Q1 2021 Adapthealth Corp Earnings Call
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With a question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder of this conference is being recorded it is now my pleasure to introduce your host Chris Joyce General Counsel. Thank you Sir you may begin.
I'd like to welcome everyone to adapt help Corp's earnings conference call the quarter end of March 31, 2021 ever.
And everyone should have received a copy of of our earnings release earlier. This morning, if not I'd like to highlight that the earnings release as well as a supplemental slide presentation. Regarding Q1 2021 results has posted and the Investor Relations section of our web site.
And a moment and we'll have some prepared comments from Steve Griggs Co Chief Executive Officer, Josh Barnes, President and Jason Clemens Chief Financial Officer, We will then open the call for questions.
Before we begin and I'd like to remind everyone that statements included and this conference call and and our earnings release May constitute forward looking statements within the meaning of the private Securities Litigation of Reform Act. These statements include but are not limited to comments regarding our financial results for 2021 and beyond.
Actual results could differ materially from those projected and forward looking statements because of the number of risk factors and uncertainties, which are discussed and our annual and quarterly of SEC filings adapt.
Adapt healthcorp and you'll have no obligation to update the information provided on this call to reflect subsequent events.
Additionally, on this morning's call will reference certain financial measures such as EBITDA, adjusted EBITDA and adjusted EBITDA less patient equipment, Capex, which are all non-GAAP financial measures. This morning's call is being reported and a replay of the call will be available later today and.
I am now pleased to introduce our co Chief Executive Officer, Steve Griggs.
Thank you, Chris and thanks to everyone for joining and our call.
Before we get to our prepared remarks I'd like to start out by thanking are 9000, and 331 employees across the country for their unwavering resilience and the face of the ongoing pandemic and a continued commitment to serve and our patients.
And operating largely and new England of markets, which we were previously underpinned penetrated with the acquisition of Spiro adapt health now has the premier HEB provider and the new England market.
Top flight local management team led by Gary Sheehan and a platform to drive substantial organic growth across all adapt health product lines and that region. The acquisition of Spiro like our February 2021 acquisition of the line of health systems, HMA business, and Minnesota reinforces our ability.
City to expand our footprint and growing markets dziedzic acquisitions of market leading suppliers.
The combined the M&A teams of both adapt health of narrow care, which actually executed more than 240 transactions continue to see opportunities to make strategic accretive acquisitions with this in mind. We recently worked with regions bank and our other lenders on the $300 million expansion of our scene.
And your secured credit facility that the.
Expansion, which includes an increase and our revolving credit line to $450 million allows us to execute on a robust M&A pipeline and take advantage of opportunities to expand our scale and geographic coverage across the HMA diabetes and supply of product lines.
Three months ago, our branch consolidation team led by sure re Kirk and Dan Bunting has completed its review of our combined branches.
We are well on our way to executing on of plan to rationalize hour of infrastructure consolidate redundant facilities and reduce overhead.
At the end of April we of exited more than 56 overlapping branches, reducing our footprint to 614 locations and we are continuing to evaluate further consolidation opportunities.
While these to work streams have preceded our operations revenue cycle management and sleep teams have been working hard to identify and implement best practices of both of our companies and take advantage of synergies and technologies.
While the cost and revenue synergies associated with these works for you and it will take some time to realize.
I am confident that the work plans in place when executed will have the effect of improving the operating performance of the legacy adapt health and Arrow care business as we move forward into 2021 and 2022.
These are just a few examples of adapt arrow care integration progress.
Which give us the confidence to confirm our previous guidance estimating $50 million and run right synergies by Q4, 2021 and $30 million of synergies as of the December 31 2021.
Another area of investment and focus has been centered on bringing together are of diabetes and hmu product teams and technologies.
Many years spent streamlining and developing infrastructure and technologies for HIV products and supplies directly correlate to what we see are opportunities and the diabetes product lines one.
One of the things we are very excited about is the ability to leverage are approximately 500 strong sales team.
To cross sell both diabetes sleep and HIV products are initial phase of rolling out cross selling of diabetes products and select markets is showing promising results.
As our technology mature so allow for seamless processing of orders across multiple product lines. The benefits tower referral sources and patients will be palpable.
Over time this should also allow us to operate more efficiently.
