well at that point relative to supply chain, and we really got tripped up pretty bad in Q1. It exposed some vulnerabilities, you know, in our supply chains across our manufacturing network. What I can tell you is we're a lot more resilient now, and we have a much better eye and a much better strategic focus on managing those supply chains and having much more resiliency. I believe that'll carry forward into next year.
Now, having said that, just because you roll into the year with a large backlog, I think we need to be a little more cautiously optimistic and a little more metered in our expectations of how quickly that will ship.
Yeah. I think surgical procedure volume was the other thing that we anticipated was gonna be much higher this year, and obviously everybody knows how that is playing out. Although from a favorability standpoint, we have seen some improvement in Q3 in the U.S. in particular. Again, there is just so many moving pieces here. To Dan's point, I think, you know, conservatism at the end of the day is the norm for us. We have put out a outlook for the fourth quarter that we believe is conservative in nature based upon the facts that we continue to work with throughout the year.
All right. Very helpful, and that's good to hear. Okay. Maybe one on free cash flow. I mean, we saw the pretty sizable reduction. I know we're talking, I think some round numbers here, you know, $500 million versus $600 million. You know, that is a much, a bigger drop than what's implied just from the EPS cut. I think, Mike, you mentioned some comments there around, you know, inventory running higher, receivable collections running lower. Maybe could you know, bucket those two, you know, does that reverse as we start thinking towards, you know, free cash flow then for next year? Does working capital work lower?
Yeah. I would say that, you know, if we go back to the beginning of the year, we anticipated about $675 million in free cash flow, obviously we're down to $500 million. I would bucket though that inventory and receivables 2/3, 1/3. Inventory is remaining elevated. Obviously, as we have not been able to ship at the rates we anticipated, we are carrying more inventory. As we've talked many times, the last couple of quarters, we continue to fill our manufacturing slots, so we're building, waiting for that golden screw. That golden screw doesn't come, that product remains in inventory until we ship it. Inventory is continued to be elevated. On the receivable side, it's not our inability to collect, it's just the timing of collections.
We have about just under a 60-day, DSO that we have collection. Originally, we anticipated shipping earlier or more product in the 3rd quarter. That has shifted to the 4th quarter, which pushes collections into the 1st quarter. Free cash flow isn't lost. It's just more of a timing issue.
Okay. All right. Makes a lot of sense. I'll hop back in queue. Thanks so much.
Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 2. Our next question comes from Michael Polark from Wolfe Research. Please go ahead with your question.
Good morning. Thank you. I want to follow up on bioprocess and AST and try and put together some math, Dan, that you mentioned earlier in the Q&A. At one point not long ago, it was contributing 1.5-2 points of growth to the segment. I also heard that it's been growing high double digits, which I would interpret as 15%-20%. If I put those two data points together, bioprocess is a portion of total and AST is 10%. Is that a ballpark?
Ballpark. Maybe slightly less, but you're in the range.
Okay. To follow up also AST, the MEVEX $10 million slippage, I know this is a recent acquisition. It's been lumpy quarter to quarter. I had $10 million of revenue from this in the year ago quarter. Now you were annualizing it in the numbers, and now you're calling out a $10 million slippage out of this quarter, which I would interpret as MEVEX was at or near zero in the quarter. The question is, what is the revenue headwind from this equipment line in AST year-on-year?
Yeah. Your math is about right. In total, we're somewhere between 25 and $30 million for the full year for MEVEX. Yeah, you're exactly right, Mike. It was near zero, that full $10 million is flipped from one quarter, third quarter to the fourth quarter. Again, it's the timing. It is lumpy, unfortunately. I know that AST has, in the past, been much more predictable for us, MEVEX has hurt us twice now with shipping issues. If you add the MEVEX shipping issues, you take the bioprocessing, you're back to somewhere in the low teens growth for AST. The trajectory hasn't changed dramatically, but it's the timing that is the concern, I think, from everybody's standpoint.
Yeah, just to add to that, Mike, those systems from MEVEX can be anywhere from $5 million or $6 million - $12 million, and they're large build systems with lots of conveyance and complicated electronics and control systems. You know, we rely on our customers to have the infrastructure in place before we can come install. Sometimes there's change in scope, and sometimes there's just little delays in construction. As much as we try to stay on top of it and help project manage, ultimately, it's in the hands of our customer as to when we can deliver.
Those two for me. I would hop back in queue and ask a few more, but, I guess, maybe I'll do that and come back in. Thank you.
You're welcome.
Our next question is a follow-up from Matthew Mishan from KeyBanc. Please go ahead with your question.
