Q1 2025 Option Care Health Inc Earnings Call
Hello, and welcome to the option care Health first quarter 2025 earnings Conference call.
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Nicole Maggio: I would now like to turn the conference over to Nicole Maggio.
Nicole Maggio: I begin.
Nicole Maggio: Good morning. Please note that today's discussion will include certain forward looking statements reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions.
Nicole Maggio: Forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations.
Nicole Maggio: We encourage you to review the information in today's press release as well as in our Form 10-K filed with the SEC regarding specific risks and uncertainties would you don't undertake any duty to update any forward looking statements, except as required by law.
Nicole Maggio: During this call, we'll use non-GAAP financial measures when talking about the company's performance and find natural condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of the website with that I will turn the call over to John Rademacher, President and Chief Executive Officer.
Nicole Maggio: Thanks, Nicole and good morning, everyone.
Nicole Maggio: As you can imagine we are very pleased with the first quarter results and the continued progress we are making in building a unique care model.
Nicole Maggio: Report the needs of our patients.
Nicole Maggio: I wanted to spend a few minutes highlighting the progress we made in the first quarter and then pivot to share some thoughts on the dynamic market conditions, our relationship with health plans our investments in the business and how we think about risk management within option care health.
Nicole Maggio: Mike will go deeper into the financials in a few minutes, but revenue momentum continued in the first quarter with balanced performance across the portfolio.
Nicole Maggio: Breaking down the revenue growth, which grew 16% over the first quarter of last year, we saw a nice acceleration in acute therapies, which grew in the mid teens and our chronic therapies grew in the high teens with solid performance in our rare and orphan and limited distribution therapies.
Nicole Maggio: As for the acute therapy growth, we believe our team executed well to capitalize on improved IV bags supply.
Nicole Maggio: Shifting market dynamics, and our continued investments in capabilities to serve the specific needs of patients and these therapies.
Nicole Maggio: This is where we believe our national scale and local responsiveness places us in a unique position.
Nicole Maggio: Our reliability and dependability allow us to partner more effectively with referral sources and payors.
Nicole Maggio: From the investments we have made into dedicated care transition specialists through our technology enabled and efficient patient admission process through our comprehensive and interconnected national compounding pharmacy network.
Nicole Maggio: We believe we are well positioned to serve patients with complex needs as they are being discharged from the hospital.
Nicole Maggio: The strength of the topline performance across a broad set of therapies, along with disciplined spending drove 13, 7% adjusted EBITDA growth on a year over year basis.
Nicole Maggio: During the quarter, we continued to deepen our partnership and demonstration of value with health plans.
Nicole Maggio: As they are feeling pressure of increased medical loss ratios and higher utilization of care. We believe we provide a valuable solution by providing high quality care at an appropriate cost and a setting in which they are members want to receive it.
Nicole Maggio: Whether it is by helping to safely and effectively transition a patient out of an inpatient setting to help better manage the number of bad days.
Nicole Maggio: Avoiding the need for a patient to have to go to a step down facility or.
Nicole Maggio: We're effectively managing a patient's complex medical needs to help avoid hospital readmissions are costly complications we believe our goals are aligned with our payer partners.
Nicole Maggio: Today, we are working with some of the most innovative health plans to support their site of care initiatives, which we believe positions us to make a meaningful contribution in helping to reduce the total cost of care.
Nicole Maggio: We continue to invest vigorously and are people process technology and facilities.
Nicole Maggio: Since the beginning of 2025, we opened another state of the art compounding pharmacy in Virginia.
Nicole Maggio: Three additional infusion clinics.
Nicole Maggio: Invested further in advanced technology, enablement and expanded our nursing capabilities.
Nicole Maggio: And the advanced technology front, we continue to expand our use of robotic process automation and machine learning to help improve the efficiency and effectiveness of our revenue cycle management process.
We have seen consistent improvement in cash collection velocity resource productivity and spending leverage.
Nicole Maggio: Through our strategic partnership with commentary, we've launched AI embedded intelligence into our patient registration process.
Nicole Maggio: Which is specifically designed to improve the speed and accuracy of Onboarding, new patients and manage the rebirth vacation and reauthorization process for existing patients.
Nicole Maggio: We also continue to invest in our internal nursing capabilities and May even help our Standalone nursing agency.
Nicole Maggio: Nathan Health conducted almost 50000 nursing visits in the quarter, which represents significant growth over the prior year.
Nicole Maggio: Main a key enabler of our ability to effectively take on new patients.
Nicole Maggio: As we announced on the fourth quarter earnings call.
Nicole Maggio: In late January we closed on our acquisition of <unk> plot, a home infusion pharmacy in the ambulatory infusion center operator in the southeast.
Nicole Maggio: I am pleased to report that our teams are working together seamlessly and we remain on track to achieve the financial and operational performance goals from this acquisition and to leverage some of the best practices from their operations in infusion clinics across our network.
Nicole Maggio: Not only did this acquisition to help to expand our infusion clinic footprint and a key and growing region, but also expanded our use of the advanced practitioner model and increase the number of shares we operate.
Nicole Maggio: As a reminder, we operate over 750 infusion carriers across the country, which we believe provides a safe and convenient alternative for patients who are willing and able to receive care outside of their home.
Nicole Maggio: We continue to see increased utilization of these facilities in the first quarter and conducted over one third of our nursing visit been one of our centers.