And organic growth, while at the same time investing and creating a more efficient and patient centric model of homecare equipment supplies and services.
With that I'll turn it over to Jason for results of our first quarter and a discussion on our full year outlook.
Thanks, Josh good morning, and thanks for joining our call for the first quarter ending March 2021, adapt health reported net revenue of $482 $1 million and increase of 152% from the first quarter of 2020.
The substantial increase as a result of our companywide focus driving organic growth and the efficient integration of our 2020 and 2021 acquisitions, including the acquisition of Arrow care, which was completed on February one 2021.
As the frame of reference pro forma revenue for acquisitions was $564 1 million for the first quarter, driven primarily by Aero care, but also from solid performance from previously announced acquisitions.
As detailed in our Q1 2021 earnings supplement our organic growth for the quarter was very strong at 11, 5% up significantly against Q4, 2020 organic growth and led by new starts and our diabetes product line.
There is additional good news on the revenue front as we learned of several regulatory changes during the quarter that will provide additional tailwind to our business in 2021.
Medicare sequestration relief was extended through the balance of the year.
Additionally, the public health emergency was extended through mid July positively impacting the non rural and non CBA dnb fee schedule.
Finally, and importantly, the CMS published its April 2021, <unk> schedule, which resulted in higher reimbursement rates.
Some of these impacts were partially accounted for and our guidance, but the net incremental impact of these programs for the balance of 2021 is accounted for and our guide raise that I'll discuss later.
Adjusted EBITDA for the first quarter was $104 2 million and increase of 242% from the first quarter of 2020.
Our adjusted EBIT margin of 21, 6% came in as expected for the period adjusted.
Adjusted EBITDA margin improved materially against the first quarter of 2020 led by turnaround results within the PCM business and higher margins from acquired companies, particularly Erica.
We expect these trends to continue throughout the balance of 2021, and we also expect incremental margin expansion sequentially throughout the balance of the year as our integration and synergy program picks up steam.
As a reminder, we projected $50 million and run rate cost synergies by Q4, 2021, and approximately $30 million of such synergies to be recognized and the full year ended December 31 2021.
Turning to the balance sheet, we ended the quarter with $132 million of cash and $1 $76 billion of debt.
As previously announced on April 26, we took the next step and our capital structure planning by amending our senior secured facilities to increase our term loan by $100 million and by expanding.
Handing our revolver capacity from $250 million to $450 million.
At the time of the deal our net leverage was two nine times pro forma adjusted EBITDA.
With the completion of this transaction we are confident that the company has the resources to move quickly with respect to our M&A opportunities as previously stated our net leverage target remains at or below three times adjusted EBITDA pro forma for acquisitions.
I'd like to turn to our guidance for 2021 as announced this morning, we are increasing our 2021 full year guidance for net revenue adjusted EBITDA and adjusted EBITDA less patient equipment Capex, we're guiding to net revenue of $2, two 2 billion to $2 three $9 billion.
Adjusted EBITDA of 525 million to $565 million and adjusted EBITDA less patient equipment, capex with $330 million to $360 million. As a reminder, our guidance does not include any contribution from acquisitions that have not yet been closed with that I'll turn the call back over to Steve.
Thanks, Jason before we open the line for your questions I'd like to address the recent announcement of loop mcgee's unpaid leave of absence and.
As you know on April 13, 2021, the company announced and it learned and Luke had been formally charged by the authorities and Denmark for alleged tax fraud related to certain private activities between 2014 and 2015.
Following these revelations the board of directors of immediately place Luke on unpaid leave from his role as co CEO and initiated an investigation into his contact by a special committee of independent directors.
And counters the.
Chairman of adapt tells the audit committee is leading the special Committee.
And the investigation is being conducted by DLA Piper and independent law firm with no prior connection to the company.
The primary inquiry of this investigation as to confirm that.
And that there is no connection between Luke and the alleged personal contact and <unk> business or operations.
And the investigation is well underway and we continue to believe that Luke's past private activities are entirely separate from the company and the company was unaware of this alleged criminal behavior prior to April 12.
And as I'm sure you can understand we've been instructed by counsel and we would not that would be inappropriate to answer any questions about this ongoing investigation and therefore, we will not be taking any questions on this call regarding Luke situation or the investigation.
