Q3 2019 Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the option care Health third quarter 2019 earnings Conference call. At this time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to asked a question during the session you'll need to press star one on your telephone.
Please be advised of today's conference is being recorded.
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I would now like to hand, the conference over to Chief Financial Officer, Mike Shapiro. Thank you. Please go ahead Sir.
Thanks, Bridget good morning, and for joining us for the option care Health third quarter earnings call I'm joined this morning by John rather maker, Chief Executive Officer of option care health.
Before we begin please note that during the call will make certain forward looking statements that reflect our current views related to our future financial performance future events and industry and market conditions.
These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our comments.
We encourage you to review the information in the reports we filed with the FCC regarding the specific risks and uncertainties. You should also review the section entitled forward looking statements in this mornings press release.
During the call, we'll use non-GAAP financial measures when talking about the Companys performance and financial condition.
You can find additional information on these non-GAAP measures in this mornings press release posted on the Investor Relations portion of our website.
With that I'll turn the call over to John .
Thanks, Mike and good morning, everyone and thank you for joining us on bodies are first earnings call as one organization.
By now hopefully you have seen our press release sharing our results for the third quarter.
I'd be happy the entire leadership team and the over 6000 team members the boxing care how.
I'm thrilled to share an update on her efforts to integrate and set the standard for alternate site infusion therapy.
Overall I'm very pleased with the progress we have made and I'm very proud of how our two businesses have come together in a short timeframe to begin building a truly extraordinary organization as one team with a unified purpose.
I want to spend a few minutes, revealing the high level financial results before revisiting the merits of the merger and providing an update on the progress over the past 90 days.
Mike will walk you through the financial results for the quarter in a bit more detail, but I do want to reiterate that as a result of the merger on August that.
Performance as released this morning represent a full quarter up option care and incorporates legacy Bioscrip result from the date of the merger through the ended the quarter.
So the results as reported do not represent a full quarter's results as they merged enterprise.
While we are not providing pro forma results for the quarter, we'll try to frame. The result on a comparable full quarter basis, where possible.
Net revenue for the quarter with $615.9 million, representing a 24.7% growth over prior year on a reported basis.
On a comparable basis net revenue was up 2.3%.
This is lighter than our historical results, but given the level of disruption over the past 90 days as Weve integrated to sales teams and commercial organization I'm pleased with the results Nonetheless.
While our commercial integration efforts continue I anticipate revenue accelerating into the fourth quarter, as we stabilize territory and resource alignment and sharpen our commercial execution.
Adjusted EBITDA for the third quarter was $34.8 million.
As you can imagine there are number of moving pieces given the merger activities in the quarter and Mike will address the earnings performance in a few minutes.
I would highlight that there are number of areas in which we have harmonized, our accounting policies, which creates some year over year comparison challenges.
Mike and I are aligned that we will deploy.
Conservative inconsistent principles that will build on the strength of our improved capital structure, and we will strive to be as transparent as possible with her external stakeholders.
One of the key merits of the merger has always been cash flow potential.
The combined organization and despite the merger related outflows in the third quarter, we increased our cash balances and finished with more than $50 million on the balance sheet.
I am comfortable with our capital position at the end of third quarter and the performance reaffirms our belief in the cash generation potential for option care health.
Stepping back for a minute from the quarterly result.
I want to remind everyone of the merits of the merger between option care and Bioscrip and the opportunity that lies ahead.
I couldn't care, how is the nations largest independent provider of infusion services in the alternate site setting.
With a network of over 120, compounding pharmacy and approximately 2900 clinician. We're license in all 50 states and have unparalleled ability to reach approximately 96% of the U.S. population.
The investments we've made in our people infrastructure and technology enable us to scale up rapidly and raised the level of infusion care going forward efficiently and effectively.
We've talked about the economic justification for the merger and the cost synergy potential, but I'm also excited about the opportunity to collaborate with our payer and health system partners to help drive better outcomes for our patients.
Providing infusion therapy under our model traditionally costs, a fourth to a third of what it cost to provide similar treatment in the acute setting.