Nicole Maggio: In addition to our deployment of capital towards the instrument plus acquisition, we repurchased $100 million of stock during the quarter capitalizing on the strength of our balance sheet.
Nicole Maggio: And finally, I would like to take a few minutes to speak about how we are viewing the macroeconomic backdrop as well as the potential impact of proposed tariffs.
Nicole Maggio: Like all enterprises, we continue to monitor closely developments out of Washington, and evaluate internally through our enterprise risk management framework.
Nicole Maggio: <unk> scenarios may impact our operation.
Nicole Maggio: I do not need to tell you that the tariff situation is complicated and highly uncertain. However.
Nicole Maggio: However, let me tell you what I do know.
Nicole Maggio: We do not manufacture directly import products that may be subject to tariffs. However, we purchased through various distributors or manufacturers medical supplies and pharmaceuticals that are used to administer care to our patients.
What is difficult to assess at this point is how tariffs will be applied to those products and when and to what extent any of those costs will be passed on to us in the form of price increases.
Nicole Maggio: We currently have a cross functional team that is working hard to identify the country of origin of key supplies and pharmaceuticals, and determining ways to help manage and mitigate the impact of any proposed tariffs.
Nicole Maggio: As we sit here today, there remains a high level of uncertainty and therefore, it will require close monitoring and an agile approach as we attempt to navigate these impacts.
Nicole Maggio: That being said as you saw this morning, given the strength of the first quarter, we increased the lower end of our full year adjusted EBITDA guidance range to reflect the first quarter performance, but left the top end unchanged largely due to the uncertainty of the market.
Speaker Change: In closing I am quite pleased with the progress. The team has made in the first quarter and driving results as well as continuing to build on our strength and invest for future growth with that ill hand, the call over to Mike to provide additional details Mike.
Mike: Thanks, John and good morning, everyone overall as John mentioned, the first quarter was a strong start to the year revenue growth of 16% was quite balanced with mid teens growth within our acute portfolio of therapies and high teens growth across the chronic therapies.
Mike: Acute therapy growth, we delivered in the quarter was notably higher than we've seen historically.
Mike: And the team executed well in targeted areas.
Mike: We also saw improved supply chain dynamics for acute therapies, which further contributed to the growth.
Mike: Within the chronic therapies, we delivered balanced performance across the portfolio with continued strong growth within our limited distribution and rare and orphan therapies.
Mike: Gross profit of $263 million grew a bit over 10% versus the first quarter last year and there is a bit to unpack here.
Mike: Gross profit benefited from the therapy mix as acute therapies helped the dollar growth.
Mike: As we outlined on our fourth quarter call, we projected a 60% to $70 million gross profit impact from the stellar economics reset we've previously discussed.
Mike: We continue to believe that range for the full year is accurate, but there was minimal impact in the first quarter as we exited 2024 with higher store inventories that were exhausted in the first quarter of 2025.
Mike: We estimate that roughly $5 million of the 60 to 70 million dollar negative stellar gross profit impact was realized in the first quarter.
Mike: SG&A was in line with our expectation and we did augment some of our patient support and field functions in anticipation of the higher acute volumes and to help ensure a smooth and efficient benefit re verification and reauthorization process.
Mike: We continue to expect strong spending leverage for the year, which is a hallmark of our value creation strategy.
Mike: Adjusted EBITDA of $111 $8 million grew 13, 7% over the prior year.
Mike: Represented eight 4% of net revenue.
Mike: And adjusted earnings per share of <unk> 40.
Mike: Grew 14, 3% over the prior year.
Mike: As John mentioned, we were active in deploying capital in the first quarter. In addition to closing on the $117 million acquisition of interim Ed plus we also repurchased $100 million of stock in the quarter.
Mike: Notwithstanding those outflows we continue to maintain what we believe is a strong balance sheet and capital structure with the capacity to continue pursuing value creation strategies for our shareholders.
Mike: Finally, I just wanted to provide a quick update on our expectations for the full year.
Mike: For full year 2025, we now expect to generate revenue of $5 4 billion to $5 6 billion.
Mike: And adjusted EBITDA of 455 million to $470 million, which we believe will translate into adjusted earnings per share of $1 61 to $1 70.
Mike: We continue to expect to generate more than $320 million in cash flow from operations.
Mike: At this point our guidance does not reflect any extraordinary impact from tariffs or other policy changes from the administration as we do not believe we are in a position to determine such an impact are accurately quantify at this time.
Mike: To the extent, we determined that such an impact exists and we are in a position to quantify we intend to incorporate this into our expectations and articulate accordingly.
Mike: So overall, we're quite pleased with the solid start to 2025, and we expect it will be another year of growth for option care health.
Mike: That will open the call for questions operator.
Mike: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Lisa Gill with Jpmorgan. Your line is open.
Lisa Gill: Hi, good morning, and thanks for all the detail.
Lisa Gill: I just wanted to go back to the guidance update talking about no impact thus far for tariffs, but you beat by $7 million raised by $2 5 million.
Speaker Change: So John's comments that there is some level of uncertainty in the marketplace, but is there anything else that you're concerned about or looking at for the rest of the year from an underlying fundamental perspective or is this just you being conservative.
Speaker Change: Hey, good morning, Lisa.
Speaker Change: Look.
Speaker Change: As you know historically, we entered the year relatively cautiously I think this year to John's point just underscores.