With that operator, please open the line for questions.
Thank you at this time, we will be conducting a question and answer session and you would like to ask a question. Please press star one on your telephone keypad. The confirmation of color indicate that your line is and the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick up your handset before.
Pressing the star keys.
Our first question comes from the line of Brian <unk> with Jefferies. Please proceed with your question.
Hey, good morning, guys.
Steve I appreciate the the last comments you made but I guess I'll ask the question kind of related to that so how would you address the investor's concerns about the business. Obviously Luke was the big part of the company and he built the company and together with Josh over the years and and view on Eric here. So how would you guys.
Give comfort the investors that.
The company and find things are going well and you know that.
You guys have everything and control and that you have the bandwidth.
Take over some of the responsibilities that Luke had when he was CEO.
Well, we have a lot of experience and the business like I've said I've been in 33 years. So I'm very confident that we can operate the business going forward the.
The vision that Arrow care had and the vision that adapt health pad for where this business is heading and the importance of home care evolving as a more crucial part of the healthcare delivery system, we're very very much alive and Thats why the acquisition made so much sense or the combination of the companies.
We're confident of that.
As a public company President and granted it was and the nineties, but.
And I'm pretty familiar with how capital markets work very familiar how of that Mark.
<unk> work as evidenced by.
The increase in the in the loan and the tremendous support we got from the Bank group. So I think as far as where the company is headed and I think it's pretty clear we're going to be heading and it has very same if theres not similar direction homecare is growing tremendously. It's importance is growing the ability to do things at home is unprecedented.
And it you cannot take care of patients.
And the same manner and.
And the future as we do today, so things have to go to the home environment and we're prepared for that and we've got all of these processes and people in place to take advantage of that opportunity. So we're very very comfortable of the ability to carry forward. The mission of the depth adapt health, who our leadership team, we have great people and the field of great people and.
And the corporate offices were very impressed with all of the processes that we're doing and we can go through the numbers of people that are really really contributing to make a difference to make this a world class organization.
Hey, Brian and I'll, just quickly add a little color there, obviously, Luke and I have been working closely over the last kind of eight nine years from when we met and 2013.
We've been kind of every day hand, and glove really doing some of the things and Mylan and some of the things and his lane and.
And so obviously the vision and the execution of the vision, we each kind of share of.
The where we are today and where we're set up.
And we feel very good about where we are and we feel good about we are because at the end of the data the complete army behind us that's helping kind of getting this done every day and like we said on the on the script, our employees and kind of the management team that we've built over the years the.
Additional strength that we got from both the <unk> acquisition and now with the spear acquisition really kind of HMA veterans people that know the business inside and out but more importantly, our thinking about what the future of this business means in terms of technology and connected care and and how this really fits into the overall health care delivery system like Steve said, so we're going to.
We're going to definitely Miss Luxe presence now and obviously.
The strategy and where we're executing on and where this business is going is well established and we just continue to believe that we'll prove that throw numbers and and we continue to feel confident about executing on the plan.
I appreciate it.
Yes. My second question is you mentioned you know the the.
And the diabetes business Youre happy with it now as I look at the sequential growth and revenue from Q1 from Q4 to Q1.
Just a little over $1 billion right. So I know you've done some acquisitions.
Net.
And Q1 as well so how are you thinking about that right.
And then the diabetes business have performed a little better given the deal flow and the quarter and how should we be thinking about the next quarters in terms of sequential growth.
And just like yes, it's obviously.
Some of this business as the quarterly timing thing with Q4 before the reset of deductibles you kind of Spike in December.
We're extremely proud of how the diabetes business is performing particularly Q1, which is typically softer softer and that business came ahead came ahead of our expectations for the quarter.
And obviously you know we haven't been and this business all of that long only since last July but the progress we've been made bolt on E prescribing and restructuring processes and organizing some of the acquisitions and putting them on a organic pathway to growth and kind of better bottomline numbers were extremely proud and confident about the cash.
Current diabetes product line.
And.
Got you and then last question from me.
I guess, Jason as I think about the guidance, obviously strong organic growth and Q1 of raising the guidance for the year.
How are you thinking about the cadence.
And any seasonality or how should we be thinking about just the breakdown of the quarters.
Sure I'd be happy to give you some overarching.
