Q2 2022 Adapthealth Corp Earnings Call
Greetings and welcome to the adapt health second quarter 2022 financial results Conference call. At this time, all participants are in a listen only mode.
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, this conference is being recorded.
It is now my pleasure to introduce your host Chris George Thank you, Chris you may begin.
Thank you operator, I'd like to welcome everyone to today's adapt Health Corp Conference call for the second quarter ended June 32022, everyone should have received a copy 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 <unk>.
Q2, 2022 results is posted on the Investor Relations section of our website.
In a moment, we'll have some prepared comments from Steve Greg's Chief Executive Officer of adapt health, Josh Parnis, President of adapt health and Jason Clemens Chief Financial Officer of adapt Health will then open the call for questions.
Before we begin I'd like to remind everyone that statements included in this conference call and in our press release May constitute forward looking statements within the meaning of the private Securities Litigation Reform Act. These statements include but are not limited to comments regarding our financial results for 2022 and beyond.
Actual results could differ materially from those projected in forward looking statements because of a number of risk factors and uncertainties, which are discussed at length in our annual and quarterly SEC filings adapt health Corp shall have no obligation to update the information provided on this call to reflect such subsequent events.
Additionally, on this mornings call, we will reference certain financial measures such as EBITDA, adjusted EBITDA and free cash flow all of which are non-GAAP financial measures. This mornings call is being recorded and a replay of the call will be available later today.
I'm now pleased to introduce our Chief Executive Officer, Steve <unk>.
Thank you Chris Good morning, everyone and thank you for joining us as we review our results for the quarter ended June 30th 2022.
As always we are indebted to our 11109 employees for the contributions they make every day to adapt health success.
As we move into our second year together, we are very pleased on how well adapt health in Aero care have integrated operations and continue to take advantage of our scale as a full service nationwide H M mean supplies provider reach.
For the second quarter were consistent with our expectations and were characterized by many of the same themes that we've experienced in recent quarters. Our record revenues of $727 6 million the sequential growth in our second quarter sleep business and the improvement in our EBITDA margin gives us confidence that we are entering.
The second half of 2022 on a strong trajectory to achieve our guidance for the year, despite inflationary pressures and supply chain issues that have affected us.
Turning to the sleep business. We are pleased to report at quarter end. Our census is up 16% from February 2022, when it hit its lowest level since the filter recall began in June of 2021.
13 months into the recall, we have worked with our manufacturers to gain greater capacity and accelerate delivery of machines, thus, enabling us to get more patients onto therapy in Q2.
While we do not expect Philips to be back in the market anytime before early 2023. The increased production. We are starting to see from other suppliers has become more reliable and we have substantially increased our capacity to schedule and setup patients. We have we are of course incurring additional shipping costs and other incremental.
<unk> expenses, but we expect those costs decline as normal supply returns to the market.
We continue to drive double digit growth in our diabetes business consistent with the market.
For the year to date non acquired growth of 17% and we continue to expect solid growth for the remainder of the year.
Even though growth in our non acquired business was flat for the quarter, we feel comfortable with our guidance for overall non acquired growth of 4% for the full year largely driven by increased census in our sleep business and our continued growth in our diabetes business.
Like most companies our company is challenged by inflationary pressures and other supply chain issues.
While these issues, especially shipping costs, including the price of fuel for our 2400 vehicles have impacted our results I'm pleased that we've been able to mitigate the impact of these pressures through our purchasing scale and use of technology to drive efficiencies further the labor synergies, we achieved with the arrow care merger.
Have minimized the effect of broad labor inflation as is demonstrated by our labor holding steady as a percentage of revenue.
As a result of these factors our gross margin has stayed relatively stable over the past few quarters.
Finally, we are largely insulated from highly higher interest rates since more than 75% of our debt is fixed so our cost of capital has remained favorable I will now turn the call over to our President Josh part is for further details and an update on our strategic developments.
Thank you Steve.
On the strategy front, we continue to look for ways that we can leverage our infrastructure to address the broader needs of the $3 9 million patients that we serve.