So we are energized about the leveraging our scale and clinical expertise to this.
To disrupt the traditional paradigm of delivering infusion and settings that are more expensive and transitioning these patients under service in the home or one of our 150 ambulatory treatments like.
Finally, I'd like to spend the remainder of my time. This morning, providing an update on our integration efforts today.
Shortly after we announced the merger in March of this year, we established an integration management office with dedicated resources to begin developing our integration plans to hit the ground running in the team has done just that.
We knew that any successful merger requires the team to establish a northstar that will guide decisions and actions across the organization.
To move with speed and reduce uncertainty combined to blend the best practices across both entities and to provide frequent clear and honest communications broadly to all team members.
As we've approached the incredibly complex integration highly effective been compassionate patient care has always been at the center of both organizations.
We'll continue to be our Northstar in terms of focus.
Every one of our team members understands that there is a loved one on the receiving end of everything that we do and this has been a galvanizing aspect as we bring the two teams together.
While at the same time, we're acting with a sense of urgency to integrate the organizations as quickly and effectively as possible.
Before the merger, which completed we had already identified the new executive leadership team, which is what the blend the two legacy organizations.
And as we have announced virtually all leadership position several layer deep it's been a best athlete drill across the board and we've created a tremendous team splitting roughly 60 40 across the legacy option care and Bioscrip organization.
It is truly an extraordinary organization of talented professionals, who share my passion for delivering extraordinary service to the patients with whom we are interested for their care.
We also committed to the concept a basket both whereas we entered the merger with the belief that we had much to learn from each other and we would be big begin to build the integration planning process with an openness to take the best practices from either organization.
Since the transaction since the transaction close we've established our organizational leadership model and identified all key leaders for the respective area.
We know that accelerating topline growth is critical to our success in integrating and reorganizing our two commercial organization is critically important.
From day, one post merger, we initiated a comprehensive review of our combined customer base, the market opportunities and the appropriate alignment of our resources to maximize our reach.
Given the focus of the team I'd estimate were 80% complete in realigning of our field sales team as at the end of the third quarter.
This is one of the more complex areas to harmonize as we have considerable territory Apple overlap.
We have reassigned and redeployed resources, where we can but there is no avoiding the disruptive nature of this exercise we estimate that 45% of our commercial organization has a territory or new portfolio of accounts as a result.
Just underscores the commercial alignment efforts will take time, but as I said, we've made tremendous progress to date.
All of this exercise was to increase the reach and frequency of our selling resources and based on the analytics and monitoring we havent place, we're seeing early signs of achieving these targets.
We've also made considerable progress on our procurement efforts to date.
As we.
As we've consistently highlighted procurement as a shorter run way to capture and realize synergies.
This is broader than just taking best contract in negotiating a price as Mike will highlight we've made progress and getting current with vendors on past due invoices, which has afforded us a platform from which we can form more collaborative and productive relationship with our procurement partners.
We have initiated contact with all of our key commercial payers to begin harmonizing contract and the start were then to start work with some of the more innovative health plans to design programs that not only encouraged the best site selection.
But also enhance the value per member payer and also the provider.
I'm also pleased with that our efforts to drive operational efficiencies in the field are taking shape.
As we've mentioned previously we estimate that integration.
Our operations will take 18 to 24 months as the complexity around system integration pharmacy licensure Credentialing and overall service continuity is significant.
We have considerable experience in this area and ensuring seamless patient care and high service levels for our referral partners and payers is the priority.
To date I'm very pleased with the month multifunctional effort to begin standardizing our field operations that will generate a more efficient and effective model.
One of the initial activities for the clinical team was to standardize the quality management system for all our facilities and to prioritize and deploy capital to eliminate any deferred maintenance and to bring the entire fleet of facilities up to this paying high standards.
This process is well underway and we have made strong progress in deploying standard operating procedures supporting technology, and making facility upgrades where appropriate.
As you know revenue cycle management is a vital component in driving our financial performance.
Both organizations have placed a significant amount of focus to stabilize and improve the performance of these functions.