Comments on that as you know, we don't guide of the quarter, but in general I mean this this business from a revenue perspective produces somewhere in the ballpark of 28, 3% of annual revenue and the first quarter.
And it steps up from there or touch and Q2 still.
And still under 25% and then Q3 and four are bigger quarters and is.
Josh said and diabetes Q4 is particularly a big quarter.
Lot of that is due to just the traditional health care.
Dynamics of resetting the.
Deductibles and patient patterns ordering patterns, and so thats really whats driving that for this quarter.
We are of a touch under that under that under the 23% I mentioned, because we only had two months of Aero care as opposed to three.
Got it thanks guys.
Thank you.
Our next question is coming from the line of Anton <unk> with RBC capital markets. Please proceed with your question.
Thanks, Good morning, guys.
And this one kind of.
The feeds off of Brian's last question, a little bit, but could you help break down sort of the the components of the the guidance raise.
I think you mentioned the sequester extension.
And what's your holiday extension was already in there and possibly I'm not sure I heard that right and then maybe how some of the latest.
Completed M&A.
The factors into the the additional 10 million of EBITDA and then the versus organic performance of really just all of those kind of three elements how that feeds into the new guidance.
Sure Anthony be happy to cover that so firstly, you've got it right on sequestration relief.
In terms of other regulatory tailwind.
The the CMS did publish new fee schedule. So on April one as part of that were were increases around oxygen. The frankly, the industry and and our leadership team has been has been has been pushing for for a long time.
And once I finish I can pass it to Steve to talk about those efforts a little bit.
And think in terms of thinking about the size of that I mean, you can think of the oxygen and annual increase and call. It the high single digit millions of dollars.
So of course, the only have it for nine months, so you've got to run that math and then and then the rest is frankly this the Spiro acquisition that were just so incredibly excited about it.
In the new England.
So that was the reason for the for the raise.
I suspect we'll talk later about the synergy, but we did not change the union delivery or the exit rate delivery of synergy.
As you saw the bands of tightened slightly.
But frankly, it's still early in the year, we're still in a pandemic and.
We feel great about the numbers that we put out Steve do you want to add a couple of comments on the on the oxygen and increases yes. The accident increases were related to budget neutrality.
Condition that was put in some 15 to 20 years ago that and was related to portable oxygen concentrators.
And when competitive bidding came in there it seemed like that should've been and come out came out and gone away, but it didnt and we spend a lot of time I was involved in it and <unk> homecare bunch of people from the industry and Doug and the CMS and CMS agreed, but they just didn't feel like they have the authority to.
And get it out of there and discontinue it so it had to go through legislative action. So finally.
And after years and years and years of industry work with the with the Hill they were able to take it out and April one so now that just level set those those rates, which resulted in net increase for everybody within the industry.
Okay.
Yes.
Okay, great and obviously, a very strong organic growth performance, there, but I wondered how much or can you talk about any impact that you may have had from.
The severe winter storms, and we saw and now you guys have some presence in Texas and Arkansas certainly areas saw a lot of shutdowns and if you could just address that.
Yes.
Certainly the weeks of those storms.
We didn't have a lot of patient setups, but the business pop back nicely from that and.
And nobody is complaining.
Planning and about their revenues and those two states that the both of those states performed well over the quarter.
And so they pop back nicely and.
And had no effect really on our on our financial performance.
Okay, and then last one from me are you seeing I mean, obviously, we kind of it seems like we're through.
The last real big COVID-19 surge and the vaccines and rolling out are you still seeing at this point any real issues with patient access.
And.
And we're kind of maybe how that trended from from month to month within the quarter.
Yes generally.
The health care businesses and the healthcare entities are open for business. So I think that we're pretty much past the.
The pandemic and and how people are willing to come to the doctors' offices come to sleep labs come to our offices to get treated.
And and still it still and a lot of the virtual care still.
So generally speaking that is behind US I think everybody saw some softness in January and February.
It's hard to figure out why that happened, but everybody kind of did that I talked to.
Kind of excited about joining that team and so we're seeing more and more of that so I think we're going to have a lot of opportunities and the pipelines robust and across the whole spectrum of the.
That as far as you know.
Initiatives I don't think they've changed I mean.
