Q4 2020 Option Care Health Inc Earnings Call
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And care Health fourth quarter 2020 earnings conference call will begin momentarily. Thank you for your patience and please continue and standby.
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Okay.
Ladies and gentlemen, thank you for standing by and welcome to the option care Health fourth quarter 2020 earnings Conference call. At this time, all participants on a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
And I ask a question during the session you will need to press Star then one of your telephone.
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We require additional systems and you May press Star and then do you want to reach and operator, I'd now like to hand, the call over to Mike Shapiro. Please go ahead.
Good morning, and thank you for joining us for the option care health fourth quarter earnings call I'm joined this morning by John Rademacher, Chief Executive Officer before we begin please.
Please note that during the call we will make certain forward looking statements that reflect our current views related to our future financial performance and 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 incur.
Bridge you to review the information and the reports we file with the SEC regarding the specific risks and uncertainties.
You should also review the section entitled forward looking statements in this morning's press release.
During the call we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures and this mornings press release posted on the Investor Relations portion of our website.
And with that I'll turn the call over to John.
Thanks, Mike and good morning, everyone to say that 2020 was and unprecedented and extraordinary year is quite the understatement and reflecting back I've never been prouder to be a part of the option care health team.
We have risen to every challenge thrown our way and through it all and emerged stronger and more focused than ever.
We delivered strong financial results ahead of our initial expectations effectively completed the vast majority of the integration effort.
And most importantly remained focused on the loved them on and trusting their care to our team.
This would have been a strong accomplishment and ordinary times.
So the fact that the team made all of this progress and delivered these result under the unexpected challenges presented by the pandemic is truly outstanding.
With the performance and the results by the team I have never been more confident and the road ahead as we emerge from the pandemic and focus on setting the standards and alternate site infusion therapy.
As Mike will highlight and a few minutes the fourth quarter continued our track record on delivering robust top line growth EBITDA expansion and and improved capital structure.
As we sit here today, we are clearly executed on the strategy, we outlined shortly after the merger and the fourth quarter of 2019 and.
And I am extremely proud of how the option care health team has performed and an extremely challenging environment.
And the severity of the COVID-19 crisis began to emerge and the first half of 2020.
We quickly developed mitigation plans and migrated to respond and recover and prosper mentality and make sure. We adjusted quickly to the challenges while also remaining focused on the long term.
As I've outlined previously we are focused on four key tenants accelerating topline growth, providing consistent high quality care.
Strengthening our balance sheet and.
And converting every claim to cash.
And in 2020, we clearly delivered across all four key priorities.
The Q4 double digit growth is the result of tremendous collaboration and the field between our commercial and operational teams who over the course of the year ensured that option care health could be dependent upon by payers and our referral sources and most importantly, our patients.
And to deliver unparalleled care and the pace of adversity.
We continue to execute our strategy to increase reach and frequency and our team responded even with the access restrictions caused by the pandemic.
The chronic portfolio continued to grow and the mid teens that we launched a number of new therapies and collaborated with payers to prioritize care outside the acute care setting.
Our acute therapies, which are to a great extent correlated to hospital discharges.
And were effectively flat year over year through the third quarter did post modest low single digit growth and the fourth quarter, which is quite encouraging.
Our relentless focus on the patient and delivering high quality care and a cost effective setting crucial throughout the district and the Covid costs.
Our ability to quickly pivot and utilize our technology platform more fully through telemedicine features like virtual visits and discharge support.
And collaboration tools that allowed our clinical teams and remote workforce to continue to excel and by enhancing our digital capabilities to enable predictive analytics repetitive process automation and machine learning.
All of these contributed to delivering consistent high quality care strong clinical outcomes and exceptional patient satisfaction.
We also took significant actions to improve the strength of our balance sheet by restructuring and paying down debt efficiently.
Efficiently managing working capital expanding earnings generation and through strong conversion of claims to cash.
We began 2020 with a leverage ratio of six times and exited the year at four eight times with a clear glide path to getting below four times and short quarter.
