Q2 2024 AdaptHealth Corp Earnings Call

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Speaker Change: Please stand by, your program is about to begin. If you need operator assistance during the conference today, please press star zero.

Operator: Please stand by; your program is about to begin. If you need operator assistance during the conference today, please press star zero. Good day, everyone, and welcome to today's Adapthealth second quarter 2024 earnings release. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session, and you may register at any time by pressing star 1. If you find your question has been answered, you may remove yourself from the queue by pressing star 2.

Unknown Executive: C standby, your program is about to begin.

Unknown Executive: If you need operator assistance during the conference today, please press star zero.

Unknown Executive: Good day everyone and welcome to today's Adept Health second quarter 2024 earnings release. At this time, all participants are going to listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session, and you may register to add any time by pressing star one. If you find your question has been answered, you may remove yourself from the queue by pressing star two.

Speaker Change: Good day everyone and welcome to today's Adapthealth second quarter 2024 earnings release.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: Later you will have an opportunity to ask questions during the question and answer session, and you may register at any time by pressing star 1. If you find your question has been answered, you may remove yourself from the queue by pressing star 2.

Unknown Executive: Today's speakers will be Suzanne Foster, Chief Executive Officer of Adapthealth, and Jason Clemens, Chief Financial Officer of Adapthealth. Before we begin, I'd like to remind everyone that these statements included in this conference call and in the press release issued today may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Speaker Change: Today's speakers will be Suzanne Foster, Chief Executive Officer of Adapthealth, and Jason Clemens, Chief Financial Officer of Adapthealth.

Operator: Today's speakers will be Suzanne Foster, Chief Executive Officer of Adapthealth, and Jason Clemens, Chief Financial Officer of Adapthealth. Before we begin, I'd like to remind everyone that these statements included in this conference call and in the press release issued today 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 financial results for 2024 and beyond. However, 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 the company's annual and quarterly SAC filings.

Speaker Change: Before we begin, I'd like to remind everyone that these statements included in this conference call and in the press release issued today may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act.

Unknown Executive: Staying safe and safe is an art limit to comments regarding financial results for 2024 and beyond. Actual results could differ materially from those projected and forward-looking statements because of a number of risk factors and uncertainties, which are discussed at length in the company's annual and quarterly SEC filings. Adthealth Corps should have no obligation to update the information provided on this call to reflect such subsequent events.

Speaker Change: These statements include, and are not limited to, comments regarding financial results for 2024 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 the company's annual and quarterly SAC filings.

Operator: Corp. should have no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, the company will reference certain financial measures, such as EBITDA, adjusted EBITDA, and free cash flow, which are non-GAAP financial measures. This morning's call is being recorded, and a replay of the call will be available later today. I am now pleased to introduce the Chief Executive Officer of Adapthealth, Suzanne

Speaker Change: Corp. should have no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, the company will reference certain financial measures, such as EBITDA, adjusted EBITDA, and free cash flow, which are non-GAAP financial measures.

Unknown Executive: Additionally, on this morning's call, the company will reference certain financial measures, such as Evadah, adjusted Evadah, and free cash flow, which are non-GAAP financial measures. This morning's call is being recorded, and a replay of the call will be available later today.

Speaker Change: This morning's call is being recorded and a replay of the call will be available later today. I am now pleased to introduce the Chief Executive Officer of Adapthealth, Suzanne Foster.

Suzanne Foster: I am now pleased to introduce the Chief Executive Officer of Adapthealth, Suzanne Foster. Thank you and good morning for joining our second quarter earnings call. I'm pleased to report another consistent quarter with second quarter results in line with expectations for revenue, adjusted Evadah, and free cash flow.

Suzanne Foster: Thank you and good morning for joining our second quarter earnings call. I'm pleased to report another consistent quarter with second quarter results in line with expectations for revenue, adjusted EBITDA, and free cash flow. With this being my first quarter, I'd like to start by briefly sharing why I'm excited to be at Adapthealth. I joined the team because I believe in our purpose and the vital role we play in improving health care.

Suzanne Foster: Thank you and good morning for joining our second quarter earnings call. I'm pleased to report another consistent quarter with second quarter results in line with expectations for revenue, adjusted EBITDA, and free cash flow.

Suzanne Foster: With this being my first floor, I'd like to start by briefly sharing why I'm excited to be at Adapthealth. I join the team because I believe in our purpose and the vital role we play in improving healthcare. For too long, I have witnessed the increasing desire to extend high quality and cost-effective care to the concrete of one's home, and I want to be part of solving this problem in accelerating this movement. I'm grateful to the learning set of come from a 30-year career in healthcare that began on the front lines as a clinical social worker in a hospital setting.

Suzanne Foster: With this being my first quarter, I'd like to start by briefly sharing why I'm excited to be at Adapthealth.

Speaker Change: I joined the team because I believe in our purpose and the vital role we play in improving health care. For too long, I have witnessed the increasing desire to extend high-quality and cost-effective care to the comfort of one's home, and I want to be part of solving this problem and accelerating this movement.

Suzanne Foster: For too long, I have witnessed the increasing desire to extend high-quality and cost-effective care to the comfort of one's home, and I want to be part of solving this problem and accelerating this movement. I'm grateful for the learnings that have come from a 30-year career in health care that began on the front lines as a clinical social worker in a hospital setting. The learnings from obtaining a degree in public health policy focused on ways to bend the health care cost curve.

Speaker Change: I'm grateful for the learnings that have come from a 30-year career in healthcare that began on the front lines as a clinical social worker in a hospital setting.

Suzanne Foster: The learning from obtaining a degree in public health policy focused on ways to bend the healthcare cost curve, followed by experiences in leading companies focused on medical devices, life sciences, and distribution of healthcare supplies. Most recently, I left business within a large corporation known for operational excellence and high performance through emphasizing standard work, standard metrics, and a mindset of continuous improvement. I'm bringing these learnings and skill sets to the team of Adapthealth, which I'm confident will result in improved performance in growth across our business.

Speaker Change: The learnings from obtaining a degree in public health policy focused on ways to bend the health care cost curve, followed by experiences in leading companies focused on medical devices, life sciences, and distribution of health care supplies.

Suzanne Foster: Following this, I worked in leading companies focused on medical devices, life sciences, and the distribution of health care supplies. Most recently, I led a business within a large corporation known for operational excellence and high performance through emphasizing standard work, standard metrics, and a mindset of continuous improvement. I'm bringing these learnings and skill sets to the team at Adapthealth, which I'm confident will result in improved performance and growth across our business. Over the last two months, I've spent most of my time traveling to meet our employees and see our operations. Here are a few of my early impressions.

Speaker Change: I'm bringing these learnings and skill sets to the team at ADAPT Health, which I'm confident will result in improved performance and growth across our business.

Suzanne Foster: Over the last two months, I've spent most of my time traveling to meet our employees and see our operations. Here are a few of my early impressions. Overall, the business is performing well. Our patients and heroes programs are besting class, digital orders are increasing, thereby reducing the number of taxes, resupplied demand is strong and our technology infrastructure projects are underway. I am especially impressed with the depth of commitment and knowledge of this team. The team at Adaptealth formed through many acquisitions brought together strong and entrepreneurial leaders in the industry with decades of experience. Our team knows the business, and in many cases, have grown up in the business.

Speaker Change: Over the last two months, I've spent most of my time traveling to meet our employees and see our operations.

Suzanne Foster: Overall, the business is performing well. Our patient adherence programs are best in class. Digital orders are increasing, thereby reducing the number of faxes.

Speaker Change: Here are a few of my early impressions.

Suzanne Foster: Resupply demand is strong, and our technology infrastructure projects are underway. I am especially impressed with the depth of commitment and knowledge of this team. The team at Adapthealth, formed through many acquisitions, brings together strong and entrepreneurial leaders in the industry with decades of experience. Our team knows the business and, in many cases, have grown up in the business. There are, however, some key areas where I see we can improve to realize our full potential and grow. We're making several investments now in the areas of talent, and strengthening our processes focused on organic growth. Simplifying the business and developing a long-term strategy for sustainable growth and technology adoption

Suzanne Foster: There are, however, some key areas where I see I can, where we can improve to realize our full potential and grow. We're making several investments now in the areas of talent, strengthening our processes focused on organic growth, simplifying the business, developing a long-term strategy for sustainable growth, and technology adoption.

Suzanne Foster: Let me take these five areas of focus one at a time. First, we are investing in clinical, commercial, and operational talent to a few key areas of the organization, and we are working to better align our teams, provide low clarity, and remove duplication. We are investing in training that is focused on process improvement for critical workflows. We are having our first kinds of events this month with several more scheduled this year. We have implemented standard work and metrics across the leadership team and are working to drive this through the rest of the organization. The alignment of roles and responsibilities and the standardization of how we do the work has become an important initiative for us, and one we are excited about.

Suzanne Foster: Let me take these five areas of focus one at a time. First, we are investing in clinical, commercial, and operational talent in a few key areas of the organization, and we are working to better align our teams, provide role clarity, and remove duplication. We are investing in training that is focused on process improvement for critical workflows. We are having our first Kaizen event this month with several more scheduled this year.

Speaker Change: First, we are investing in clinical, commercial, and operational talent to a few key areas of the organization, and we are working to better align our teams, provide role clarity, and remove duplication. Thank you.

Speaker Change: We are investing in training that is focused on process improvement for critical workflows. We are having our first Kaizen event this month, with several more scheduled this year.

Suzanne Foster: We have implemented standard work and metrics across the leadership team and are working to drive this through the rest of the organization. The alignment of roles and responsibilities and the standardization of how we do the work have become an important initiative for us, and one we are excited about. In sum, we are coming together as one Adapthealth. The team is eager to create and adopt standards work and understands that this work is work we must do ourselves. We have the knowledge and desire to do so.

Suzanne Foster: In some, we are coming together as one adapt. The team is eager to create an adopt standard work and understand that this work is work we must do ourselves. We have the knowledge and desire to do so. This work will help us drive leverage and position us for growth in the large end markets we serve. Our goal is to continuously improve on how we deliver cost-effective, accurate, and timely care to the home.

Speaker Change: The team is eager to create and adopt standard work and understands that this work is work we must do ourselves. We have the knowledge and desire to do so. This work will help us drive leverage and position us for growth in the large end markets we serve.

Suzanne Foster: This work will help us drive leverage and position us for growth in the large end markets we serve. Our goal is to continuously improve how we deliver cost-effective, accurate, and timely care to the home. Second, we are working to strengthen the business to deliver organic growth in the three markets we serve.

Speaker Change: Our goal is to continuously improve on how we deliver cost-effective, accurate, and timely care to the home.

