OMI - NYSE

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Owens & Minor Fourth Quarter 2022 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I will hand it over to Alex Jost, Director of Investor Relations. You may begin.

Thank you. Hello and welcome to the Owens & Minor fourth quarter and full-year 2022 earnings call. Our comments on the call will be focused on the financial results for the fourth quarter and full-year of 2022, as well as our outlook for 2023, all included in today’s press release. The press release along with the supplemental slides are posted on the Investor Relations section of our website. Please note that during this call, we will make forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied here today. Please refer to our SEC filings for a full description of these risks and uncertainties, including the risk factors section of our Annual Report on Form 10-K. In our discussion today, we will reference certain non-GAAP financial measures, and information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I’m joined by Ed Pesicka, President and Chief Executive Officer; and Alex Bruni, Executive Vice President and Chief Financial Officer. I will now turn the call over to Ed.

Thank you. Good morning, everyone and thank you for joining us on the call this morning. I would like to begin the call with a quick recap of 2022. Our company celebrated its 140th anniversary of service to the healthcare community, while achieving our highest annual revenue in the company's history at nearly $10 billion. In addition, we completed the largest acquisition in the company's history acquiring Apria on March 29. This further strengthened our position as a leader in the fast-growing, higher margin home health care industry; enhancing our ability to support healthcare beyond the hospital and into the home. As a result of this acquisition, we have materially changed the profile of our overall business with the majority of our profit and EBITDA now coming from our Patient Direct segment even though this segment currently makes up less than 25% of total company revenue. In addition, this segment provides recurring revenue with higher growth rates and margin profiles in our Products and Healthcare Services segment. We are excited as the current and future trajectory of the Patient Direct segment. Turning now to the fourth quarter. Our results were mixed between our two segments and they were even mixed within our Product and Healthcare Services segment. Starting with our Patient Direct segment, which continued to deliver outstanding revenue and profit growth, while closing out a record year. When adjusted for the Apria acquisition, the segment delivered revenue growth of more than 10% in the fourth quarter with double-digit growth in most key product categories. In addition Patient Direct delivered nearly 11% profit margin, growing 280 basis points year-over-year on an adjusted basis, aided by above market growth, synergy realization and strong execution. In addition to the strong performance in our Patient Direct segment, our medical distribution division part of our products and healthcare services segment performed well. Our medical distribution division retained key accounts, recorded new wins and continued to deliver leading service levels. Overall, the segment revenue increased nearly 2% on a sequential basis, driven by solid performance in the medical distribution business. However, our Global Products Division's surgical and infection prevention products continue to be impacted by significant excess stock in all channels and at our customers. The fourth quarter showed that we need to move quickly to offset reductions in demand, increases in cost and pricing headwinds, particularly in our Global Products division. The market dynamics that continue to negatively impact our higher margin S&IP products and it has become clear that our company's cost structure needs to better align with the evolving market. In order to address the current and prospective market realities, we have initiated a company-wide operating model realignment program. This program will have a dedicated team to accelerate profit improvement and reduce costs. The team will be led by Dan Starck, who will utilize his experience driving successful large-scale transformations at Apria, as well as the successful integration of Apria Environment. Building upon his successful leadership of the Byram division, Perry Bernocchi will be promoted to CEO of the Patient Direct segment. He will also further the integration of Byram and Apria to better serve our customers and drive efficiencies. With these proven leaders in place, we are confident in the continued success in our Patient Direct segment and success in the operating model realignment, which we have already built out the teams and we've started to work on the program. The Owens & Minor leadership team has resolved that the business model realignment program will quickly and sustainably drive an expected $30 million of adjusted operating income in 2023. In addition, the program is expected to deliver approximately $100 million of adjusted operating income run rate by the end of 2023, and approximately $200 million of adjusted operating income run rate by 2025. In addition, the program is expected to provide between $250 million and $400 million of working capital benefits by 2025. We further believe that this program will enhance our overall quality of service to our customers, increase our margins and allow us to continue to focus on debt reduction and reinvest in higher growth, more profitable opportunities. Coming out of this program, we believe that products and healthcare services segment will deliver between 2% and 3% sustained operating margin and Patient Direct segment will continue to deliver margin expansion and strong top line growth. Now let's look at the detail of how the operating model realignment program will drive cost reductions and profit improvements. It will focus on the following four work streams: One, sourcing and demand management, which includes direct and indirect material cost reduction and utilization efficiencies. Two, organizational structure redesign, which includes savings related to reduced overhead and structural changes resulting in headcount reduction along with elimination of non-value-added work. Three, network rationalization and operational excellence, which includes the optimization of manufacturing footprint and the supply chain network. And four, commercial excellence and product profitability enhancement, which includes price for the value we provide, growth from accelerated proprietary portfolio expansion, SKU rationalization and strategic supplier management. Look, we're not waiting. The program has already started and we are in process of evaluating and implementing cost reductions and profit improvements to support the four work streams. We will aggressively look across the entire company for efficiencies and savings with a heavy focus on the areas where the greatest opportunities exist. And here are just a few of those areas including a much more aggressive procurement approach. Quickly evaluating and rationalizing the entire manufacturing and sourcing process to eliminate waste and drive value; optimization of our factories and DC network; aligning capacity to existing [Technical Difficulty] and sales opportunities; reduction of SG&A headcount and overhead costs; streamlining back office functions; and enhancement of our sales effectiveness for profitable growth through aligned compensation structures, and enhanced tools, which will allow us to grow our proprietary product portfolio. We will operate with urgency and focus to right size the business in these new market conditions just as we did to address the pandemic and the other improvements achieved over the past four years. We expect that these work streams will provide benefit that they take hold and will position us as a stronger more profitable company going forward. As I look back over the past four years, we have accomplished a lot and have a lot more to do. During the past four years, we have drastically improved the service levels and productivity of our medical distribution division and stop the trend of significant business loss. We have deployed a business development team that has leveraged the strength of Owens & Minor to deliver new wins in our medical distribution division. We have substantially increased full-year operating cash flow from $116 million in 2018 to $325 million in 2022. The cash flow improvement over the past four years has allowed us to pay down debt, invest in the business and acquire Apria, materially changing the profile of the company. And finally, we rapidly expanded our manufacturing output of our S&IP products to unprecedented levels to protect caregivers in the fight against the COVID-19 pandemic and to maintain continuity of supply for our customers. However, to do this, we also significantly increased our cost structure, which we now must address in this post-pandemic market realities that adjusted rapidly during the second-half of 2022 in both product pricing and demand. This will be addressed by the operating model realignment program. As we look ahead, we remain focused on executing our strategy to leverage, invest and grow our Patient Direct segment, further diversifying our total company revenue, adjusted EBITDA and the creation of margin expansion. We will utilize our products and healthcare services segment to develop deeper customer relationships and expand our proprietary product sales both in and out of our channels. And finally, continue to strengthen free cash flow to reduce debt and reinvest into profit expansion opportunities in higher growth areas. It is important to keep in mind that our acute care customers are increasingly looking for our Patient Direct segment to help service their patients in the home and we are uniquely positioned to support this rapid evolution of care moving to the home. I will now turn the call over to our CFO, Alex Bruni for a more detailed discussion of our fourth quarter operating and financial performance, our new cost savings plan and our 2023 financial guidance. Alex?