We were able to do that by deploying technology that optimizes efficiencies and developing capabilities to identify gaps in care and make sure patients are getting what they need when they need it as well as offering a comprehensive range of products and services to help patients wherever they are on their home health journey.
In addition to driving better outcomes by keeping patients at home and out of the hospital, we're able to add value as an extension of the referring physician offices.
We believe these investments position us well to advance our strategy beyond the traditional <unk> business model and into more risk and value based payment arrangements.
For example, during the second quarter, we signed two new agreements with value based managed care Payors with one on the east coast and one on the West Coast, we are leveraging our complete product offering our geographic footprint and our patient centric technology to simplify and improve the experience for both payers and patients.
This will add to our existing value based portfolio and we will continue to pursue similar creative arrangements.
We remain committed to investments in technology that transformed the HMA experience for our patients Payors and referring physicians for example, our E prescribed platform continues to make home health easier for our referring providers by allowing them to eliminate the hassle and paperwork of outdated and error prone ordering method.
Such as facts.
We continue to see greater than 50% adoption in the regions, where this technology is rolled out as well as quarter over quarter growth of seven 5%.
Our new E ordering capabilities are improving patient experience by providing channel of choice communication Approx.
Approximately 50% of all Pap and diabetes resupply orders in Q2 were processed electronically via our digital patient portal.
Our E delivery platform greatly increases transparency for order delivery, enabling every customer to read interactions in real time and by providing real time order tracking.
84% of deliveries in Q2 leverage this technology.
This system also facilitates real time patient satisfaction survey results, allowing our branches to address any patient concerns more timely.
In addition to improving the experience for users our combined digital platform for prescribing ordering and delivery helped control operating expenses, which we believe is particularly important given the current inflationary environment.
We continue to believe that these technologies will allow us to keep our costs in line, even as we scale and continue to grow.
By making home health easier and more accessible for payers patients and providers, we can continue to gain share and volume within the broader home health industry.
As we look down the road.
These proprietary tools are the foundations for both improving our patient satisfaction as well as operating efficiencies and will help open the door to greater collaboration with our payers on alternative payment arrangements.
With that I'll pass the call over to our CFO , Jason Clemens to review our financial results.
Thanks, Josh Good morning, and thank you for joining our call I'll discuss the second quarter operating results, our cash flow performance and capital allocation and conclude with a discussion of our 2022 outlook. We were pleased to again deliver revenue and adjusted EBITDA consistent with internal expectations. Despite the ongoing impact of the Philips <unk>.
Call ongoing inflation and supply chain challenges for the second quarter, ending June 32020 to adapt health reported net revenue of $727 $6 million representing year over year growth of 17, 9%.
Total company non acquired growth was a decline of 30 basis points for the quarter.
We were particularly pleased with the growth in sleep by far our largest product category.
Pop rental census is growing faster than we forecasted in the first quarter outperformance and our Pap resupply business continued in the second quarter.
Our respiratory or diabetes categories slightly missed topline targets, but we continue to believe that non acquired revenue for the entire company, we will achieve our 4% guidance for the full year.
We have not been immune to affiliate inflation and ongoing supply chain challenges, but we are very proud that our efforts to become more efficient and the scale and synergies, resulting from the arrow care merger.
Offset these pressures to a great degree specifically cost of goods, which includes freight and fuel held steady as a percent of revenue against the first quarter. Additionally.
Additionally, despite a tough labor market salaries wages and benefits were also flat as a percent of revenue against the first quarter.
We believe our operating results for the second quarter demonstrate the weird accelerating operating leverage by driving cost and inefficiencies out of our business model.
We remain confident that we will achieve our full year guidance that implies 21, 9% adjusted EBITDA margin at the midpoint, which already reflects the impact from temporary mix shift towards sales revenue away from higher margin rental revenue.
Free cash flow defined as cash flow from operations less capital expenditures was $26 $3 million for the quarter, surpassing our expectations cat.
Capital expenditures of $77 $2 million remained in line with our guidance representing 10.6% of revenues.
We converted more inventory into sales, we compressed dsos by three days and as planned we decreased accounts payable. So we're very pleased with cash performance.