As I mentioned earlier and as is apparent in our statement of cash flows we have seen improving velocity of cash collections across both organization as we increase the productivity and effectiveness of our efforts.
We still have a significant amount of work ahead.
To drive better than historical results, but we are building in executing plans to utilize technology and more effectively deploy resources to increase the speed and accuracy of our claim submission.
Throughout this entire process both pre closing sense, we've worked tirelessly to provide a constant stream of communication to our team members to ensure that everyone is up to speed on the integration plans and how it may affect them.
We have engaged teams from across all disciplines and from both legacy organizations to help us define described and communicate the purpose mission and values of option care health.
And we are finding ways to identify and recognize team members, who are modeling the desired behaviors and living the values.
So a few thoughts in closing.
We know that a successful merger of this size and complexity required disciplined execution.
So it's early and a nowhere we over the hump, but I'm very encouraged by the progress to date and that we're on track with the plans that we've established.
We have a significant amount of work ahead of us, but I've never been more excited about our team our enterprise and the opportunities that lie ahead with that ill turn the call over to Mike to walk through the third quarter results Mike.
Thanks, John again before I comment on the specific results for the third quarter I want to reiterate John's earlier comments regarding the reported results in our disclosures today, we're reporting the financial results for option care health for the third quarter, which is comprised of legacy absent care results for the entire third quarter and Bioscrip from.
August six prospectively.
All historical results in our disclosures are option care standalone as mandated by the accounting standards.
We'll do our best to provide high level comparative contact estimating results for a full quarter where possible in our comments.
For the third quarter net revenue of $615.9 million represents reported growth of 24.7% or approximately 2.3% on a comparable basis.
As John mentioned earlier and as we've anticipated as we talked openly about our synergy capture efforts.
Integrating the commercial organizations generated some disruption in our revenue in the quarter. However, we're encouraged that were in the later innings of the commercial integration and remain confident in our longer term topline expectations as a unified organization.
Regarding revenue recall that we deduct our provision for bad debt and recognize both positive and negative contractual adjustments to arrive at net revenue.
As we brought the to enterprises together, we have harmonize our accounting policies and practices, including our reserve methodology for bad debt and contractual revenue adjustments.
We employ a conservative reserve methodology that objective Lee assesses reserve requirements based on historical collections and for the quarter, we've reserved 3.9% based on that criteria in the reported results.
Note that as we unified the bad debt and contractual policy across the entire book. This has had an impact on the net revenue results as reported.
In the reported results we estimate that the policy has resulted in that in a 9 million dollar year over year negative impact considering what was reported last year and this year.
Again, as John mentioned, we have seen consistent improvements over the past few quarters and cash velocity and are seeing our aging improve.
However, our reserving methodology is solely based on historical collection activity and as a result, it takes time for the reserve levels to reflect current collection impact.
Gross profit of $137.8 million represented 22.4% of net revenue and on a reported basis grew 27.3%.
We are encouraged by gross margin expansion, despite higher revenue reserve levels as we successfully driven operational efficiencies and are yet to start realizing the merger related synergies to a material extent.
At Genie of $133.5 million is up 55% on reported basis. However, note that in the third quarter. It includes approximately $21 million in deal related expenses.
Adjusted EBITDA of $34.8 million grew 32% on a reported basis.
Adjusted EBITDA margin of 5.6% expanded 30, bips compared to last year and again, we are yet to start seeing the impact of the cost synergies.
And again analyzing comparable Q3 results to last year is difficult given the drop through on the bad debt and contractual policy harmonization.
We estimate that excluding the impact related to bad debt and contractual adjustments adjusted EBITDA growth on a comparable basis would have been in the mid teens.
For the quarter reported net loss of $43 million reflects the impact of the merger, which translates into a net loss per share of seven cents.
Again, we have provided a reconciliation from net loss to adjusted EBITDA in the press release this morning.
Shifting to cash flow and working capital I'm very pleased with our performance in the third quarter. Despite the disruption from the merger activities. We've maintained a relentless focus on cash collections and we've seen an acceleration in collection performance across the organization.