With all of the great work done by the team throughout the year. We are entering the late innings of integration efforts with technology deployment and harmonization efforts continuing the first half of 2021.
The effective and efficient platform. We have created is beginning to unlock operating leverage and aligned for much stronger capacity utilization as evidenced by our EBITDA margin expansion.
As we sit here today, a little over a year since the pandemic onset we continue to manage through a very dynamic and challenging situation.
We are by no means out of the woods and we remain vigilant to ensure the safety of our team members and our patients.
We continue to closely monitor drug and medical supply availability to help anticipate disruption and advance.
And as new care models emerge, we are very well positioned to pivot based on our industry, leading technology suite.
Our recently announced partnership with the Medicine is a Prime example of how quickly we can respond and market demand with innovative new models.
Yeah.
Reflecting on our first full year as a combined enterprise and having completed the far majority of integration activities ahead of schedule and I've never been more confident and this team our unique platform and the significant number of opportunities that lie ahead.
We have persevered and the base of a diversity to deliver across the spectrum.
And as we shift from integration to acceleration.
Platform, we've created is clearly evident and poised to create sustainable value.
We are the only independent national provider of infusion services with relationships with all national payers and along with the broadest therapy portfolio across the industry.
And as apparent in our 2021 guidance communicated. This morning momentum is clearly building and our revenue base, our margin expansion efforts and our focus on cash flow generation.
And we're just getting started.
With that I will turn the call over to Mike to review, the financial results and a bit more detail Mike.
Thanks, John Good morning, everyone and as you can imagine we are very pleased with the fourth quarter financial results. We're finally at a point where the prior year fourth quarter is a truly comparable period and growth rates represent apples to apples growth.
A reminder, however that our full year results for 2019 reflect only legacy option care results up to the merger date of August and.
And the combined results for the merged enterprise thereafter.
Revenue in the fourth quarter of $805 million grew more than 11% year over year, driven by mid teens chronic therapy growth and modest single digit acute revenue growth.
Site of care initiatives continue to resonate and directly benefit our chronic portfolio. While at the same time newer therapies introduced for conditions, including myasthenia gravis and chronic inflammatory conditions contributed to strong growth as well.
Cute referrals and revenue did improve modestly and as mentioned, we did see some traction and acute therapies, which were effectively flat to the first nine months.
We are clearly pleased with the overall revenue results for the quarter.
Gross profit represented 22, 8% of revenue, which is the highest quarter reported for 2020 and illustrates our scale leverage despite the mixed headwinds from our chronic portfolio, which is growing and a faster pace and carries a lower gross margin profile and.
And spending of $123 million was flat to Q3 spending levels and dropped to 15, 3% of revenue down from 20% in Q4 of the prior year.
Adjusted EBITDA of $67 $7 million and the quarter represented eight 4% of net revenue and up approximately 28% over prior year and.
And the EBITDA margin of eight 4% was our strongest on record and expanded over 100 basis points over Q4 of the prior year.
The expansion was in part due to accelerated integration efforts and our ability to capture cost synergies rapidly and 2020 and while we expect to continue driving spending leverage we would not expect to realize EBITDA margin expansion at that same pace going forward.
But for the year, we generated $221 $7 million of adjusted EBITDA, which is almost $7 million above our initial guidance range for 2020.
And the fourth quarter, we generated over $25 million and cash flow from operations, which enabled us to voluntarily pay down $50 million of our outstanding second lien debt.
We finished the year with over $99 million and cash after the debt pay down and more than a quarter billion dollars of total liquidity.
While technically a 2021 event I did want and take a moment to highlight the extinguishment of the entire second lien debt and repricing of our first lien debt shortly after year end.
Given the robust market conditions and the strength of our enterprise, we opportunistically retire the entire second lien debt in January and replaced it with incremental first lien debt under our existing credit facility.
As part of the transaction, we repriced the entire first lien tranche at LIBOR, plus 375 down from a spread of 425 basis points the.