At the end of the quarter, we had cash of $119 million and an undrawn revolver with net leverage as defined under our bank covenants of 3.4 times and trailing 12 months leverage essentially unchanged at three five times.
As previously announced our board of directors authorized a share repurchase program.
During the second quarter, we repurchased 199000 shares for $3 $4 million pursuant to this program.
Turning to guidance as noted in the press release, we are maintaining the outlook, we provided last quarter for revenue of $2.840 billion to $3.040 billion and adjusted EBITDA of $615 million to $675 million.
Consistent with previous periods. Our guidance does not include contribution from acquisitions that have not yet closed.
Now pass the call back over to Steve for some final thoughts before we open it up for Q&A.
Thanks, Jason over the past year, our employees from the legacy operations of adapt Hell Aero care and many of our acquisitions have come together as one adapt hell I would encourage you to visit our website and click on the we are adapt help video which highlights the many accomplishments of our fully.
Integrated organization, so again I would like to thank our 11109 employees for the United commitment to our mission of empowering our patients to live their best lives.
We are pleased to announce our capital markets day on September 16th when our team will do demonstrate how this committed and leads to superior results and create significant opportunities for our company and our shareholders will present specific achievable targets for the next few years and demonstrate how we are preparing for the unique opportunities beyond.
The current time horizon.
With that operator, please open the line for questions.
Thank you we will now be conducting a question and answer session.
Low Castle question. Please press star one on your telephone keypad a.
On the Kate Your line is in the question queue. You May of course talk to if he'd like to remove your question from the queue.
For participants using speaker equipment, and maybe not so sorry real quick up your handset before pressing the star key one moment. Please while we poll for questions.
Thank you. Our first question is from Brian <unk> with Jefferies. Please proceed with your question.
Hey, good morning.
That's my first question for Josh you called out sorry, the weakness or relative shortfall in diabetes, but I know that's always been there.
Charles spot for you guys, but maybe just any color or thoughts you can share on what is driving that and how youre thinking about the recovery in that.
<unk>.
Yeah. Thanks, Brian So I think in general like we look at this kind of quarter to quarter and generally you know from the from the year to date, we're pretty happy where where things are and kind of in line with our forecast, we do see some movement quarter to quarter as well depending on where we were at last year last year, we had a lot of acquisitions.
That came on and ramping up the resupply obviously first six months this year not having much in the way of acquisitions is going to affect the growth rate there.
But in general we're not seeing anything structurally there that that's concerning overall kind of performing where the market is right now.
Got it and then I guess I appreciate that.
I know you started your prepared remarks that the expense lines and overhead basically came in line with your expectations, but any thoughts on the ability to maybe bring down G&A a little bit going forward or is that just operating leverage that we should wait for us to the top line comes back with <unk>.
And diabetes recovering.
Sure Brian So.
You might recall I guess two quarters ago, we spoke about.
Planned investments within G&A, specifically technology, we've referenced Oracle also upgrades to the infrastructure for our O T. L. A R. R E delivery technology as well as the ordering platform that Josh referenced in his remarks. So you know at that time, we also had planned for about 5%.
Of revenue.
To be spent in G&A.
And when you account for kind of add backs related to transaction costs were spot on that number so.
Wouldn't expect any operating leverage out of G&A until the end of next year.
But again these are planned investments we were very confident these investments are going to get operating leverage out of the out of the core part of the business and so we think their smartphones.
Awesome. Thank you.
Thank you our next question from.
Kevin Caliendo with UBS. Please proceed with your question.
Thanks, and thanks for taking my question.
I just wanted to ask a little bit about the backlog it sounds to me like your commentary suggests that maybe things are loosening up a little bit.
More than maybe you had expected a quarter or so ago in the second half youre getting more supply.
Does that.
Compare to where you were before in terms of how much of the backlog you might be able to work through this year and how big do you think that backlog of patients fits now versus where it was last time you gave us an update on that.
Yeah. Thanks. This is Steve great question.
Yeah.
The backlog.
Okay.
Yeah.
Generally maintained.
It's a level, but in this this past quarter and in the first month of this quarter, we have at least been able to set up what we've been able to get as new referrals. So the backlog stay we look that have a pretty successful third quarter as more product is available. So it's that.