Suzanne Foster: Second, we are working to strengthen the business to deliver organic growth in the three markets we serve: sleep, respiratory, and diabetes. We are working to align our sales forces. We are expanding our national accounts and care relations teams. On the operation side, we are taking steps to improve our throughput and conversion rates so that our sales teams have the confidence to deliver on the promise of reliable and accurate service.

Speaker Change: Second, we are working to strengthen the business to deliver organic growth in the three markets we serve, sleep, respiratory, and diabetes.

Suzanne Foster: We are working to align our sales forces. We are expanding our national accounts and payer relations team. On the operations side, we are taking steps to improve our throughput and conversion rates so that our sales teams have the confidence to deliver on the promise of reliable and accurate service. Third, we are simplifying our processes and our organizational structure while continuing to strengthen our balance. We are evaluating non-core assets, rationalizing our footprint, and we are paying down debt. All these efforts are focused on increasing our free cash flow yield.

Speaker Change: We are working to align our sales forces, we are expanding our national accounts and payer relations teams.

Suzanne Foster: Third, we are simplifying our processes in our org structure while continuing to strengthen our balance sheet. We are evaluating non-core assets, rationalizing our footprint, and we are paying down debt. All these efforts are focused on increasing our free cash flow yield.

Speaker Change: Third, we are simplifying our processes and our org structure while continuing to strengthen our balance sheet.

Speaker Change: We are evaluating non-core assets, rationalizing our footprint, and we are paying down debt. All these efforts are focused on increasing our free cash flow yield.

Suzanne Foster: Fourth, we are building a strategy for long-term sustainable growth. One that positions ourselves for increased clinical and payer relevance. To that end, we created a new leadership role and welcomed Dr. Philip Parks as our Executive Vice President of Strategy and Healthcare Innovation. As an experienced military and civilian physician, strategist, and leader, he is intimately familiar with the clinical, technological, and logistical challenges of decentralized care on the battlefield and in the home. We are embracing our role as we are uniquely positioned to enable decentralized healthcare more broadly, reliably, and with higher levels of clinical quality and improved patient experiences.

Suzanne Foster: Fourth, we are building a strategy for long-term sustainable growth, one that positions us for increased clinical and payer relevance. To that end, we created a new leadership role and welcomed Dr. Philip Parks as our Executive Vice President of Strategy and Healthcare Innovation. As an experienced military and civilian physician, strategist, and leader, he is intimately familiar with the clinical, technological, and logistical challenges of decentralized care on the battlefield and in the home. We are embracing our role as we are uniquely positioned to enable decentralized healthcare more broadly, reliably, and with higher levels of clinical quality and improved patient experience. Dr.

Speaker Change: Fourth, we are building a strategy for long-term sustainable growth.

Speaker Change: One that positions ourselves for increased clinical and payer relevance. To that end, we created a new leadership role and welcomed Dr. Philip Parks as our Executive Vice President of Strategy and Healthcare Innovation.

Suzanne Foster: Parks understands the important roles we play as a provider and facilitator of care and support to people living with acute and chronic diseases. I believe the unique lens his background and experiences afford him will be invaluable as we shape our strategy and future of what this company can become. Finally, I have familiarized myself with our IT systems and infrastructure, and I'm happy to report that the team has made solid progress in this area over the past couple of years.

Philip Parks: As an experienced military and civilian physician, strategist, and leader, he is intimately familiar with the clinical, technological, and logistical challenges of decentralized care on the battlefield and in the home.

Speaker Change: We are embracing our role, as we are uniquely positioned, to enable decentralized healthcare more broadly, reliably, and with higher levels of clinical quality and improved patient experiences.

Suzanne Foster: Dr. Parks understands the important roles we play as a provider and facilitator of care and support to people living with acute and chronic diseases. I believe the unique landscape background and experiences aboard him will be invaluable as we shape our strategy and future of what this company can become.

Dr. Parks: Dr. Parks understands the important roles we play as a provider and facilitator of care and support to people living with acute and chronic diseases.

Speaker Change: I believe the unique lens his background and experiences afford him will be invaluable as we shape our strategy and future of what this company can become.

Suzanne Foster: Finally, I have familiarized myself with our IT systems and infrastructure, and I'm happy to report that the team made solid progress in this area over the past couple of years. I do, however, see significant potential for automation, AI, and other advanced technologies to improve our operations, increase our capabilities, and drive efficiencies. We are currently conducting a few low-cost experiments with AI that are progressing well around customer and clinical documentation. The technology is producing highly accurate structured data with predictable results. It is early days, but this is encouraging because we know that our critical functions can run more efficiently and effectively if we remove the work that otherwise slows us down.

Speaker Change: Finally, I have familiarized myself with our IT systems and infrastructure, and I'm happy to report that the team made solid progress in this area over the past couple of years.

Suzanne Foster: I do, however, see significant potential for automation, AI, and other advanced technologies to improve our operations, increase our capabilities, and drive efficiency. We are currently conducting a few low-cost experiments with AI that are progressing well in customer and clinical documentation. The technology is producing highly accurate structured data with predictable results. It is early days, but this is encouraging because we know that our critical functions can run more efficiently and effectively if we remove the work that otherwise slows us down. What is more compelling is that accurately and reliably transforming facts and digitally transmitted documents into structured data at scale can unlock the potential to improve patient experiences and allow us to personalize our patient and provider interactions.

Speaker Change: I do, however, see significant potential for automation, AI, and other advanced technologies to improve our operations, increase our capabilities, and drive efficiencies.

Speaker Change: We are currently conducting a few low-cost experiments with AI that are progressing well around customer and clinical documentation.

Speaker Change: The technology is producing highly accurate structured data with predictable results. It is early days but this is encouraging because we know that our critical functions can run more efficiently and effectively if we remove the work that otherwise slows us down.

Suzanne Foster: What is more compelling is that accurately and reliably, reliably transforming facts and digitally transmitted documents and structured data at scale can unlock potential to improve patient experiences and allow us to personalize our patient and provider interactions.

Speaker Change: What is more compelling is that accurately and reliably transforming facts and digitally transmitted documents into structured data at scale can unlock potential to improve patient experiences and allow us to personalize our patient and provider interactions.

Suzanne Foster: We are just at the beginning of this journey, but we are confident that we will soon uncover more areas for operational improvement and efficiencies using AI, which will create a better experience for employees, patients, and providers that we support.

Suzanne Foster: We are just at the beginning of this journey, but we are confident that we will soon uncover more areas for operational improvement and efficiencies using AI, which will create a better experience for our employees, patients, and providers that we support. We have already invested in key hires, initiated projects focused on increasing organic growth, and are simplifying the business. We believe these short-term investments will lead to longer-term improved profitability and performance, ultimately fulfilling our mission to shift more care to the home and reduce overall health care costs.

Speaker Change: We are just at the beginning of this journey, but we are confident that we will soon uncover more areas for operational improvement and efficiencies using AI, which will create a better experience for our employees, patients, and providers that we support.

Suzanne Foster: We have already invested in key hires, initiated projects focused on increasing organic growth, and are simplifying the business. We believe these short-term investments will lead to longer-term improved profitability and performance, ultimately fulfilling our mission to shift more care to the home and reduce overall healthcare costs.

Speaker Change: We have already invested in key hires, initiated projects focused on increasing organic growth, and are simplifying the business.

Speaker Change: We believe these short-term investments will lead to longer-term, improved profitability and performance, ultimately fulfilling our mission to shift more care to the home and reduce overall health care costs.

Suzanne Foster: I would like to take this opportunity to express my sincere appreciation to the team at Adapt Health, our partners and shareholders who have helped educate me on the state of the business and the markets we serve. I am optimistic about the road ahead and look forward to working as one Adapt by unified team to simplify and standardize our operations, deliver growth, realize clinical and payer value, and most importantly, support our patients in their homes.

Suzanne Foster: I would like to take this opportunity to express my sincere appreciation to the team at Adapthealth, our partners, and shareholders who have helped educate me on the state of the business and the markets we serve. I am optimistic about the road ahead and look forward to working as one ADAPT, a unified team to simplify and standardize our operations, deliver growth, realize clinical and payer value, and most importantly, support our patients in their homes. With that, I will turn it over to Jason.

Speaker Change: I would like to take this opportunity to express my sincere appreciation to the team at Adapthealth, our partners, and shareholders who have helped educate me on the state of the business and the markets we serve.

Speaker Change: I am optimistic about the road ahead and look forward to working as one ADAPT, a unified team, to simplify and standardize our operations, deliver growth, realize clinical and payer value, and most importantly, support our patients in their homes.

Jason Clemens: With that, I will turn it over to Jason. Thanks, Suzanne, and thanks to all for joining our call today. For the second quarter of 2024, we delivered against our expectations for revenue, adjusted EBITDA, and free cash flow. Incremental expense associated with recovering from the Change Healthcare situation came in line with what we projected. In shipping, lead times for sleep-resupply products improved in June over what we experienced in April and May. Now revenue of $806 million increased 1.6% compared to the second quarter of 2023. Sleep revenue of $322.4 million increased 6.5% over the prior year. New starts were strong, up over 5% sequentially from Q1.

Jason Clemens: Thanks, Suzanne, and thanks to all for joining our call today. For the second quarter of 2024, we delivered against our expectations for revenue, adjusted EBITDA, and free cash flow. Incremental expense associated with recovering from the changed health care situation came in line with what we projected, and shipping lead times for sleep resupply products improved in June over what we experienced in April and May. Net revenue of $806 million increased 1.6% compared to the second quarter of 2023.

Speaker Change: Thanks, Suzanne, and thanks to all for joining our call today.

Speaker Change: For the second quarter of 2024, we delivered against our expectations for revenue, adjusted EBITDA, and free cash flow.

Speaker Change: Incremental expense associated with recovering from the changed healthcare situation came in line with what we projected, and shipping lead times for sleep resupply products improved in June over what we experienced in April and May.

Speaker Change: Net revenue of $806 million increased 1.6% compared to the second quarter of 2023.

Jason Clemens: Sleep revenue of $322.4 million increased 6.5% over the prior year. New starts were strong, up over 5% sequentially from Q1. Notably, our sleep resupply census reached a new milestone in the quarter and now stands at over 1.6 million patients. Additionally, over 30% of new patients responded to our GLP-1 survey in the quarter, which showed that approximately 12% of those patients were prescribed GLP-1 therapy, up a touch from the first quarter. While we continue to closely monitor adherence and resupply ordering patterns in our GLP-1 patient cohort versus patients not currently utilizing GLP-1 therapy, we have not detected any notable difference to date.

Speaker Change: Sleep revenue of $322.4 million increased 6.5% over the prior year. New starts were strong, up over 5% sequentially from Q1.