And the existing favorable covenant light terms and maturity of 2026 remain intact. So we enter 2021 with even more flexibility under our improved capital structure.
Shifting gears I wanted to spend a minute on our guidance as communicated in this morning's press release.
Our referral patterns across our broad portfolio of therapies and geographies continues to be volatile given the ongoing pandemic impact, but nonetheless, we see revenue growth of 6% to 7% incorporating a number of these dynamics. Additionally.
Additionally, we expect to deliver between $245 million and $258 million and adjusted EBITDA for the full year.
Based on our scalable platform, we established we anticipate double digit EBITDA growth and margin expansion.
We also expect to generate at least $140 million and cash flow from operations, which also represents double digit growth over 2020.
Since the merger, we have relentlessly focused on improving our capital structure and improving our leverage profile as a reminder, at the time and the merger we were six two times levered on a net debt basis.
We drove our leverage profile down to four eight times at year end and based on our guidance, we expect to be below four times by the end of the year.
We will continue our focus on improving our capital structure and are encouraged by our progress to date.
So in summary, we anticipate a very productive year, both in terms of executing on our growth strategy, leveraging our infrastructure to expand profit margins and generating cash flow to further improve our capital structure and fuel further growth initiatives.
With that we'll open the call for Q&A operator.
As a reminder to ask a question. Please press Star then one.
If your question asked and answered and you'd like to remove yourself from the queue. Please press the balance sheet.
First question comes from Peter Chickering with Deutsche Bank. Your line is open.
Good morning, guys and thanks for taking my questions two quick ones right here. The first one is can you give us an update on IV I E.
Jess.
Refreshes and the fourth quarter, what percentage of revenues come from IV, IV and walk through any supply constraints.
Deposit collections and how we should think about IV throughout 2021.
Sure Peter and good morning, it's Mike.
Obviously this is a situation we've been very open with and we've been monitoring closely again, we don't disclose products level, specifically, but the way we've characterized it and the passes and it's approximately 20% of our revenue and that that held firm and is.
Is an accurate statement for for the fourth quarter I'd say as it relates to the supply situation. We continue to monitor it closely the fractionator as had been very open around the trends and plasma collections, which is obviously the critical raw material for that therapy.
But this is a situation where as.
As we've talked about we have direct relationships.
Which in times like this.
Really underscores the value of that supply chain strategy and so we.
We've also been Opportunistically.
Adding to our inventory levels to buffer but.
Thus far we're cautiously optimistic.
But clearly this is something that we've incorporated into our thoughts around 2021, and something that we will continue to monitor extremely closely.
Okay Fair enough and then.
A question for you on gross margins fourth quarter was very strong despite the mixed headwinds and just steroid starting point for you for 2020, one and as mix improves should gross margins continued to improve throughout 2021.
I mean look we're our operations team and his relentless on driving margin expansion again, we don't give quarterly guidance and typically the fourth quarter is our strongest quarter of the year, but nonetheless, we would expect gross margin.
Expansion going into 2021, and again I think you highlighted a number of the key variables.
We are expecting that as the chronic portfolio continues to outpace the acute and given the relative margin profile that would represent a headwind, but nonetheless, the team is relentlessly focused on spending leverage and.
And as an aside one of the things we're really pleased with in terms of our margin resulted and thats. Despite a lot of headwinds and cost inefficiencies. This year around PPE costs, just overall delivery and supply chain. So.
<unk>.
And while I wouldn't anchor 22, eight as the as the new measuring stick for every quarter I would say that for the year, we would expect to.
And to drive some gross margin expansion.
Yes.
The only other thing I would add is look as we.
We've outlined.
And the investments we've made into our technology platform as Mike said really gives us an opportunity to continue to squeeze.
On our productivity and capacity.
To make certain that we're optimizing that and as Mike said also the operations team is relentless and their focus and.
Again, we feel as if there's there's still some opportunity as we're thinking about the road ahead.
Okay and then.
It's always tough to give you and ask for intra quarter trends, but curious as.
And as this COVID-19 and a spike as day.