Thank you, Ed. Good morning, everyone. Today, I'll review our financial results and key drivers for our performance in the fourth quarter and full-year. Then provide commentary on segment level performance and finally discuss our expectations and assumptions related to the full-year 2023 outlook. First, let me start with our fourth quarter and full-year results. Our revenue in the quarter was nearly $2.6 billion, up 3.4% from the prior year and up 2.2% sequentially from Q3. For the full-year revenue was $10 billion, up 1.7%. Fourth quarter gross margin was $407 million or 16% of revenue, up 210 basis points from last year's fourth quarter. Full-year gross margin was $1.8 billion or 18.3% of revenue, up 290 basis points from the prior year. The increase in gross margin in the quarter and for the full-year was driven by the inclusion of Apria and sales mix partially offset by inflationary pressures and reduced demand for S&IP products, which included customer reliance on stockpiles. In addition, gross margin reflects a $92 million inventory valuation adjustment recorded to cost of goods sold in our Products and Healthcare Services segment during the fourth quarter. This reserve was recorded as a result of excess PPE inventory at year-end relative to the current demand outlook. The demand for these products began to decline in the back half of 2022 and fell sharply through year-end. The decrease in demand is due to customers utilizing the stockpiles created during the once in the century pandemic. This inventory valuation adjustment, which was about 5% of our gross inventory, was classified as a non-GAAP item, due to the highly unusual circumstances associated with this extraordinary charge. Distribution, selling and administrative expense was $456 million in the fourth quarter and $1.6 billion for the full-year. The increased expense in the fourth quarter and for the full-year was driven by the addition of Apria. Along with ongoing inflationary pressures, partially offset by operating efficiencies and reduced incentive compensation. Adjusted operating income was $67 million in the quarter and $369 million for the full-year 2022. Year-over-year, foreign currency negatively impacted fourth quarter revenue by $10 million and adjusted operating income by $3 million. For the full-year, foreign currency negatively impacted revenue by $43 million and adjusted operating income by $16 million. Interest expense was $41 million in the fourth quarter, which was $30 million higher than the prior year. Interest expense for the full-year was $129 million, which was $81 million higher than the prior year. Both the quarterly and full-year increases were driven by the associated debt financing for the acquisition of Apria and rising interest rates. Adjusted net income for the fourth quarter was $22 million or $0.28 a share. For the full-year 2022, adjusted net income was $184 million or $2.42 a share. Fourth quarter 2022 adjusted EBITDA was $117 million with a margin of 4.6%, up 60 basis points versus last year's fourth quarter. Full-year 2022 adjusted EBITDA was $518 million with a margin of 5.2%, up 20 basis points versus the prior year. Moving now to cash flow, the balance sheet and capital structure. This quarter, we generated $87 million of cash from operations, up 73% year-over-year. For the full-year, we generated a very strong $325 million, up 162% year-over-year. We ended the year with a net leverage ratio of 4.7 times. Total debt was $61 million lower than at the end of the third quarter and we've reduced debt by approximately $143 million, since we funded the Apria acquisition in April 2022. It's important to note that our debt compliance leverage ratio at the end of the year was almost a turn lower than the book leverage I just stated. Leverage reduction continues to be a top priority and we expect the continuation of our ongoing actions along with our operating model realignment program will accelerate leverage reduction to our target of 2 times to 3 times. Turning now to our segment results beginning with our Patient Direct segment. This segment continued to excel in the fourth quarter. Net revenue in the fourth quarter was $617 million, an increase of 135% year-over-year. Full-year net revenue was $2.1 billion, an increase of 114% year-over-year. In the fourth quarter, on an adjusted basis for the Apria acquisition, Patient Direct grew revenue by 10.3% year-over-year with double-digit growth in most key product categories. Segment income for the quarter was $66 million, compared to last year's fourth quarter of $17 million. For the full-year, segment income was $194 million, compared to $58 million last year. More impressively, in the fourth quarter, on an adjusted basis for the Apria acquisition, Patient Direct grew adjusted segment income by 50% year-over-year with a margin increase of 280 basis points to 10.7%. This improvement was driven by synergies and fixed cost leverage aided by continued above market growth and operational discipline. Looking