Way ahead of expectations, both on Ross Med and other suppliers arrest med with their car to cloud certainly has helped considerably.
With that and then other suppliers coming on the market also.
And then you know if that can continue then what youll see is the compounding effect of those increased.
CPAP setups, continuing to grow our revenue rental revenue and a resupply rabbiter just as you've seen the compounding effect negatively for the first nine nine months of the recall.
I know you've done six acquisitions year to date.
Getting more comfortable about supply coming back to the market does that make it easier to do further M&A going forward because I know that had been somewhat hamstringing you in terms of getting deals done.
Well, yes that certainly was a big factor in there. So I think we will be looking.
For more acquisitions and considering those you know more I think we're past the Oracle conversion that was part of it too you know.
Getting caught up on all the activity we did in 2021.
So we're in pretty good shape and so if we see something that's attractive I think we'll be much more attentive to it than we were in the first half of the year.
Sounds good thank you very much.
Okay.
Okay.
Okay.
Okay.
Thank you. Our next question is from Joanna <unk> with Bank of America. Please proceed with your question.
Hey, good morning. Thank you so much so a couple of questions I guess, so first the follow up on that 4%. So definitely organic growth that you I still continue to expect so can you talk about how.
The sleep business had been tracking organic like it sounds like things may be a little bit better than.
And then expected any change there in terms of your expectations.
Before I talk about the I guess, 5% to 6% decline for the year, So what kind of way, where do you stand versus that aren't 14th inside your guidance.
Hey, Joanna it's Jason I'd be I'd be glad to take that so first I would call out that we had expected the second quarter to be roughly flat in terms of non acquired growth year over year, I mean, a big part of that is that we're comping against a period that you can't really comp I mean, it was a pre Philips recall full supply of <unk>.
<unk> on the market.
So it is technically a comparable period from a financial aspect, but but operationally, they're just they're just very different periods. So we had expected roughly flat for Q2, so bigger picture when we through the product lines.
We are highlighting.
Bit of a top line miss against our internal expectations within respiratory and within diabetes.
Respiratory really related to the impact of Covid.
<unk> continuing to roll off.
So.
A slight miss in internally on respiratory and then on diabetes I mean, we had a tremendous Q1 Q2 was a bit lighter.
But overall I mean, 17% growth I mean, we're pleased with so on the other hand with sleep to your question I mean, we absolutely outperformed our internal expectations we.
We talked about the setups.
Steve had referenced that we are feeling.
Through even the month of July we're feeling good about it and so the reason we feel so strongly about delivering the 4% for the full year is that we have a few ins and outs we.
We don't know if respiratory in diabetes will continue to slightly underperformed, but if they do we're gaining confidence that sleep will outperform and make up the difference.
Great that's good to hear.
I guess on the on the guidance.
The Phe extension does that.
A couple of million.
Yes, yeah, the way to think about that is $3 million to $4 million a quarter, we had referenced that in previous calls.
Frankly $3 million to $4 million on a $3 billion business.
That alone there was no <unk>.
M&A that we have done since the last call.
So in the aggregate it just didn't hit a threshold that we felt it was important to raise the guidance.
But you know that that is a tailwind that we will.
We will have four for Q3.
Oh, great. Thanks for that and I guess bigger question.
It sounds like that you really are pushing hard on that value base.
Purchasing and adding additional contracts. So that's that's good to hear can you give us a little bit more flavor in terms of the magnitude of things here I don't know if you're willing to maybe just in the aggregate without the contract in terms of like how big when he does.
So I don't know probably some revenues that would also.
Can you give us a flavor for off or maybe margin expectations and.
For that quite a bit of business. Thank you.
Hey, Julien I'll start on the kind of the math side, and then I'll pass it to Josh on the framework, which we think is important for folks to understand of those contracts and so.
In terms of the percent of the business value based arrangements, where kind of non traditional fee for service arrangements account for about 3% of our total revenue.
We are pleased with.
With that part of the portfolio.
The margin profile to your question is very consistent with the overall margin profile for the rest of the company.
