Q2 2022 Option Care Health Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Good day and thank you for standing by welcome to the option care Health 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that session you will need to press star one one on your telephone please.
Today's conference is being recorded I would now like to hand, the call over to our speaker today, Mr. Mike Shapiro.
Okay.
Go ahead.
Good morning, before we begin please note that today's discussion will include certain forward looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. These forward looking statements are subject to risks and uncertainties that could cause <unk>.
<unk> results could differ materially from our expectations. We encourage you to review the information in today's press release as well as in our Form 10-K filed with the SEC regarding these specific risks and uncertainties, we do not undertake any duty to update any forward looking statements, except as required by law.
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 in this morning's press release posted on the Investor Relations portion of our website with that I'll turn the call over to John <unk> to make our Chief Executive Officer.
Thanks, Mike and good morning, everyone.
Overall, we are very pleased with the progress we have made in the second quarter and the financial results. We delivered as reported this morning.
Despite operating in a very dynamic environment.
Our team continues to execute our plans to realize our purpose of providing extraordinary care that changes lives.
In the quarter, we increased the number of patients, we serve and who entrust us with their care in the home or one of our alternate infusion site.
Throughout the second quarter. We also made strong progress on several fronts of our focused strategy.
As Mike will outline in a few minutes, we delivered low teens revenue growth and mid teens EBITDA growth and translated that into strong cash flow.
We continue to navigate a very difficult labor market and inflationary dynamics, which presents challenges on a daily basis.
Yes, we were able to leverage our strong infrastructure and continue our track record of delivering strong EBITDA growth and expanding EBITDA margins.
And at the same time, we invested for the future growth having.
Having closed on our acquisition of specialty pharmacy nursing that work or spin early in the second quarter and opened six new infusion centers in key markets across the country.
With respect to our results in the second quarter, we saw balanced growth across our portfolio of therapy, including low single digit growth in our acute portfolio and mid teens growth in our chronic portfolio.
Despite modest hospital discharge volume growth at acute care facilities across the country and continued supply shortages in vital nutrition support product.
We saw solid referral trends throughout the quarter.
Given recent repositioning by some other market participants we are confident that we are executing well relative to the broader market and we remain well positioned to support market demand for the portfolio acute therapies.
I've spoken before about our commercial focus to ensure we have the appropriate market coverage through reach and frequency.
And we are seeing the value of this disciplined approach.
The investments we have made and continue to make into our care management better infrastructure to help ensure we are responsive to our acute care channel partners and referral sources have resulted in a more reliable and timely collaboration across our national network of 97 highly connected and efficient pharmacies.
Yeah.
We have created an increasingly effective digitally enabled platform for complex pharmacy administration and point of care services across the country.
Our chronic portfolio continues to grow in the mid teens and our results are quite balanced across established chronic therapies as well as newer products that have rounded out our portfolio.
With our comprehensive nursing network, we are well positioned to help payers meet the immediate needs of their members and move beyond the infusion event to help better support the whole patient and reduce the total cost of care.
As we have discussed previously we continue to operate in a challenging market backdrop with continued labor and cost pressures.
Our focus on recruiting our existing team members every single day and recruiting new members to the team helps ensure that we have capacity and vital skills necessary to provide advanced care to our patients.
The teams in the field are executing well to help ensure we have the right staff and the right therapies to provide extraordinary care.
The inflationary cost pressures continue to present challenges, but we remain very focused on offsetting those pressures were possible primarily through leveraging our technology to drive productivity and operating efficiencies.
We continue to see widespread cost pressures across a broad array of input, including fuel and transportation packaging and medical supplies and a variety of other categories.
And we do not expect those pressures to subside anytime soon.
As I mentioned earlier, we are thrilled to welcome the spin team to the broader option care health enterprise and with the acquisition, we continue to make progress on creating a unique skilled infusion nursing platform.
Combined with our internal nursing organization as well as our acquisition of Infinity infusion nursing last fall. We have now established a leading clinical organization of more than 3000 qualified infusion nurses to provide exceptional infusion services at the point of care to patients across the country.
While we are in the early innings of integrating those organization, we are more confident than ever that the spin and infinity teams will be instrumental in our growth strategy going forward.
Finally, we are investing for future growth through our expansion of infusion centers nationwide.
In the second quarter, we opened six new infusion centers and now expect to open more than 25% in 2022.
As a reminder center expansion is a vital growth strategy as it enables us to provide more choice for our patients clinics.