ahead, we believe Patient Direct will maintain its strong organic growth and outperform the market in 2023. Moving on to products and healthcare services. Net revenue in the fourth quarter was $1.9 billion, down 12% year-over-year. So as Ed noted earlier, up almost 2% sequentially versus Q3, driven by retention and implementation of new wins, and seasonality in our medical distribution divisions. Net revenue for the full-year was $7.9 billion, a decrease of 11% year-over-year. The decrease in net revenue in the quarter and for the full-year was driven primarily by reduced S&IP demand and customer destocking. Segment income for the quarter was $1 million, compared to $68 million last year. For the full-year, segment income was $175 million, down 54%, compared to last year. The decline in the quarter and for the full-year was driven by post-pandemic reductions and pricing and demand for S&IP products, including destocking along with inflationary pressures and foreign currency translation. Before discussing our full-year 2023 guidance, I want to take a moment to expand on the operating model realignment program as discussed. We are focused and committed to addressing our challenges in a thoughtful, but urgent manner to improve profit and cash flow. The targets we set out today will improve many key fundamental metrics of the business. Once again, we expect to deliver approximately $30 million of adjusted operating income to the P&L in 2023, ending the year with a run rate benefit of approximately $100 million and approximately $200 million annualized by the end of 2025. Furthermore, we expect $250 million to $400 million of working capital benefit over the course of the program. We’ve recognize this operating model realignment in the four work streams Ed laid out are necessary to put the company in the best position to win in the current and expected future environment. Our leadership team hit successfully executed large scale change initiatives in the past and are committed to successfully doing so here. Now let's look at our full-year 2023 guidance. We expect net revenue to be in a range of $10.1 billion to $10.5 billion. Adjusted EBITDA to be in a range of $490 million to $550 million and adjusted EPS to be in a range of $1.15 to $1.65. Given the backdrop of what Ed and I have discussed this morning and the operating model realignment program that is now underway, I would like to provide some commentary related to our 2023 guidance and some added color around our expectations for the cadence of earnings throughout the year. With the continued volume and price pressure we are seeing on our S&IP products, along with the normal seasonality in our Patient Direct segment, we expect consolidated revenue in Q1 to be down sequentially from Q4 by approximately 5%. We expect that adjusted EPS in the first quarter could be as low as negative $0.10. We believe the vast majority of our earnings will occur in the back half of the year as our operating model realignment program benefits take hold our S&IP product volumes begin to recover and normal seasonality ramps up across our business. Our key assumptions for 2023 include expected realization of approximately $30 million of adjusted operating income benefit from the operating model realignment program. Destocking begins to subside in the back half of 2023. A gross margin rate of approximately 20.5%, interest expense in the range of $175 million to $180 million and adjusted effective tax rate of 26% to 27%, diluted weighted average shares of 77.5 million, capital expenditures of $190 million to $210 million, stable to improving commodity prices, and FX rates as of 12/31/2022. Please refer to the supplemental slides filed with the SEC on Form 8-K earlier today, which we've also posted to the Investor Relations section of our website. In addition, I'd like to point out a few administrative matters. To be more aligned with peer companies and to provide investors with a cleaner view of the company's cash earnings beginning in the first quarter of 2023, we will be modifying our non-GAAP reporting to include stock compensation and the inventory LIFO provision, both of which are non-cash items as reconciling items to arrive at adjusted EBITDA. Additionally, we will change the line-item presentation in our statement of operations to break out intangible amortization from our distribution, selling and administrative expense, which will be combined in a separate line item with acquisition-related charges. Ahead of reporting the first quarter results, we will file an 8-K to recast 2022 quarterly results to reflect these changes. Finally, in the coming weeks, we will be filing a Universal self-registration statement. Our current self-registration is approaching this three-year life and solely as a matter of good governance we will file a new registration statement. At this time, we do not have plans to issue any securities. At this point, I'll turn the call back over to the operator to begin the Q&A session. Operator?