Kris and from the Texas storms are behind US just curious what you guys are thinking about sort of the the lessons learned from from patients and and hospital hospitals in terms of pushing into a home setting and I'm curious.
And a lot of noise and last 90 days, but do you see increase from macro moving into the home setting.
At this point.
Yeah. It is John again.
I think we're trying to be balanced in our approach and I think what you saw.
And we provided in guidance is that we believe there is going to be some puts and takes.
I think the acceptance of the home as being a safe and effective setting continues to increase and a lot of the referral sources have embraced that and ways.
Net.
They may not have bought before the pandemic on the other side of that as.
The.
We opened back up as restrictions start to diminish and we do expect that the hospital outpatient departments are going to try to hold some of the patients that were being transitioned on to care and the home. So we will expect some level of increased competition on that standpoint, and we feel we're really well positioned based on.
On the relationships, we formed day on the.
Performance of the team to really.
Whether a pretty challenging and dynamic environment, but Tom.
It's kind of the balance that we're trying to put in there is where we're trying to be thoughtful about what 2021 and that's going to look like.
From from that perspective.
Great. Thank you guys so much.
Thanks, Peter Thank you Peter.
Our next question comes from Matt Larew with William Blair. Your line is open.
Hi, Good morning, guys two questions on the.
The guidance, Mike first maybe just thinking about what you're contemplating for acute relative to chronic you highlighted mid teens chronic and the fourth quarter, which I think is even stronger than it was perhaps the rest of the year and acute.
Creeping back up into the low single digits, but John obviously, you just alluded to some of the dynamics with.
Well essentially hospitals trying to retain more patients as KOL data and less of a capacity problems and maybe the first would be on that and on the second relative to the guidance is.
I think EBITDA margin guidance is about 20 basis points lower for the year relative to the second half of 2020 and.
And just help us understand if there are.
And any sort of cost coming back into the model or areas that maybe we should be thinking about.
In terms of EBITDA margin that we might have been thinking about it.
Sure, Matt, It's Mike I'll start and John can certainly jump in I think the way that look as we try to handicap, our top line expectations for the year.
Net to state the obvious there's quite a few things moving I think we're encouraged with the with the reemergence of acute which we've been candid around our expectations and how we characterize the growth and the low single digits.
I think thats, a reasonable characterization for how we're thinking about this year and.
And with the chronic again remember we did have some benefits and the mid year with site of care shifts with.
With <unk> and outpatient clinics shifting site of care into the home and so while we're thrilled with the fourth quarter results. We've characterized the chronic is high single low double digit growth profile and again as in response and the first question and obviously we're being.
A little cautious around the IAG growth profile, which is our largest.
Our largest therapy franchise.
And I would say is the way we also characterize revenue and how we've oriented folks to think about the overall growth trends and the mid to high single digits. That's on a constant pricing basis. There are a handful of therapies not to get into specifics, but we do think that from ASP declines could have a point or so.
Headwind from a top line.
From a top line on a reported growth perspective.
That hasnt translated as much into the bottom line because again that also offsets with a with a lower cost to procure but overall, we feel comfortable with.
With lower acute and obviously a higher.
Chronic portfolio growth profile for the year as it really from the EBITDA margin I mean look as I mentioned in my prepared comments, we're thrilled with them with the expansion and based on our model. We expect that we will continue to to expand EBITDA margin going forward.
Our midpoint for the year and again it gets a little bumpy with.
Intra quarter, but our EBITDA margin and.
At the midpoint is in the neighborhood of 50 bps of expansion year over year. So we're continuing to drive EBITDA margin expansion and again.
At the midpoint around half a point of expansion for the full year with a revenue base.
Base.
Increasingly skewed more towards the lower margin.
Chronic is something we feel really comfortable with.
That all makes sense and then just maybe the second.
Obviously referral source changes additions what was the theme throughout the year and net and John you've highlighted how urgent care as an area that.
So on increase and referral sources.
And to have discussed.