As previously disclosed in Q2 option care financial result, we drove a 26 million dollar reduction in accounts receivable in the first half of the year and we drove reductions across the entire organization in the third quarter.
For Q3 cash flow from operations was an outflow of $6 million. However, it's important to note that we have spent more than $15 million in the quarter to get caught up on past due balances with key vendors, which helps with our procurement efforts. We funded all of the initial phases of integration through cash on hand, and despite having a step.
I wish to $150 million revolver as part of our new capital structure, we have no outstanding borrowings against the revolver.
So we exited the third quarter with very strong liquidity, including $53 million and cash balances and no revolver borrowings our leverage profile remains consistent with what we articulated and we see a passive deleveraging as we enter 2020.
In addition, you'll note that the cash flow disclosures in particular reflect significant impact of purchase accounting and I'd refer you to the relevant sections of our 10-Q for more information.
As John mentioned, we're very encouraged by the integration efforts to date in the progress. We've made we've outlined since March our expectation to generate at least $60 million in cost synergies over an 18 to 24 months horizon and based on our visibility thus far our confidence remains very high.
Again, it's early.
And our third quarter results do not incorporate any significant synergies given it represents less than two months has emerged entity.
As a reminder, we see synergy opportunities falling into three primary categories procurement savings of $10 million to $15 million to be achieved on a run rate basis within nine to 12 month spending savings of $35 million to $40 million manifesting in both SDMA and cost of service to be achieved over a 12 to 18 month period and finally network.
Optimization savings of approximately $20 million to $25 million over a 24 month period.
Finally, before we open the call to questions I did want to establish expectations for when we will provide more granular guidance for our financial outlook given the current dynamics of the integration and our ongoing planning activities, we're not providing guidance for the balance of 2019, our full year 2020 at this point.
We anticipate providing guidance for 2020, when we report Q4 results in the first quarter.
So with that I'll turn the call back over to the operator, and we'll open the call for acuity.
As a reminder to ask the question you will need to press star one on your telephone to withdraw your question. Please press the pound key.
Please standby, let me compiled acuity roster.
Our first question comes from the line of David Mcdonald with Suntrust. Your line is open.
Hi, guys.
A couple of quick question, Mike just first on the bad debt.
Can you kind of segment that out a little bit we look at the Threenine should we think about kind of legacy Bios, probably being in the 5% range and watching Caribbean in the 3% ranges.
Got it that way to think about it.
And then secondly would you expect cash flow to be kind of quote normalized in the fourth quarter. When we when we look at it when I got one or two more.
You bet, Dave Yeah look is as we as we harmonize the bad debt again is as you know.
This is a relatively subjective area in its a.
There is there is a level of subjectivity in judgment, but as we bring it together the the policy that Weve established is relatively consistent with what we've historically deployed I think the way you're thinking about it is directionally correct in terms of.
In terms of the impact on specific books, but again as we think about it going forward, it's really one aging going forward and one one hindsight analysis as we as we accrue going forward as it relates to cash flow again look we're very encouraged that.
Excluding the disbursement outflow very encouraged that we were effectively generating cash excluding that onetime catch up so that gives us some wind in the sales as we go into the fourth quarter is we continue to look to fund the integration through cash generation.
Again, we're not in a position to provide specific guidance for the fourth quarter, but.
Clearly, we feel good about our ability to fund the integration.
And Mike just back on the cash flow is that kind of 9 million a relatively clean quarter does that 15 million kind of capture all of the.
Onetime stop so you've got the negative six for the quarter and then 15 million of what would consider onetime so as 9 million a fairly clean quarter in terms of how to think about it.
Yes, you thinking about a right Dave we one of the first thing we wanted to do is get caught up which again as I mentioned gives us a.
Chip to play as we engage with our procurement partners. So getting caught up gives us a better platform from which to collaborate with them. So you should definitely think about the catch up is as more of a onetime item in nature.
And then just two last questions on the first when you just touched on.
