Q4 2020 Hanger Inc Earnings Call
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Greetings and welcome to Hanger fourth quarter 'twenty 'twenty earnings call all participants will be in listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by zero as a reminder, on this conference is being recorded today, we will have prepared remarks, followed by a Q&A.
Period instructions for questions and answers will be provided after the formal presentation. It is now my pleasure to introduce your host Seth Frank Vice President of Treasury and Investor Relations. Please go ahead.
Good morning, and thank you welcome to hangers fourth quarter 2020 earnings conference call with US today are minute author hanger, as President and Chief Executive Officer, and Thomas Crowley Executive Vice President and Chief Financial Officer.
Some of the information discussed today will include forward looking information and the meaning of the private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause hangers actual results to materially differ from those we discuss today. Those risks include among others matters we have.
<unk> identified in the forward looking statements portion of our latest earnings release and in our filings with the SEC.
Hanger disclaims any obligation to update forward looking information discussed on this call and now let's hand, the call over it isn't it.
Thanks, Seth and good morning. Thank you all for joining hanger as fourth quarter and full year 2020 earnings call.
I hope you and yours are staying safe and healthy.
We were pleased with our results in Q4, the resilience and determination of the communities, we serve as well as the tenacity of our hanger nationwide organization to meet the continuing needs of our patients and customers were significant factors in our success. Despite the national surge in COVID-19 cases in the fourth quarter.
That said COVID-19 continues to challenge our industry, we believe that a cohort of patients, particularly those most vulnerable to the virus such as the elderly and those with chronic health issues may be delaying certain aspects of their orthotic and prosthetic care in deference to social distancing and other life priorities.
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So while we were pleased with our achievements we remain cautious in the near term until key public health considerations become clearer.
Looking at our overall fourth quarter results net revenue totaled $277 $3 million, a decrease of seven 8% compared to the same period of 2019 adjust.
Adjusted EBITA was $35 $5 million.
These results are notable particularly in light of the fact that we made the critical decision to bring back the organization to pre pandemic staffing levels essentially intact.
In October we fully normalized base salaries eliminated furloughs and returned to hourly employees to full time schedules.
We took these actions because we remain convinced of the temporary nature of the pandemic related business downturn.
From a cash perspective, the results are quite remarkable across the entire company. We continued to make excellent progress on cash collections and managing our working capital needs.
Looking at our business segments inpatient care appointment volumes for Q4 were at 88% over the same period last year. This is an improvement compared to the 84% in the third quarter.
So there is a recovery in place that did not go backwards. Despite the resurgence of infections during the quarter.
From our perspective OMB patients most vulnerable to a poor COVID-19 outcomes continue to be the most impacted by surges in infection rates and intensity of disease.
Typically these individuals suffer from chronic illnesses, including diabetes.
In general it appears these are the patients that are currently more reticent to come in for care.
Conversely, the less vulnerable than higher morbidity patients needing higher technology prosthetic and orthotic devices were less impacted and constituted more of the patient encounters during the fourth quarter.
Prosthetic volumes overall did improve modestly from third quarter levels driving a sequential improvement in segment revenue excluding acquisitions.
When compared to the fourth quarter 2019, prosthetics declined approximately 12% driven primarily by lower mobility device volumes.
Orthotic revenues continued to firm up as the year went on and this was true in Q4 Orthotic revenues declined 8% an improvement from third quarter levels.
<unk> performed relatively well while off the shelf orthotics and shoes declined more than the category average.
The products and services segment performed well in the fourth quarter as prior investments emerging strategic initiatives and the strength of our leadership all came together our.
Our enhanced value proposition and our ability to provide greater efficiencies to our core customers among the independent O&M providers and skilled nursing facilities drove these results.
COVID-19 continued to create business challenges in products and services during 2020 for the fourth quarter segment net revenues declined seven 2% unimproved meant compared to the nine 7% decline in the third quarter, while adjusted EBITDA actually grew by $1 million year over year a note.