On telemedicine and your technology platform potentially as something that opens up the aperture of our frozen and feature could you maybe give us a sense for what it is.
Number you can put around the number of referral sources and if theres anything interesting semantically and terms of retention for numerous roles sources that you've seen here over the last several months I think that'd be interesting here.
Yes, Matt it's John So as we've highlighted before a great work by our commercial team really focusing around that reach and frequency as we had gone through a lot of the.
The transformation of the team post merger and part of the integration I would tell you there. They have done a lot of work over 2020, and continuing into 2021 focused around making certain that we have clear segmentation of our referral sources and identification.
Not only where we're getting referrals today, but who are the the.
Higher prescribers that we may not have relationships with and so a lot of work has been done on that and targeting to make certain that the team is focused around those opportunities.
And I can tell you that.
On a preliminary basis I'd say there are easily.
A couple of hundred new referral sources that.
We generated at new starts from in the fourth quarter that were not part of our our base heading into the fourth quarter. So the team is focused on that we're again looking for those opportunities to expand into new settings and develop those new relationships.
And we think that with the data and the data analytics team being able to really focus on that segmentation with not only augmenting our internal data with external data, but then being much more prescriptive and the analytical response of the team we feel that we will continue to see that trend as we head into two.
<unk> thousand 21.
Okay. Congrats on the great year.
Thanks, Matt Thanks, Matt.
Our next question comes from Jamie Paris with Goldman Sachs. Your line is open.
Hey, guys good morning.
Hey, Jamie good morning.
And I wanted to ask a sales guidance question and and focus on on cadence throughout the year, maybe the way on asking is can you give us a sense and the typical for Q1 Q seasonality, obviously last year wasn't a clean the air with the integration and and Covid. This year won't be there, but just a cash.
Call it seasonality.
Measure that we can adjust from and then.
Any reaction to the street's modeling the first quarter and.
$750 million would be great.
Hey, Jamie it's Mike I'll start so.
I'll use a typical and air quotes typically the first quarter is the lightest of the year. There is from seasonality you have benefit reauthorization and you have.
Health care consumers that now face did.
Deductibles and higher co pays and so we do typically see coming out of the holidays that the.
The velocity does lighten up a little bit and the first quarter and then you typically see a gradual ramp with the fourth quarter typically being.
The strongest of the year.
Good question, because I would caution folks thinking about the year over year growth that starting really at the end of the first quarter of last year.
Last year was anything but typical in terms of referral patterns and revenue patterns with some spikes mid year with especially chronic <unk>.
<unk> from.
From the acute care setting into the home. So I think the year over year could be a little choppy. When you look at it on a quarter to quarter basis, but again overall for the year. We obviously laid out what we think is from some impressive growth expectations and.
In terms of how commentary on the first quarter I'm going to refrain from doing that we typically don't.
Opine on.
And intra year quarterly consensus models.
Okay fair enough on.
Just one one more on on the guidance for the year and a 6% to 7% growth, it's a pretty narrow range and why.
And your peers are guiding to much wider ranges just given all that's going on so the question is really just how do you get confidence from such a precise range and and and also if you can just touch on how you are incorporating.
And I thought there and procedure and recovery in the acute and.
Business into your guidance. Thank you.
Yes, Jamie so one of the things that we talk about is the value of the balance revenue.
Portfolio that we have on the chronic side again this is a lower patient turnover. So when you look at our revenue based on the chronic side.
The far majority of our revenue and any month or quarter is for pre existing patients that are already on service. So we have a very what I would call predictable.
Referral.
Revenue model that.
And that balances, obviously with acute which are at a little more volatile, but as we looked at the balance portfolio clearly theres a lot of.
Undertones around Iga around asps around reemergence of the acute care setting new therapies that are emerging.
As we risk adjusted all of those.
Take your point.
A 1% range.
As a little bit tighter than most but rest assured we have a high degree of confidence that you know.
That's a that's and applicable range for us again, taking into account the number of.
Various components.
Okay. That's great. Thank you.