Well, it's obviously a little bit more difficult to have a constructive conversation with your vendors. When you all have money. So can you talk a little bit about the goodwill that you think that creates and the opportunity to kind of.
You know drive that into a more positive relationship and then secondly, when you look at the kind of best of both initiatives I was wondering if you could highlight a couple of areas, where Bios was candidly outperforming and some of the several things that bias was doing that will be integrated into the best practices.
Yes, David Stan.
So let me start with the vendor platform and really what we've done with procurement as you as you outlined the ability to get caught up and to really have a platform to then start having more.
Concrete conversations it was an imperative out of the blocks and.
It's Mike that outlined that was up front and center something that we look to do.
Yes. It has created the opportunity for us to sit down with many of the key vendors to start to look at.
Not only taking the best contract.
Its start thinking about how we use our scale as a competitive advantage and more importantly, how we can make certain that we are maximizing the opportunities that are there. So.
The the first order of.
Of magnitude was around taking best contract and applying that into the procurement and as we get through that we're now starting to move into.
Thinking about what renegotiation and and realignment can be around those key vendors.
As for the best to both question, Yes really excited about.
The way the teams are working together I honestly, it's in so many ways better than expected. When you had two organizations that were.
Competitors against each other day to day in the marketplace.
You are always a little bit leary around bringing them together and I would tell you. The team has responded.
Very well to that some of the things that we took as as real best practices from the Bioscrip side look.
They're focused around driving growth on an organic basis and focusing around the entire organization looking at the opportunities to up to sell from the seat to should be focused around driving the topline is something that we've embedded across the organization.
With that with Harry Booker as the as Chief operating officer. There are some best practices within the way that that the Bioscrip team was leading their operations that we have started to pull through and some of it is too.
In various ways eliminate some of the bureaucracy that we had as an option care organization and being a little bit more nimble and responsive to the needs of the market based on that and so pleased with the progress to date on both of those and and I really pleased with the teams willingness to.
Be open minded and and really look at how do we take the best and take a one plus one and make a greater than two.
And guys. Just last question in your prepared remarks, I want to make sure I got this number right. I think you said on this part of this field sales harmonization, 45% or folks are focused on a new territory can you just give us a sense of once this kind of settled down and everyone's in their see it sounds like thats largely done.
How big an expansion of the footprint.
You are able to attack from a sales standpoint, given the increased.
Increased resources that you have with the combined company.
Yes, so and yes, two to just put a period on that so 45% of our field sales organization have some new.
Dr. So some of them.
I have some new accounts within their existing territory and others have.
Reach talking up the districts.
Have new territories in which they are covering and so we knew that was going to be disruptive, but as I think we had talked about before there was significant amount of overlap.
And you had situations, where we would have resources in the same hospital or resources, calling on the same referral sources and so it really gave us an opportunity to reach that and realign the resources.
In general we believe that we can get a.
About a 15 or 20% expansion in our coverage with the realignment of those resources now we're not going to embed a.
A resource into every hospital, we guided we go through a criteria of establishing the size of the.
The hospital the number of beds the number of discharges in the way that we align those resources, but we really believe that theres an opportunity as we start to build and grow this forward that our frequency and reach will expand in that let's call it 15% to 20% range.
Okay. Thanks very much.
Thanks, Dave.
And as a reminder, ladies and gentlemen, if you'd like to ask a question. Please press star and the number one.
Our next question comes from the line of Brooks O'neil.
With Lake Street Capital Your line is open.
Good morning, guys, it's nice to start with new company and the new structure, the new team. So I'm excited for you.
Thanks.
I guess the first one historically guys adjusted EBITDA margin has been a key topic for Bioscrip investors I recognize all the moving parts and I thought maybe we should start there and just talk a little bit about.
Refreshing People's memory about why Youre adjusted EBITDA margins are lower than historical Bioscrip margins and was wondering if you can make any attempt to kind of.
Talk about year over year comparisons on each side.
Your business, specifically are you seeing margin expansion or contraction on the option care side on the Bioscrip side.
Recognize that.