<unk> achievement for our team.
Hangars OMB distribution business continued to expand partnerships with large and small manufacturers, adding skus to our catalog and providing a unique one stop shopping destination for independent owned practices there.
The business has also positioned itself well as an essential partner for manufacturers seeking to maximize our impact with these independent on P clinics.
Our therapeutic solutions subsidiary is also pivoting during COVID-19 skill.
Skilled nursing facilities remained challenged protecting their highly vulnerable populations, resulting in access to decision makers being temporarily hampered.
We pivoted to remote teaching and education for therapists, which has allowed us to ensure patients get access to the best possible rehabilitative services.
As I consider the results we achieved in 2020 they are in retrospect truly remarkable.
Covid has been I hope a once in a lifetime merciless adversary. It has brought unspeakable loss and suffering that would bring anyone did their breaking point.
As if this was not enough the economic and social hardships brought by this pandemic have been difficult to fathom and of course. This all occurred against a backdrop in the U S of historic social unrest.
The tale of 2020, where it began how we ended the year and the manner in which we carry ourselves forward was a result, I believe of the culture values and purpose that hanger employees bring to their professional lives every day.
In addition, four years, we have executed on a comprehensive investment plan focused on differentiation.
We have built clinical and business technology to support our team's enabling them to increase their focus on patient care.
This past year, we quickly innovated and adapted to remote work environments.
Cooperating PPE requirements and enhanced safety protocols in every clinic and office locations and countless other challenges.
And this was done I would remind you while the entire workforce endured the challenges of a painful but necessary reduction in compensation.
I know we did the right thing because we made a collective sacrifice under a common bond of understanding that we would come out of this on the other side together intact and stronger.
I could not be more proud of every one of our employees and I. Thank them again for their commitment leadership and sacrifice.
So by no means where we're lucky we made good investments in wise decisions and that's our strength as an organization today is better than it has ever been based on our financials corporate reputation and quality of care we provide.
For 2020, our net promoter score within patient care, a key process indicators for the company improved from 84 at the end of 2019 to 86.
In contrast, our analysis of each cap survey data from CMS of nearly 2700 hospitals surveyed for 2020 showed a meaningful decline in NPS across a majority of facilities. This is understandable given the strains and demands of frontline workers doing their best under sometimes impossible conditions.
That said, we take it as a point of pride that patient satisfaction improved at hanger This past year.
I believe the key reason for our continued upward trajectory is the commitment hanger has made to our patients referral partners and payers around evidence driven care models and outcomes research.
We could've sideline this agenda in 2020, but instead, we doubled down dip.
The pandemic showed us what we have always known that the rehabilitation based medical services, we provide enabling mobility and human potential are absolutely essential and then Owen P is a must have not a nice to have in the health care value equation.
Our virtual classroom programs enrolled over 5000 attendees from over 460 health care organizations in order to ensure that our greater medical community, including our referral partners stayed connected and engaged.
Our investments in people are the most important allocations of capital we have.
I was delighted on the heels of all we went through in 2020 that hanger was recognized as one of America's Best Midsized employers in 2021 by Forbes magazine.
Hanger was selected through an independent nationwide survey of more than 50000 American employees working from midsize to large sized companies.
This is a great way to start the year.
Looking at 2021, we have a clear and focused set of priorities intended to build on these core strengths that will propel us to growth this year and in the years ahead.
Our multiyear growth strategy consists of four pillars.
Ensuring we are the employer of choice in our industry.
Providing outcomes based clinical care and improving the ease of doing business with us all intended to achieve the fourth pillar accelerating growth.
In addition, during 2020, we implemented multiple programs to further enhance our commitment to diversity and inclusion.
We initiated our corporate DNI pledge that includes a commitment to implementing a DNI employee counsel chaired by myself as.
As well as affinity groups and awareness networks for underrepresented populations to lift up our organization and support the communities we represent and serve.
