Q4 2020 Apria Inc Earnings Call
Good afternoon, and welcome to Apogee is fourth quarter and full year 2020 earnings conference call and webcast.
All participants will be in a listen only mode.
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After today's presentation there'll be an opportunity to ask questions.
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Please note this event is being recorded.
Leading today's call are Dan Stark, Chief Executive Officer, and Debbie Morris Chief Financial Officer.
Before we begin we'd like to remind you that certain statements made during this call will be forward looking statements as defined by the private Securities Litigation Reform Act.
These forward looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs assumptions and information currently available to us.
Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur after this call.
Descriptions of some of the factors that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our filings with the SEC, including the risk factors section of the prospectus for our initial public offering filed with the SEC on February 12 2021.
And in subsequent periodic filings, including our upcoming annual report on form 10-K for the year ended December 31, 2000 and 'twenty.
In addition, please note that the company will be discussing certain non-GAAP financial measures that they believe are important and evaluating performance.
Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the company's website.
With that I'd like to turn the call over to Apria CEO Dan Stark. Please go ahead.
Okay.
Welcome and thank you all for joining US this afternoon to discuss our fourth quarter and full year earnings results.
To begin the call I'll touch briefly on the year's financial results and the highlights from fiscal year 2020.
Debbie Morris, our Chief Financial Officer will provide a more detailed review of the financials later on the call.
We closed out 2020 with solid results coming in at the high end of the ranges we provided during our IPO process.
I'm pleased to report that our full year revenue grew to 1.109 billion of 2% increase over fiscal 2019.
Adjusted EBITDA grew to $227 billion of 30% increase over fiscal 2019.
And adjusted EBITDA, less patient and equipment Capex grew to $134 million.
The 67% increase over fiscal 2019.
We believe these financial results indicate a company that is well positioned to capitalize on the tailwind of growth and the home care setting.
We have the opportunity to meet many of you on our recent IPO Roadshow and we thank you for your continued interest and the Apria story.
For those of you who are new to Apria I'd like to start the call today with the brief overview of our company.
Apria is mission statement is to improve the quality of life for our patients at home.
We have been executing on our mission since the company's inception, and we remain steadfast and that commitment.
While this past year has presented us with unique challenges the compassion and resiliency of the Africa team allowed us to rights of the occasion and continued to deliver on our mission and the most difficult times.
As the vision of of post Covid environment, because it takes shape. We're proud of how we've managed through this past year and we're excited about the future and.
He has a seasoned management team steeped and dnb as well as other service industries.
This team along with our 6500 and teammates as managed growth earnings improvement and margin improvement throughout the historical pricing pressure that has reshaped our industry.
We accomplished this through many initiatives.
<unk>, changing our payer and product mix and streamlining our management structure implementing technology capabilities and leveraging our national infrastructure.
Our 275 local branches and nationally scaled infrastructure allows us to consistently provide home respiratory equipment and services obstructive sleep apnea treatment negative pressure wound therapy, and other home medical equipment to our patients.
As the shift of homecare increases, we are well positioned to deliver consistent organic growth as well as take advantage of M&A opportunities now that we believe the major price compression events are behind us.
That's the operate of high level.
And I wanted to dig in deeper to what we accomplished as an organization during 2020.
We are now over a year into the COVID-19 pandemic.
And while a lot of the changes we made at Apria occurred in early 2020 I want to say, how proud I am of how our team adapted and responded to the unusual circumstances surrounding this health crisis.
We made a number of operational changes to ensure we were best positioned to handle the increased demand for providing oxygen therapy to patients and their homes and to act as the relief valve for hospitals to keep their beds of bill available for the more critically ill patients.
Just for a bit of perspective, our new patient oxygen starts increased 77% and the fourth quarter of 2020 compared to a year ago, and we provided services to over 44000 patients with COVID-19 during calendar year 2020.
A number of the operational changes we implemented were designed to optimize the organization's effectiveness and to ensure the safety of our employees, including procuring the necessary PP&E and sanitizing supplies.
Pre buying on equipment and cylinder filling.
Moving over 60% of our non frontline workforce to remote work.
And implementing appointment only branch pickups, and enabling contact free delivery and paperwork processes.