Thats going to be less and less sort of relevant going forward, but I'm, just curious where we're starting today.
Sure you bet Brooks. Thanks for the question. So again one of the distinct differences is we've tried to articulate over the last few months since announcing the mergers that there is a difference in the revenue book in basis for the organizations on the legacy option care side again, we've invested in a portfolio of limited distribution.
Therapies, which are somewhat finite in terms of the patient population again. Many times. These are orphan populations are smaller patient cohorts.
We find these to be attractive complementary therapies that.
There are a more efficient therapy class to collaborate with biopharma as they bring these to market. They do admittedly have a lower margin profile again, because we are bearing the.
Exorbitant cost of the therapy in our revenue so, whereas these are efficient therapies to treat strategically they're very complimentary for our for our chronic therapy portfolio. They do.
Have a negative impact on the gross margin rate still attractive gross margin dollars, but from a rate perspective.
That has had a lowering effect on our EBITDA margin.
Overall.
When you really normalized for the limited distribution and high cost chronic therapy. The EBITDA margins are relatively comparable from the start.
On the.
In response to John's comments, we made a number of investments in technology and infrastructure.
On our side, we are seeing EBITDA expansion, but again Brooks. The further we get into the integration to becomes much more challenging to really talk to to EBITDA margins on either side.
But the bottom line is again back to why we're excited about the merger and integrating these two organizations is the tremendous cost synergy opportunity, which frankly, the best way to articulate as that is by demonstrating to you. The the EBITDA margin expansion over over the next several quarters.
Absolutely I get that totally so I appreciate all that color.
I have two more just quick ones. One there was quite a bit of commentary or discussion during the quarter about pressures relative to idea G. Just give us an update on sort of your.
Perspective, where you're at in in the cycle or would that particular therapy.
Yes.
Thanks, it's done.
We feel that we're in a really.
Strong position in the relationships that we have across multiple manufactures and providers of the product. So.
Yes. It is tight yes, there are constraints within the supply lines associated with that but we've been pretty nimble and our ability to manage that effectively and we do have where appropriate clinically appropriate. We do have alternatives that we can provide to patients and too.
Prescribers in the marketplace. So we operate with a center of excellence that really focuses around managing that patient population effectively we worked proactively with our referral sources and the prescribing physicians to to really get a best match of product.
To to the patient based on availability and and clinical efficacy. So we we really believe that that gives a strength for us as an organization is something we're going to continue to work closely as we move forward with our procurement and developing those deeper relationship.
With the vendor partners to make certain that we have.
Access to the products and services in Brooks, It's Mike. The one thing I'd add is this is an area where scale absolutely matters you've been following the AG market for years, you know that this is an environment, where it it's subject to product disruption in shortages from time to time in given our strong procure.
One strategy, which is to primarily procure these with direct relationships through manufacturers with the scale that we have and again now that were caught up and we have more amicable relationships. This gives us the strength to whether some of those disruptions, probably a little bit better than than many in this space.
That's great I totally get that.
Last question, obviously, there was some commentary or Medicare related legislation.
This week I'm just curious it makes sense is.
Clearly the the CMS.
It's still reluctant reluctant to give you guys full and fair reimbursement for infusion services.
Yes, if you have any commentary about where you stand now and where you think this is going to ultimately play out going forward.
Yes, Brooks, yes lot of commentary this weekend if anything.
Matt just reaffirmed what has been their historic position around an infusion day in the way that they're looking to reimburse home infusion.
We didnt, we weren't caught by surprise on that we expected that that was going to be their position given that that had been.
You know there.
Their message up to this point, we're continuing to vigorously Fibest I mean, we are in partnership with any CCI eight continue to look at all alternatives to do that we do not believe that the current structure.
And reimbursement scheme is fair in the in the value that we're able to deliver through that process and so we're looking at all available.
To to influence and then more importantly to get a better outcome on that from the lawsuit that has been filed against HHS and CMS all the way to working with.
With members of.
Of Congress to get better legislation this more definitive.