These programs are already underway.
<unk> has also contributed funds to the Hanger Foundation.
501 C. Three organization funded by hanger its employees and other partners.
The foundation announced the creation of the Hanger Foundation diversity scholarship program to do its part to create a more inclusive on P profession by attracting more diverse candidates to OMB graduate programs.
Accelerating growth is where all of this comes together in the form of greater organic and inorganic opportunities.
We continue to be encouraged that our differentiators focused on clinical outcomes and patient engagement that the strength of our relationships with our referral sources payers and customers combined with the exceptional clinical talent, we have assembled has positioned us well.
I expect that in 2021, we will continue to deploy capital towards our M&A program targeting strategic acquisitions of OMB clinics I was delighted by the successful Midwest acquisition of one of the best known players in the private independent <unk> World during 2020.
This transaction and others like it will pay significant dividends to further our growth beyond what we generate internally.
During the last 12 months, we've acquired nine independent OSP businesses of varying sizes and are very pleased with the teams that have joined us as a result.
As you can see we are excited about hangers future and are grateful that we've been able to manage through the pandemic safely while further strengthening our commitment of empowering human potential together.
Tom will now provide you more specific details on the numbers Tom.
Thanks, Bennett and good morning, 2020 was certainly a remarkable year, we will all not soon forget.
While we all face their own challenges when reviewing hangers performance I'd like to spend a few minutes discussing how the company's financial results reflect well on its inherent ability to successfully overcome adversity.
From an operational and financial perspective.
Congress results can be summarized in three specific ways.
First the company responded early and decisively at the onset of the COVID-19, pandemic and that provided us with the ability to get a head start and to confront the impact of the virus from a position of operational and financial preparedness.
Second the company's responses enabled it to achieve financial results that reflect the sound underlying level of revenue and earnings despite the pandemic.
And third our focus on liquidity enabled hanger to emerge in an even stronger position today than it was a year ago at this time.
During the fourth quarter the company produced $35 5 million in adjusted EBITDA on $277 $3 million on net revenue.
This reflected a $6 $9 million decrease in adjusted EBITDA, and a $23 $6 million decrease in revenue as compared with the fourth quarter of 2019.
This brought our results for the full year, two and adjusted EBITDA level of $105 1 million and net revenues to just over $1 billion.
As Ben discussed despite the resurgence of the virus on the fourth quarter, we did not experience a regression in patient encounters are same clinic volumes from the levels experienced in the third quarter and this enabled the company's performance to exceed what was expected.
And looking at this performance within our patient care segment appointments reflected a 12% decrease during the quarter, which compared favorably with the 33% decrease from the second quarter and a 16% decrease from the third quarter.
This drove our same clinic revenue decline rate of 10, 6%, which was generally consistent with the 10, 3% we reported in the third quarter.
It is the approximate level, we have experienced during the early weeks of 2021.
For the year, our patient care segment experienced a 17% decline in patient appointments and an 11% decline in same clinic revenue.
After considering the favorable effect of acquisitions reported revenue for the year declined by eight 2%.
Despite this decrease in revenue due to the proactive measures taken within the patient care segment to pivot its operations and cost structure in response to the virus. It was able to produce a contribution margin of 17, 6% during 2020, which was modestly lower than the 18.
One 2% reported in 2019.
When reviewing the products and services segment results for the quarter and the year. We believe they are truly remarkable under the circumstances.
While revenues declined by seven 2% in the quarter and 11, 9% on the year.
<unk> EBITDA grew by $1 million on the fourth quarter as compared with the fourth quarter of 2019 and for the full year was $29 3 million was consistent with the level reported in 2019.
In addition to the favorable effect of our cost reduction programs on results. This segment also benefited from a marked reduction in bad debt expense.
Overall due in part to the temporary $51 million reduction in personnel and other costs realized over the second and third quarters. The company's consolidated adjusted EBITDA of $105 1 million reflected a contribution margin of 10, 5%, which was reasonably close to the 11 three.