All of these changes were largely implemented earlier in the year, but they have enabled us to adapt quickly with each wave of COVID-19 throughout 2020 and into early 2021.
We also leaned on our logistics expertise to ship the equipment and people to areas, where they were most in need.
For example, last spring, we move thousands of rental assets from around the country to help meet the needs and New York and the rest of the northeast.
And as we face the surge crisis at the end of 2020, our apria teammates from around the country volunteered to travel to the most severe locations and in order to help meet the nearly overwhelming increases and places like southern California.
Before the Covid pandemic hit the U S, specifically and the fourth quarter of 2019, we implemented project simplify.
Which was the series of initiatives designed to transform our order to billing process.
Order fulfillment strategy and organizational structure.
Project simplify started yielding immediate results upon implementation, so we're very confident and its effectiveness the.
<unk> of these out of innovations became even more apparent amid the pressures of the pandemic.
For example, our efforts enabled us to manage our variable cost more effectively throughout the year as new patient volumes ebb and flow due to COVID-19.
While project simplify was initially conceived of as a revenue growth initiative the impact of the pandemic did offset any revenue acceleration in 2020.
As I mentioned earlier, we experienced significant increases and our oxygen patient starts however, new patient starts and our other therapies were suppressed by the effects of COVID-19, and the decrease and normal patient flow and the health system.
Ultimately, we continue to believe and project simplifies the effectiveness and sustainability.
And the rest health care seeking patient volumes normalize over the course of 2021, we will realize the growth aspects of the project that we were seeing and early 2020 prior to the onset of COVID-19.
Looking ahead to 2021, we are well positioned as a mature organization to move quickly and adapt whether patient volumes return gradually over the course of this year or if we see of rapid rebound due to pent up demand.
Additionally, we have of stable regulatory environment outlook for the next few years.
As many of you are aware of the centers for Medicare and Medicaid services embarked upon a competitive bidding program for companies, providing services within durable medical equipment, prosthetics orthotics and supplies.
Since its implementation in 2011 and subsequent rounds of competitive bidding reduced reimbursement rates for the products included in the bid process until around 2021.
And when competitive bidding contracts were only awarded for two of the 15 product categories that were originally and mark for competitive bidding off the shelf back braces and off the shelf knee braces neither of which we provide.
Due to a lack of substantial savings CMS did not award competitive bidding contracts for the other 13 product categories, some of which we provide oxygen CPAP and CPAP supplies negative pressure wound therapy, and some home medical equipment.
We view the outcome of the CMS round 2021 competitive bidding largely as a positive for Apria and we will continue to have full access to all Medicare beneficiaries and for the products we provide the.
And secondarily earlier this month.
CMS permanently remove the budget neutrality rate adjustment for oxygen equipment that has resulted in a reimbursement rate increase for some oxygen systems that will take effect with dates of service on or after April one 2021.
Budget neutrality wasn't artifact from the pre competitive bidding error that allowed for a higher reimbursement rate for evolving technologies and <unk>.
The portable oxygen concentrators and Tom transfer the units by reducing the price for traditional oxygen equipment. The.
The budget neutrality, six coupled with the competitive bidding round 2021 outcome provides the industry with an increase of oxygen and reimbursement rates from CMS and stable reimbursement rates for the other products that were formally subject to the competitive bidding rate adjustments.
From a big picture our priorities for this year can be categorized into three buckets execution growth and leveraging technology.
We will continue to execute on the operational aspects of the business meeting referral source expectations and patient needs and managing costs and collecting our receivables and gaining operational efficiencies and our order processing and billing and collections and other administrative and distribution functions.
We will grow both organically and through M&A and 2021.
We believe that the investments we made in 2019 and 2020 and do our sales efforts and service capability has us well positioned.
Is it more normal patient flow returns of the U S health care system, we expect to see our organic growth rate increase.
The increase and the organic growth rate will take some time as the compounding effects of new patients on service builds and our patient census grows.
We also expect to become more active in M&A in 2021, albeit we're starting slowly.
We have invested in and M&A team and have an active pipeline.