Okay.
Thank you. Your next question comes from Brooks O'neil with Lake Street Capital. Your line is open.
Good morning, and I have two questions. So.
Recognizing that the integration efforts with <unk> are pretty much complete are melding into your other actions to you highlight.
Two or three key business optimization steps you hope to accomplish in 2021.
Good morning, Brooks, it's John Yeah.
Yes, so I think as we've highlighted we will have some.
Some.
Follow up activities and 2021 as we can see our path.
Integration.
Smaller amount of effort, but we still have some of the technology deployment as well as the harmonization efforts that we'll move through the year. So the team is still focused there.
In our prepared comments a lot of our focus will be really around.
Primarily moving from integration to acceleration I think as we as we highlighted our goal is to really now starting to focus on the use of the data and data analytics to drive a lot of the business performance so from the.
The commercial team standpoint, it's focusing around that targeting segmentation and really driving the referrals.
Into the process from an operations standpoint, it is really focusing around leveraging the technology to optimize the interoperability and continue to focus on.
The efficiencies that we know we can drive as we begin to harmonize and optimize the technology platform and I'd say the third area that will continue to focus on is just the patient experience. We're spending a lot of time, right now and making certain that we understand through journey mapping and other aspects.
To really capitalize on that patient experience and making certain that we have a clear line of sight for the unique needs of the different patient based on <unk>.
Chronic condition and or therapy.
They will be built they'll be receiving so we're really focused around those areas and we think that create.
Sustainable long term growth I'd be remiss, if I didn't highlight that look we we spent a lot of time on the culture.
Our focus as a team to make certain that we took the best of both organizations as we move forward and I would tell you that we still are focusing around that high performance culture to make certain that we're.
Optimizing and employee engagement, and we're really focusing our energy and efforts around diversity and inclusion and other aspects that they drive.
Drive a high performance culture and continue to create a sustainable competitive advantage for option care health.
That's great and then.
And then.
Again recognize that no one knows the direction of interest rates as we move through 2020, one, but Mike as you continue to focus on strengthening.
Operating performance and lowering net.
That would you expect and the opportunity to lower the rate on your debt as well as low as the absolute amount of debt you have and 2021.
Hey, Brooks.
This is an area, we're really pleased with the progress we've made.
Year ago again, we were.
We were around six times Levered, our cash interest run rate was around $110 million and.
And we were at L. Plus 450 on the first lien with a lot of secondly, right. Now we are entering the year with a cash interest run rate of around 70% to $75 million. So we've taken $35 $40 million.
And $3 million a month in and.
And cash interest savings and again with the with the.
First lien.
Structure that we have right now at L plus 375.
We feel really comfortable around where we are from a leverage profile, having said that.
Improving our cap structure and debt reduction will continue to be the measuring stick with $140 million plus and cash flow from operations, we expect capex to be as we've talked about and that $30 million range and with cash interest coming down and integration costs coming down.
The cash generation is expected to be robust this year and so that gives us.
The opportunities too.
Evaluate how best to deploy that and whether it's in further gross debt reduction or through strategic deployment and that's something that we're spending a lot of time thinking through.
Cool. Thank you very much looking forward to 2021.
Thanks Brooks.
Our next question comes from Kevin Fischbeck with Bank of America. Your line is open.
Okay, great. Thanks.
So I guess when we think about you guys I think kind of the long term building blocks to the growth.
And to 7% top line and 12% to 15%.
EBITDA I think you guys will go to the higher end of that revenue growth, there, but EBITDA range and it starts off a little bit lower.
So just wanted to see if theres anything that youre thinking about that might push you to the lower end of the range, even though the revenue growth looks pretty strong.
Sure, Kevin It's Mike I'll, maybe start.
And then when you look at the midpoint the.
The midpoint of our EBITDA growth ranges 13, and 14% I think.
It's early and the year I think as we've tried to establish an air of conservatism, obviously, John and I want to be conveyed.
Conveying that numbers that we're outlining our very high confidence.