It's language around that so we'll continue to fight the fight on this because we believe we're on the right side of the argument we offer high quality appropriate cost care in a setting in which patients want to be served and quite frankly, we believe that.
CMS and the beneficiaries would benefit in lowering costs and better outcomes. So we will continue to fight that fight.
So I get that I, just want to clarify I think I mean, my own senses, it's all upside from here, there's absolutely no downside in in the current posture from CMS right.
Correct at this point in time, we have there's nothing in our numbers that would.
That we have put forward the upside on that so anything that would move.
In a favorable way would be something that would be upside for for us.
Great. Thanks, a lot.
Keep up all the good integration efforts.
Great. Thanks, Brett Thanks Brooks.
Thank you and our next question is from Brian Tanquilut with Jefferies. Your line is open.
Hey, guys, Jason lagged on for Brian .
Just wanted to ask if.
You know the numbers and the growth in synergy targets you laid out in that in proxy any any material changes from those so far that you now that you're.
A couple of months into that the integration just wondering if.
Anything has.
Changed from from your thoughts prior to that deal closing.
Hey, Jason It's Mike No again, as we mentioned obviously, it's early early innings, but very encouraged with the progress over the last couple of months.
As Weve tried to convey a high degree of confidence in at least $60 million of net synergies and I'd I'd characterize our confidence is as high are higher than.
Then when we closed the merger so good good first as John mentioned, it's early Theres a lot ahead of us.
Theres some complexity over the next 18 24 months, but.
Encouraging progress thus far.
Great and then just wondering.
What reaction you've heard.
Since the deal closed from clients and referral sources.
Given.
Yes, well, how they how they're viewing the combined organization.
In their ability to partner with the combined organization.
Yes, David it's John .
I think in general it has been positively received no in.
In many instances the breadth of the product portfolio that now we can bring the clinical expertise.
That is available when you look at the combined organization and what we can to bring to the equation as well as you know as we've talked before about taking the best both around the efficiencies and effective way to onboard patients and bring that ahead. So.
In general I'd say, it's been very positively received.
The reach we have when you look at the National platform is something that is is extremely helpful and in many of those situations, especially with some of the major academic medical centers or where you have medical tourism. If you want to think of it that way of patients that are traveling from.
You know from.
A large distances to receive care at one of the setting our ability to help with that transition no matter where that patient may reside.
It is also a benefit that we can bring given the size and scale of our platform.
Great Thats it for me thanks.
Thanks Jay.
Thank you and our last question comes from the line of Mike Petusky with Barrington Research Your line.
Hey, good morning, Mike Good morning. Thanks.
During the call taking the questions.
So I guess when you guys. Just looking ahead when you guys do give guidance have you guys.
Dialed in and how is it full year quarterly.
Can be sort of revenue adjusted EBITDA is there going more to whatever have you guys thought about how.
The cadence of I guess, the cadence or the coverage of the guidance and then the important metrics you want to provide.
Yes, Mike It it's Mike.
We're still refining that I think we're we're generally going to provide annual expectations.
Naturally we'll be providing.
Revenue and adjusted EBITDA, how far beyond that we go we're still refining, but what will provide annual guidance on on our fourth quarter call in Q1.
Okay, Great and then just in terms of.
Synergies and I know, it's super early but as you sort of.
Good.
Few quarters into.
The integration efforts I mean, we you guys provide sort of a quantification or or or just items that hey, we've we've now Chuck checked off this.
This issue or this issue have you get thought about how you're going to communicate.
Either quantitatively or qualitatively.
Qualitatively.
Yes, we're absolutely committed to providing updates on on.
Excuse me. This is the operator I apologize if there will be a slight delay into lease today's conference. Please hold in the conference will resume shortly thank you for your patience.
Yes.
Hey, Mike Yes, please begin.
Hey, apologies for that matter vote of intelligent telecommunications challenge.
No no no problem.
Sometimes asked questions, let me make executives.
They normally [laughter], all the way and do that Hey.
[laughter]. Thanks.
Yes, so yes, I just ask.
Along lines of synergy updates and.