We closed the small tuck in acquisition and southern California already in Q1 and expect to continue to pursue strategic opportunities throughout the course of the year.
And finally, we will continually leverage our technology to drive operating efficiencies we.
We have systematically made strides and our internal systems and processes, enabling improved workflow for our teams and increasing throughput.
As an organization, we've embraced telehealth and believe there will be long lasting benefits to apria and our patient base.
2020 was a challenging year, but we made great strides as an organization and I'm looking forward of pursuing continued flawless execution and daily service of our patients and 2021 and beyond.
I am honored to be of part of this company and I. Thank each and every one of our team members for their resiliency and hard work and dedication of this past year.
They are the heartbeat of Apria and every day, they help us deliver our mission of improving the quality of life for our patients at home.
I'll now turn the call over to Debbie to review, our financial performance in more detail and provide our outlook for 2021 debt.
Debbie.
Thank you Dan and thanks to everyone for joining the call today before we open the call to questions I'll share some highlights around 2020 and then I'll share our outlook for Q1 and full year 'twenty one.
We delivered full year 2020 results at the high end of the range that we included in our recently filed the S. One on all key measures, including net revenues net income adjusted EBITDA and adjusted EBITDA less patient Capex.
Full year revenue of $1 1 billion increased 2% year over year.
Net income of $46 million increased to 195% year over year.
Adjusted EBITDA of $227 million increased 30% year over year.
And adjusted EBITDA less patient equipment capex of $134 million for full year, 'twenty increased 67% year over year.
Our results do not include any funds from the government as we returned all provider relief funds allocated to the company. Shortly after they were received.
Overall, we had a remarkable year in spite of COVID-19, and thanks to the extraordinary assets of our employees, some regulatory challenge and deliberate and effective cost management throughout the year.
The fourth quarter of 2020 was a record quarter for Apria net.
The net revenues of $294 million increased 5% year over year, all of which was organic.
While there was some slowdown of new patient setups for noninvasive vents sleep and negative pressure wound therapy late in the quarter. Following the post holiday Covid surge the quarter was nevertheless, solid and all three of our core service lines and buoyed by strong cash collections home respiratory revenue was up 8%.
Largely driven by oxygen and as a result of the Covid surge along with strong cash collections and relax documentation and authorization requirements during the public health emergency.
<unk> was up 4%, mainly due to sleep supplies, despite experiencing and reduction in demand from new patients sleep starts during the pandemic.
And negative pressure wound therapy was up 4% year over year, despite some COVID-19 headwinds in the fourth quarter.
Their equipment and services was down 2% largely due to lower patient flows.
And as Dan mentioned project simplify and has not only meaningfully improved our cost structure, but it has made us more nimble with the ability of serve our patients consistently and reliably while also enabling more control of our variable costs.
In addition, our focus on continuous improvement and investment and technology, including leveraging robotics and further automating workflow as well as our deliberate cost management. During the Covid has continued to reduce our cost as a percentage of revenue and create operating leverage.
Our adjusted EBITDA and the quarter of $64 million increased 17% from Q4 dollars 19, while adjusted EBITDA less patient equipment Capex of $35 million was up slightly from $34 9 million.
Capex was significantly higher year over year due to the increase and oxygen concentrator is required to meet the demand, resulting from the surge in Covid cases late in the fourth quarter.
Moving on to the balance sheet as of December 31.
We had $195 million and cash and $401 million and debt.
This correlates to a leverage ratio on on adjusted EBITDA less patient equipment Capex of one five times.
Turning to our outlook for 2021 and.
I wanted to provide some color on what we expect this year.
And Q1, we continue to see volatility associated with COVID-19, with the surge in oxygen and sleep supplies and some slowdown and noninvasive vents negative pressure wound therapy and other equipment and services.
We continue to see strong cash collections.
The benefits from the Phe and the public health emergency in terms of Medicare reimbursement rates and relaxed documentation requirements and we continue to manage our cost structure effectively.
Well the Q1 is generally the lowest quarter from the net revenue and adjusted EBITDA perspective, given our patients are generally responsible for a greater percentage of the cost of their therapy. During the early months of the year due to the deductibles and therefore, it may defer certain therapy, such as sleep apnea.