When when I came here and the the mission was to put the organizations together, but then create that organization I mean adapt health has grown significantly through acquisition and now it's time to put all of the pieces and parts and all of the backbone of the foundation together to make this and the organization that no not only the.
Works today, but works in the future and and we have tremendous growth opportunities and ambitions and so we got to have to have the the the foundation and the organization to be able to take care of that and that's not just and easy task and the snap your fingers and boom. It happens I mean the.
The the accounting the I T.
The revenue cycle management, and so we have the people and place to get all of that done and to be the b and if we do it right will actually create a competitive advantage and each of those areas that we'll be able to further improve of us. So so our focus is really on becoming a better company and all aspects of it and when you go through.
Who are 16 or 17 different work streams that we work on every day and have people assigned to to do that stuff to make sure that happens and on and overreaching of all of that stuff is and organic sales mentality that we have to bring to this company and the the combined organization that really should see and and set us apart and so that's R.
Focus and then within at the end of these great assets are showing up and we're just not going to pass them up.
I appreciate that and Jason just a couple of for Ya I want to make sure I heard you correctly, you said pro forma the first quarter of sort of revenue run rate somewhere and the $564 million range of that I hear that correctly.
Correct.
Okay and then.
G&A did spike and the quarter is that are okay and related or not is it something else and and that sort of the trajectory we should be thinking about from here and that's all for me. Thanks.
Yeah, Great Great question Mat G and I mean, there there is some adjustments EBITDA of the flows through there and even after adjusting out we're seeing SG&A per cent of revenue hold pretty steady.
Really phenomenal team share re Kirk Dan bumping from Arrow care.
A lot of our kind of regional leaders state by state as we go through and even some of the folks that Ive got to meet and over the last number of months from the air of care team just really the best.
Say, the best and brightest and the industry and.
And the other thing that I think would be changing is is really just more investment and operational technology and connected care and I think we feel like just from a footprint perspective, we're positioned nicely, but where we can really set ourselves. Apart is if there is much less friction between the patient the referral and the <unk>.
<unk>, which would be us and again as that gets better over time, we're going to be able to drive kind of meaningful change in terms of velocity of amount of orders to be produced and go through our system as well as potentially over time become a more efficient provider unable to take some of the cost out of kind of the home care post acute care business that we're in so I think.
Youll see more of that from us more investment from us and those areas and we're going to look to make kind of pretty aggressive moves and that and that.
And that seemed so more from us and the future, but we're feeling pretty good about where the operation of today.
Okay great.
Organic growth rate of 11, 5% is the best I've seen since.
And since I've known you.
Can you walk us through the components of net organic growth rate and how do you. How do you think the progressive throughout the year and any color you can give us some sort of cross selling practices.
Between the two companies.
And diabetes.
And kind of what was the key driver of that.
And how about I start on the on the Mat side, and then I think past, Steve and Josh on the cross selling and frankly, the exciting part of the story.
If you look at the components of how we generally guide each of our product lines and I'll start with the kind of the traditional somewhat slower growers, but very very steady and consistent.
<unk> supplies to the home.
And we're back above.
The pre pandemic levels and we've reached.
The watermark, there and those products, we will we will consider to be steady as she goes for the balance of the year.
As we get into respiratory frankly, there is a little bit of a pop and early Q1 that we're thinking of is nonrecurring as Steve mentioned earlier, it's still early to tell and the long haulers.
Related to COVID-19, how that will materialize over the balance of the year, but we still feel firm about our the range that we put out on expectations for respiratory.
As you get into sleep.
In terms of March and we are very happy with App starts and where we stand with that business now and now back to high watermark as we as we said we expected by the end of Q1 on the last call.
Tell you January February was a bit soft, but re supply has been just a tremendous story for us as we're beating internal expectations on the resupply side and then last certainly not least as diabetes I mean, we're just so excited about this business volumes are.
Frankly above expectations growth as is great.
We are still somewhat cautious to raise the 10% to 12% on diabetes that we typically talk about just because we still haven't even though and this business for a year, but everything we're seeing is indicating that we are and the rate and market.
For this part of the company and as the year as year goes on we'll continue to refresh guidance Accordingly regarding the cross sell and all kind of the more exciting parts of this I'd, probably the fastest of Steve and Josh Yes, the cross.