You there, Matt?
Yeah, sorry about that.
It's all right.
I guess we're gonna be doing some follow-ups on this call. Just first on the consumables, the low single digit growth you saw. It's been lagging or, like, flat to low single digit, maybe even a little bit declining in a couple of quarters ago. What's your sense of hospital inventory of your consumables? Is it pure volumes, or has there been some de-stocking that's gone on as well?
I think it's purely procedural volume driven. They don't hold a lot of this because it's heavy, it's bulky, it's takes up a lot of space, it's not something they would carry a lot of excess inventory of.
Okay. Is it across the board from CoreStar, as Cantel, Key Surgical, or is there a little bit of mix, you know, change in pieces of the business that may be lagging versus others?
You can get into really complex stratification of this, but in the end, it's not really any one particular piece that's driving it one way or another. It's. I wouldn't say it's a mix issue. It's purely procedure driven. Certain procedures, you know, in terms where we have a little more exposure with our endoscopy products, obviously to endoscopy procedure rates. Generally speaking, it's all procedurally driven demand.
Okay.
Matt, you guys know we're heavy U.S., right? You know, compared to a lot of other.
Yep.
-healthcare companies, we're 80% U.S. in what we do. The trends here have the biggest impact on our performance.
Back to AST, I mean, does this open some capacity for AST with some slower growth in bioprocessing? I guess, my sense would be you could fill that fairly quickly if because of, like, the shortage through the industry.
Well, keep in mind, all single-use technologies for bioprocessing only run in radiation. Not ethylene oxide, where there's a real significant shortage. Really the phenomena is, you know, if we're running with a lot of product backlogged, especially as we come up to the holiday seasons, in a typical year in AST, we would starve out our plants, and we'd shut down a day or two and either do it the Christmas week, or you end up starving out because it takes customers a longer time to start up production because they've shut down factories before you see their supply chain start to flow in early January.
In the case of the last couple of years, we've been sitting on so much backlog demand in bioprocessing that we ran at a number of our plants straight through the holidays, 24/7, 365. Not doing that, in this year's case is basically straight drop through because of the high fixed cost model at AST.
Okay. Mike, if I'm looking at the balance sheet, right, it looks like the debt... You've generated cash flow, through the course of this year, even with the working capital builds. I guess, why has the debt balance gone up, and why not pay some of that down to lower interest expense?
Yeah. The debt balance went up primarily for two reasons. One, we did some minor acquisitions, some tuck-ins that we paid cash for during the quarter, and then we continued to fulfill our dilution offset for share repurchases. We also were opportunistic during the quarter on the share repurchase side, just due to the overhang that we were facing with the EO situation. In total, we spent about $88 million in the quarter on share repurchases, and then another $50 million-$75 million of cost force acquisitions. Those are the two main drivers that changed our profile of debt. We still are within the leverage ratio that we are very comfortable in. We're just over 2.3 times.
We did pay off during the quarter a private placement note that was due, which was about $91 million, so we actually just borrowed. It was fixed versus floating. Our interest rate ticked up just a tiny bit. Our average interest rate is just under 4% as we sit here today.
Okay. Then how much is left on your authorization for share repurchase?
About $160 million remains under the current authorization.
Okay. Thank you very much.
You're welcome, Matt.
Our next question is also a follow-up from Michael Polark from Wolfe Research. Please go ahead with your follow-ups.
Hey, thank you. Just to In Healthcare Capital, given the supply chain strains, are you fully competing for new orders, or has the supply chain challenges impacted your kind of your ability to bid for new business?
We're still fully competing. You gotta think of it this way. These are generally, you know, a significant portion of our business is long-term projects, and then the other portion is replacement. That's largely replacement of equipment that we already have placed in the marketplace. You know, if we have a longer term in terms of delivery for a replacement unit, we tend to be able to work with the customer and manage that through our service arrangements and service contracts until we can replace that with a new system.
Makes sense. The last one, the few small acquisitions in the quarter, anything to flag there? In what business segments and any revenue that we even if minor, any revenue that we should consider for our bridge work over the next year or so? Thank you.
We called those out in the queue last night, Mike. Some healthcare and AST, really small deals in some cases. Buying out a former distributor, for example, where there's really no change in revenue to the company, but we're choosing to go direct to markets opportunistically.
Okay. Thank you so much.
Ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Julie Winter for any closing remarks.
Thanks, everybody, for taking the time to join us this morning. If anyone would still like to chat, please let me know, and I'll be happy to do my best to accommodate you. Take care.