And we nevertheless are having a record quarter and have increased our Q1 guidance over that provided during the IPO process.
For the first quarter of 2021, we expect net revenues of $268 million to $272 million.
Adjusted EBITDA of $45 million to $48 million.
And adjusted EBITDA, less patient equipment, capex of $21 million to $24 million.
For full year 'twenty, one we've increased our guidance and that provided during the IPO to account for the removal by CMS of the budget neutrality rate adjustment, which Dan discussed earlier.
While we are out of the gate with a solid first quarter and we are confident and the full 2020 of numbers we're sharing today.
We are nevertheless, maintaining our prior guidance outside of the impact of the budget neutrality, given the uncertainty around the timing and the pace of the Covid recovery.
And the rental nature of our business share. It is an example of the recovery and accelerate growth due to pent up demand our costs could increase ahead of growth and revenue and patient census.
Likewise, the range that uncertainty around when the public health emergency will and as well as uncertainty around whether the suspension of sequestration will be continued to the end of the year.
And both are either of these events would be beneficial to the industry and are resolved.
We believe maintaining a conservative outlook on 2021 until the future of Covid unfolds further is prudent at this time.
We remain confident we will manage and communicate effectively through whatever of cards.
As such for the full year 2020, one we are increasing our guidance to net revenue of 1112 114 billion.
Adjusted EBITDA of two or $3 million to $212 million.
And adjusted EBITDA less patient equipment, capex of the $108 million to $115 million.
As Dan mentioned, we closed the strategic tuck in acquisition and Q1, we have a solid pipeline and we expect your pursuit of additional acquisitions, which grow our core business throughout 'twenty one.
Our financial projections exclude any M&A activity at this point.
To close out our prepared remarks today I want to Echo Dan's sentiment that we ended 2020 on a solid footing to build upon we're finishing up a good first quarter and were ready to capitalize on opportunities and Jan.
Finally, I will also want to thank our employees for such a strong 2020 and for taking care of our patients throughout the pandemic.
Operator, we'll now open the call for questions.
Ladies and gentlemen, if you'd like to ask a question and at this time. Please press the star and the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
And then Thats Star then one if you'd like to ask the question at this time.
Our first question comes from Ralph Jacoby with Citi.
Thanks, Good afternoon first of all I guess I just wanted to clarify.
Otis at the <unk>.
Recent positive of CMS oxygen bump beginning on April 1st due to the removal of budget neutrality.
Yes.
Are you, including that and guidance or if you weren't and sounds like you said you were conservative I just didn't I wasn't clear on the if you sort of inclusion and Youre, just leaving yourself cushion on the other side and if you could just quantify what that benefit is the 2021.
Hey, Ralph ex Debbie Yes, we have included in our annual guidance, obviously it doesn't affect Q1. So we have included it in our full year and it's similar to what you had projected in the report and you recently issued.
And the $3 million to $4 million range for the year for 'twenty one.
Got it so if anything goes the play the three or $4 million as potential upside, but youre, just choosing not to flow that through simply given the COVID-19 backdrop and up here.
So we are slowing that true we are.
Excuse me can you repeat your question because we are flowing it into our annual guidance. So we basically took what was provided during the IPO.
And process and then we have increased debt for the budget neutrality that was announced by CMS and a few weeks ago.
Got it okay.
Okay Fair enough and then.
Got it.
Does the does the new CMS rate impact commercial rates either directly for some piece of your business or indirectly the negotiations, where perhaps you will be able to capture of those higher rates as well.
Hey, Ralph it's Dan.
It does not directly impact commercial rates.
And what it does is.
The opinion is continues to send the right message to the commercial payers the prices.
Going up.
And so between the outcome of competitive bidding not producing.
Results that would that would drive any savings plus the budget neutrality. It does impact the Medicare specifically, but not the commercial payers, but I think it continues to send the right message.
Through the through the payer community.
Okay Fair enough and then and then just one more if I could.
You know as things hopefully get back to normal.
Can you just talk about the competitive landscape do you think smaller players can sort of try to get back on their feet or how quickly do you see a more active M&A backdrop. Thanks.
Well.
We see a pretty active M&A backdrop currently and it really hasnt slowed down that much for us.