Speaker Change: Need to tread a little carefully look a couple of things first and foremost as you know we don't provide quarterly guidance. So.
Speaker Change: First quarter can be a bit wonky at times with <unk>.
Speaker Change: Dynamics coming out of the holidays and benefit plans resetting so I would caution folks too.
Speaker Change: <unk>.
Speaker Change: Beat versus an external collective expectation and try to extrapolate that out throughout the year.
Speaker Change: As I highlighted look a lot of things going on in the first quarter, we saw very robust growth within our acute portfolio, we had a relatively muted impact from.
Speaker Change: Theres still lora economic reset because we exited the.
Speaker Change: For the year with higher inventory levels than than we thought.
Speaker Change: Which.
Speaker Change: Net inventory was at the more favorable procurement levels and so at the end of the day, we were able to bring up the bottom end of the range and.
Speaker Change: At the midpoint, we're still expecting earnings to grow in the high teens. So.
Speaker Change: Yes, I think.
Speaker Change: The first quarter is always a little hard to extrapolate because theres always some dynamics.
Speaker Change: No I appreciate that and then secondly, there are a lot of changes with MLP, Jay with the out of pocket costs forward you.
Speaker Change: And you talked about acute growth, but I would think that that potentially would impact more of the chronic side of your business. So just curious if youre seeing an increase in utilization due to some of those changes.
Lisa Gill: Hey, Lisa Thanks.
Lisa Gill: Thanks for the question yes.
Speaker Change: Yes.
Speaker Change: As we said we saw a strong growth in both the acute and the chronic <unk>.
Speaker Change: We continue to see that moving forward.
Speaker Change: We do think that.
Speaker Change: Some of the changes that have come forward will benefit us in some of the aspects of.
The write offs that we have for some of the patient to obligations as you would expect with a bigger amount of out of pocket.
Speaker Change: It's harder to collect that from some of the from the patients given the economic conditions that they have or the Scotia economic stress.
Speaker Change: Strata.
Speaker Change: They occupied so we don't see a lot of that in the first quarter.
Speaker Change: But where we will start to see it is in the back half of the year.
Speaker Change: I think we're well positioned.
Speaker Change: Aggressively with all of our patients to tap into patient assistance program and other foundation and other aspect to move that along so hard to determine right now.
Speaker Change: That impact is going to be but.
Speaker Change: We work hard within our revenue cycle management team and support of patients and making certain that we collect every dollar.
Speaker Change: Good.
Speaker Change: Great well, thanks for the comments and congrats on the first quarter.
Lisa Gill: Okay. Thanks, Lisa.
Speaker Change: Thank you please standby for our next question.
Speaker Change: Our next question comes from the line of <unk> Chickering with Deutsche Bank. Your line is open.
Speaker Change: Hey, good morning, guys and thanks for taking my questions.
Speaker Change: I understand the complexities around around the tariffs, but can you walk us through the mechanics of what happens if pharma increases there.
Speaker Change: Prices due to tariffs and how can flow through your branded.
Speaker Change: And generic impact business any impacts under the different reimbursement mechanisms like AWP in ASP, and then remind us.
Speaker Change: <unk>, probably doesn't have any impact from tariffs.
Mike: Thanks, Peter It's Mike is always one question in 15 part so I appreciate that appreciate that look.
Speaker Change: You know.
Speaker Change: Good luck.
Speaker Change: A large component of our revenue is reimbursement for the pharmaceutical or that therapy.
Speaker Change: We have relatively good balance across the reference prices in terms of how we invoice. The health plans are mix of AWP NASP and those those reference prices generally correlate to the underlying indices that we utilize to procure that the drugs roughly half.
Speaker Change: The drugs.
Speaker Change: Three $5 billion to $4 billion of drugs that we procure every year roughly half is coming directly from manufacturers have through wholesalers, but ultimately it's at those reference prices and so again I don't want to leave a connotation that it's a perfect hedge but to the extent that drug prices increase that would presumably have upward.
Speaker Change: Sure on the reference prices that correlates to how we get reimbursed because we're billing health plans at a reference price plus or minus of spreads and those reference prices also.
Speaker Change: Our utilized with our procurement relationships to determine what we're buying so again I wouldn't want to leave the expectation that it's a perfect hedge but over time.
Speaker Change: That spread that we make is relatively consistent whether it's a generic or whether it's whether it's a branded drug.
Speaker Change: Okay, Great and then.
Speaker Change: For <unk> I guess it would be adjusted.
Speaker Change: Our U S domestic this or until it back there correct.
Speaker Change: Well I mean, the biggest raw material for IAG.
Speaker Change: Whether it's sub Q or intravenous is human plasma and in the U S. It's required that human plasma be utilized so.
Speaker Change: That's the biggest rock component item fully understand.
Speaker Change: Frac Sanders or adding value, whether it's onshore or offshore, but one would presume that given more domestic content for that therapy.
Speaker Change: That would leave a connotation that there would be lower tariff impact that's a better question probably for the fractionator.
Speaker Change: Okay, Great and then for the follow ups I guess back to Laura I guess going back to.
Speaker Change: Where the guidance was going into the quarter or go into the year as to where it is now I guess the changes is is on the procurement inventory that you guys had you sort of walk us through how we should be thinking about the seasonality.
Speaker Change: <unk> impact and any impact to the annual guidance and how we should think about that and then your thoughts around biosimilars and store. Thanks.