Clinical labor efficiency, while also expanding our ability to collaborate with referral sources to increase our patient expenses.
Through our consistent investment in site capacity, we now have more than 140 infusion centers across the country.
And I expect this to be an area of continued investment beyond the current year.
Our disciplined investment strategy focuses on improving access to care across geographies and therapies and improving the patient experience.
Given our investment in infusion centers and technology over the past several years, we continue to cast a wider shadow so to speak in the new therapies more rural geographies and a broader base of referral sources.
It's about providing consistent high quality care, whether you're in New York City, Kansas City or Carson City.
So overall the second quarter was very productive and we continue to make solid progress on executing our growth strategy focused on providing extraordinary patient care in the post acute setting.
We delivered strong revenue and EBITDA growth in the quarter.
And we increased our cash balances, while making significant investments into our future, allowing us the tightened and raised our full year guidance.
Before I hand, it over to Mike to go into the results in more detail I must recognize and highlight the incredible collaboration and focus of our teams across the country as they rise up to meet every challenge and maintain our focus of placing the patient and their families at the center of everything that we do.
And with that I'll turn the call over to Mike to review the results in a bit more detail Mike.
Thanks, John overall, Q2 was a very solid quarter with double digit revenue growth that translated into leveraged growth at the bottom line and modestly better EBIT margins. Despite the cost headwinds that John articulated.
Additionally, our balance sheet has never been stronger and with our relentless focus on translating revenue into cash flow. We are reporting record levels of cash and new lows in terms of our leverage profile, which are critical as we navigate the challenging environment.
Revenue grew 14% and was consistent with our expectations and as and as expected growth was a bit more tempered relative to the first quarter due to higher prior year comps.
Nonetheless, our chronic portfolio continues to perform quite well and represented most of our revenue growth.
Acute revenue was up in the low single digits. Despite mixed acute volumes reported by our health system partners and we attribute our relative performance in our acute portfolio to the investments John alluded to in our strategic focus on this portfolio of therapies.
Gross margin of 22, 1% decline versus the prior year as expected due to the mix shift towards chronic therapies and higher cost to deliver care.
Despite the gross margin decline, we drove 9% growth in gross margin dollars based on higher volumes.
And SG&A grew considerably slower than gross margin as we've talked to offset inflationary pressures, which allowed us to expand EBITDA margin. Despite the mix headwind.
While we continue to focus on efficiency and cost savings to mitigate inflationary cost pressures, which as John mentioned, we do not expect to subside anytime soon.
<unk> EBITDA of $85 $2 million grew 17% over the prior year and represented eight 7% of revenue.
So despite the mix shift towards chronic and unprecedented cost pressures, we continue to expand profit margins and demonstrate the scalability of the platform.
Additionally, as we discussed earlier in the year, we have reversed our valuation reserves on our tax net operating losses and as expected our effective tax rate has migrated upward to 28, 8% in the quarter as we now anticipate fully utilizing our Nols.
We generated over $104 million in cash flow from operations in Q2, and we increased cash balances by $58 million in the quarter, despite paying approximately $60 million in the quarter to acquire spin.
At the end of Q2, our net leverage ratio has declined to two seven times, which is extraordinary given where we started this journey three years ago.
As I mentioned earlier, our capital structure is quite strong and with no maturities until 2028 and modest interest rate exposure. We believe we are in a strong position going forward.
And based on the momentum exiting the second quarter, we are increasing our outlook for the full year. Accordingly, we now expect to generate revenue of $3 85 billion to $3 95 billion.
And adjusted EBITDA of 330 million to $342 million.
Based on our higher earnings we now expect to generate cash flow from operations of at least $250 million.
So overall, we're quite pleased with the momentum halfway through the year and continue to anticipate a productive full year.
And with that we will open the call for Q&A operator.
As a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
And our first question comes from Lisa Gill of Jpmorgan. Your line is open alright, thanks, very much and good morning, Congratulations on a great quarter, just really wanted to start with with referral pattern. So you talked about.
First is chronic just curious what youre seeing today really in two areas one.
We continue I hate to even talk about code at this point, but as you continue to see Covid ebb and flow has that had any impact on referral patterns and then secondly, John as we think about site of care has become so important to managed care really keeping patients and sites of care like option care can you, maybe just talk about what youre seeing in.
The environment today.
And do the payers have any interest in moving more towards narrow networks.
The benefit of this Titan.