Jason Clemens: Notably, our sleep resupply census reached a new milestone in the quarter and now stands at over 1.6 million patients. Over 30% of new patients responded to our GLP-1 survey in the quarter, which showed that approximately 12% of those patients were prescribed GLP-1 therapy, up the touch from the first quarter. While we continue to closely monitor adherence and resupply ordering patterns in our GLP-1 patient cohort versus patients not currently utilizing GLP-1 therapy, we have not detected any notable difference to date. Diabetes revenue of $151.2 million was down 17.7 million over the prior year, but as previously discussed, we faced a tough prior year CGM comparable this quarter due to timing of system conversions in 2023, so we expected year-over-year compression.

Speaker Change: Notably, our sleep resupply census reached a new milestone in the quarter and now stands at over 1.6 million patients.

Speaker Change: While we continue to closely monitor adherence and resupply ordering patterns in our GLP-1 patient cohort versus patients not currently utilizing GLP-1 therapy, we have not detected any notable difference to date.

Jason Clemens: Diabetes revenue of $151.2 million was down $17.7 million over the prior year. But, as previously discussed, we faced a tough prior year CGM comparable this quarter due to the timing of system conversions in 2023, so we expected year-over-year compression. For the first half of 2024, diabetes revenue of $302 million was down $13.2 million over the first half of 2023. We expected pump and supplies revenue to decline by about $10 million for the first half, but results were slightly worse as some patients held off on new tubeless pumps, pending CGM compatibility that just recently launched. So we believe that starts should pick up in the second half.

Jason Clemens: For the first half of 2024, diabetes revenue of $302 million was down $13.2 million over the first half of 2023. We expected pump and supplies revenue to decline by about 10 million for the first half, but results were slightly worse as some patients held off on new tubeless pumps, pending CGM compatibility that just recently launched. So we believe that Stark should pick up in the second half. Also, we started supplying Tanda Moby during the second quarter, and we expect this product to ramp up over the rest of the year. As expected, CGM revenue growth was flat for the first half, as our new sales reps made up for three payers that shifted to 100% pharmacy reimbursement earlier in the year.

Speaker Change: For the first half of 2024, diabetes revenue of $302 million was down $13.2 million over the first half of 2023.

Speaker Change: We expected pump and supplies revenue to decline by about $10 million for the first half, but results were slightly worse as some patients held off on new tubeless pumps, pending CGM compatibility that just recently launched. So we believe that starts should pick up in the second half.

Jason Clemens: Also, we started supplying Tandem Mobi during the second quarter, and we expect that product to ramp up over the rest of the year. As expected, CGM revenue growth was flat for the first half, as our new sales reps made up for three payers that shifted to 100% pharmacy reimbursement earlier in the year. As of today, our pharmacy is now distributing products in each of those markets, and we are working to grow.

Speaker Change: Also, we started supplying Tandem Mobi during the second quarter, and we expect that product to ramp up over the rest of the year.

Speaker Change: As expected, CGM revenue growth was flat for the first half as our new sales reps made up for three payers that shifted to 100% pharmacy reimbursement earlier in the year. As of today, our pharmacy is now distributing products in each of those markets and we are working to grow.

Jason Clemens: As of today, our pharmacy is now distributing products in each of those markets, and we are working to grow. Since the end of the quarter, we have seen a modest shift in payer reimbursement channels, but encouragingly, we have seen shifts in both directions. We remain focused on building the capabilities to provide our diabetes products, regardless of reimbursement channel, and our sales force is focused on growing our share in a continuously increasing achievable market. Revenue from all other categories was $332.4 million, growing 3.3% over the prior year, led by respiratory. Much of our respiratory growth was driven by the one boarding, the rest of our communications, and we were pleased with those results.

Jason Clemens: Since the end of the quarter, we have seen a modest shift in payer reimbursement channels, but, encouragingly, we have seen shifts in both directions. We remain focused on building the capabilities to provide our diabetes products, regardless of the reimbursement channel.

Speaker Change: Since the end of the quarter, we have seen a modest shift in payer reimbursement channels, but encouragingly, we have seen shifts in both directions.

Speaker Change: We remain focused on building the capabilities to provide our diabetes products regardless of reimbursement channel, and our sales force is focused on growing our share in a continuously increasing achievable market.

Jason Clemens: And our sales force is focused on growing our share in a continuously increasing, achievable market. Revenue from all other categories was $332.4 million, growing 3.3% over the prior year, led by Respite. Much of our respiratory growth was driven by onboarding the rest of our humanity, and we were pleased with those results.

Speaker Change: Revenue from all other categories was $332.4 million, growing 3.3% over the prior year, led by respiratory.

Speaker Change: Much of our respiratory growth was driven by the onboarding the rest of our Humana patients and we were pleased with those results. Utilization is right in line with our expectations.

Jason Clemens: Utilization is right in line with our expectations. For the HME and Supplies to the Home revenue categories, we continue to reevaluate products that do not fit our strategic roadmap and do not drive the ancillary volumes into our core areas of sleep, respiratory, and diabetes. To that end, we recently signed a definitive agreement to sell certain custom rehab technology assets to National Seating and Mobility, a well-respected national mobility solutions provider with over 30 years of experience in the CRT category.

Jason Clemens: Utilization is right in line with our expectations. For the HME and supplies to the home revenue categories, we continue to re-evaluate products that do not fit our strategic roadmap and do not drive the insular volumes into our core areas of sleep, respiratory, and diabetes.

Jason Clemens: To that end, we recently signed a definitive agreement to sell certain custom rehab technology assets to National Seating and Mobility, a well-respected national mobility solution provider with over 30 years of experience in the CRT category. For Adapt Health, these products represented a small amount of revenue from individual acquisitions over the years, but an aggregate represented out of points of enterprise revenue. Later we will discuss our adjustment to full year guidance, and we are looking forward to working closely with NSM to ensure a smooth transition. Turning to profitability, second quarter adjusted even of 165.3 million reflects an adjusted even a margin of 20.5 percent, a slight improvement over the first quarter.

Jason Clemens: For Adapthealth, these products represented a small amount of revenue from individual acquisitions over the years, but as an aggregate, they represented about a point of enterprise revenue. Later, we will discuss our adjustment to four-year guidance, and we are looking forward to working closely with NSM to ensure a smooth transition. Turning to profitability, the second quarter adjusted even of $165.3 million reflects an adjusted even margin of 20.5%, a slight improvement over the first quarter. Our sequential margin expansion was driven by the cost of products and supplies, primarily driven by outsized growth in higher margin products and compression in diabetes products that are amongst the lowest product margins in our portfolio. Labor and other operating expenses performed as expected. Cash flow from operations was $198 million, driven by cash inflows that were delayed from Q1 due to the changed health care situation.

Speaker Change: Later, we will discuss our adjustment to four-year guidance, and we are looking forward to working closely with NSM to ensure a smooth transition.

Jason Clemens: Our sequential margin expansion was driven by costs of products and supplies, primarily driven by outsized growth in higher margin products in compression in diabetes products that are amongst the lowest product margins in our portfolio. Labor and other operating expenses performed as expected. Cash flow for operations was 198 million, driven by cash inflows that were delayed from Q1 due to the change healthcare situation. They sailed outstanding for Q2 was 48.9, with the month of June was 44.3, and we expected to be back to normal by the end of a third quarter. Capeths of 81.3 million, representing 10.1 percent of revenue, was down against 10.4 percent of revenue the second quarter of 2023.

Speaker Change: Labor and other operating expenses performed as expected.

Speaker Change: Cash flow from operations was $198 million, driven by cash inflows that were delayed from Q1 due to the changed healthcare situation.

Jason Clemens: Today's sales outstanding for Q2 was 48.9, the month of June was 44.3, and we expect to be back to normal by the end of the third quarter. CapEx of $81.3 million, representing 10.1% of revenue, was down against 10.4% of revenue in the second quarter of 2023. Free cash flow of $116.7 million outperformed our target of $94 million. We remain confident in delivering our full-year guidance for CAFs law.

Speaker Change: Day sales outstanding for Q2 was 48.9, but the month of June was 44.3, and we expect to be back to normal by the end of the third quarter.

Speaker Change: CapEx of $81.3 million, representing 10.1% of revenue, was down against 10.4% of revenue the second quarter of 2023.

Jason Clemens: Free cash flow of 116.7 million outperformed our target of 94 million dollars. We remain confident in delivering our full year guidance for cash flow. At the end of the second quarter, our TLA bounce was 650 million, a result of paying off $45 million since the end of the quarter, including voluntary payments of 35 million. Our net leverage ratio is now just under three times, ahead of our goal to be under three times before the end of 2024. We expect to further deliver over the remainder of the year. For the third quarter, we expect revenue to be flat sequentially from Q2, accounting for the disposition discussed earlier and in line with the seasonal effects we experienced last year.

Speaker Change: Free cash flow of $116.7 million outperformed our target of $94 million.

Jason Clemens: At the end of the second quarter, our TLA balance was $650 million, a result of paying off $45 million since the end of the quarter, including voluntary payments of $35 million. Our net leverage ratio is now just under three times, ahead of our goal to be under three times by the end of 2024. We expect to further deliver over the remainder of the year. For the third quarter, we expect revenue to be flat sequentially from Q2 accounting for the disposition discussed earlier and in line with the seasonal effect we experienced last year, adjusted even a margin percent of 20.0%, down slightly from Q2, as we recently made key investments in people and technology that Suzanne discussed earlier, and free cash flow of at least $30 million.

Speaker Change: We remain confident in delivering our full-year guidance for cash flow.

Speaker Change: At the end of the second quarter, our TLA balance was $650 million, a result of paying off $45 million since the end of the quarter, including voluntary payments of $35 million.

Speaker Change: Our net leverage ratio is now just under three times, ahead of our goal to be under three times before the end of 2024. We expect to further de-lever over the remainder of the year.

Speaker Change: For the third quarter, we expect revenue to be flat sequentially from Q2, accounting for the disposition discussed earlier, and in line with the seasonal effect we experienced last year.

Jason Clemens: Adjusted even a margin percent of 20.0 percent down slightly from Q2 as we recently made key investments in people and technology that's whose name discussed earlier. Free cash flow of at least 30 million dollars. For the full year, we are adjusting our revenue midpoint to account for the disposition discussed earlier. However, we are maintaining our midpoint for adjusted EBITDA, and we are increasing our midpoint for free cash flow. Our updated full year guidance is net revenue to be in the range of 3.255 to 3.315 billion dollars. Adjusted EBITDA to be in the range of $660 to $700 million, in free cash flow to be in the range of $160 to $180 million.

Speaker Change: Adjusted even a margin percent of 20.0% down slightly from Q2 as we recently made key investments in people and technology that Suzanne discussed earlier.