If you're going to provide quantification of that or just items.
Yes, My apologies again, yes, we're committed to providing updates again as we get further away from the merger date, it becomes a little bit more difficult to quantify but we're absolutely going to provide.
Based on our progress again, how granular we're getting the in the dollars again, the best way to show evidence of the synergies through this or meaningful EBITDA margin expansion and so we'll do our best to provide you with what feedback on our progress.
And then just last last one and I may have I may have missed as he may have spoken to this earlier, but.
Other than debt pay down which is obviously a big deal in terms of whatever free cash you got to generate what other capital allocation priorities you see I mean is 96 or 97% coverage. Whatever you guys have I mean as M&A actually something that you guys need to look at or can you just speak to besides debt pay down capital allocation priorities. Thanks.
Yes. So this is John I think as we're looking at the priorities as you say for at this point in time, adding additional pharmacies is not necessarily on the top of our list. We we've got a lot to do with integration of what we have and making certain that we maximize the value there.
We certainly want to make.
Our priorities around.
Looking for near adjacent sees that May make sense, we have.
As we had outlined before we have some capex that we're going to need to deploy for bringing everything up to the same high standards and making certain that we as an organization.
Our leveraging that technology platform across all of the facilities as we move ahead. So there is some views of the dollars within that that we would say, but I would say from a priority perspective.
Certainly we are having cash on the balance sheet, and and really making certain that we get through the integration is first and foremost, including the capex associate with that and then I'd say, we're always looking for opportunities for near adjacent sees that could be complementary to what we do in in the business, but none.
The last Mike again, it just it reaffirms my comments, we made that it's early but.
Our confidence in the free cash flow potential of this enterprise is as strong as ever and we think that that.
A key tenant of of the merger and as John said I think near term. It funds fund the integration make sure we've got adequate liquidity and we'll look at the different alternatives down the road.
Okay sounds great looking forward to covering your guys. Thanks.
Thank you.
Thank you and our next question is from Richard close from Canaccord Genuity. Your line is open.
Great. Thanks for the questions congratulations on the merger.
Jay jumped on the call wait a little late here, but just curious if theres anything to call out in the fourth quarter I understand you're not giving guidance, but is there anything we should think about with the fourth quarter.
In terms of our modeling efforts.
Yes, Richard as you as you mentioned, we're just not in a position to be providing any specific guidance I think some of this objective comments. We've made is obviously, we're encouraged having having.
Gotten to the later stages of of the commercial integration, which again getting that.
Most of that disruption behind us is encouraging obviously.
We're in full swing on pursuing the synergies across both of procurement effort as well as driving the spending saving so again.
Encouraged by the near term and again as John mentioned, the critical critical priority as with the commercial organization driving the topline acceleration. So again beyond that there's not a lot that we can provide around thoughts on how to how to model out the fourth quarter.
Okay.
And then maybe bigger picture, obviously, you're still in the early days here, but any thoughts with respect to what you think the long term growth and maybe.
Aspiration or margin targets are for the for the company.
Yes, I mean, the way we think about it again, we think that the near term driving the synergies that that will manifest in in a meaningful expansion on the EBITDA margins and then again as we've articulated our expectations going forward. We see this enterprise is one that with topline in that.
Mid single digits, delivering two to three X bottom line earnings leverage is something that frankly, we think is realistic expectation and so over time, we think that that that leads us enterprise into an EBITDA margin in the high single digits with.
With very strong cash flow potential.
Okay, great. Thanks.
Thanks Richard.
Thank you and I'm not showing any further questions I'll now turn the call back over to John Rademacher for closing remarks.
Thanks, Bridget Thank you everyone for joining us this morning.
As I hope you hear from from our commentary, we're really excited about the progress that we've made and more importantly about the potential that the business has as we look forward so with that.
We'll look forward to providing further updates as we get into.
Fourth quarter earnings released in the first quarter and so thanks, everyone for your your time and in participation this morning and.
Everyone has a great day take care.
Ladies and gentlemen, this does conclude the program you may now disconnect.