Benefit from change in site of care.
Yes, good morning, Lisa.
Yes, thanks for the question so on referral patterns.
All lines look it still is very local.
Communities are dealing with the VA, five grain and that kind of putting a little bit of disruption.
Patients visiting doctors or receiving elective surgeries or other aspects of that so it truly is localized we're not seeing kind of national patterns and as we called out.
It was.
Although moving in a forward direction around hospital admissions and discharges as you see.
And others as they report.
It was modest growth a lot of our focus is really on making certain that we are well prepared as an organization as a partner of choice for those referral sources that we focus around reach and frequency of our teams that we've got the right.
Therapies on the shelves to end and staffing models in order to do that and so.
We expect that it's going to remain a little bit choppy market by market.
As we continue to.
Deal with different variants.
Covid strain.
But feel like we're well positioned.
To be a partner of choice and the investments that we've made into our core infrastructure and the 97 pharmacies that.
Operating effectively and efficiently, we feel well positioned from that side.
On the second part of your question on site of care to look we continue to have really.
Productive conversations with the payer community around their thoughts around not only think about site of care initiatives and making certain that they get.
That balance of cost quality.
Mind with member.
Choice and.
We're working closely too.
Support those efforts.
Of course, the board a lot of the investments that we're making not only into the nursing community, but also into the infusion centers across the country really dovetail and fit well within that overall strategy of moving more of the care closer to the home or into these dedicated site of care.
<unk>.
To align with the payers initiatives and we feel as if.
The progress that we're making opening.
Over 25, this year and six in the quarter just continues to position us well as a partner of choice as they are thinking about their network design and.
The partners that they want in network moving forward along that.
The back part of that question is we are seeing interest in narrowing of networks or the qualifications that the payers are looking for.
As that moves ahead, and we've done everything.
It's part of our strategic move to make certain that we are on the right side of any of those narrowing given that fact that we can provide high quality care consistently and effectively and as I said in my prepared remarks, whether in New York City, Kansas City of Carson City, We've got a national network that really drives that consistent high quality care.
They're in a setting in which patients want to receive it great.
Great. Thanks for the comments.
Yes, Thanks, Lisa Thanks.
Thank you and our next question will come from David Mcdonald.
Of choice.
David Your line is open good morning, guys.
So just a couple of quick questions I'm curious.
Just conversations with your payers in terms of.
As contracts start to roll forward and renewals just conversations around potential escalators, just acknowledgment out of the payer community when you talk to them about the inflationary.
Larry environment, and then Mike.
Is the $10 million to $12 million per quarter is that kind of still the right number or any acceleration or deceleration of that is my first question.
Hey, David It's John I'll start on just the the.
Conversations with the payer community.
Yes, I mean look there is recognition of some of the pressures that are out there I think as we've explained before we really have three legs of our reimbursement stool certainly.
The cost of the drug or clinical per Dms, and then the nursing and.
We look at it across all of those dimensions as we're moving.
And negotiating our reimbursement rates with the with the payer community. So we're always looking for the appropriate balance.
Across those three dimensions and.
I think it's been well publicized and people know clearly that there are pressures from an inflationary and labor.
Perspective, especially in the areas of nursing and some of the inputs.
I highlighted on that so.
We were very balanced in the way that we look at it.
That.
We've got to make certain that as an organization, we're working across all three of those dimensions.
And no one is knocking on our door, telling us that they want to give us more money as you fully understand but I think there is there's good recognition of some of the inflationary pressures and we're going to continue to be focused on that as an organization is we're looking at renewal cycles and the way that we're <unk>.
Contracting as we move ahead.
And Dave the only thing I would say on the inflationary pressures as we estimated 40% to $50 million of annualized or call it $10 million to $12 million a quarter.
<unk>.
This is a broad estimate I'd say as we think about the inflationary pressures.
Nothing has materially deviated from how we thought about the cost pressures when we.
Connected 90 days ago in the first quarter call and again as.
One of the things, we're proud of as well.
We continue to drive leverage in the P&L with gross margin dollars growing 9% and SG&A growing slower.
Part of it is just our relentless focus on efficiencies and searching for coins between the cushions on the carriage so to speak so so far.
Continuing to to report modest EBITDA margin expansion and what is unprecedented inflationary pressures.
It's energizing for the team but.
Make no mistake, it's still challenging across several cost categories as John mentioned okay.
Wanted to dig into labor a little bit further.