Speaker Change: Yes.
Speaker Change: Yes, I'll take the first and then I'll, let John jump in with the.
Speaker Change: On the Biosimilars.
Speaker Change: As I mentioned my prepared remarks was $60 million to $70 million I think remains intact.
Speaker Change: Our our expectations were that we would we would exit the year with with a.
Speaker Change: A reasonable level of skill our inventory at the more favorable procurement levels.
Speaker Change: It was more timing than anything else, we think that the $60 million to $70 million still remains intact again call. It 5% and again, it's not a perfect science, because theres a lot of moving pieces, but roughly five of the 60 to 70 million impacted the first quarter. So quick math as you would expect going from Q1 into the subsequent quarters.
Speaker Change: About a $20 million negative impact notwithstanding that we still increased the bottom end of our range because we're seeing a lot of.
Speaker Change: Momentum in other areas.
Speaker Change: The operations.
Yes, and then the only other thing I would add is.
Speaker Change: We entered the year with a <unk>.
Speaker Change: Two to continue to support the scale of our patients.
Speaker Change: We've called out before still lot of patients are still profitable.
Speaker Change: They're just less profitable than they were before.
Speaker Change: Our team has done a really.
Speaker Change: Really good job.
Speaker Change: Certainly we went through that re verification.
Speaker Change: And reauthorization process.
Speaker Change: Maintained a solid portion of that patient census.
Speaker Change: And that remains intact and again I think it just speaks to the clinical programs that we have in place and their support of this unique patient population, which.
Speaker Change: Requires a letter of medical necessity and have some complexity.
Speaker Change: In in their care plan that our team can.
Speaker Change: We provide.
Speaker Change: As for the overall biochem environment.
Speaker Change: Not a lot of.
Speaker Change: Change in kind of our existing book, we continue to.
Speaker Change: We're closely with all the manufacturers to make certain that we have access to the product on the formulary.
Speaker Change: We expect that as time moves through the year, we'll continue to have.
Speaker Change: A bigger portion of patients that will start to utilize those products and so that was factored into the way that we're looking at and I would say, it's patterning as we had expected.
Speaker Change: Been a pretty tight range to the to the overall <unk>.
Speaker Change: Had as we entered the year.
Speaker Change: Great. Thanks, so much and great quarter.
Speaker Change: Yes. Thank you Peter ladies standby for our next question.
Speaker Change: Our next question comes from the line of constant thing Davita with citizens. Your line is open.
Speaker Change: Thanks, John in your prepared remarks, you talked a bit about how you are increasingly demonstrating your value proposition to your payer partners and can you just talk about how that dialogue.
Speaker Change: <unk> has changed over the past year, or so and maybe what some of the more progressive payers are doing or thinking with respect to infuse.
Speaker Change: Infusion benefits and plan designed around that area. Thanks.
Speaker Change: Yeah, absolutely thanks for the question.
Speaker Change: With some of the shifting market dynamics as you would expect.
Speaker Change: The ability for option care health to be that partner of choice to help transition patients out of the hospital into the home.
Speaker Change: We played a bigger role you saw some of the growth in the acute therapies in the quarter.
Speaker Change: Supply has improved on the IV bag and our team.
Speaker Change: Executed well within that process.
Speaker Change: Value of a bad day is as significant.
Speaker Change: You're working to try to manage your medical loss ratio and reduce the total cost of care. We are a part of that solution, we offer high quality care and appropriate cost and a setting which patients want to receive it. So the conversations that we've had with the payers, especially with some of the.
Speaker Change: Competitive.
Speaker Change: Retrenchment that has happened is one that puts option care health.
Speaker Change: As a meaningful part of their network design, we're able to provide that broad spectrum of products both in the acute and chronic.
Speaker Change: Our responsiveness at the local level is something that we take pride and we understand the positive impact we have on the patients that we serve and we.
Speaker Change: Our partnering and deeper ways given.
Speaker Change: The capacity that we have to take that up.
Speaker Change: How that kind of fits into that longer second part of your question is.
Speaker Change: There is a lot of focus around the total cost of care and so some of the innovative partner that we're working with are looking at state of care initiative in which they are helping too.
Speaker Change: Informed their members around <unk>.
Speaker Change: Selections are choices that they have and where they can receive the care and are helping too.
Speaker Change: Inspire them to choose those lower cost settings to help them make informed decisions around.
Speaker Change: The treatment plans and how they receive their infusion whether it's in one of our infusion care in the home and so we're working with them.
Speaker Change: To help identify those patients to help to bring those patients onto service with option care health and help to reduce the total cost of care for the health plan.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of David Macdonald with Truth. Your line is open.
Yes, guys. Good morning, just a couple of questions just want to follow up on <unk> question.
Speaker Change: Look I mean, your payers have had to pivot a couple of times in the last two years around acute.
Speaker Change: Just curious conversations around that.
Speaker Change: Any potential.
Speaker Change: Halo effect or expected Halo effect, even in chronic in terms of ability to pick up some additional business just given the support that you guys have provided on the on the acute side.
Yes, David again.
Speaker Change: I don't want to repeat myself, but yes, we feel we're really well positioned in those conversations we believe yes, there is probably some.
Speaker Change: Goodwill that's created in the ability to help them with a very.
Speaker Change: Complicated patient base that are being discharged from acute settings and be able to take those down so.