It's really about getting started and getting started on the right. So the small deal will start in Q1 and pursue more here as we go through the rest of the remainder of the year.
And really making sure that we.
We get our muscle memory back for the lack of a better term from from doing acquisitions and doing integrations. So I think we will slowly builds here, but there's a pretty active M&A throughout the industry right now.
Got it okay. Thanks.
Ex Ralph.
Our next question comes from Jamie <unk> with Goldman Sachs.
Hey, good afternoon.
Thats on getting this first one out of the.
The other way.
Wanted to start just firstly.
And with guidance for the year and and the cadence and it looks like the first quarter your guidance about.
Minus 50 basis points of plus one and then.
Implies about 50 basis points positive to the 4% for the remainder of the year and just wondering if you could talk us through some of the key drivers that accelerated growth and the back half of it and I know you touched on the budget neutrality.
You talked about the project simplify and that being a growth driver and in the later part of the year, but just.
Kind of bridge the acceleration that you expect from from <unk> to the remainder of the year.
Jamie Youre talking about 'twenty, one as we look forward.
Yes, your guidance for 2021.
Yes, so if you look at our Q1.
We're providing for Q1 were coming out of the gate with the strong first quarter, so while theres not significant seasonality and the business typically our Q1 of the lowest.
And what we're seeing is Q1 being strong.
We expect to continue to have some of the normal seasonality.
However, as we said we haven't taken up the.
The full year guidance at this point and time, just as we remaining kind of where we were when we met with you earlier as we see how the two.
<unk> unfolds.
So there's a lot of activity that could still occur, but just in our normal course, typically Q4 is the strongest.
No.
You would see from Q1.
Q1 of the lowest Q2 and three about equal and then Q4 slightly slightly higher so as far as the year and Thats, how <unk> unfolds, there's a lot of.
Events that may occur that we talked about obviously with the public health emergency should that be expended excuse me. The extended we've currently assume that gets extended one more quarter through July <unk>.
Scheduled to and if it gets extended further and then the delay of sequestration and those are.
On possible upsides that could occur.
And as well as obviously volume is lots of activity that can happen with volume.
Could fluctuate between products.
That answer your question for Matt.
Yes, that's helpful I'll jump to margins just for a second again on on guidance here. Your 2021 guidance implies roughly 18% to 19% EBITDA margin adjusted EBITDA margin.
The big improvement from where you were a couple of years ago, I know project simplify which was part of that.
But first question is really if you could just talk to whether there is any.
On one time things in the air from from Covid, and I know you had some moving pieces and and 'twenty are there any of those recurring in 2021 that we should be thinking about that won't repeat and the future and then the second piece of that is vicious anymore, I guess meat left on the bone and their opportunity from here to continue.
<unk> margin or is this what we should be thinking about longer term as the run rate for the business.
Yeah I'll hit on the first part and then the <unk>.
So as far as our margins, yes, as you've noted we had significant improvement from.
And from 19 to 20 and.
And as you May recall 2000, and we ended the year, but the adjusted EBITDA margin of about 25% and.
And Covid, we can precisely measure of certain activities around COVID-19 as far as price for example, and reduced costs and then others, we estimate as far as volume impact, but I think as we talked about during the IPO process on a normalized kind of outside of Covid basis, we'd say, we're in the mid <unk>.
<unk> percent adjusted EBITDA range. So as you look at 21, and we're sticking with where we were there's opportunity as I said for events that could drive that higher before I get to kind of initiatives and you're on the part of the question but.
But so there is pluses and minuses currently and 21 in regard to Covid, because we anticipated some events would go away as I mentioned with the public health emergency which has continued.
Assume the sequestration is not extended obviously oxygen has been surging along with sleep re supplier with some of the other products, including noninvasive vent.
It has been a little bit slower and sleep. So I wouldn't say, there's any precise COVID-19 one time that you could take out at this point.
We are currently and our numbers given you, where we where we said we'd be on a more normalized basis and 21 is still a bit of a.
See how it turned and see what happens with Covid over the next few weeks Steven of what's going to happen.
Okay and then for example.
Oh go ahead go ahead.