Speaker Change: Free cash flow of at least 30 million dollars.

Speaker Change: For the full year, we are adjusting our However, we are maintaining our midpoint for adjusted EBITDA, and we are increasing our midpoint for free cash flow.

Jason Clemens: Our updated full year guidance is net revenue to be in the range of $3.255 to $3.315 billion, and Justin D'Ibera to be in the range of $660 to $700 million. Free Cash Flow to be in the range of $160 to $180 million. With that, we'll open the call up for questions.

Speaker Change: Our updated full year guidance is net revenue to be in the range of $3.255 to $3.315 billion.

Speaker Change: adjusted EBITDA to be in the range of

Speaker Change: and free cash flow to be in the range of $160 to $180 million.

Unknown Executive: With that, we'll open the call up for questions. Operator? Thank you, and at this time, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing Star 2.

Speaker Change: With that, we'll open the call up for questions.

Operator: Thank you. And at this time, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.

Speaker Change: Operator.

Speaker Change: Thank you. And at this time, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.

Unknown Executive: Once again, that is star 1 to ask a question, and we will take our first question from Brian Telequitt from Jeffries. Please go ahead. Good morning. Thanks.

Speaker Change: Once again, that is star one to ask a question, and we will take our first question from Brian Tanquilut from Jeffries. Please go ahead.

Jack Slevin: Hey, good morning. Thanks. It's Jack Slevin on for Brian. Great work on the quarter by the team, and welcome to Suzanne on the first earnings call here. I guess maybe starting with that, Suzanne, the one comment I just wanted to make sure I got clarity on your point on, you know, taking a look at non-core assets. Could you just give a sense for, for kind of what you mean in terms of size and scope or boundaries that you might put around that? I just want to make sure I understood that correctly.

Operator: Once again, that is Star 1 to ask a question. And we will take our first question from Brian Tanquilut from Jeffries. Please go ahead. Hey, good morning.

Jack Slevin: It's Jack Sleven on for Brian. Great work on the quarter to the team and welcome to Suzanne on the first earnings call here. I got it. Really helpful. Thanks again, and congrats.

Speaker Change: Hey, good morning. Thanks. It's Jack Slevin on for Brian . Great work on the quarter to the team and welcome to Suzanne on the first earnings call here.

Speaker Change: I guess maybe starting with that, Suzanne, the one comment I just wanted to make sure I got clarity on, your point on, you know, taking a look at non-core assets. Could you just give a sense for kind of what you mean in terms of size and scope or boundaries that you might put around that? I just want to make sure I understood that correctly.

Suzanne Foster: Hi there, thanks for the warm welcome. I'm going to let Jason handle the size and scope, but let me clarify what I mean by non-core assets. So, as I looked at our portfolio, one of the benefits, of course, is we have a really nice, broad portfolio that helps us serve patients with sleep disorders, respiratory, and diabetes. But then we have a bunch of other things that are around that, that came in through the acquisitions that really strategically don't support us moving towards focusing on those three areas.

Suzanne Foster: Hi there, thanks for the warm welcome.

Speaker Change: I'm going to let Jason handle the size and scope, but let me clarify what I mean by non-core assets. So, as I looked at our portfolio, one of the benefits, of course, is we have a really nice, broad portfolio that

Speaker Change: helps us serve patients with sleep disorders, respiratory, and diabetes.

Speaker Change: But then we have a bunch of other, or a few other things that are around that that came in through the acquisitions that really strategically don't support us moving towards focus on those three areas. So, as I looked across the portfolio, we challenged ourselves to say, which of these

Suzanne Foster: So, as I looked across the portfolio, we challenged ourselves to say, which of these is in furtherance of supporting patients with those chronic and acute conditions? And if not, and there is no other strategic imperative there, then should ADAPT own it? Yes.

Speaker Change: is in furtherance of supporting patients with those chronic and acute conditions, and if not, and there is no other strategic imperative there, then should adopt OMIN.

Jason Clemens: Yeah, and I'd round that out, Jack, by saying that, you know, as we qualify certain products, this is a very just targeted analysis and study that we've been working on for some time. You know, products that are no growth to low growth with, you know, no margin to low margin, you know, taking free cash out of the company. I mean, those, you know, certainly we are looking very hard at those products.

Speaker Change: Yeah, and I'd round that out, Jack, by saying that, you know, as we qualify certain products...

Speaker Change: This is a very targeted analysis and study that we've been working on for some time. Products that are no growth to low growth.

Speaker Change: with no margin to low margin, taking free cash out of the company. I mean those, you know, certainly we are looking very hard at those products. Additionally, if the product does not provide ancillary revenue,

Jason Clemens: Additionally, if the product does not provide ancillary services. An example is some of our businesses that we support, our hospital. Well, you know, those are not good candidates for disposition because that individual product on its own may not have a high growth profile or high margin.

Speaker Change: An example is some of our businesses that we support our hospital systems.

Speaker Change: Well.

Speaker Change: You know, those are not good candidates for disposition because...

Jason Clemens: However, it feeds respiratory. It feeds the HME categories that we're focused on. It feeds sleep and diabetes.

Speaker Change: That individual product on its own may not have a high growth profile or a high margin. However, it feeds respiratory, it feeds

Jason Clemens: And so that's a little bit of how we're approaching this program. In terms of size or scope or what else to come, I mean, we won't have much to say about that today. But I suspect that we will have something to discuss at that time. But at the end of the day, you know, we're focused on simplifying this business and continuing to de-lever our balance sheet.

Speaker Change: The HME category is what we're focused on. It feeds sleep and diabetes. And so that's a little bit of how we're approaching this program.

Speaker Change: In terms of size or scope or what else to come, I mean, we won't have much to say about that today.

Jack Slevin: Got it. Really, really helpful.

Speaker Change: Got it. Really, really helpful. And then, Jason, maybe just as a follow-up on some of the diabetes commentary, I just want to make sure I'm understanding.

Jason Clemens: and the CGM side of things as we look into the second half. So, it sort of got that things were ahead of expectation on pumps coming out of one queue. Now two queue, you know, lagging a little behind what's baked in the guidance. I guess.

Jason Clemens: And then, Jason, maybe just as a follow-up to some of the diabetes commentary, I just want to make sure I'm understanding sort of what the expectation is on the trajectory, both on the pump side of things and on the CGM side of things, as we look into the second half. So sort of got that things were ahead of expectation on pumps coming out of 1Q, now 2Q, you know, lagging a little behind what's baked in the guidance, I guess.

Jason Clemens: When we think about jumping to the second half there, how do we get confident that that's turning a corner? Any color there would be helpful, and then just how you're thinking about CGM with the Salesforce and other moving pieces into the second half. Thanks.

Speaker Change: When we think about jumping to the second half there, what's the, you know, how do we get confident that that's turning a corner or any color there would be helpful? And then just, you know, how you're thinking about CGM with the Salesforce and other moving pieces into the second half. Thanks.

Jason Clemens: Yeah, sure. I'd say first on pump and pump supplies. I might remind you that at the beginning of the year, when we set our guidance, we had expected somewhere between a $15 and $20 million top line compression, much of that driven by the continued shift from tube-based pumps to tube list pumps, which are primarily distributed through pharmacy operations. And, you know, we've been playing a little bit of catch up, which we've been making progress on, as reported last quarter.

Speaker Change: Yeah, sure. I'd say first on pump and pump supplies, you know, I might remind you that at the beginning of the year when we set for your guidance, we had expected somewhere between a $15 and $20 million top line compression.

Speaker Change: Much of that driven by the continued shift.

Speaker Change: from two base pumps to two bliss pumps.

Jason Clemens: For this quarter, look, pumps fell a little behind. We believe it's timing-related, related to the CGM compatibility. Some of this was just launched in June for Dexcom G7, as well as, we believe, A3.

Speaker Change: which are primarily distributed through pharmacy operations and you know we've been playing a little bit of catch-up which we've been making progress on as reported last quarter.

Speaker Change: For this quarter, look, pumps fell a little behind. You know, we believe it's timing related, related to the CGM compatibility. Some of this was just launched in June for Dexcom G7 as well as Libre 3.

Jason Clemens: And so we think we'll call some of that back in the third quarter. So that $15 to $20 still holds. If I had to say today, probably closer to the $20, but we're still within range of that.

Speaker Change: And so we think we'll call some of that back in the third quarter. So that 15 to 20 still holds.

Jason Clemens: For CGMs, you know, as discussed, we came in line with our full-year guidance expectation of flat, as we knew we had to overcome some barrier policy shifts earlier in the year. Based on what we're seeing today, we're feeling pretty good about the back half on CGMs. We have noted a small handful of shifts, you know, in the last month or two, but, encouragingly, as mentioned in our prepared remarks, some of this actually went the other way. For example, there was a state Medicaid plan that switched to 100% pharmacy reimbursement a couple of years ago. And effective July 1st of this year, they've reopened the DME benefit.

Speaker Change: If I had to say today, probably closer to the 20, but we're still within range to that.

Speaker Change: For CGMs, as discussed, we came in line with our full year guidance expectation of flat.

Speaker Change: As we knew we had to overcome some barrier policy shifts earlier in the year.

Speaker Change: Based on what we're seeing today, we're feeling pretty good with the back half on CGM. We have noted a small handful of shifts.

Speaker Change: In the last month or two, but encouragingly, as mentioned in our prepared remarks, some of this actually went the other way. There was a state Medicaid plan that had switched to a 100% pharmacy reimbursement a couple of years ago.

Speaker Change: Effective July 1st of this year, they've reopened the DMV benefits, so it's essentially a dual channel.

Jason Clemens: So it's essentially a dual-channel reimbursement, which we believe is an indication of the value that DME drives versus a pharmacy. It's that constant touch. It's adherence. It's the relationship with the patient. It's access to the data that's getting generated from the CGMs and where we have patient consent. We're monitoring. I mean, after all, a measurement for A1C every six months by a blood test is a triple-weighted STARS measure. And look, these things matter to payers.

Speaker Change: reimbursement which you know we believe is an indication of the value that DME drives versus a pharmacy. It's that constant touch, it's the adherence, it's the relationship with the patient, it's the access to the data that's getting generated from the CGMs and where we have patient consent we're monitoring. I mean after all

Speaker Change: A measurement for A1C every six months by a blood test is triple weighted.

Jason Clemens: And so we're continuing to do work to help educate the market, advise on that dynamic, and, of course, be agnostic in our diabetes products regarding how we get reimbursed. We want to take care of as many patients as possible because we think we do a great job with

Speaker Change: Stars Measure. And look, these things matter to payers. And so we're continuing to do work to

Speaker Change: Help educate the market, advise on that dynamic, and of course be agnostic in our diabetes products regarding how we get reimbursed. We want to take care of as many patients as possible because we think we do a great job of it.