The sale is fascinating to me. So if you think about our sales reps out there in 2020 of <unk>.
A lot of them were unable to get into the doctor's offices had limited.
The access and all the stuff and so we still were able to produce high quality numbers well now that's opened up.
All of our reps are very very very busy now, making sure that they get back into all of our counce re establish those relationships.
Reestablish and bring back and all of the patient demographic information and the patient compliance information of the patient success information to those referral sources, which they have to do.
So there is a incredibly busy but even within all of that we've made great strides already and the cross sales. So while we're very optimistic point I wasn't expecting much because our reps are so busy but they took it upon themselves put in the extra hours when do they counts and started talking about stuff and so.
We're ahead of where I really thought we'd be biased because we're incredibly busy right now.
The longer tail and some of that will go into 2022, but otherwise.
And the software stuff, which is less measured by metrics is really how well the team is getting along.
The cultural aspects.
No politics really everybody just focused on getting the job done and I think that.
The business operator, all of these years, that's the thing that that I feel the most confident about obviously it'll play out of numbers over time, but we certainly feel good about kind of where it is operational and right now and I'll pass at the adjacent to some of the numbers. Thanks Josh.
That hard work has materialized.
And firm for you that we have realized a couple of million dollars and the first quarter.
And I will tell you that is very heavily weighted in March as these programs have been locked in place, but depending on the contract date and the effective date and $1 start flowing right that theres a shape to all of this but the beauty of the synergy is that these are either recurring dollars. So the couple of million and I'm quoting will be recurring for the balance of the year. So.
Take that number over 10 months and you can see why we are still very confident with the $30 million in year.
There is still some work to do and a big Hill to climb here.
And that we've got confidence and our team to do but we've been cautious to increase that in year or the exit rate synergy at this stage, but based on what we're seeing we are extraordinarily confident about what we've got.
And just one last quick numbers question you raised the adjusted EBITDA less capex by $10 million I think you said earlier that oxygen and was high single digits. So is the way to think about the guidance range $8 million coming from oxygen and $2 million from the spirit transaction.
Thanks, so much well I'd say it was in April one.
Implementation date for oxygen. So, it's just a little bit of of ramp there but.
And youre thinking of it correctly is that oxygen revenue should flow through.
Thanks, guys.
Thanks Peter.
Our next question is coming from Richard close with Canaccord Genuity. Please proceed with your question.
Yes. Thanks.
Jason maybe on the synergies I just wanted to check in on something.
One of the answers earlier, you mentioned Titan and the bans and I just was curious what exactly that meant.
Sure, Yes, Richard I was just talking about the guidance range on revenue adjusted EBITDA adjusted EBITDA loss of patient equipment Capex. So the numbers came up the bands tightened slightly I think as we go over the course of the year Youre going to see us moving those bands closer.
As of course of of course of moving through the year.
Okay I wasn't sure if that was related to the synergies and just wanted the check they're moving on to acquisitions, you guys talked a lot about that.
Over the course of the call, but I'm curious in your discussions.
And then about a month since the news came out with respect to look and I'm just curious whether.
Does that come off the at all and any discussions with potential <unk>.
Yes.
Well sure it is kind of math, but.
And I'll, just take Gary Sheehan at Spiro Gary.
No and look for a long time I've known Gary for long time zone, Dan and some of the Josh and so yes share it came up and.
And but obviously it didn't affect the outcome of that transaction and the other ones you know of similar.
And we competed with the arrow care Cabelas adapt and pretty much every acquisition they did <unk>.
And with them and every acquisition we did we would compete they were competing with us so.
Certainly it's going to come up, but we don't see it affecting the ability to get a deal done and.
And I'll just add this is <unk>.
Just wanted to give you a little more color. There. So obviously look always throughout the year as used to just use the tell me and working closely with him and that this business is more than just about me more than just about more than just about Josh.
I think when I think about what the events of this year the per.
And the takes.
If you woke me up middle of the night I would say that the era of care merger acquisition. The the Spiro deal of the growth and our diabetes businesses are more than anything kind of look and I even.
Moving on our vision would of thought would impact us positively so in.
In general this business is not built around any one or multiple individuals. It's really a team of division, it's infrastructure and technology, it's locations its operations its drivers.