Given the strength of the topline I assume the answer to this is yes, but.
Were you guys able to staff all the demand that you saw in the quarter and then secondly can you just talk about the leverage from continuing to put up these ambulatory infusion suites and also is there an opportunity to maybe replace or alleviate some labor pressure through.
Further automating some jobs that maybe some people are actually doing right now.
Yes, so I'll start on just the capacity models and the way that we operate from from that perspective as you as you said Dave.
We certainly were really strong in the quarter of being able to.
Staff appropriately on that look on a market by market level there may be some.
Some challenges on a daily basis or on a weekly basis on that but for the most part the team has worked extremely well and collaborative in order to do that part of the investments into the nursing community with Infinity and spin as well as the.
What we've done with the infusion centers is to help to expand and make certain that we've got that capacity, especially in the nursing area in order to move that ahead. So we feel really good about the position we are and I called out look we spend a lot of time on making certain that we are recruiting our team members every single day.
We have been adding staff in markets in which we have the opportunity to continue to expand and grow.
And we.
We will work aggressively to make certain that we have that capacity both in staffing as well as all of the products that are necessary for us to be able to move that ahead. So.
All in all feel good about that okay.
Sorry go ahead no go ahead Mike.
No John made the point go ahead John .
Okay. Just last question guys.
And John I think you've touched on this a touch in your prepared comments, but our checks suggest there are some competitor pharmacy closures does this create an opportunity in acute and in there is there the potential for that to become <unk>.
Somewhat non trivial overtime.
Yes look.
The market is dynamic and continues to change and certainly as as organization.
Reevaluate repositioning on that we feel really good about the investments that we've made into our pharmacy infrastructure and our ability to support the acute therapy broadly within that that standpoint.
It's early to tell kind of what the long term implications are and look it's a competitive environment.
Across the board, we have many competitors and most of those markets as we move ahead, but the platform that we've created the consistency and quality that we've invested in the ability to drive that leverage growth.
And scalability within our infrastructure all of that we feel like we're well positioned to be a partner of choice for those referral sources and also to capture.
Our fair share or more than our fair share of demand based on the reach and frequency and the.
And really just the expertise of our our commercial as well as our our clinical team.
Okay. Thanks, very much guys.
Yep. Thanks, Ed.
Yes.
One moment.
And our next question will come from Matt <unk> of J P. Morgan.
And your line is open Matt.
Okay switched firms not bad.
Hi.
From William Blair.
I'm curious, Mike if you could.
Can you maybe break out the growth for us between.
No the M&A.
And then any definitive.
New centers and organic.
Maybe more so than previous quarters, just a lot going on here, so, let's maybe that'd be helpful.
Absolutely, Matt so in the quarter again last year in the first quarter. We did have the <unk> results, which was admittedly one of the smaller acquisitions. We've made so in the second quarter. We did have the full result of infinity.
And Wasatch as well as virtually a full quarter.
That top line contributed a little over two points of the growth so about two and a quarter of of our reported growth from a center from a new center perspective, that's not really how we think about it because again, we simply view that as a point of care.
So thats really it.
The gains in our center.
Penetration was up modestly in the quarter, but again thats just part of our overall organic growth strategy, you've heard us talk about how in around 20% of our nursing events were occurring in one of our centers.
A couple of points higher than that in the quarter were probably around 'twenty, one 'twenty two so nice.
Nice momentum there not only are our nursing events, obviously growing but the penetration in the centers has crept up a bit as well.
Okay, and then just on gross margins, obviously over the last couple of years as this shift towards product has been occurring crush margins still have been.
Kind of modestly expanding.
Curious this year on year over year basis.
Could you maybe break out for us some of the more inflationary pressures you referenced gas and travel I think packaging relative to sort of that portfolio shift just to get maybe a better model for future periods.
Yeah. So look as I mentioned in the prepared remarks, and again, we've been talking about this consistently with that chronic.
Acceleration relative to acute we it is inevitable that we will be facing mixed pressure at the gross margin rate line not to sound defeatist, because as you know we fight for every darn basis points in our gross margin. There are what we would refer to as the direct cost to administering care so that compound.
The pharmacy technician, the the oversight of the clinical pharmacists at our pharmacies.
All of the medical supplies, the direct nursing labor for administration of the therapy as well as the transportation and distribution again all of the therapies that leave our our pharmacies are delivered directly to the patients' homes.
Through UBS, Fedex or a career and so.