We reported in 2019.
Due to the Swift actions of our employees and the cost measures that were put in place while 2020 reflected a decline from 2019 that decline was significantly moderated.
Additionally, operating responses, we talk to the pandemic did not reduce the company's capacity on.
Or otherwise harm its ability to return to normal levels of patient and customer volumes as the virus subsides in 2021.
Those accomplishments on our revenue and earnings for 2020 tell only half the story.
As we've discussed on prior calls during the year one of our most important objectives in response to the COVID-19 pandemic was to build liquidity.
We're pleased to report that we achieved that objective.
As of December 31, 2020, Hanger had 239 4 million on liquidity.
This reflected an increase of $70 2 million or 41% over the level reported at December 31 2019.
And $107 6 million or <unk>, 81% increase since March 31 2020.
The company benefited from $24 million in cares Act funds during the year, while we did not include them in our reported adjusted EBITDA. They were a contributor to the company's liquidity position.
In addition to the direct flow through from earnings and the Cares Act funds. The company achieved substantial favorable changes in its working capital position during the year.
When excluding cash the current portion of debt and tax refunds receivable the company's underlying working capital position reflected a decrease of $59 7 million as compared with the prior year end.
This favorable working capital change was the result of a multitude of factors with perhaps the most important contributing element being found in the company's increased collections and resulting reduction of accounts receivable.
During the year through widespread revenue cycle management and collections initiatives.
The company decreased its net accounts receivable by $30 8 million or 19%.
This decrease reflected gains that were substantially in excess of the eight 8% effect of the Companys net revenue decrease for the year.
This favorable collections experience also resulted in a decline in hangars combined disallowance in patient nonpayment rate from five 3% in 2019 to four 5% in 2020 and resulted in a six day decrease in its day sales outstanding from 48 days down to <unk>.
Just 42.
These favorable changes directly contributed to the company's reporting of $155 6 million in operating cash flow during 2020.
And they resulted in a reduction in net indebtedness to $365 9 million.
This enabled hanger to sustain a three five times leverage ratio. Despite the decrease in as reported adjusted EBITDA.
Given this level of liquidity and net indebtedness.
Hanger is in a stronger financial position today than it was a year ago at this time.
As our revenues and adjusted EBITDA returned to their normal run rate levels on a post COVID-19 environment.
The company will find itself in a good position to continue its acquisition program in 2021 and to manage its leverage.
I will now provide a few comments on our capital expenditures before I turn to our outlook for 2021.
During 2020, we expanded $28 1 million in capital expenditures these expenditures related to the purchase of property plant and equipment as well as therapeutic equipment.
Of this amount approximately seven $5 million related to the company's buildout of its new distribution facility in Alpharetta, Georgia.
While we pause the key systems projects related to our supply chain initiative in 2020, we did continue and complete the construction of that facility.
This has enabled us to spread out the investment over several years as opposed to the more concentrated approach. We had originally planned for 2020.
We currently estimate that we will expend $35 million in capital expenditures in 2021 inclusive of the capital portion of our supply chain initiative.
We are currently in the process of resuming our work on the supply chain and financial systems project and despite the one year pause the company. Nevertheless benefited from approximately $4 million in savings during 2020 related to its supply chain initiative, primarily in the area of freight savings.
Now I'll turn my commentary towards our overall outlook and key operating considerations for 2021.
Obviously, I think we all recognize that a substantial amount of uncertainty and speculation remains about the course of COVID-19, and its lingering effects on our daily lives.
Well that uncertainly makes our ability to estimate our forward results exceedingly difficult.
Nevertheless, feel that providing you with insight into our best current thinking is warranted.
The key premise behind our outlook is that COVID-19 will affect patient volumes at a similar rate as experienced in Q4, all the way through February.
And then those effects will subside ratably through the end of June with normal patient volumes and growth resuming in the second half of 2021.