Spec patients for ourselves and I think we're entering a year I'd say with a number of things, we're keeping an eye on PPE costs remain inflated.
With a highly remote work force there still some inefficiencies that were managing through and and how and when we emerge from the pandemic.
And how we manage through the supply situations I think that just yet.
Yes.
Led us to a little bit more conservative on the on EBITDA range, but there is no.
And there is no deviation from what we believe which is this is a as a base case, a mid teens earnings growth engine from years, there'll be a little bit higher than that from years might be a little bit lower than that.
Okay and now it certainly makes going back to the earlier question about a wider range during COVID-19.
Makes sense and want to make sure I was missing something.
I guess.
Secondly, when you talked about I guess, the long term view.
And chronic <unk>.
And that.
Yes.
Single digits.
What's the long term growth rate and volume again or do you think are acute and how close to that normal growth rate will you be by the end of the year and your guidance.
Yes. It is.
John and Kevin.
I think when we're looking at the opportunities that that are in the pipeline. So I'll start with that on the chronic.
Look we expect that that high single digits.
And it's something that's going to continue there's a significant number of of new therapies that are going through the SBA.
The process to seek approval.
And.
Many of them require health care professional oversight and are infused drugs. So we think we're really well positioned with our business development team to continue to participate.
Within those launches as well as as Mike said build on the strong patient census that we have today within our existing chronic portfolio. So that we think is good but there's always those.
Moving to.
Either ASP adjustments or generic events that down the line could affect the revenue, but not necessarily have or would have a more muted impact on earnings and and EBITDA given the lower acquisition costs on.
On the acute side look.
We were encouraged by what we saw in emerging and coming out of the fourth quarter with with low single digits from that standpoint, we hope that add.
The marketplace opens back up and people begin to return to normal for scheduled.
Physician visits scheduled procedures.
And we'll start to see that that rebound continue into the year I think the low single digits is the right measure on the acute and again a lot of those products are generic today a lot of those products.
Our are certainly in the shorter duration and so the acquisition of new patients will be.
Critical aspect as we're thinking about the acute side as we move ahead, but we love the balance of the portfolio, we love the ability that we have to.
Really offer a full spectrum of therapy that we want to be the partner of choice to the referral sources that they have that one stop and we think with the expansion and and really the breadth of our payer relations.
And we think that with the breadth of our product portfolio and we think that with some of the new products coming into the pipeline that.
And that we will have.
The first two.
And we think we're really well positioned for.
The growth that we've outlined.
Okay and then maybe last question I think in your prepared remarks, you talked about exactly what the term was something along the lines of and moving from integration to acceleration I guess you guys are already growing pretty well just wanted to understand and.
What acceleration means and your and your views how should we think about that.
Yeah as I outlined.
We believe that our team is starting to get really well set from a commercial standpoint on this.
And the use of data analytics to guide them around segmentation as well as setting their force around targeting as we move forward and so our focus there is making certain that we continue to expand our reach and frequency and that we're capturing demand thats in the market.
Place.
We also have the opportunity to.
On an organic basis to continue to optum.
Optimize the performance of the business and our operating model to be able to squeeze the operating leverage out to to continue to expand and accelerate our bottom line growth.
We're maniacally focused on those opportunities and.
Think as a team we believe that coming out of a lot of heavy work and a lot of great work by the team on integration.
As well as a lot of the dynamics and the marketplace with Covid. We now are more focused than ever on making certain that we are that partner of choice for our referral sources and.
And that should create additional opportunities to accelerate topline and bottomline, but as Mike said look we're trying to be thoughtful and the way that we're providing guidance and we're trying to be disciplined knowing that theres puts and takes and.
The in the in the environment that we're operating and.
And Kevin It's Mike the only thing I would add is look as we continue to expand our access to capital I think we'd characterize the organic horsepower under the hood of being that mid teens growth I think we still feel confident and that which we think is quite attractive base organic case, and as we think about access to capital and Thats, where we can do.
<unk> to <unk>.
<unk> collaborate with our.