Some of the categories no surprise that have been.
Hit harder from an inflationary perspective, obviously, the clinical labor, we continue to as John has mentioned keep our ear to the rail at the local level to make sure. We're competitive so the clinical labor has seen some inflationary pressure upward trend.
Transportation packaging materials medical supplies, which are petroleum based.
Plastics.
We have seen considerable inflationary pressure, especially around a lot of the transportation and medical costs.
Okay, and then just the last one you referenced mixed volumes from health system partners and I guess just curious.
How much of that relates to.
Some of the Covid dynamics around referral patterns that Lisa alluded to persons health systems coming back and maybe re engaging more with their own internal.
And <unk> offerings.
Yes, Matt it's John look.
Yes.
We continue to look at kind of those referral patterns, we have not seen major.
Changes in the referral patterns.
That hospital systems are holding on in <unk> Tvs or other places, where we have competition competition has been strong on that.
So the team is working aggressively to make certain that we are well positioned as a partner of choice that we're doing everything we can.
Round, the patient registration and administration aspect to make it a smooth and efficient transition of care out of the inpatient or onto service for our chronic patients. So we haven't seen anything.
Substantial but it's competitive.
It's always been competitive whether it's.
<unk>.
In kind competitor or hospital owned <unk>.
<unk>.
The dynamics continue to be.
As competitive as it's ever been.
Alright, thank you.
Yes, Thanks, Matt.
In a moment.
And our next question comes from Joanna.
<unk> Bank of America. Your line is open.
Good morning, Thanks for taking the questions. So I guess first actually a follow up on something you mentioned on your prepared remarks, you mentioned of a position of other players so.
Can you tell us what are you actually referring to are you talking about your competitors.
I guess going down there.
Finally, some of some of the changes.
Our site of care from.
Employees being let go some of these locations.
There's something else you're talking about when you referred to with the fishing, Nevada players.
Yes, Joanna it's John look the market has dynamics as I've said before.
And we have.
There are certain markets and with several of our competitors are retreating from certain therapies.
Really in the acute area.
Is there kind of thinking about what their longer term goals could be.
We see this kind of market by market. There is kind of there is always interesting dynamics on that as as competition ebbs and flows on that as an organization. We've invested in a national network and a platform of highly connected and efficient.
Pharmacies to make certain that we are a partner of choice across all of the therapies that we are able to provide services, whether it's coming out of an acute.
Facility or whether it's a patient that has kind of condition and so our focus remains steadfast in the investments that we're making the partnerships that we're developing our ability to collaborate closely with hospital discharge planners case managers as they are thinking about safe and effective transition.
And Ah patients out of the hospital into the home or into an infusion suite and so we feel like we're well positioned on that.
The focus and the discipline that we've had in kind of our investment thesis remains solid and our expectations are that as demand is in the marketplace that we are.
A.
Partner of choice and they're making their decisions.
Round, where to send patients and how to.
How to participate from that standpoint.
Okay. Thank you and I guess another follow up here before.
My real question, but why.
When I was thinking about that other players and then also you commented about the hospital systems and <unk> been hearing about.
Hospital also interested in extending out their own home infusion business in particular, I think amerisourcebergen talk about like a program that they offer to help hospitals I mean, it sounds like they might be using third party. So I don't know if this is something you're also seeing.
Hospitals coming to you directly.
To kind of have some sort of.
More close to.
Relationship or some sort of.
Factor that kind of will bring more volumes to you or can you just talk about those trends.
Yes.
Yes, Julien look we've always had.
Hospital owned infusion pharmacies as part of the competitive dynamics of the marketplace and.
Again, we have partnerships with some hospital systems in which we worked very closely on that.
And we continue to look at that is just the competitive dynamics in the marketplace.
Yes.
There are different organizations that align around supporting hospitals in that process.
And.
And helping support their needs as they're looking at where they want to deploy their capital and how theyre looking at their overall health care ecosystem.
As an organization look we we take all.
<unk> threat seriously and.
We really work hard to make certain that we are well positioned on that I can say that in certain circumstances, where.
Hospitals do have their own hospital owned infusion pharmacies, we still have strong partnerships when you think about.
The ability that they have in the catchment area that they can provide for their patients in today's.
Health care system, where there is a lot of travel associated with going to centers of excellence and other aspects given the national network. We have given the ability that we have to take a patient that may receive service in.
And city eight but they live in a rural setting.