Jack Slevin: Got it. Really helpful. Thanks again and congrats.

Speaker Change: Got it. Really helpful. Thanks again and congrats.

Richard Close: Our next question will come from Richard Close. Please can I call our genuity? Please go ahead. Yes, thanks for the questions. Who then welcome. Jason, maybe just diving deeper on the diabetes side. Obviously, Dexcom had some mixed results there. I guess, you know, if you could put it in context, you know, how you're thinking in terms of how the second quarter performed and the second half. Was there anything surprising in their commentary on the market versus what you have baked into your assumption? Richard, thanks for the question. I wouldn't say that there's anything surprising to us from Dexcom's comments.

Operator: Our next question will come from Richard Close with Canaccord Genuity. Please go ahead.

Speaker Change: Our next question will come from Richard Close with Canaccord Genuity. Please go ahead.

Richard Close: Yes, thanks for the questions. Suzanne, welcome.

Richard Close: Yes, thanks for the questions. Suzanne, welcome. Jason, maybe just diving deeper on the diabetes side. Obviously, Dexcom had some mixed results there. I guess, you know, if you could put it in context.

Richard Close: Jason, maybe just diving deeper on the diabetes side. Obviously, Dexcom had some mixed results there. I guess, you know, if you could put in context how you're thinking in terms of how the second quarter performed and the second half. Was there anything surprising in their commentary on the market versus what you have baked in to your assumptions?

Speaker Change: You know, how you're thinking in terms of how the second quarter performed and the second half. Was there anything surprising in their commentary on the market versus what you have baked in to your assumptions?

Jason Clemens: Richard, thanks for the question. I wouldn't say that there's anything surprising to us from Dexcom's comments. You know, I'd say that if anything was surprising, it was a reference to relationships with DME operators. Like, for us, I mean, we've maintained a long-standing and, I think, a very solid, open relationship with Dexcom, so that, to us, doesn't apply.

Speaker Change: Richard, thanks for the question. I wouldn't say that there's anything surprising to us.

Jason Clemens: You know, I'd say that if anything was surprising, it was a reference to relationships with DME operators like for us. I mean, we've maintained a long-standing and I think very solid open relationship with Dexcom.

Speaker Change: from Dexcom's comments.

Speaker Change: I'd say that if anything was surprising, it was a reference to relationships with DME operators. Like for us, I mean, we've maintained a long-standing and I think very solid open relationship with Dexcom, so that to us just...

Jason Clemens: So, that that's us just, you know, it doesn't apply. Regarding their, you know, their down guide revenue changes. I mean, again, for us, like, you know, operating within this DME reimbursement channel, having very deep visibility now in the pharmacy channel and shifts as they occur. I can't say we had that a year ago or about a year and a half ago, but we did invest in a fair amount of detection, kind of for looking detection capabilities. And so, you know, at this stage, it feels like a slow moving but dynamic channel environment. And so, you know, based on the information we have today, we're feeling good with our full year gap.

Jason Clemens: Regarding their DOM guide and revenue changes, again, for us, operating within this DME reimbursement channel, having very deep visibility now in the pharmacy channel and shifts as they occur. Can't say we had that a year ago or about a year-and-a-half ago, but we did invest in a fair amount of detection, and forward-looking detection capabilities. At this stage, to us, it feels like a slow-moving but dynamic channel environment. Based on the information we have today, we're feeling good about our full-year guide.

Speaker Change: It doesn't apply. Regarding their DOM guide and revenue changes, I mean, again, for us, operating within this DME reimbursement channel, having very deep visibility now,

Speaker Change: in the pharmacy channel and shifts as they occur. Can't say we had that a year ago or about a year and a half ago, but we did invest in a fair amount of detection, kind of forward-looking detection capabilities. And so, you know, at this stage it's to us.

Speaker Change: It feels like a slow-moving but dynamic channel environment. And so, you know, based on the information we have today, we're feeling good with our full-year guide.

Jason Clemens: Okay, I appreciate that. And then maybe she's in. If you could talk a little bit about the sales teams, you made some comments there. I think in your delivering better organic growth. Can you just provide a little bit more details on any changes to the sales teams and adding to national accounts? That would be helpful. Thank you. Sure. Thank you. Sales teams. One of my favorite topics. So today, we have several different sales teams, and we go to, we, we go to our customers and several different channels. And, you know, again, it's only been a little over 60 days.

Richard Close: Okay, I appreciate that. And then maybe Suzanne, if you could talk a little bit about the sales teams. You made some comments there. I think in your delivering better organic growth, can you just provide a little bit more details on any changes to the sales teams or adding to national accounts?

Speaker Change: Okay, I appreciate that. And then maybe, Suzanne, if you could talk a little bit about the sales teams. You made some comments there, I think, in your delivering better organic growth. Can you just...

Speaker Change: provide a little bit more details on any changes to the sales teams and adding to national accounts that would be helpful. Thank you.

Suzanne Foster: That would be helpful. Thank you. Sure, thank you. Sales Team is one of my favorite

Suzanne Foster: Sure. Thank you.

Suzanne Foster: Sales teams is one of my favorite topics. So today, we have several different sales teams, and we go to our customers through several different channels. And, you know, again, it's only been a little over 60 days, so I want to preface this by saying I haven't completely dug in, but I do have a hypothesis that if we further align our commercial organization so that we're looking at it more holistically, and what I mean by that is all of our referral sources.

Suzanne Foster: Sure. Thank you. Sales teams is one of my favorite topics.

Suzanne Foster: So today we have several different sales teams and we go to...

Suzanne Foster: We go to our customers in several different channels and, you know, again, it's only been a little over 60 days, so I want to preface this with I haven't

Suzanne Foster: So I want to prep this with, I haven't completely dug in, but I do have a hypothesis that we, if we further align our commercial organization so that we're looking at it more holistically. And what I mean by that is all of our referral sources, so all the different providers that refer to us, the big national accounts, and the payers. If we look at that as in a holistic way around what are we trying to accomplish? And we align the teams under that strategy, then maybe there's more to be had. So, for example, we know that a lot of patients have multiple comorbidities.

Speaker Change: Completely dug in, but I do have a hypothesis.

Speaker Change: That if we further align our commercial organization so that we're looking at it more holistically, and what I mean by that is

Suzanne Foster: So all the different providers that refer to us, the big national accounts, and the payers, if we look at that in a holistic way around what we are trying to accomplish, and we align the teams under that strategy, then maybe there's more to be had. So, for example, we know that a lot of patients have multiple comorbidities, and the hypothesis on the table is: Do we look at a different way of going to market where we're capturing the referral both for the diabetic patient and who may also have a sleep disorder? And so that's work to be done in this next quarter. But the going in hypothesis is that we can do more with our current sales organization.

Suzanne Foster: All of our referral sources, so all the different providers that refer to us, the big national accounts, and the payers, if we look at that in a holistic way around what are we trying to accomplish,

Suzanne Foster: And we align the teams under that strategy, then maybe there's more to be had. So, for example, we know that a lot of patients have multiple comorbidities, and the hypothesis on the table is

Suzanne Foster: And the hypothesis on the table is. Do we look at a different way of going to market where we're capturing the referral both for the diabetic patient and who also may have a sleep disorder. And so that's work to be done in this next quarter, but the high going in hypothesis is that we can we can do more with our current sales organization. Okay, thank you.

Speaker Change: Do we look at a different way of going to market where we're capturing the referral both for the diabetic patient and who also may have a sleep disorder?

Speaker Change: And so that's work to be done in this next quarter, but the going-in hypothesis is that we can do more with our current sales organization.

Speaker Change: Okay, thank you.

Colin Clark: Our next question will be come from Matthew Blackman with People. Please go ahead. Hi, this is Colin on from that. Um, we saw a couple dynamics play out this quarter from both the pump and CGM companies that have already reported. We're still trying to fully wrap our head around it. But it sounds like things are okay on the CGM side. I'm curious on the pump side. Things are now tracking one line with your original expectations. Last quarter, you saw the pharmacy mix for only five. Five actually exceed your DME pump mix, your durable pump mix for the first time.

Operator: Our next question will come from Matthew Blackman with Siebel.

Speaker Change: Our next question will come from Matthew Blackman with CEPL.

Colin Clark: Hi, this is Colin on for Matt. Um, we saw a couple dynamics play out this quarter from both the pump and CGM companies that have already reported. We're still trying to fully wrap our heads around it, but it sounds like things are okay on the CGM side. I'm curious on the pump side, things are now tracking more in line with your original expectations. Last quarter, you saw the pharmacy mix for Omnipod 5 actually exceed your DME pump mix, your durable pump mix for the first time. Did that continue this quarter, and with the potential backlog of patients looking to adopt the new integrations, do you expect that to continue in the second half?

Matthew: Please go ahead.

Colin: Hi, this is Colin on for Matt. We saw a couple dynamics play out this quarter from both the pump and CGM companies that have already reported. We're still trying to fully wrap our head around it, but it sounds like things are okay on the CGM side. I'm curious on the pump side, things are now tracking more in line with your original expectations.

Speaker Change: Last quarter you saw the pharmacy mix for Omnipod 5 actually exceed your DME pump mix, your durable pump mix, for the first time. Did that continue this quarter?

Jason Clemens: Did that continue this quarter and with the potential backlog of patients looking to adopt the new integrations? Do you expect that to continue in the second half?

Speaker Change: with the potential backup of patients looking to adopt the new integrations. Do you expect that to continue in the second half?

Jason Clemens: Hey, Collins, Jason. Good question. We did not see the strength in OP five setups in the second quarter that we saw in the first and in the fourth quarter last year. You know, we're very confident that that is related to just a delay: patients delaying, provider delaying on account of the CGM integrations. Argylline numbers are up quite significantly for OP five. And so, you know, hard to say if that'll be a trend or make a trend, but, you know, we are confident that it's a climate issue. Great.

Jason Clemens: Hey, Colin, it's Jason. Good question. We did not see the strength in OP5 setups in the second quarter that we saw in the first and fourth quarters of last year. But you know, we're very confident that that is related to just a delay, patients delaying, and providers delaying on account of the CGM integrations. Our July numbers are up quite significantly for OP5. And so, you know, hard to say if that'll be a trend or not, but we are confident that it's a timing issue.

Speaker Change: Hey Colin, it's Jason. Good question.

Speaker Change: We did not see the strength in OP5 setups in the second quarter that we saw in the first and fourth quarter of last year. You know, we're very confident that that is related to just a delay, patients delaying, providers delaying on account of the CGM.

Speaker Change: Integrations. Our July numbers are up quite significantly for for OB-5 and so you know hard to say if that'll be a trend or make a trend but you know we are confident that it's a timing issue.