The only see the necessarily the face of of who's talking maybe to investors or even analysts, but but obviously theres a lot going on behind the scenes and that's why I think we feel confident that the machine that was built over the last number of years and the combination of a lot of good people and companies and technologies when it's all blended into one which is <unk>.
And great progress I think we'll all be very happy with the results.
And my final question is on the <unk> prescribed can you just go over that again I think you said the above 30%.
And where could that go over time.
Sure. So I'll handle that so it was 30 plus percent on new orders for our diabetes product line.
We're extremely proud of that just because we started from dollar from order number one and October.
Really this is the nexus of what I mentioned, a little bit and the script of we're taking what we've learned and the <unk> business and some of the supplies businesses and really bringing that over to our diabetes business and our diabetes business and we're going to take things over time.
The <unk> business and Thats, what Steve was talking about vis vis cross selling we have.
A team of 500, plus sales reps that are out in the marketplace and as our technology continues to evolve the ability to do.
<unk> line and won't be as important in terms of differentiating how we process orders and how we deliver to our customers. So our goal over time and to bring all of these product lines together.
To drive kind of a seamless experience for the patient and the referring provider and the referring physician and the home.
So I think and general E prescribing at 30% over time.
Obviously, not going to be this year, but over time, we're going to want to get that significantly over 60, 70 plus percent of our business and maybe even over time similar to what we see and pharmacy, where E. Prescription is really kind of becoming much much more dominant and over time, we'd like to get that up north of 75% and 80%, but it will.
Take some time to get there, but for less than six months were extremely proud of kind of where it's gone to and we believe that Theres room ahead. So we'll continue pushing there.
Great. Thank you.
Thank you. Our next question comes from Kevin Fischbeck with Bank of America. Please proceed with your question.
Alright, great.
What kind of reconcile the guidance range.
Sounds like the deal and the operating rate.
Right.
And the majority of it but then I guess sequestration was also.
And so just trying to understand a little bit.
All of the pieces and there and how you think about it and then I guess more importantly.
How much of this guidance the range and kind of.
A real increase of the base and we think about going into 2022 and beyond and we showed you.
Use is kind of the <unk>.
Base off of which to grow and if theres anything in here that and kind of say is the.
Onetime in nature, and we should be backing out.
Well of the sequester.
Spent a lot of time on the hail and with our organizations and so we're very very confident that that would be extended.
And when you have the Hospital Association and the physician Association founding.
CMS and and.
And getting Congress and we just.
And relative the coat tails, so that was always and the numbers of the sequester numbers and then.
As far as the other increase ill turn it over the two Jason Thanks, Steve.
Kevin and I guess, what I'd say in terms of thinking youre asking about like the foundation going forward into 2022 and beyond.
The way we've thought about sequestration.
And any of these supplemental programs or short term programs is that as the management team I mean, our job is to grow through that and above that once once those programs are eliminated or stopped and so when we talk about revenue synergy I mean again, we haven't hung numbers on that but our expectation is that we absolutely sort of.
Pass any of the supplemental.
Relief of revenue that we're that we're seeing in 2021.
We've talked about Pap compliance rates, we've talked about Pap resupply.
We've talked about patient pay and what we're learning from each other adapt.
The adapt and <unk> combined.
Those will be very real numbers.
As we bridge into the tail end of this year and into 2022 again, we haven't we haven't hung specific numbers on it externally it's not included and guide.
I would suspect over the coming quarter, we will start putting pen to paper on that for you all.
Okay. So the the guide is really on the two things that need to annualize that only and the partially in the year the oxygen and the deals with at the normalize and something bigger next year, but the.
It also does include the sequestration, which we have to.
Back out but it did include that already so that's not new alright, correct that right that makes sense. Okay. And then I guess just wanted to follow up on your comment about the respiratory business and the potential for long haul and are you are you able to are you seeing patients who come in with the COVID-19 diagnosis and you're able to convert the document.
They actually.
Are turning into chronic.
Love to hear of any kind of color there.
Well certainly we're happy to see and a lot of these patients are getting off of oxygen for their own benefit and there and theyre in there.
And back to their normal lives. So that's a positive.
Positive for those for those patients. So we're thrilled to help and with that process having.
Having said that and.