But the stickiness of these contracts is very very good.
Of the benefits and the value that we offer to payers and patients that I'll pass the Josh to explain a little more.
Yeah, So just touching a little bit more on that so from a from a macro perspective in terms of the opportunity.
As you know kind of a lot of these contracts. The sales cycle is generally pretty long. So a lot of these discussions and others have I think for a while and will continue to happen and we continue to build that pipeline out on what I think is unique here is that our ability to leverage some of the new technology, that's come online internally.
With matching it up directly with the payer to be able to offer cost savings and kind of a value based arrangement that allows us to take some risk on on these patients a lot of these a lot of these contracts are kind of ramp. So initially you'll take them on.
They kind of pilot period, not necessarily the pilot, but a phase one where you get one product line and the fact that we have multiple product lines allows us to feed more product lines into that value based arrangement as we go further along.
So again initially exciting.
But we'll continue to look for these to ramp over time as well as like you said look for other opportunities and continue to push on that front.
Thank you so much.
As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Our next question is from <unk> Chickering with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys. Thanks for taking my questions and apologies if I missed this and you mentioned the diabetes or organic growth rate of 17%, but can you walk us through the organic growth for each product division during <unk> and what you assume in the back half a year to get to the 4% organic growth.
Yeah sure Peter so.
Diabetes running a touch light against the 18% that we've got included in guidance.
As we stand here today do we think Q3 and four will be above 18, I don't know that were confident to say that I mean staring down a potential.
Recession, and those are high priced products. So we have a very insulated portfolio. We believe from overall recession, but if there is if there is.
A potential drag.
Likely in that diabetes products.
Don't don't misinterpret that as you know, we don't think we're going to get close to the 18, but I don't know that were going to beat it.
In terms of respiratory we're running a bit light we've talked about 5% within respiratory again, that's COVID-19 census, rolling off.
They are rolling a little faster.
We'll lap that probably mid to late Q3, and so expect Q4 to be back in line, so feel pretty comfortable there.
The <unk> and other product lines, we forecast that at 3% to 4% it's running about in line, maybe a very touch light I mean, I know everything we've seen on electives.
A minor slowdown I don't think it's anything that we're losing sleep over in terms of the overall delivery.
But the Big news I think for the quarter asleep I mean, we had projected a negative five to negative 6%.
Non acquired growth rate for sleep back when we produce guidance.
We think we're going to beat that.
Maybe maybe handily I mean, we were a touch positive for Q2, which against.
A very difficult comparable comp here that we've talked about I mean, we were we were thrilled with that so.
The themes continue.
We're very comfortable with 4% for the full year.
So just to make sure that I mean.
Three points ever stand in <unk>, and 30 basis points in two Q, it's implying organic growth rate of 6% in the back half of the year that that's the right range, we should we take that right.
Correct.
Okay Fair enough and then can you actually.
Remind me sort of what's in the other revenue line as we're now your third largest divisions.
What is in the lineup and how is that growing.
Yeah sure so.
I'll pass off to the guys for a little operational detail, but in terms of what's in it.
The value based arrangements that we just discussed.
Included in there as is our custom rehab products are in that line item is a very steady and stable business for us we've got orthotics, which is a very very rapidly growing business. We've done I think an admirable job signing up new business with very well known hospital system.
Sure.
<unk> been very happy with that for that product line and it's been continuing to grow.
We've also got infusion within that product line that we built up a nice.
Little portfolio there of Av.
Essentially a collection of home infusion businesses from companies that we've acquired over the last 18 months and we're starting to run them together hospitals are interested in and more and more of those services and so those are some of the reasons youre seeing that other grew.
Growing quite a bit I mean, I think it gets much bigger we won't be discussing do we do we break out the next the next category to give some visibility to that.
Okay, and then last question here.
The guidance for the back half of the year implies 30 to 40 basis points of margin expansion can you sort of walk us through.
Leverage on the margin expansion.
Thanks, So much yes sure. So some of that is.
The sleep.
Rental I mean, we I think we've discussed this previously I mean, that's coming out of essentially 100%.
<unk> EBITDA margin because the.