And we can say and part two of your question. We have is again as you pointed out the drivetrain the extensive site.
Pressure and the past and we.
<unk> proven that we can continue to improve.
The improvements and we are committed to.
The company and environment of continuous improvement so we will continue.
On an ongoing basis 10, best and initiatives.
And which will drive margin improvement and that's before we even talk about M&A, obviously I'll hit on that and the second but from a pure.
Operational efficiency.
We have been very focused on I think I mentioned robotics and.
The process automation and.
And we focused.
Focused on our order to cash process as well as our.
Our billing and collections Rev cycle process.
There is.
Ample opportunity as good as we've done for continual improvement and enhances and leveraging of current technology and those areas. We've done a tremendous amount, but I wouldn't for a second and say that there's no additional opportunities for further expansion.
In addition, our infrastructure we have as we've talked about a very mature chassis that has 1000 system. All orders does true and it can handle increased volume. So we are of very scalable infrastructure capable of handling growth. So when we look at layering on M&A.
And as Dan talked about we plan on starting a little bit slower and then speeding up that we expect to have some.
Margin improvement naturally given our scale.
Okay.
Color just one last one for me and then I'll jump back in queue, but just the the diabetes business that you recently launched just curious what you've seen early on here.
And with the early traction and is encouraging and if there's challenges that are coming out that were unforeseen or just an update on the diabetes business and how we should think about that contributing to 2021 would be great. Thank you.
Yes, Jamie this is Dan so we've.
We've had.
I'd say, it's both the encouraging but also some challenges that go with like the launch of any business.
It started pretty slow as we expected.
But what we are doing is obviously learning a lot about the patient to patient.
Patient experience.
Patients and the friction and actually that exists and.
And move either moving providers are getting patients.
Started on CGM so we.
We don't expect it to be a material impact of this year, we hadn't expected it when we provided.
Any forward looking information.
And the.
But we do expect to start to pick up a little speed on that business here over the course of the year.
Alright, Thank you very much.
Youre welcome.
Our next question comes from Kevin Fischbeck with Bank of America.
Great. Thanks, just want to follow up on the.
But the good trial, the number of the $3 million to $4 million is that the nine month number impact.
Yes, Kevin.
Okay. So is there any reason not to flow through four to 5 million and then enter into the out years.
No.
Okay, and then sequestration and sounds like not in the numbers.
How should we think about that if you could get that for.
For the rest of the nine months.
I think the bottom pretty strongly at this point, Kevin there is actually.
There was actually a notification sent out about 15 minutes before this call started that.
<unk> was going to initiate a claims hold.
Because they anticipate that the house will approve the Senate.
Approved sequestration language when they return on April 12.
And so I guess the quantify then how much of that would be is it.
Just sticking to EPS on your Medicare business sort of any other impacts of the calculated rate or or any other lines of business.
Yes, I'd say that again kind of a review and the $3 million to $4 million range for.
For sequestration should it go through the rest of the year for another nine months.
We've already seen the belt.
Yeah.
Okay. That's helpful.
And then I guess.
I think and your prepared remarks, you kind of talked about.
The organic growth rate.
Continue and you think to improve as the year goes on and build.
And can ultimately normalize I mean.
How should we think about that I mean, when do you guys think that.
But that happens and it just a matter of kind of.
Anniversarying.
You know of the last kind of tough COVID-19 quarter or.
Is that something that happens even.
Q4.
Yes, Kevin and I think.
It will largely depend on how the virus ebbs and flows.
And maybe I'll talk a little bit about what we've seen so far and the first quarter. What we saw was patient volumes that got impacted.
On January and really through February with oxygen and being a significantly and the other products being impacted negatively.
But literally as soon as the trajectory of the virus started trending down.
The other product started trending up again and.
And we think we will exit really cute one here at not quite pre pandemic levels, but close to pre pandemic levels. So the volume indicators are positive now from a total revenue standpoint, we have to replace the census, and keep the census, moving forward and growing.
So that we start lapping the census that we had at the time last year when the impact started but I think the my sense is that what we'll see is the the.
The organic growth rates slowly increase.
And whether it's Q4 of this year.