We've incorporated modest favorable effects from pent up demand and our forward view for the second half of the year.
In addition to other factors any further adverse delays in vaccinations or a continuing delay in the return of normal activities could adversely affect our outlook.
If the resumption of normal business volumes is delayed we nevertheless, currently have confidence that there has been no material underlying change in the nature of our business or capacity.
And that would adversely affect our ability to eventually return on our revenue and adjusted EBITDA run rate to pre COVID-19 levels.
With these considerations in mind, our current outlook for 2021 is that hanger will produce net revenues in the range of 1.145 billion to $1 $1 75 billion and adjusted EBITDA of $130 million to $135 million.
Our outlook includes the benefit of approximately 27 million on net revenues from the annualized effect of acquisitions completed in 2020 or closed prior to March one of this year.
From a quarterly timing perspective, we believe that the first and second quarters will provide difficult year over year comparisons.
The first quarter will be adversely affected due to the residual effects of the pandemic.
The adverse weather.
As well as it being our normal seasonal low period of operations.
The second quarter will likely be affected by the lingering transitional effects of Covid and due to the fact that we had a temporary benefit of $35 million in cost reductions, which aided our results in the second quarter of last year.
With respect to the company's operating cash flow. It is important to recognize that the level. We achieved in 2020 reflected a number of favorable factors that are not sustainable in 2021.
As the company resumes its normal levels of operations reinvestment in working capital will naturally occur.
Accordingly, we believe our operating cash flow will be limited in 2021.
It is also useful to note that our 2021 seasonal payment of incentive compensation and operations will reduce our liquidity levels on the first quarter as they do in every year.
In closing I believe hanger on its employees evidenced something incredibly important in 2020.
We demonstrated the ability to hit adversity head on and to manage through it both from an operating and a cash flow perspective.
We showed the company's inherent tenacity and resilience.
These qualities have enabled hanger to enter 2021 is a company that is stronger and better positioned than it ever has been before.
With that I'll turn the call back over to the operator to open it up for any questions you may have.
We will now begin the question and answer session. You'll ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the key to withdraw from the question queue. Please press Star then two.
The first question comes from Brian Tanqueray net of Jefferies. Please go ahead.
Hey, good morning, guys.
Brad on a good.
Here.
Given all the circumstances, but Tom.
Tom I guess as we think about guidance I appreciate you, taking the initiatives putting out guidance despite uncertainty but.
As I think about the seasonality comment or the progression comment that you made a couple of questions.
Number one.
You're expecting some inflection in volume beginning after February.
I know generally you have pretty good visibility into your order. So is that a good way to think about that and then I guess, if you were just too.
Yeah, asking for a percentage just because of the breakdown between quarters EBITDA, how should that look.
Any color you can give on that.
Yeah.
Yeah, Brian so.
First of all on from a visibility standpoint.
I would argue that we do have some visibility, but not as much as obviously anyone would.
I would like to have we.
March is always traditionally the strongest month in the first quarter.
We do have some good work in process levels, but it really is a bit of a of a bet on our part as to how this quarter pans out and the hope that with all the vaccinations and positive effects occurring with Covid debt, we start to see at least some return to more of a normal environment, but.
Again, it remains to be seen.
From a standpoint of quarter realization.
Really what you are looking at is.
Very modest.
Sort of performance in Q1 from a percentage standpoint.
I would and then somewhat of a step up in Q2, you start to look at what it means for the year you could have 50, 560% the company's EBITDA in the second half of the year when you look within the numbers.
Got it and then.
Obviously, you're sitting on a lot of cash right now significantly above what you normally would keep on the balance sheet.
How are you thinking about capital deployment in the M&A environment and also like.
Any changes to how youre doing M&A versus the historical hanger approach.
It looks like you had a pretty good acquisition on the Midwest that's more concentrated.
If you don't mind, just walking us through that thank you.