Our payer partners around value based relationships or are there other technology or service offerings to add additional branches of the tree and so part of the acceleration is beyond what I would call the organic horsepower.
Okay. That's helpful. So you're basically saying no change right now and kind of grow.
<unk> outlook, but you are feeling good about doing better there and then layering on and potentially deals on top of everything to be upside.
And youre looking on that side right.
Okay perfect. Thank you.
Thanks, Kevin.
Our next question comes from Mike Pitofsky with Barrington Research Your line is open.
Hey, good morning, guys and Mike.
Just a couple of questions Mike on the 23, seven and interest expenses quarter, how much of that was cash interest I mean was there other stuff in there or was that mostly.
Cash interest.
Yeah, and it's a good point there is a little bit of.
There is a couple of things if you remember we did pay down some of the second lien opportunistically and and the closing innings of December. So there is some there is some write offs.
Deferred financing cost and there is amortization of OID etcetera, but.
I'd say the majority of it is cash but.
And this is around 20 or roughly cash interest roughly yeah, I think that yes, maybe a notch below but somewhere in that neighborhood.
Alright, Great and then just as it has a much longer term question looking beyond 'twenty, one and maybe even beyond 'twenty two to where you guys maybe sort of closer.
Closer to three times Levered as opposed to four eight times Levered as you sort of look at capital allocation.
Obviously, you guys have sort of most of the map covered.
So I would assume M&A.
Our infusion business is at least as it won't be a big part of it you've made tons of investment and technology. How do you guys think about the <unk>.
Capital allocation and sort of over a three to five year period. I mean is it is it looking at adjacent businesses or.
Can you just speak to sort.
And sort of.
Our longer term strategic vision in terms of capital allocation.
Sure, Mike I'll start and we'll defer to John for his perspective, as well I think thats something that really gets us excited as I mentioned earlier.
Capex is quite efficient and this business under 1% on revenue.
And with interest declining and integration and out of pocket expenses declining we expect cash generation to increase and through both earnings growth and cash generation.
The leverage profile will continue to drift southward and so as we think about how to deploy capital we take that very seriously.
With the footprint as you highlighted we can reach 96% and the U S population today, so buying assets to shut the doors and is probably not the most efficient use now we've said we will continue to look at opportunistic.
Industry.
<unk>, where there might be some unique aspects or regional strength that would be complementary to ours, but I do think there is a component and again I think we're going to be very thoughtful to make sure that any deployment as both economic and strategic.
And.
How do we leverage the technology and the clinical fabric, which is inherent and everything we do and are there services technologies or other capabilities that can further distinguish us and expand.
The value that we can bring to.
On a referral sources are physicians.
And our payer partners.
Yes, the only other thing I'd add is look.
We're spending time and as we can.
Come out of now the integration effort and have the ability to put some more focus because I mean, we're looking for those near Adjacencies right as Mike said, there are certain aspects, where we can deepen our <unk>.
And the value that we deliver to the payers to our referral sources to our hospital partners and so we.
We're looking for those type of opportunities will again be opportunistic with some industry and timed.
No.
<unk> ventures picking and looked at those type of opportunities, but we really think that augmenting our service model looking for additional value drivers and then participating and a greater way.
And following patients on a longitudinal basis and providing those additional services, we think will be and opportunity for growth and a new vectors of growth for us as we're thinking about the business ahead.
Okay. Thank you very much I appreciate it.
Thanks, Mike.
There are no further questions I'd like to turn the call back over to John Rademacher for any closing remarks.
Great. Thanks, Michelle in closing we are very pleased with the strong results and the pace of a very challenging year and we're very excited about the momentum we're carrying into 2021, we are well positioned to capitalize on the shifts that are happening and health care focused on the effective dispensing a specialty drug and the delivery of care and the home we look.
Forward to updating you throughout the year on the progress we are making.
Take care and please stay safe.
Ladies and gentlemen, this does conclude the program and you may now disconnect everyone have a great day.
Yeah.
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Okay.
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