Colin Clark: And then really quickly on the sleep business, you mentioned last quarter the potential for some supply constraints. It really didn't seem to play out in this quarter's results, but just wanted to confirm that that's not a worry going forward. Yep, good question, Colin. Nope, we're feeling good.

Jason Clemens: And then really quickly on the sleep business, you mentioned last quarter the potential for some supply constraints. It really didn't seem to play out in this quarter's results. But just wanted to confirm that that's not a worry going forward for the rest of the year. Thank you. Yep. Good question, Collins. We're feeling good on supply across all products, as we stand here today. You know, through April and early May, so we reported on about that second week in May, we were absolutely experiencing a slowdown from some specific sleep, resupply products. You know, that did get better over the course of the quarter, and we ended up coming in right in line with what we expected.

Speaker Change: Great. And then really quickly on the sleep business, you mentioned last quarter the potential for some supply constraints. It really didn't seem to play out in this quarter's results, but just wanted to confirm that that's not a worry going forward for the rest of the year. Thank you.

Jason Clemens: Yeah, good question, Colin. No, we're feeling good on supply across all products as we stand here today. You know, through April and early May, so we reported on about that second week of May, we were absolutely experiencing slowdown from some specific sleep resupply products. But, that did get better over the course of the quarter, and we ended up coming in right in line with what we expected. That's not a spillover in any way for the rest of the year, and as we stand here today, we've got the products that we need to take care of our patients.

Speaker Change: Yep, good question, Colin. No, we're feeling good on supply across all products as we stand here today. You know, through April and early May, so we reported on about that second week of May, we were absolutely experiencing slowdown from some specific

Speaker Change: Sleep Resupply products. You know that did get better over the course of the quarter and we ended up coming in right in line with what we expected. That's not a spillover in any way for the rest of the year and as we stand here today we've got the products that we need to take care of our patient demand.

Jason Clemens: That's not a spillover in any way for the rest of the year. And as we stand here today, we've got the products that we need to take care of our patient demand. Great. Thank you.

Speaker Change: Thank you.

Eric Coldwell: Our next question will come from Eric Coldwell with Beard. Please go ahead. Thanks. I have a few hopefully not too long on the sleep, Jason, that you just responded to. I think the options that were laid out if those previous constraints continued were that you could just wait and then hopefully the manufacturer of the shipping would clear up. You could shift to alternative suppliers, or you could. And perhaps, you know, shift your strategy on getting supply into the market. You know, maybe, I think at one point even mentioned running a plane and flying stuff over.

Operator: Our next question will come from Eric Coldwell with Baird.

Speaker Change: Our next question will come from Eric Coldwell with Baird. Please go ahead.

Eric Coldwell: Thanks. I have a few, hopefully not too long.

Eric Caldwell: Thanks. I have a few, hopefully not too long. On the sleep, Jason, that you just responded to, I think the options that were laid out, if those previous constraints continued, were that you could just wait and then hopefully the manufacturer of the shipping would clear up.

Eric Coldwell: On the sleep, Jason, that you just responded to, I think the options that were laid out, if those previous constraints continued, were that you could just wait, and then hopefully, the manufacturer of the shipping would clear, you could shift to alternative suppliers, or you could Perhaps, you know, shift your strategy on getting supply into the market. You know, maybe I think at one point even mentioned renting a plane and flying stuff over. So, I'm just curious; what was the final tally? Was it just the manufacturing question that got me? got the problem resolved through the shipping lanes cleared, but what actually changed in the second half of the quarter?

Speaker Change: Perhaps, you know, shift your strategy on getting supply into the market. You know, maybe I think at one point even mentioned renting a plane and flying stuff over. So I'm just curious, what was the final tally? Was it just the manufacturing question got?

Jason Clemens: So, I'm just curious: what was the final tally? Was it just the manufacturer in question, got the problem resolved through the shipping lanes cleared? What actually changed in the second half of the quarter? Yeah, good question. We did not have the pool, any levers operationally to deliver on the quarter, as related to that item. The manufacturer supply chain did come through the course. Okay, on the, on sleep, I think you said patient sleep starts were up over 5%, and hopefully that's the right number that I got. If so, that's, that's, that's, that's, that's sequential versus prior.

Speaker Change: got the problem resolved through the shipping lanes cleared. What actually changed in the second half of the quarter? Unknown Speaker

Jason Clemens: Yeah, good question. We did not have to pull any levers operationally to deliver on the quarter. As it related to that item, the manufacturer's supply chain

Speaker Change: Yeah, good question. We did not have to pull any levers operationally to deliver on the quarter as it related to that item. The manufacturer supply chain did come through for us.

Eric Coldwell: Okay, on sleep, I think you said patient sleep starts were up over 5%, and hopefully, that's the right number that I got. If so, that's pretty good. See, Eric, that's sequential versus prior year. So Q over Q. Yes. Yeah, okay.

Speaker Change: Okay, on sleep, I think you said patient sleep starts were up over 5%.

Speaker Change: and hopefully that's the right number that I got. If so, that's that's pretty good. Eric, that's sequential versus prior year.

Jason Clemens: So, Q over Q. Yeah, okay. So, no change in your overall view on equipment rental run rate this year, given, you know, working through the prior period supply constraints and then the patient pack log that came back in. Yeah, a year plus ago, you have a top component equipment rental that what you saw this quarter doesn't change your view on equipment rental for the full year then.

Eric Coldwell: So, no change in your overall view on equipment rental run rate this year given, you know, working through the prior period supply constraints and then the patient pack log that came back in a year plus ago. You have a tough comp on equipment rental. What you saw this quarter doesn't change your view on equipment rental for the full year.

Speaker Change: So Q over Q.

Speaker Change: Yeah.

Eric Caldwell: Yeah, okay. So, no change in your overall view on equipment rental run rate this year, given, you know, working through.

Speaker Change: the prior period supply constraints and then the patient backlog that came back in a year plus ago, you have a tough comp on equipment rental, that what you saw this quarter doesn't change your view on equipment rental for the full year then.

Jason Clemens: If anything changed, it was a modest improvement in Outlook. You know, our census for rental properties bottomed in February. And of course, as a reminder, that was related to, you know, healthy starts in the first quarter, but, you know, record starts a year ago. And as those patients, as we start getting paid for that rental device 13 months later. Right? So it was really that phenomenon, but we bottomed in February, and we have continued to increase that census since. So we're feeling very solid on the rental line for sleep. You know, if anything, you know, we're feeling a little bit better than we did a quarter ago.

Jason Clemens: If anything change, it's a modest improvement in outlook. You know, our census for rental bottomed in February. And, and of course, as a reminder, that was related to, you know, healthy starts in the first quarter, but, you know, record starts a year ago and as those patients, as we start getting paid for that rental device, they're cumulative, right? So it was really that phenomenon, but we bonded in February and we have continued to increase that census since, so we're feeling very solid on the rental on for sleep. You know, if anything, you know, we'll be on a little bit better than we did a quarter ago.

Speaker Change: If anything changes, it's a modest improvement in outlook.

Speaker Change: You know, our census for rental bottomed in February .

Speaker Change: And of course, as a reminder, that was related to, you know, healthy starts.

Eric Caldwell: in the first quarter.

Speaker Change: But, you know, record starts a year ago, and as those patients, as we start getting paid for that, run the device 13 months later, right? So, it was really that.

Speaker Change: Phenomenon, but we bonded in February , and we have continued to.

Speaker Change: increase that census since. So we're feeling very solid on the rental line for sleep. You know, if anything, you know, we're feeling a little bit better than we did a quarter ago.

Eric Coldwell: One or two more quick ones, if you will. First off, you maintained EBITDA guidance at the midpoint, but you also mentioned heightened investments. I was hoping you could walk through with some of the mechanics there selling the business.

Jason Clemens: One or two more quick ones, if you will. First off, you maintained EBITDA guidance at the midpoint, but you also mentioned heightened investments. I was hoping you could walk through some of the mechanics there, selling a business, some other, of course, you know, progression and some of your other lines. Now, you have some heightened investments you've called out. How does this all, what are the, what are the pluses and minuses in that analysis, and maybe just how much is the incremental investment that was highlighted. Yes, sure, sure thing Eric. I might start on the disposition; you know, the guidance change implies 15 million of revenue for the rest of the year and zero dollar even, in fact, for the rest of the year.

Speaker Change: One or two more quick ones, if you will. First off, you maintained EBITDA guidance at the midpoint, but you also mentioned heightened investments. I was hoping you could walk through.

Speaker Change: Some of the mechanics there, selling a business.

Jason Clemens: Some other obvious progression in some of your other lines. Now you have some heightened investments you've called out. How does this all, what are the, what are the pluses and minuses in that analysis? And maybe just how much is the incremental investment that was highlighted?

Speaker Change: some other obvious, you know, progression in some of your other lines. Now you have some heightened investments you've called out. How does this all, what are the, what are the pluses and minuses in that analysis? And maybe just how much is the incremental investment that was highlighted? Unknown Speaker

Jason Clemens: Yeah, sure thing, Eric. I might start on the disposition. You know, the guidance change implies $15 million of revenue for the rest of the year and $0, in fact, for the rest of the year. You know, for us, again, these were kind of collections of businesses acquired over years. We didn't maintain a product leader and a distinct focus on growing it or driving efficiencies in that business.

Speaker Change: Yeah, sure thing, Eric. I might start on the disposition, you know, the guidance change implies $15 million of revenue.

Speaker Change: for the rest of the year, and Zero Dollar, even in fact, for the rest of the year.

Jason Clemens: You know, for us, at the beginning, these were kind of collections of businesses, quieter over years. We didn't mean of, you know, we didn't maintain a product leader and a distinct focus on growing it or driving efficiencies in that business. We think that national sustainability is going to be a terrific owner. For that business, we think they're going to take very good care of that patients. We think that, you know, they, they will find under their management and their focus, you know, improvement and growth improvement and operating margin. I mean, I mean, I mean, that business will be in good hands. We, we believe.

Speaker Change: You know, for us, again, these were kind of collections of businesses acquired over years.

Speaker Change: We didn't maintain like a product leader and a distinct focus on growing it or...

Jason Clemens: We think that National City Mobility is going to be a terrific owner for that business. We think they're going to take very good care of that patience. We think that, you know, under their management and their focus, improvement in growth, improvement in operating margin. I mean, that business will be in good hands, we believe. So, that's the first piece.

Speaker Change: driving efficiencies in that business.

Speaker Change: We think that National City Mobility is going to be a terrific owner.

Speaker Change: for that business. We think they're going to take very good care of that patient. We think that you know they they will find under their

Speaker Change: Management and their focus, you know, improvement in growth, improvement in operating margin. I mean, I mean, I mean that business will be in good hands, we believe. So that's the first piece. So on the even line, no, no impact for the full year.