Speaker Change: Our dedicated team in market access are having those conversations we continue to articulate the value that we bring how we can serve their members across the broad spectrum of therapies that were that we have within our portfolio and we're going to continue to utilize the strength of.
Speaker Change: The breadth of our portfolio and the responsiveness of our team to win in the marketplace and we know we have to win each patient.
Speaker Change: We have to win every single day. This is a hustle business and one in which our team is up to that challenge and Dave. The only thing I'd add is to borrow your term of the Halo effect I think as you know.
Speaker Change: Cute referrals are.
Speaker Change: They're they're not easy.
Speaker Change: <unk> time.
Speaker Change: Quite rapid but for forward thinking payors.
Speaker Change: Even though the the sticker price if the therapy is lower than the chronic and the value it creates by reducing bed days and helping them with MLR is dramatic and so that's where I think we really can articulate the value is getting their patients out of the hospital quicker.
Speaker Change: And then guys just.
Speaker Change: You mentioned best practices. It into med is there is there kind of one or two areas that you would point to where they're kind of really doing a good job or anything you would call out in terms of them doing something a little bit different.
Speaker Change: Yeah, I would call out there their execution around their advanced practitioner model is one in which there are plenty of learnings that we can take out of that and apply across our platform as we continue to expand in that base.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: <unk> worked really hard within their model too.
Speaker Change: To provide a broader spectrum of products and really to execute well around that and so.
Speaker Change: We feel really pleased about that the other thing is they.
Speaker Change: They moved ahead on.
Speaker Change: Some of the technology implementations of next generation.
Speaker Change: The core pharmacy system and.
Speaker Change: So it gives us an opportunity to learn fast around that technology, how to integrate that we're going to be moving in that direction over the long run.
Speaker Change: And so it gives us really a sandbox to play in a place to have an innovation center around.
Speaker Change: Some of the technology as we're thinking about that next generation intelligent platform that we're building and so it gave gave us.
Speaker Change: Jumped pad to really to start from.
Speaker Change: And it really is.
Speaker Change: Informative and I think the innovative way.
Speaker Change: And then guys just two more on you mentioned AI.
Speaker Change: Hi.
Speaker Change: Mostly in the area of revenue cycle management now understanding the dynamics around lack of bad debt and chronic I'm just kind of curious when you look at acute is there an opportunity through some of these initiatives.
Speaker Change: Around the potential bad debt in Q.
Speaker Change: Yes.
Speaker Change: The team has been relentless Dave around not only efficiency.
Speaker Change: How how quickly and comprehensively, we can onboard new patients, but utilizing technology to make sure that we're putting a clean claim in front of a payer because miraculously when you put a clean claim in front of a payer on a timely basis, they pay very quickly and so.
Speaker Change: Again, as John said, that's really where we've been deploying AI and some of the RPE is really around a lot of the back office again, a lot of times when our teams are receiving referrals across the country. The expectation is well within an hour and we're getting back to them with a comprehensive answer and Thats, where not only is automation, helping us on the <unk>.
Speaker Change: And but it's just creating a more confident rev cycle event on the backend, which as you know all too well result in much lower contractual and bad debt.
Speaker Change: And then guys just last one Mike I just wanted to make sure I'm thinking about this correctly, obviously you heard the comments around solera, but is it fair to say that you guys absorbed it sounded like maybe a little bit of inflated cost as you brought on some of the additional corn business and maybe those costs get absorbed a bit better as we move throughout the year also so a little bit.
Speaker Change: Pushing the pulp is that fair.
Speaker Change: That's very fair.
Speaker Change: Okay. Thank you guys.
Speaker Change: Thanks, Dave.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Matt <unk> with William Blair. Your line is open.
Matt: Hey, good morning.
Speaker Change: Great.
Speaker Change: I wanted to ask on the acute side.
Speaker Change: The quarter, if I think back a couple of years ago. When there were some other competitive departures you had about a four quarter carried a higher growth.
Speaker Change: The magnitude of threat slightly soft first quarter. So maybe just thinking about this opportunity.
Speaker Change: How should we think of.
Speaker Change: That's great and the sustainability of that demand.
Speaker Change: Okay, well, thank you everyone.
Speaker Change: Associated gauge the size of this share shift opportunity.
Speaker Change: $1.
Matt: Yes, Matt.
Speaker Change: We turned the patient population within the acute portfolio every single month so the.
Speaker Change: The revenue gain from mid 'twenty, two when we saw some of the market dynamics shifting.
Speaker Change: Statistically all of those patients are off service and so, but we've been able to maintain the.
Speaker Change: The referral sources confidence and our dependable service model across the country at the local level.
Speaker Change: This time around I think we had a better playbook.
Speaker Change: Youll recall in the third quarter of 2002, we talked about.
Speaker Change: I'm trying to respond with labor models, we we were very proactive in making sure that we had the clinical resources, we had the Rev cycle and the patient registration resources in my comments I mentioned, we did invest up a little bit in the first quarter and to Dave's point, we expect that that absorption to improve and look we're thrilled we.
Speaker Change: For every referral every day, we saw mid teens growth in the acute which as you know is very attractive from a margin contribution perspective, we would expect that that will lap that going into the fourth quarter to some extent, but the team never lights up and.
Speaker Change: Our expectation is we're going to continue to fight for those referrals.