The true variable cost there is just the acquired equipment, which hits the cap of Capex lines.
Next we've got just the scale factor of as you get into the later parts of the year, particularly Q4, the resupply businesses are huge Q.
Q4, I mean, a lot of that has to do with patient deductibles.
Set too.
Reset at the beginning of the year and or just cutover to new.
Insurance carriers on account of change in employers are the employers change at making changes and so what you see is the patient behavior of essentially ensuring that their spending every dollar of the health care of wallet.
Wisely and it's just it's just a huge quarter.
In the meantime, and when we've got extra variable cost to deliver but the fixed cost structures isn't changing so.
We always have a natural progression of market margin enhancement over the over the course of the year driven driven primarily by those dynamics.
Great. Thanks, so much guys.
Thank you. Our next question is from Whit Mayo with babies.
Please proceed with your question.
Hey, Thanks, Mike as a follow on to that last question, just maybe a different way I mean, Jason sitting where we are.
Halfway through the year, you've got a pretty wide range out there and I mean do you feel like you're tracking to be closer to the low end the midpoint to high end just just trying to maybe take your temperature on.
Where do you feel.
You were tracking within the range of at the low end it looks like it could be flat year over year in the high end up over 20%. So I don't I don't know any any help or color around just how you feel about where you are tracking within the guidance range yes.
Yes sure thing.
So I'll, probably give you a unexpected answer I mean, we don't straight down the middle is where we are is where we're tracking now.
The gives and takes that could change that throughout the balance of the year of course.
We were we were thrilled with the fleet performance in Q2.
So if supply remains steady <unk> increases, which as we stand here today, we believe it will.
That's going to be a tailwind both top line and then and then and then certainly bottom line.
I would say.
The next factor is arguably diabetes.
All things remain equal and we are kind of steady as she goes we think we're right at that mid now do we accelerate in the second half as some of the manufacturers has indicated they believe will happen.
That's obviously to the good and.
Recession is more than expected and that is a drag on the business that's more to more to the downside, but as we stand here today I'd say mid is where we feel comfortable with.
With diabetes so.
I don't know if Steve Josh if you got anything to add on.
I think the the big swing could be the continued of the paths as we sit right. Here July was a great month August should be a great month, and but we don't know our allocations for September October November December last year. If you remember we were expecting this boom December .
Allocations were pitiful.
So we feel like a lot of that's been corrected and suppliers have a lot more confidence, but they're not willing to guarantee anything to us. So we still have to live on that apprehension lease.
At least for the next.
A few months.
Makes sense.
Jason <unk> as you mentioned in your prepared remarks definitely came down what three days or so maybe talk a little bit more about yeah. Some of the internal initiatives there perhaps at some of the <unk>.
M&A integration, just just any color on sort of what's happening around the cash flow.
Yeah for sure and then.
I think there's a few folks jumping at the bid on this question because we were thrilled with the performance.
Integration is a component as you referenced.
You might recall DSO spiked to 50, even 51.
In Q3 of last year that was a lot of changeover to single tax Ids for the aircraft and the adapt health merger activity.
But then following July one I mean, we had with 15 or so act.
Acquisitions that we also brought in and so you've just got that dynamic of Onboarding, a whole lot of business from a whole lot of operating system. So.
Picture Thats, what Youre seeing as we as we move into Q3, and we've integrated the Rev cycle operations and we are delivering.
The performance that we're seeing I mean, you want to talk a little dynamic patient pay other other factors guys. Yeah, I mean, well first of all we'd like to brag on the RCM team, they're fantastic they've done an incredible job, but in the process is something that we.
Look forward to continuing to improve and continue to do but the process is much better but it is a new process for a significant part of the company certainly for the air care folks and certainly for any kind of new acquisitions that come in there and it just takes.
So while they get used to how that works and it's that flow of paperwork and getting paid for in the system quicker faster better getting into the payer quicker faster and better and getting resolutions to quicker faster better and so you know that.
That team, though we're very proud of them again, and Theyre doing a great job and so we expect continued.
Results for them throughout this year and certainly.
<unk>.
Okay, great. Thanks, guys.