Jason Clemens: So, on the even line, no impact for the full year. Now, in terms of the third quarter and Suzanne's remarks, I mean, we have made several key investments, some just a week or two after Suzanne arrived. And so, I frame that as a couple million in people within the third quarter, and a couple million in technology within the third quarter. You know, in the fourth quarter, we have to counteract some of this and make sure we deliver on our full year guide.

Jason Clemens: So that's the first piece, so on the even line, no, no impact for the full year. Now, in terms of the third quarter in Suzanne's remarks, we have made several key investments. Some just a week or two after Suzanne arrived, and so I frame that as a couple million in people within the third quarter, a couple million in technology. Within the third quarter, you know, in the fourth quarter, we have to counteract some of this and to make sure we deliver our full year guide. We've got various cost-out streams that activated two weeks ago. And so we'll get a little bit of that back in Q3, but you know, the predominance we expect to get back in Q4.

Speaker Change: Now, in terms of the third quarter and Suzanne's remarks, we have made several key investments.

Speaker Change: Some just a week or two after Suzanna arrived.

Suzanne Foster: And so I frame that as a couple million in people within the third quarter.

Speaker Change: A couple million in technology within the third quarter. You know, in the fourth quarter, we have to counteract some of this and to make sure we deliver on our four-year guide.

Jason Clemens: We've got various cost out streams that activated two weeks ago. And so, we'll get a little bit of that back in Q3, but, you know, the predominance we expect to get back in Q4, you know, so think of the Q3 as well as Q4 as a recurring expense. So, it's left pocket, right pocket. I mean, we feel very good about delivering on the full year numbers. All right

Speaker Change: We've got various cost out streams that activated two weeks ago.

Speaker Change: We'll get a little bit of that back in Q3, but the predominance we expect to get back in Q4. Think of the Q3 as well as Q4 as recurring expense, so it's left pocket, right pocket. We feel very good about delivering on the full-year numbers.

Jason Clemens: So I think as a Q3, as well as Q4 is, you know, recurring expense, so it's less pocket right pocket. I mean, we feel very good about delivering on the full year. All right, great.

Eric Coldwell: All right. Great. And if I could get one last one, how much diabetes revenue is going through pharmacy now?

Jason Clemens: And if I could get one last one, how much diabetes revenue is going through pharmacy now? We have maintained it at just a touch over 5%. It has grown very slightly against the first quarter, but of course we are continuing to run new markets with new sales people to sell and distribute in the pharmacy. And so we do expect that number to grow.

Speaker Change: All right, great. And if I could get one last one, how much diabetes revenue is going through pharmacy now?

Jason Clemens: We have maintained it at just a touch over 5%. It has grown very slightly against the first quarter, but of course, we are continuing to ramp up new markets with new salespeople to sell and distribute in the pharmacy, and so we do expect that number to grow.

Speaker Change: We have maintained it at just a touch over 5%. It has grown very slightly against the first quarter, but of course we are continuing to ramp new markets with new salespeople to sell and distribute in the pharmacy, and so we do expect that number to grow.

Unknown Executive: Thanks for all the questions, and congrats on a smooth study quarter here. Thanks, guys.

Eric Coldwell: Thanks for all the questions and congrats on a smooth, steady quarter here. Thanks, guys. Thanks, Eric.

Speaker Change: Thanks for all the questions and congrats on a smooth, steady quarter here. Thanks, guys. Thanks, Eric.

Unknown Executive: All right, next question. We'll come from PETO triggering with Deutsche Bank. Please go ahead. Hi there. You've got a Kirin Ryan on for PETO. Thanks for taking the questions. For thinking about 4Q revenue, usually diabetes is strong due to deductibles being hit and pulled forward from the first quarter.

Operator: Our next question will come from Peter Chickering with Deutsche Bank. Please go ahead.

Speaker Change: Our next question will come from Peter Chickering with Deutsche Bank. Please go ahead.

Operator: Hi there, you've got Kieran Ryan on for PETA. Thanks for taking the questions. When thinking about 4-2 revenue, usually diabetes is strong due to deductibles being hit and pulled forward from the first quarter. With diabetes pretty much flat year to date, do you still assume that seasonality in 4-2 and is there anything that you'd call out that might make that change?

Speaker Change: Hi there, you've got a Kieran Ryan on for PETA. Thanks for taking the questions.

Kieran Ryan: For thinking about 4Q revenue, usually diabetes is strong due to deductibles being hit and pulled forward from the first quarter.

Unknown Executive: With diabetes pretty much flat here today, do you still assume that these now to be in 4Q and is there anything that you'd call out that might make that change? Yeah, Karen, we absolutely expect a big pop sequentially from Q3 to Q4 from a percentage basis, pretty similar to what we saw last year. Got it. Thanks.

Speaker Change: With diabetes pretty much flat year-to-date, do you still assume that seasonality imports you and is there anything that you'd call out that might make that change?

Kieran Ryan: Yeah, Karen, we absolutely expect a big pop sequentially from Q3 to Q4 on a percentage basis, pretty similar to what we saw last year.

Kieran Ryan: Yeah, Karen, we absolutely expect a big pop sequentially from Q3 to Q4 from a percentage basis pretty similar to what we saw last year.

Kieran Ryan: Got it. Thanks. And then I was just wondering how we should think about the seasonality of the capitated revenues. I was just a little curious why 2Q was down just a touch from first 1Q. Thanks a lot. Yeah, sure. You're going to see cap revenue.

Unknown Executive: And then just quick follow up. I was just wondering how we should think on the seasonality of the capitated revenues. I was just a little curious why 2Q was down just to just a touch first one. Thank you. Yeah, sure. You're going to see cap revenue right in that kind of $30 million ballpark, you know, touch our essentially the cap payment works as the number, the membership number that's set at the beginning of the year through the payers that we're cap with. And then, over the course of the year, certainly as there's changes to plan design, you know, there could be life events, people changing players, things like that, you know, it will bounce around a little bit, but we expect it to be in a very tight band.

Speaker Change: I was just wondering how we should think on the seasonality of the capitated revenues.

Speaker Change: I'm just a little curious why 2Q is down just a touch versus 1Q. Thanks a lot. Yeah, sure. You're going to see cap revenue right in that kind of $30 million ballpark, you know, touch hour.

Jason Clemens: Yeah, sure. You're going to see cap revenue right away in that kind of $30 million ballpark. Touch it. Essentially, the cap payment works as the number, the membership number, that's set at the beginning of the year through the payers that we're capped with. And then over the course of the year, certainly as there are changes to plan design, there could be life events, people change employers, things like that. It will bounce around a little bit, but we expect it to be in a very tight band. So up a million, down a million, from one quarter to the next is what you should expect going forward.

Speaker Change: Essentially, the cap payment works as the membership number that's set at the beginning of the year through the payers that we're capped with.

Speaker Change: And then over the course of the year, certainly as there's changes to plan design, you know, there could be life events, people change employers, things like that, you know, it will bounce around a little bit, but we expect it to be in a very tight band.

Unknown Executive: So, up a million, down a million from one quarter to the next is what you should expect.

Speaker Change: So up a million, down a million, from one quarter to the next is what you should expect going forward.

Unknown Executive: Thank you.

Joanna Gajuk: And our last question will come from Joanna Gojak with Bank of America. Please go ahead. Hi, good morning. Thank you so much for taking the questions here. So I guess a restaurant revenue there. I guess sounds like you've restated some of your numbers here, especially for one. So I guess when I look at that number, Q over Q revenues up at one percent. So, yeah, what's driving this, I guess, change in that revenue versus how you reported in Q one. And also, how are you thinking about the growth for the year for this service line?

Speaker Change: Thank you.

Operator: And our last question will come from Joanna Gajuk with Bank of America. Please go ahead.

Speaker Change: And our last question will come from Joanna Gajuk with Bank of America. Please go ahead.

Joanna Gajuk: Hi, good morning. Thank you so much for taking the questions here. So on, I guess, the restorative revenue there, it sounds like you've restated some of your numbers here, especially for Q1. So I guess when I look at that number, Q over Q, revenue is up like 1%. So yeah, what's driving this, I guess, change in that revenue versus how you reported in Q1? And also, how are you thinking about the growth for the year for this service line?

Joanna Gojek: Hi, good morning. Thank you so much for taking the questions here. So on, I guess, the restoratory revenue there,

Joanna Gojek: It sounds like you've restated some of your numbers here, so I guess when I look at that number, Q over Q, revenue is up like 1%.

Speaker Change: So, yeah, what's driving this, I guess, change in the revenue versus how you reported in Q1? And also, how are you thinking about the growth for the year for this service line?

Jason Clemens: Yeah, Joanna, firstly, I would provide a perspective on I think you said the word restatement. So just to clarify, nothing was restated. We did add disclosure detail in the second quarter to break out the capitated revenue by product line. You know, we thought that made good sense. We've heard some feedback from the street that, you know, that would be helpful data. And so, we applied with that. And so you can see now; you can look at the data, both goals. You can look at it on a clear cap versus rental and sales. We can also look across the product category, regardless of the nature of that revenue.

Jason Clemens: Yeah, Joanna, firstly, I would provide a perspective on, I think you said the word restatement. So just to clarify, nothing was restated.

Speaker Change: Yeah, Joanna, firstly, I would provide a perspective on, I think you said the word restatement, so just to clarify, nothing was restated.

Jason Clemens: We did add disclosure detail in the second quarter to break out the capitated revenue by product line. You know, we thought that made good sense. We've heard some feedback from the street that, you know, that would be helpful data. And so we obliged with that.

Speaker Change: We did add disclosure detail in the second quarter to break out the capitated revenue by product line.

Speaker Change: You know, we thought that made good sense. We've heard some feedback from the street.

Jason Clemens: And so you can see now, you can look at the data both ways. You can look at it, I don't care about the cap versus rental and sales. But you can also look across the product category, regardless of the nature of that revenue, if it's rental or sales or capitated. And so it's just providing that extra disclosure in the second.

Speaker Change: That, you know, that would be helpful data. And so we obliged with that. And so you can see now, we can look at the data both ways.

Speaker Change: You can look at it, I don't care, cap versus rental and sales, but you can also look across the product category regardless of the nature of that revenue, if it's rental or sales or capitated. And so, it's just providing that extra disclosure in the second quarter.

Jason Clemens: It's rental or sales or capitated. And so it's just providing that extra disclosure in the second quarter.