Speaker Change: And deepen the relationships at the lower level and we'll we'll look to build off this revenue base going forward. That's a very important strategic component of our go to market strategy.
Speaker Change: Okay. Thanks, and then just two quick follow ups one on.
Speaker Change: The reference pricing dynamic.
Speaker Change: Constructive similar in terms of how quickly.
Speaker Change: A piece of it.
Speaker Change: The updated whether it's six months or couple of years.
Speaker Change: Kevin and benefits represented some lag there, but some inventory in the fall.
Speaker Change: <unk> reconciled those so that maybe first and then secondly foreign.
Speaker Change: For self injection with options.
Speaker Change: Markwest.
Speaker Change: Okay time reminders here.
Speaker Change: On a breakdown in terms of what's biosimilar versus purchases.
Speaker Change: Larger branded therapies that you're exposed to or similar to solar.
Speaker Change: Yes remind me Matt real quick I was describing.
Speaker Change: Your first question.
Speaker Change: I just want to understand do you sort of a duration how quickly.
Speaker Change: Yes.
Speaker Change: Yes, exactly yes.
Speaker Change: Yes look structurally payor contracts, there's variation, but at its core it's a reference price whether it's asps AWP they use reference bureau's too.
Speaker Change: J code level too.
Speaker Change: Two.
Speaker Change: To reimburse us at AFC your AWP whatever the spread is on the procurement side, it's a little different we do have some prices locked in.
Speaker Change: Frankly, a little stickier in terms of the ups and downs. So we have more forward visibility, but over the longer term.
Speaker Change: Most of those contracts the ones that do have some some established terms and fixed prices typically are on an annual basis, so within a year or so.
Speaker Change: The reference price impact on the procurement and the reimbursement pretty much catches up.
Speaker Change: And then on the Sterling Euro and then other Biosimilars as I said earlier Matt.
Speaker Change: So Larry as patterning pretty much as we expected and not.
Speaker Change: Not only in what we've retained but then.
Speaker Change: We look at the biofilm uptake and how that's moving forward really early.
Speaker Change: Stages, you know so we'll see how that kind of moves through the rest of the year, but right now it's.
Speaker Change: Within alignment with those expectations.
Speaker Change: As for other <unk> and kind of the way that we've looked at the rest of the portfolio as we've conveyed.
Speaker Change: And.
Speaker Change: Public information that we've provided.
Speaker Change: Not been a significant change in the portfolio, we don't feel like there is a significant risk.
Speaker Change: Product is more than 5% of the revenue.
Speaker Change: There was some noise earlier in the quarter around high true low.
Speaker Change: Which is.
Speaker Change: <unk> Gard.
Speaker Change: <unk> is a product that went subcutaneous again.
Speaker Change: We think that it's an opportunity for us to continue to demonstrate.
Speaker Change: Our clinical compound competencies and capabilities.
Speaker Change: Have that product as part of our portfolio will continue to.
Speaker Change: Support innovators as they're bringing new products into the marketplace. We also think that it kind of creates a broader awareness in the marketplace.
Speaker Change: Some of these products.
Speaker Change: And the opportunity to move that forward and so.
Speaker Change: We feel very confident in the portfolio that we have we don't see that Theyre cigna.
Speaker Change: Significant changes.
Speaker Change: We had outlined before.
Speaker Change: We like the breadth of the portfolio and then now were especially.
Speaker Change: We're getting.
Speaker Change: Even better balanced with acute and chronic we think we'll be well positioned as we continue to work with innovators to bring new products into the marketplace to continue to work with products through their maturity lifecycle.
Speaker Change: And continue to make a difference in the lives of the patients that we serve.
Speaker Change: Great. Thank you.
Matt: Thanks, Matt.
Speaker Change: Our next question.
Speaker Change: Our next question comes from the line of Brian Tim Quillin with Jefferies. Your line is open.
Speaker Change: Hey, Thanks for the question and congrats on the quarter, It's Jack Levine on for Bryan.
Speaker Change: Apologies in advance on this one I mean thats one more on the tariff front just to make sure that we understand the dynamics on reference pricing.
Speaker Change: Maybe just being a bit more direct I think the concern out there right now is that there could be a sort of air pocket in time, where tariffs swing prices up and reference prices don't move yet and you had sort of have to take it on the chin I just want to understand Mike based on your other comments and acknowledging that there's a lot of my notes here, but if we.
Speaker Change: Think about how long it takes for for example, AFC to update on that.
Speaker Change: Decently significant lag is it right to think that.
Speaker Change: That on the procurement side, you have a little more flexibility to sort of match up to where the reference price is going to be absent a tariff over could you just give a little more color on that sounds great.
Speaker Change: Yes, Jack I'd caution around taking it on.
Speaker Change: The Chin approach look as we mentioned on the procurement side. Our team has very good direct dialogues with manufacturers and wholesalers a number of our procurement contract.
Speaker Change: <unk> relatively static prices for.
Speaker Change: An interim period so.
Speaker Change: We tried to manage that variability and volatility and that spread to the best we can again on the on the reimbursement side.
Speaker Change: We're billing and submitting claims on the reported <unk> and <unk>.
Speaker Change: And so.
Speaker Change: Based on what we know right now we don't see a likely scenario, where there is some kind of.
Speaker Change: Severe disruption in terms of.
Speaker Change: The lag around the.