Sure. Thanks, Brian.
Look our M&A program is pretty robust in the sense that as I've mentioned throughout 2020 debt.
Pipeline, it's pretty solid and we get we get a lot of inbound inquiries. We've got a lot of conversations going on and we're being very selective and who we're working with because we want to bring on the quantity practice and just to give you a sense of the landscape. The vast majority of the <unk> businesses in the U S are very small size.
Mrs.
We're being very selective in terms of who we speak with who were bringing on board. The conversations have been very robust and there is a focus on M&A.
You know as I mentioned in my prepared remarks, we brought in nine businesses last year.
And we feel pretty good about 'twenty 'twenty, one as well given the nature of the conversations we're having.
So we expect that trajectory to continue in 2021 at this point.
Got it and then last question from me, obviously COVID-19 delayed some of your initiatives whether it.
On the supply chain systems rollout or the ERP.
Is that safe to assume that all of that goes full steam this year and we should expect the benefits that you've outlined in the past once you get into 2022.
Yeah, we are recommencing as we described both.
<unk> chain and the financial systems projects. Fortunately, we did continues from critical ones last year and in fact have already been receiving.
The benefits from that into the tune of approximately $4 million in 2020. So those are going to continue in 2021, and obviously already demonstrate almost a lion's share of what we would expect out of the program.
And from a capital standpoint, I think we've outlined it pretty extensively in the in the 10-K.
But we've seen a nice moderation in terms of the amount of capital will put out where it won't be as dramatic as it was originally thought it might be.
Awesome. Thanks, guys.
Thanks, Brian.
The next question is from Larry Solow CJS Securities. Please go ahead.
Great. Thanks, Scott.
Echo Brian's comments, congrats on a tough environment.
So a very good year. So a few follow ups on the on the Tony mentioned, some pent up demand.
I assume you're building in some of that into your guidance. I think you know I think prosthetics declined 8% for the year. It doesn't seem like I don't think you're losing share.
How do you sort of you know I guess, it's a balancing act between hopefully some of that comes back in and but you continue to have this sort of COVID-19 at least the tail of it where the some of these patients are not coming in how do you balance that.
As you look out over the next few quarters.
Sure I can give you some color Larry on how we're thinking.
Thinking of the next few quarters, especially when it.
When it when.
When we think about the pent up demand, we certainly believe there's probably three buckets in terms of how to think of this pent up demand I'd say you know the one bucket is what I alluded to in my prepared remarks on <unk>.
There is a cohort of patients that are like the lower mobility patients.
That have these other comorbidities and theyre electing to stay in and are reticent to come in for care. So our guess is that they will over time as they get backs unaided as the environment around them allows them to come in for care. They will come in for care that they haven't been coming in in terms of getting you know there are adjustments or their replacement device.
So I'd say, that's one group of patients.
And there's another group of patients who I believe have these underlying conditions such as foot ulcers debt.
They may not have taken care of their operations through this period of the pandemic and that deteriorate that when that deteriorates. It could end up in amputations. So that you know that in home care that hasnt been given to these patients. These patients probably haven't moved around a lot either so that <unk>.
Also contributes to some pent up demand in and last but not the least there is this whole concept of the the seesaw of the elective surgeries that you know they were on again and then off again and then on again so as these three buckets start clearing up we should see some pent up demand being released and Larry we don't see that happening overnight it'll.
Happen over time, but that's how we're thinking about especially the second half year.
Okay, and then you guys mentioned that I know you know in terms of on the acquisition front I think in terms of guidance I believe I think there was $27 million included sort of in the 2021 revenue guidance.
You you've completed I think you spent like $30 million on a question to <unk> 19, and <unk> 50, or so million last year $25 million I think already this year.
How do you view sort of the ramp in <unk>.
Profit contributions I know, sometimes acquisitions first take about 12 months before you sort of get the full fruition of the profitability with COVID-19 sort of impacting a lot on 2020 is there sort of.