Thank you. Our next question is from Ben Hendrix with RBC capital markets. Please proceed with your question.
Hey, Thanks, guys quick question on your investments in Technology, you had mentioned that Youre a prescribed platform.
Had 50% adoption in regions, where it's rolled out in that 50% of your patent diabetes resupply ravaged tronic.
Can you discuss maybe the gating items that that govern.
Adoption going forward, an increased penetration of your technology platforms kind of how you see timing unfolding and what that could mean for margins. Thanks.
Sure. Thanks. So this is Josh.
From from an E prescribing perspective, a lot of that is as our sales team has shifted from kind of sales reps that go in and introduce himself to the doctor to really working on the technology side with the physician's offices and driving change in management there.
As you know E prescribing the HMA space is really serving to document the entire medical necessity lifecycle of that order and therefore, there is a fair amount of training and change management that needs to go into that so the fact that we have 50% plus adoption in areas, where this has rolled out its pretty monumental if you think about the <unk>.
Mount to work and change that needs to happen.
Both at the physician practices and at the hospital case management level. So we're very proud of the team really to be able to take that initiative and drive that change on the order front on the on the resupply and the diabetes a lot of that evolution is driven by two things number one the technology development as it gets more intuitive.
I know I referenced channel of choice communication with the patient. So a lot of that is really identifying where the patient likes and is more comfortable getting communicated with and being able to drive resupply and general communication to that channel where that patient no customers more comfortable ordering product.
And then secondly, really does it does it change management aspect from a patient perspective, where they used to getting calls.
Or E mails or even post cards back in the day too.
Ordering digitally and when you're dealing with a little bit of some of our senior population on some of these product categories being able to drive adoption. There is somewhat of a gating item, but number one as the baby Boomer population ages as well as our technology gets more intuitive, we're going to see more adoption in those categories as well.
Thank you.
Much.
Thank you. Our next question is from Matthew Blackman with Stifel. Please proceed with your question.
Hi, I just wanted to this is colin on for Matt by the way.
Wanted to have a quick follow up on M&A I was wondering if there's been any change since last quarter regarding your M&A appetite you guys.
Acquired travel during the quarter, but they were really announced.
On the <unk> call should we think about you hitting the historical 100 million $150 million in acquired revenue being inclusive of the community surgical acquisition you guys did at the end of last year.
That's the right way to think about it call it I mean.
It was frankly, if an offer in kind of a tax purposes and other factors I mean, you could think of that as a.
As a 22 deal I mean, you've done the last day of last year, but all the integration work and all the heavy lifting is is what we've been focused on for 2022.
Alright, and then a quick quick one on the on the other segment you talked about hospice orthotics and home infusion really being drivers here, how should we think about that business. Those businesses is really ramping up in <unk>.
What's a good sustainable growth rate you guys think is realistic.
And that could be more than more than analyst day question.
Yes.
We have an analyst day, but.
That business we.
We like it it's the orthotics side of it is very strategic to get it to health systems and lead to other business. So we like that I think that business will grow significantly in.
Probably low double digits. The infusion business is were still getting our feet wet in that.
The growth right now is just going to be on the operations that we have that we've been a part.
Part of an acquisition. So we haven't really expanded that business I wouldn't look for any significant growth. There and then the other staff all kind of plays into a Josh alluded to as we get these contracts it as we get the better relationships with these health systems. We can bring all of these products to that health system Adam.
Pretty low sales cost for us and so thats what were probably excited more about anything else.
That has some growth potential forced to.
Got it. Thank you very much for taking my questions and I'll hop back in the queue.
Yeah.
Thank you there are no further questions at this time I would like to turn the floor back over to Steve Greg <unk> for any closing comments.
Well once again, we'd just like to thank our fantastic employees have done a great job.
Over these past few years in particular now with not just the pandemic, but also the field free call on having to deal with taking care of our patients and sticking to our mission, which is to empower our patients to live their best lives and we appreciate the support of all of our shareholders and appreciate the support of the people on the call and thanks.
Again.
Thank you. This concludes today's conference you may disconnect.
Thank you for your participation.
Okay.