A state or two states over we can still be their partner of choice and help with that transition given that they don't have the catchment area to be able to provide that consistent high quality service outside of their local geography. So.
We're always looking.
Looking at the competitive dynamics, we're always.
Keeping our ear to the rail we believe that the investments that we've made into our National network. We think that the outcomes that we drive from a clinical standpoint, and we think that the partnerships that we've developed with our commercial team just position us to be a partner of choice.
As they're making those decisions.
And.
And looking for ways.
<unk> to support their patients in the local community and outside of that.
Thank you thanks for that color and I guess my question on the cash flow. So you raised your operating cash flow Okay. John Thank you.
Are you expecting to use the Nols I was just wondering.
I guess two part question on the cash is the one is.
Are you expecting to start paying cash taxes this year and a second question.
Of that I guess.
You raised the cost associated we expect.
Our M&A is there pressure on the smaller operators, so you're expecting to kind of spend more on deals how should we think about the use of this increased cash flow. Thank you.
Yes, Joanna so from a cash tax perspective, what we said, we don't expect to be a material cash taxpayer. This year, we'll obviously update our thoughts around 2023, but.
The overwhelming majority of the Nols will be used this year and so there could be a very modest cash tax position in Q4, but nothing of note.
Look we're thrilled and as you know.
Our mantra around here is the EBITDA only counts if it converts to cash in the bank.
And given the dynamic market, we're in carrying a little bit higher cash balances. We think is a prudent.
Strategy, however, our thinking around deploying that capital it's not our cash it's the shareholders' cash and we think the best way to create value for the shareholders is through.
Deploying that in an M&A strategy.
So.
Simply because we are generating more cash doesn't lower the bar on our expectations around the strategic and economic merits of any opportunities.
And to the extent that.
We think that there is excess of cash we will obviously look at alternative avenues through which we can return to the shareholders. However at this point our conviction remains that M&A is there.
As the primary strategy for us to optimize value.
Thank you.
You bet.
Thank you.
And our next question comes from Brooks O'neil of Lake Street Capital markets. Your line is open.
Hey, Good morning, guys. This is Charlie <unk> on for Brooks O'neil just one quick question for me could you. Please talk about how the shift to value based care might impact option care and where might you see advantages in the new paradigm.
Hey, Charlie its Dan.
Look.
We continue to have very constructive conversations.
With the payer community as things continue to evolve down that path.
Those.
Very constructive discussions.
Our focus has always been around creating favorable clinical outcomes and we believe that the ability for us to continue to be well positioned to provide high quality care at an appropriate cost in a setting in which patients want to receive that care makes us part of that longer term.
Solution that is being looked for the platform that we've created and the ability for us to really be focused around that patient experienced member experience and that high quality care.
We think is something that allows us to continue to be in those robust conversations and part of the fall.
I think as we're looking at value base, it's hard to define at this point each.
Organization is looking at it a little bit differently on that but total cost of care is something that they are beginning to really focus on.
Looking at the overall outcomes.
Associated with therapy.
And care delivery and.
We're doing a lot with.
Our organization to make certain that we're well prepared not only to clearly articulate.
The outcomes that we can deliver but more importantly, b experience from a patient standpoint, and the quality of the care that they're receiving.
Okay. Thank you very much that was very helpful and thats It for me.
Yes, Thanks Charlie.
Operator are you there yes. Our next question will come from Peter Chickering Deutsche Bank. Your line is open.
Yes, good morning, guys. Thanks for fitting me in here.
A follow up for part question about why some of your competitors actually and in markets I guess.
Number one why do you think the exited and is it because they didn't have enough scale number two does this give you more levered to the payers who are less providers, but still want home infusion savings.
Number three can you quantify how much the market share you've captured at this point and number four does at spring time multiples for tuck in deals going forward.
Yes.
Only four parts Peter Scott.
Yes, So let me start look we're not going to.
Hazard, a guess around why people do what they do with our focus there is around our strategy and our execution. What I can tell you is all along we've looked at the strength of the platform that we've created and.
And our ability to be a partner of choice at the local level right healthcare is local.
As much as we do to use our scale and the technology to create a highly reliable and interconnected network. It's still is local and it would.
The investments that we've made.
Into our care management centers our staff.
Quality of our.
Services is something.
That we believe really meets the needs of the marketplace and meet the needs of our referral sources on that and so we're going to be steadfast in our strategy and our execution and we have said time and time again, we love the balance of the portfolio across the acute and chronic and our ability to use that to draw.