A tailwind that's been.
May see over the next couple of years, where you get benefit even.
From acquisitions, you did in 19 and in 'twenty as we look out over the next few quarters.
Yeah, Larry this is Tom.
There is there is that ramp youre, describing wherever it is somewhat.
Depressed irrespective of Covid in the first year after an acquisition and then it gradually improves from there as that acquisition is fully integrated.
It is important to point out that we've been doing around this level of acquisitions each year for the last several years and so some of that ramp up already was occurring for the cohort. There was the 2019 cohort in 2020, and certainly theres a little bit of that ramp in 2021 from the 2020 cohort.
And then that portion of the 27% as occurred in Q1 would be pretty modest and contribution this year.
Characterize it as an excessive amount of overall pick up then in earnings just that it kind of layers into the Companys earnings naturally as we go and then I do want to go back to my response to an earlier cash.
Analysts question regarding quarter as nation, I had sort of cited 60% in the second half and that's typically normal I would actually argue that in 2021, it's going to be closer to 70% in the second half when you look at the effects of the first half just to make sure we have that clarification.
I don't know does that answer your question Larry on the M&A, Yeah, no absolutely absolutely and obviously your you know really.
And I expect a backend loaded year.
Just another couple of cookies.
I saw it in the MD&A you mentioned that there are a couple or several larger size independent on P providers or having some financial struggles during 2020, which which is not a surprise and I think it caused you to maybe interrupt or even stopped distributing some products from sort of a two pronged question there.
Is there any real significant impact on the distribution.
Products and services as you go forward and is there and how do you think is there any benefit.
The shake out on some of your competitors as you look out on in terms of operations and in terms of maybe per tons of acquisitions.
Yes first of all in terms of that referenced in the MD&A that gets to some of the customers of the distribution business in 2019 wherever you'd had some bad debts and some difficulty with them and it was just a few customers that were having some difficulty during that year that we chose to part ways with during that year.
But I wouldn't characterize it.
As large large providers overall in the industry or that it's indicative of an overall trend and then I'll turn it to then it just add more color to that yeah, Larry we've been obviously, having conversations with most of the independent providers from a distribution perspective and also from a potential.
No M&A perspective, and we feel that you know the conversations have been very productive in the sense that we're being you know we can get to see how strong. These providers are I think a lot of assistance. They got from the government whether it's the P. P loans are the you know the Medicare pay.
<unk> that they received did help these providers when we when we engage in conversations with these providers. It's more about looking for the stronger providers to come on board to propel us into further growth is supposed to be looking for the weaker providers to come on board. So that's the conversations we're having and.
We're just again pleased with the businesses. We brought on board last share every single one of them was solid with solid management teams and that's the focus we have on our M&A program, it's pretty selective.
Okay and then just just I appreciate that color and then just last question maybe for Tom Obviously 2020 was up.
A fabulous year for operating and free cash flow, especially as we look back what we thought it was going to be in.
April may.
You mentioned.
I understand the benefits of 'twenty, and obviously theres going to be some drop in 'twenty. One you mentioned sort of operating cash flow will be relatively I don't know what the word was but it sounded like you know it's going to drop significantly I know you don't guide to this number but can you give us an idea of what it might be.
Certainly so if you take the $156 million of operating cash flow last year $24 million of that came from the cares Act funds and then there was another $60 million that came from a reduction in working capital. So we won't have to have that $84 million in 2021 to assist the company and its operating cash flow. So if you were to.
Go to a normal year, you know being in call it the $70 million to $80 million of operating cash flow area.
The company will have a greater majority of that $60 million that it will likely have to reinvest in working capital.
As the company's revenues and overall business profile returns to normal. So you could go ahead and look at that number is a very important number in your calculation.
Got it great I appreciate all the color thanks, guys.
This concludes our question and answer session and today's conference. Thank you for attending the presentation you may now disconnect.
Yeah.