Speaker Change: The reimbursement and the procurement and again, we have a balance sheet, that's very robust similar to what we did at year end, we're willing to use it to.
Speaker Change: Soften the impact in.
Speaker Change: Lean in where we think theres opportunities for us to minimize that volatility and look ultimately we're managing this for the longer term, we have a great portfolio of therapies, all of which have different procurement and reimbursement dynamic.
Speaker Change: And Thats, what we continue to preach which is the.
Speaker Change: The power of the diversified portfolio.
Speaker Change: Got it Super helpful. And then just one quick follow up I just want to clarify the comments John you made on on the expansion of clinics.
Speaker Change: We think about those as as the infusion suites that you built out a pretty large network of or is this more on the.
Speaker Change: On the advanced practitioners last center side and should we be thinking about going forward.
Speaker Change: More expansion on that front, rather than the suite model. Thanks.
Speaker Change: Yes, Jack I would I would think of it as our expansion of chairs.
Speaker Change: And I'd really focus around it from that perspective.
Speaker Change: Three facilities that were open.
Speaker Change: I'll be able to take.
Speaker Change: Patients on both sides of that equation, whether it's through the practice of pharmacy in.
Speaker Change: Infusion.
Speaker Change: <unk> suite as we've called the Aif historically.
Speaker Change: And a advanced practitioner model, where we would have an advanced practice Sherwood overseas. So.
Speaker Change: That ability for us to.
More chairs available for patients in the communities that.
Speaker Change: That they live and work as part of our overall design and I wouldn't I wouldn't try to bifurcate between those two as much as expanding our ability to serve patients.
Speaker Change: Where they are willing and able to be served and whether it be in infusion shares that we have and provide the appropriate oversight through either in advanced practice or a registered nurse.
Speaker Change: Got it Super helpful. Thanks, again, and congrats on a great quarter.
Jack: Thanks Jack.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Joanna <unk> with Bank of America. Your line is open.
Joanna: Hey, Thank you so much for taking the question. So a couple of follow ups I guess first on the head.
Joanna: Headwinds on maybe $5 million in the quarter and you still expect the same I guess for the use of <unk>.
Joanna: $5 million that you had expected this to play out in the quarter.
Speaker Change: Yes, Joanna we expected more of a muted impact in the first quarter.
Joanna: Again, we knew we would exit the year with with <unk>.
Speaker Change: Inventory levels.
Speaker Change: Generally speaking it patterned out generally I mean put it more or less how we thought we thought that the first quarter would not be as impactful in subsequent quarter.
Speaker Change: Okay, and I just want to clarify.
Speaker Change: To make sure there's nothing like that has happened in 25, they're going to be additional hiring.
Speaker Change: Glen and thanks, a lot I guess.
Speaker Change: We kind of had expected though.
Speaker Change: The fact is that the headwind is going to be higher than rest of the year.
Speaker Change: And it still means by that is going to be some incremental hiring first quarter next year, because the first quarter. This year is lower right. That's the right way to think about it.
Speaker Change: Yes, I mean, the way, we think about it as a $60 million to $70 million impact for the year relatively minimal impact in the first quarter based on the bleed out of older inventory, but yet we brought up the bottom end of the earnings range and again back to leases first question I'd, just caution folks around calendar as Asian because.
Speaker Change: How the FERC quarter patterns out relative to the first year and we don't provide quarterly guidance can be a little wonky, but overall.
Speaker Change: We're bringing up the guidance range. Despite the fact that we still expect a $60 million to $70 million impact this year.
Speaker Change: Okay, Great and then another clarification, sorry on the carrier side I guess, a different angle obviously does the.
Speaker Change: The pharmacy cost as much speaker, but obviously there is also the stuff you buy like equipment and whatnot, So maybe talk about.
Speaker Change: Those numbers and also if you can size those in terms of say like medical supplies. Some of these other items.
Speaker Change: Kind of your revenue or cost or however, you can frame it in because they wanted to say that.
Speaker Change: Do you have time.
Speaker Change: During the pandemic.
Speaker Change: There is some there were some shortages that Mr PPE and things and there was some pressure on the call.
Speaker Change: Different items in plastics and such so maybe help us frame that number which is kind of a very small.
Speaker Change: Yes.
Joanna: Take that Joanna so.
Joanna: Again as I called out.
Joanna: We've had a team that has been working to do a comprehensive review of all of our.
Joanna: Country of origin for all of our products and trying to anticipate what that looks like just to put it into perspective, we spent roughly $100 million on med supplies.
Joanna: Across that.
Joanna: And when you look at that.
Joanna: Can you kind of refine it down to I think right now.
Joanna: The biggest concern would be around China, China is less than 10% of that and we have alternative.
Joanna: <unk> that.
Joanna: That could mitigate some of that as we would source from different countries of origin through that process.
Joanna: Is it something we're watching closely absolutely that's something that our team is working aggressively to make sure we understand and can find ways to manage and mitigate absolutely, but we don't think it's.
Joanna: A significant amount at.
Joanna: At this point in time as we look at the med supplies and how we're how we manage that within the overall portfolio.
Joanna: Thank you anytime we have another follow up I guess somewhat.
Joanna: Acquisition right. So you said, it's trucking actually.
Joanna: Expecting in terms of the into question and such but just thinking about going forward is it still now good time to buy or because of this uncertainty around tariffs.
Joanna: Bonhomie, whatever it might be caught up.