Theres a lot of.
Documentation out there and a lot of and the physician communities about the long term effects of COVID-19 has had on these patients and so youre seeing a lot of different doctors and maybe if you could go out to.
National Jewish or something like that and Denver, Colorado, where the big respiratory providers out there.
They are watching these these patients pretty closely and they are more hesitant to take them off of oxygen. So some of those patients that are showing those symptoms and.
Just having trouble.
Really get fully functional or still and auction. Thank gosh that a lot of them are coming off.
And Theres still lot lots of be found out of.
How this disease affects people long term.
Okay, alright, great. Thanks.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad at this time. Our next question is coming from the line of Eric Coldwell with Baird. Please proceed with your question.
Thanks, very much sorry, I was going to ask about the sequester question too because based on management. Prior comments, we thought it was the.
The holiday extension was not in not in guidance. So I think that's been clarified.
I did want to just the also clarify Spiro the acquisition and the most recent deal.
Have you provided revenue.
For that for that deal and the specific EBITDA youre looking for on and on an annualized basis.
And I apologize I've been toggling and a couple of calls here so.
Hey, Eric This is Jason no no problem.
And we did not put out specific.
Revenue and profitability guidance on Spiro Norte and ore really on any acquisition. It's just been our internal policy to not do that however.
In terms of the updated guide I mean, you can run the math on our comments regarding the oxygen rates that went in place April one.
That certainly is part of the guide raise and the other half of that I shouldn't say half. The other side of that range is is directly attributable to spiro.
Got it.
Thank you very much and then.
I appreciate the comments on organic growth and the.
The pro forma way you do that I am curious Jason do you have.
And the more traditional calculation on organic growth, where the company would just take out all deals yet the annualized and look at the base business that was intact 365 days prior.
Yes, it's a little difficult and this in this sector of healthcare because.
As as the business comes on right.
So I'll start with the patient that patient may have produced resupply revenue last year, but as they come onto our platform right. I mean, the whole part of adapt health is that we are going to resupply smarter and more efficiently.
To the patient of what they need when they need it.
Patients will move around the system Alright, I mean, so there's no real kind of like.
Classic same store to.
So even compare against because we don't we don't operate that way.
So there is a number of reasons why we don't follow I guess and your words, the traditional organic growth view of what we do provide and our supplement as is.
And as visibility to.
The prior year revenue and the quarter, regardless of ownership of the business and so we're validating that with <unk> and such so what youre seeing year over year is the revenue.
And that's health compared against the businesses that.
And again, regardless of ownership year over year and at 11, 5% frankly, we're feeling we're feeling great and we're feeling great about the year and the growth that's come since since Q4.
Yes.
Thank you for that and then I know you can't comment on specifics of the investigation and I am curious if you have one.
Hunter on the timeline or what the street might be looking for next in terms of updates.
Updates comments findings.
Sometimes these things can take weeks, sometimes they take months, but.
And I'm curious if you have.
Our target date, where where you might be able to share some information with US and then just again not specifics on the the findings, but how do you plan to update us will there be.
A thorough discussion of everything that was reviewed or just kind of a conclusion on finding some I'm not sure. If you have a per.
<unk> in place yet for how youre going to.
Share what your findings led to an and.
And kind of explain to us the.
The level of detail the Piper and others went to.
And this process.
Your next step date will be the completion of the investigation, which.
<unk>.
Probably a month or so two months, maybe I don't know and and we'll see how fast they get through it and they wanted to do a thorough investigation and I promise you they will do that.
The multitude of things, but predominantly and making sure that this was the private manner and.
We can't comment or even gas on and off.
How it's going to play out in Denmark, and I think that would just be.
And best of low gas and so we're not in the wild gas business.
Your next update will be the investigation completion, and while we expect that to be.
As we have which as we've described we will go through that complete and thorough process.
Yeah.
It sounds good. Thanks, Thanks again, guys I appreciate it thank you share thickener.
Thank you there are no additional questions at this time, so I'd like to pass the floor back over to management for any additional closing comments.
And just like to thank everybody and once again, thank our 9000 and 331 employees that every day go out there and take care of our patients and they're doing a great job and we continue to look forward to.
Increased growth and increased efficiencies.
And we make home care of bigger part of the health care continuum. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
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