<unk> leveraged growth and and scale as a competitive advantage.
We have invested a lot within our commercial resources to make certain that we have that reach and frequency that we were well positioned.
In the relationships that we're developing in those local markets.
The ability to identify opportunities to partner more deeply.
With them and again, we'll look at any opportunity to continue to push that forward to continue to deepen those relationships and continue to find ways to serve more patients because we truly believe that a patient that served by option care health received the best care available in the home or in one of <unk>.
Our infusion suites.
On the overall.
Look it's early to tell around what this will be I can also though just continue to reinforce.
Every market is competitive there is multiple competitors in every single one and so look we like our positioning and we like the investments that we've made and we think that the disciplined approach that we brought puts us in a really strong.
Positioned to seize on any opportunities that come to us, but way too early to tell around what any repositioning may do.
Good.
It's incumbent on us and our team to make certain that we're deepening the relationships and that we're capturing demand as it is available in the marketplace.
Peter It's Mike the only thing I would add is look as you know as we talk about kind of the market participants and relative shares. These are all estimates we don't have real time market share metrics from from IMS and as John said look we're focused on being responsive to our referral partners.
In certain markets and it's early days, but.
And again back to John's comments, it's about being dependable and reliable when the call comes in at four o'clock on a Friday afternoon can we be responsive and that's something we pride ourselves in and if that if that continues we're confident in the momentum on the acute side from a M&A perspective.
Look I mean, we're not seeing meaningful moves in multiples and valuation yet again, we're not.
We're going to be very thoughtful looking at what other strategic opportunities.
And we're going to be disciplined in how we value those.
But we're not seeing any seismic move in in valuation expectations.
Okay Fair enough and then on the supply chain in the script you talked about shortages in nutrition.
Looking at your broad portfolio are there any other areas that youre seeing or worry about seeing shortages in August .
The shortages are these more revenue impacts or gross margin impact or no impact at all your just wondering thanks so much.
Yeah look on.
What we called out certainly in nutrition support I mean, it's well publicized around some of the challenges that have existed in the marketplace with plant closures and other aspects and so our team has done a tremendous job of helping to navigate through that and make certain that we can support not only our existing patient census, but where we can.
Take on new patients.
And looking at formulary alignment and we have dedicated.
And really expert dietitians that are part of our team that worked tirelessly to make certain that all of our patients receive.
Nutrition support necessary.
As they are executing around the therapy plans.
Look there's always going to be some of those spot outages.
Got other.
Situations, where electrolyte and trace elements for our principal nutritional.
Our under constrained there is also some.
Modest constraints around some of the other products.
Things ebb and flow from a supply chain standpoint or.
Plant.
Closures or repair aspects and so we've got a dedicated team and our trade relations strategic sourcing who are just adapt that kind of beating the bushes and making certain that our teams in the field have the products that they need to make certain that we can meet meet.
The demand that's in the marketplace.
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Extremely hard.
And I believe extremely effectively try to minimize mitigate or adjust around that Mike I mean, if you want to.
Yes.
Impact the revenue or margin.
Yes look I mean, obviously a lot of our therapies are orchestrating and compounding complex therapies for a patient specific prescription and so as we think about like parenteral. Our enteral nutrition. If you don't have that one trace element that one electro right thats critical.
It's a real clear orchestration not only of that therapy input peto, but it's also making sure we have the right infusion pump the right infusion set that again is a PVC derivative.
All orchestrated and so look our team makes it look easy, but it's anything but and so I would say from your perspective.
Whether it's certain medical plastic certain infusion pumps with semiconductors and chips, whether it's new.
Nutritional compounds that are our pharmacy tax compound under our hood.
It does have an impact on the topline and margin.
But again, thus far knock on wood, our procurement team manages this 24, seven and we've fared relatively well.
Great. Thanks, so much guys.
Thanks Peter.
Thank you and Im showing no further questions at this time I would now like to turn the call back to John Rademacher for closing remarks.
Yes. Thank you for joining us this morning, and participating in our second quarter earnings call to sum. It up we are very pleased with the performance of our team. The progress we are making against our strategic initiatives and the continued strengthening of our balance sheet. We expect that there will continue to be challenges and know we have work ahead of us to achieve our goals. However, we.
We're focused on execution, and we look forward to making continuous progress take care and be well.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise Johan during Q&A you can dial one one.
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