Joanna: In part because of the seat.
Joanna: The deal, but he also brought a lot of time in Q1, so just kind of walk us through your thoughts.
Joanna: In terms of thinking about deploying capital on acquisition. Thank you.
Speaker Change: Yes, Joanna look I mean, we're going to continue as I mentioned in our prepared remarks, we deployed over $200 million in the first quarter and still exited with a very healthy balance sheet, we're not going to be shy about deploying capital to create value.
Speaker Change: Whether it's through M&A or whether it's through continued share repurchase we have $400 million of additional authorization I.
Speaker Change: I'd say on the corporate development side, we remained very active obviously.
Speaker Change: Given the broader macro environment, we're going to tread carefully but.
Speaker Change: I think <unk> a very good example of the type of deals that we're looking at.
Speaker Change: Around smaller more complementary lower risk.
A lot of the properties and assets that we know we know them well this isn't that big of a neighborhood and.
Speaker Change: And so it will be very thoughtful, but I think you know that.
Speaker Change: We're always very judicious and thoughtful on how we deploy capital.
Speaker Change: And anything that we're going through per.
Speaker Change: Pursue we're going to have a very high degree of confidence in the favorable returns.
Speaker Change: Great. Thank you.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of a J rice with UBS. Your line is open.
Speaker Change: Hi, everybody. Thanks for the question.
Speaker Change: I think on the acute side you.
Speaker Change: Obviously, historically that was sort of.
Speaker Change: Low single digits, and you said, maybe with some of the exits.
Speaker Change: Competitor exit.
Move that too high.
Speaker Change: High single digits now this quarter Youre mid teens is that just more benefit from what's happening in the market restructuring wise or is there. Some other dynamic that's driving that strength and achieved from your perspective.
Speaker Change: Yes, a J look I mean, as we think about that portfolio of therapies I would say on an overall basis, we see those growing in the low single digit. These are mature therapies like intravenous parenteral nutrition intravenous antibiotic therapy. These are therapies that have been around for decades.
Speaker Change: Very valuable in helping as I mentioned earlier on discharging patients from the hospital that cohort of therapies on a macro basis is growing in the low single digits I think to a lot.
Speaker Change: Of John's comments around the investments we've made the infrastructure that we've added with state of the art compounding pharmacies, we have been able to grow faster than what we perceive is the market in the first quarter. There were some meaningful competitive dynamics in certain markets, where we were able to jump in.
Speaker Change: Roll up their sleeves and play a bigger role for a lot of leading health systems.
Speaker Change: One.
Speaker Change: <unk> lead the lead the audience to believe that we see mid mid teens is the underlying growth rate for the acute therapies, but similar to mid 'twenty. Two we were able to jump in and grab higher volumes and grow off of those higher volumes and I think thats, what we would expect.
Speaker Change: Our guidance would presume that we will continue to see robust acute growth really until around the fourth quarter not that we're giving back volume, but we're just going to anniversary.
Speaker Change: Some of that volume pickup.
Speaker Change: Okay, and then I appreciate the comments of your continuing to be focused on acquisitions I wondered.
Speaker Change: Probably two things on the Washington front, obviously tariffs as the main place we focus relative to your business, but they're talking about Medicaid cuts are talking about potentially some site neutral stuff related to potentially impacting where drugs are administered.
Speaker Change: Or is there anything in particular that you're focused on there that either could.
Speaker Change: Be a challenge or an opportunity.
Speaker Change: You said youre still out there looking for acquisitions that are impacting in any way.
Speaker Change: Uncertainty the willingness of sellers are you seeing more sellers are you seeing less sellers, how is that affecting the dynamics of the market.
Scott: Yeah, Hey, Jay It's Scott I'll take this one so I think the pace of.
Scott: Of books that we see is patterning about the same as it has I haven't seen an increase.
Scott: In the number of.
Scott: People that are looking to sell but there is a pace fits there and as Mike said, we will.
Scott: Take a look and see if there is opportunities for us too.
Scott: So we take on and to do transactions that will create shareholder value. After Washington, Yes, we're keeping our finger on the pulse certainly site neutrality pricing transparency.
Scott: Our front and center so hard at this point in time to hazard, a guess as to where that could be but I will say again, we offer high quality care at an appropriate cost in a setting in which patients want to receive it.
Scott: The government is looking for lower cost settings in order to provide care. Our expectations are we can be part of that solution as we as we move forward.
Scott: So I think that's the areas that we're focused on we continue to.
Scott: Try to get expansion of home infusion therapy.
Scott: Access for Medicare beneficiaries.
Scott: Front and center, we believe that the next opportunity is going to be as part of the reconciliation.
Scott: <unk> AD budgets needs to get moved forward.
Scott: Again, we're active in Washington to not only have listening posts and understand what's happening, but more importantly to make certain that our voices heard.
Speaker Change: Okay. Thanks, Don.
Scott: Yes, Thank you Vijay.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, im showing no further questions in queue I would now like to turn the call back over to John Mccabe, Chief Executive Officer for closing remarks.
John Mccabe: Yes. Thank you for joining us this morning and participating on our call as we outlined the first quarter was very productive and our team continues to execute at a very high level, we understand the important role that we play in delivering care to our patients and their families and we look forward to serving even more patients and delivering value to our shareholders. Thank you very much and have a great day.
Speaker Change: <unk>.
Speaker Change: Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
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