Jason Clemens: Now, in terms of growth, I mean, we're thrilled with Restatory. I mean, restatory continues to outperform. Now, some of that is, you know, humanity. And, you know, we've just taken on more patients in respiratory as a result of that contract. But most of it is really because of new sales. I mean, our market share data, this quarter for the first time shows that we've overcome everybody in market share for restatory. And so, you know, we're very confident. We're taking share across those product categories, and it includes oxygen as well as non-advents of Italy. Okay, great.

Jason Clemens: Now, in terms of growth, I mean, we're thrilled with Respiratory. I mean, Respiratory continues to outperform. Now, some of that is, you know, Humana. And, you know, we've just taken on more patients in Respiratory as a result of that contract. But most of it is really because of new sales. I mean, our market share data this quarter, for the first time, shows that we've overcome everybody in market share for Respiratory. And so, you know, we're very confident we're taking share across those product categories. That includes oxygen as well as non-invasive ventilation. Okay.

Speaker Change: Now in terms of growth, I mean, we're thrilled with respiratory. I mean, respiratory continues to outperform. Now some of that is

Speaker Change: You know Humana and you know we've just taken on more patients in respiratory as a result of that contract.

Speaker Change: But most of it is really because of new sales.

Speaker Change: I mean, our market share data this quarter for the first time shows that we've overcome everybody in market share for respiratory. And so, you know, we're very confident we're taking share across those product categories that includes oxygen as well as non-invasive ventilation.

Joanna Gajuk: Okay, great. Now, this is my follow-up.

Jason Clemens: No, this is my own follow-up. Okay, so the market's sugar gains and Humana contract is helping you. So I guess on that end, as you mentioned, the Humana contract, because I know last quarter, there was some discussion maybe, you know, additional cabaret contract. I didn't hear this being, I guess, part of this strategy. So I don't know if this is just kind of there, or, you know, should we expect more or less commentary on additional cabaret contract. Should we expect additional commentary on capitated? Well, I think that, you know, we've offered that Humana certainly is the predominance of that capitated revenue.

Joanna Gajuk: Okay, so market share gains and the humana contract are helping you. So I guess on that end, since you mentioned the humana contract, because I know last quarter there was some discussion about maybe, you know, additional capital contracts. I didn't hear this being, I guess, part of the strategy. So I don't know if this is just kind of there, or, you know, should we expect more or less? Commentary on Additional Copyright Contracts

Speaker Change: Okay, great. Now, this is my follow-up. Okay, so market share gains and humana contract is helping you. So I guess on that end,

Speaker Change: As you mentioned, the Humana contract, because I know last quarter, there was some discussion maybe, you know, additional cabinet contracts. I didn't hear this being, I guess, part of the strategy. So I don't know if this is just kind of there or, you know, should we expect more or less.

Speaker Change: Commentary on additional cathodic contracts.

Jason Clemens: Should we expect additional commentary on capitated? Well, I think that, you know, we've offered that Humana certainly is the predominance of that capitated revenue. You know, it's 33 states, it's a lot of patients, well over a million patients. You know, for a number of years, we've maintained capitated business with other payers. A lot of that's kind of a West Coast focus, as you'd expect. You know, we do maintain a pipeline of incremental cap deals that we're working on. But you know, none of that's included in guidance and, you know, not really much to discuss until or unless we secure additional cap deals. Does that answer your question?

Speaker Change: Should we expect additional commentary on capitated? Well, I think that, you know, we've offered that Humana certainly is the predominance of that capitated revenue. You know, it's 33 states. It's a lot of patients, well over a million patients.

Jason Clemens: You know, it's 33 states. It's a lot of patients, with well over a million patients. You know, for a number of years, we've maintained capitated business with other payers. A lot of that kind of West Coast focus, as you can expect. You know, we do maintain a pipeline of incremental cap deals that we're working, but you know, that's included in guidance and, you know, not really much to discuss until or unless we secure additional cap deals. Does that answer your question? Yeah, and I was just thinking about like any additional future contracts, whether this is part of the strategy to trying to get additional ones.

Speaker Change: You know, for a number of years, we've maintained capitated business with other payers, a lot of that kind of West Coast focus, as you'd expect.

Speaker Change: We do maintain a pipeline of incremental cap deals that we're working, but none of that's included in guidance, and not really much to discuss until or unless we secure additional cap deals. Does that answer your question?

Joanna Gajuk: Yeah, and I was just thinking about any additional future contracts, whether this is part of the strategy to try to get additional ones. I mean, sounds like you've had some, but they were much smaller. So I was wondering whether this is part of the strategy to pursue additional larger copy data contracts.

Speaker Change: Yeah, and I was just thinking about any additional future contracts, whether this is part of the strategy, too, trying to get additional ones. I mean, it sounds like you've had some, but they were much smaller. So I was wondering whether this is part of the strategy, too, to pursue additional larger copy data contracts.

Jason Clemens: I mean, sounds like you've had some, but they were much smaller. So I was wondering whether this is part of the strategy to pursue additional larger capitated contracts. Yeah, yes, to reiterate our strategy, we do have dedicated sales folks that are focused on cap deals exclusively. You know, they're specialists in designing pricing through obviously big pricing machine cap deals. And so that will continue. We do intend to grow our share of cap deals, and, you know, if or when we close deals, we'll be sure to talk about it.

Jason Clemens: Yes, to reiterate our strategy, we do have dedicated sales folks that are focused on cap deals exclusively. They're specialists in designing and pricing, going through, obviously, a big pricing machine for cap deals. And so that will continue. We do intend to grow our share of cap deals, and if or when we close deals, we'll be sure to talk about it.

Speaker Change: Yes, to reiterate our strategy, we do have dedicated sales folks.

Speaker Change: that are focused on CAP deals exclusively. You know, they're specialists in designing.

Speaker Change: Pricing, goes through obviously a big pricing machine. Cap deals, and so that will continue. We do intend to grow our share of cap deals, and if or when we close deals, we'll be sure to talk about it.

Joanna Gajuk: Great. If I may ask you the very last one on the other business, diabetes, and the comments around, you know, the channel shifts and, I guess, the self-force, but specifically around your ability to participate in the pharmacy channel or, you know, that business going through the pharmacy channel, as in, do you need more pharmacies? Are you kind of using third parties? How are you kind of handling that, you know, I guess revenue stream going through the pharmacy channel? Thank you. Yeah, sure.

Jason Clemens: Great. If I may squeeze a very last one on the other business, the diabetes and the comment there is around, you know, the channel shifts and, I guess, the self force, but specifically around your ability to participate in the pharmacy channel or, you know, that business going to the pharmacy channel as an do you need more pharmacies, are you kind of using third parties, how you kind of handling that. You know, this revenue stream going through the pharmacy channel. Thank you. Yeah, sure. So I offer maybe an example to help bring the point home: Louisiana Medicaid was the state office that switched to a 100% pharmacy reimbursement earlier in 2024.

Speaker Change: Great. If I might say the very last one on the other business, the diabetes and the commentaries around, you know, the channel shifts and I guess the self-force, but specifically around your ability to participate in the pharmacy channel or, you know,

Speaker Change: Do you need more pharmacies? Are you using third parties? How are you handling this revenue stream going through the pharmacy channel? Thank you.

Jason Clemens: Louisiana Medicaid was a state office that switched to 100% pharmacy reimbursement earlier in 2024. You know, we have worked to make that a brick-and-mortar state, so you're required to have a brick-and-mortar pharmacy to distribute. And so we've set that up. You know, we've got licensing in place. We're active. We are actively selling and distributing to Louisiana State Medicaid as well as the MCFs. And so, you know, that's one example of the infrastructure that we're continuing to build and refine.

Jason Clemens: Yeah, sure. So I'd offer an example to help bring the point home.

Speaker Change: Yeah, sure. So I'd offer maybe an example.

Speaker Change: to help bring the point home. Louisiana Medicaid was a state office that switched to a 100% pharmacy reimbursement earlier in 2024.

Jason Clemens: You know, we have worked to that. That's a brick-and-mortar state. So you're part of a brick-and-mortar pharmacy to distribute. And so we've stood that up. You know, we've got licensing in place. We're active where we are actively selling and distributing to Louisiana State Medicaid as well as the MCS. And so, you know, that's, you know, one example of the infrastructure that we're continuing to stand up, and we're fine. So you think that there's actually more that you need, or you think that you have, you know, the, I guess, infrastructure in place to, to service across the country, that product through the pharmacy channel.

Speaker Change: You know, we have worked to, that's a brick-and-mortar state, so you're required to have brick-and-mortar pharmacy to distribute, and so we've stood that up.

Speaker Change: You know, we've got licensing in place, we're active, we are actively selling and distributing to Louisiana State Medicaid as well as the MCFs. And so, you know, that's, you know, one example of the infrastructure that we're continuing to stand up and refine.

Joanna Gajuk: So, are you saying that there's actually more that you need, or are you saying that you have? You know, the, I guess, infrastructure in place to service across the country that product through the pharmacy channel.

Speaker Change: So are you saying that there's actually more that you need or are you saying that you have the, I guess, infrastructure in place to service across the country that product through the pharmacy channel?

Jason Clemens: We expect to continue to grow our pharmacy business.

Jason Clemens: We expect to continue to grow our pharmacy business.

Speaker Change: We expect to continue to grow our pharmacy business.

Unknown Executive: All right. Thank you so much for the question.

Joanna Gajuk: All right, thank you so much for the question.

Speaker Change: All right, thank you so much for the question.

Unknown Executive: I have a snow for their questions.

Operator: And, with no further questions, I'd like to turn the call back to our presenters for any additional or closing remarks.

Suzanne Foster: I'd like to turn the call back to our presenters for any additional in their closing remarks. Thank you. I just want to again, want to reiterate our appreciation for the support of Adaptealth. Hopefully, you can see from today's call that we're moving quickly. But methodically through improving the business and our performance, and we're excited about the future. Thank you all again for joining today. And this will conclude today's conference.

Speaker Change: And with no further questions, I'd like to turn the call back to our presenters for any additional or closing remarks.

Suzanne Foster: Thank you. I just once again want to reiterate our appreciation for the support of Adapthealth. Hopefully, you can see from today's call that we're moving quickly but methodically, improving the business and our performance, and we're excited about the future. Thank you all again for joining us today. And this will conclude today's conference call. Thank you for your participation, and you may now go.

Speaker Change: Thank you. I just once again want to reiterate our appreciation for the support of Adapthealth. Hopefully you can see from today's call that we're moving quickly but methodically through improving the business and our performance and we're excited about the future.

Operator: And this will conclude today's conference. Thank you for your participation, and you may now disconnect.

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Speaker Change: Thank you all again for joining today.

Unknown Executive: Thank you for your participation, and you may now disconnect.

Speaker Change: And this will conclude today's conference. Thank you for your participation and you may now disconnect.

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Speaker Change: [inaudible]