Early next year that we kind of return to a more normalized mid single digit number of unexpected and maybe mid single digit number I think we will just build gradually towards that would be my impression.
Okay, and then I guess the space about how Q1 is coming and a little bit stronger I mean, it is the right way to think about it.
There's some concern that the with the start of another Covid Spike if there is another COVID-19 spike that the.
The impact of you guys will be actually probably outperformance and the quarter, but then it might just delay that normalization of the rest of the businesses back of quarter because that is that the right way to think about it that actually kind of upside of the near term but.
And kind of.
All else equal the other things get back to normal.
Yes, I think that's exactly the right way to think about it.
Alright, great. Thank you.
Thanks, Kevin.
As a reminder, ladies and gentlemen that is star then one to ask the question.
Our next question comes from Chris Pneumonitis with Piper Sandler.
Great. Thanks for all of the color and congrats on a nice first quarter guys honest switch gears, a bit and ask maybe about E. Commerce sales I'm curious about the momentum kind of and in that area and how do you get patients to really engage with that offering.
And sort of metric we can we can think about as far as seeing traction there and then just one of your manufacturers came out of couple of weeks ago with its own e-commerce offering the one.
Moving to how you think about that in terms of your plans for Apria direct and the longer term.
Yes, Chris that's a very good question so.
We.
The last or really the back half of 19 early 'twenty, we retooled both the the.
The management team the platform and the strategy.
Our E Commerce business, we have been very very heavily dependent on a lot of the sleep accessories and as COVID-19.
Impacted.
Anything to do with travel and.
It really took and impact on our on our business. So we retooled and if.
And starting to see some of the early returns on that.
Our strong management team was was brought in and they're executing on the strategy and I.
I'd say, the and diversifying product availability.
And nice growth off of a small base so far of the first quarter of this year versus.
First quarter of last year.
And so we're pleased with where it's headed.
From a how do we get eyeballs, if you will on Apria direct Theres really two ways. We do it one is the cross sell for anything we do.
Do from.
And new patient setup, if theres an opportunity there.
And secondarily, its search engine optimization and STM.
<unk> CEO so.
We don't spend a tremendous amount of money on that yet at this point.
Trying to make sure that our strategy and our performance is there, but that's really how we start thinking about the future and.
And driving folks of the site.
Great and then just one more from me on compliance you announced the hire of our new General counsel of about a month ago, maybe give us a sense of.
On your go forward direction for compliance, especially post the settlement back in December.
There was some confusion and that ultimately led to that in particular, but maybe if you could share a little more to give us some comfort around the historical of call. It maybe can be a misperception of kind of questionable billing practices that people might tend to associate with the industry.
Yes, I think.
So I mean I can comment briefly on the settlement.
The one we're just happy it's behind us.
And really were not.
We just don't want we don't want to comment on publicly and in fact accounts. So.
I think from a compliance standpoint, theres two aspects one I would think of compliance.
As the.
Historically, the industry struggled with the compliance profile if you will in the.
With CMS.
We tend to think that.
And I think but we know it has improved significantly.
The industry overall.
And as far as the number of the compliance efforts are concerned and especially when we get into the reports.
The fact that.
Medical necessity is less and 1% of the denials and literally everything above that is something to do with was the.
Something to do administratively so we feel much better as an industry and I think the companies that are driving it are doing a great job.
If you look at Apria is track record historically, it's very strong and compliance.
And we take it very seriously our new General counsel brings very good compliance.
Background and I think that you will do nothing but helped drive of a compliance culture.
And even more than we have today.
That's great. Thanks again guys.
Thanks, Chris.
I'm showing no further questions in queue at this time I'd like to turn the call back to Dan Starck and for closing remarks.
Great. Thanks, operator, and thank you everybody.
And we certainly appreciate everybody joining the call.
And I'd just like the wrap up one more time with a big Thank you to all of the Apria teammates and it takes 6500 of us to get the job done every day and they've done one heck of a job and couldn't be more proud of them and I can.
Can't wait for 'twenty, one and future years here and it's exciting it's an exciting opportunity and exciting time to be in our space. So thank you everybody and we'll talk to you again soon.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
And the deal.
[music] of Canada.