Thank you. [Operator Instructions] The first question is from Michael Cherny with Bank of America. Your line is open.

Good morning and thank you for taking the question. So Maybe if I can start on some of the work streams that you're pursuing. Ed as you think about the restructuring in the business, thinking about moving management around obviously with Andy having gone back in the business as well. How are you measuring yourself on the progress you're making? I guess, how are you going to give yourselves and give us comfort on the $30 million this year? Obviously, a much bigger number into [‘25] (ph). And what are the steps that you're taking along that process to make sure that those targets are being hit and completed?

Yes. Well, thanks for the question, Mike, and thanks for the time this morning. So first and foremost, we plan on reporting our quarterly the progress against the $30 million, as well as the $100 million run rate for this year. The four work streams each has dedicated the leaders to them already. And in addition to that, we've already started, so the first wave of actions are in place. For the last several weeks, we've been gathering the data and information. Internally, just how it's going to operate is the daily stand-up meetings for the four-leadership team -- for the four work streams. There is weekly expanded leadership reviews and then we're going to review it also with the broader leadership across the company on a regular cadence. So that's the way the project is going to be managed as we move forward. And again, for your comfort, we're going to turn around in each quarter. We're going to provide guidance on it, as well as achievement. What's been achieved? What's in the works and what's going to happen going forward.

Thanks. And if I can just have a two-part question in one, but they're kind of interrelated. Relative to the trajectory over the course of the year, you talked about the build. You know, I see the model-realignment, I see the customer destocking. Are there any other elements in place that give comfort into the build over the back of -- into the back of this year? And what does that mean relative to your covenant structure with your current outstanding debt, especially given the challenging first-half of the year that you're forecasting?

Yes. I think the other one that you also have to take into consideration is the normal seasonality in the business. Both in our Patient Direct business, which has tremendous amount of seasonality in the back half relative to the front half of the year. And even in our normal acute care medical distribution division has seasonality in the back half of the year. And then the other one, I think you got to make sure you're focused on is we had some nice wins and we're starting to ramp those up. Those are going to continue to help us in the back half of the year. So those are other factors, I think that really need to be taken into consideration. And then on the covenants, I'll let Alex add some color on the covenants, but, you know, [Multiple Speakers]

Thanks, Ed. Good morning, everyone. Yes, so on the covenants, we feel like we're in a good place and with our operating model realignment program and its associated savings, we don't believe we'll have any issues as we move forward.

The next question is from Kevin Caliendo with UBS. Your line is open.

Thanks for taking my question. If I go back to pre-pandemic days, with the Distribution and Solutions business. The company struggled to compete with sourcing from overseas, just because your costs were higher and the like. What are you anticipating now post all of this destocking inventory, your competitive position. Do you think that you'll be able to compete? There was a lot of new business wins that were talked about because of your ability to source and manufacture onshore. And I'm just wondering what do you think the dynamics of the market are going to look like in six months from a competitive perspective, [Indiscernible] OMI fit into all this now with most of your manufacturer or a lot of your manufacturing anyways here domestically?

Yes. So there's a couple parts to that question. I think it's important to answer. I said, you know, first, if I look back in our medical distribution division, one of the reasons why we’ve started to win new business and retain is part of -- was really associated with we drastically improved our service. And if I look at 2017, 2018, 2019, our service levels in our distribution business were really poor and having corrected that has helped tremendously. You know, I think on the manufacturing side of it, that's really partially what this operating model realignment is focused on. It's looking at how do we strip cost out. I mean, we got to be transparent as in 2020 and 2021 and even in 2022, we've hedged down at as many resources as we can to produce as much product as we humanly possibly could to help save and help our customers out there. We did that. Right now as we look at it, we've got of a cost structure issue, because of that as volumes have come down and it's time to take those costs out. We probably haven't done a great job during that period of time and as opportunities really around sourcing and looking at both not just pricing on what we pay, but also utilization and make sure how do we reduce yield scrap, as well as traditional scrap in our manufacturing facilities. And then, frankly, it's -- we're going to take a hard look across the manufacturing facilities. What should we be making, what should we be sourcing and making sure that we are competitive both from a global standpoint, as well as our ability to produce the product to have control over that. So that's really -- it's a fresh look at our -- really our manufacturing footprint from start to finish or top to bottom and everyone look at it. To make sure that we can be very competitive in the markets.

Okay. That's helpful. Can I just ask one quick follow-up.

Sure.

Following up on Mike’s question. Where do you think your leverage will be exiting 2023? And that we know where it is now, but sort of when you think about -- we didn't really talk about free cash flow or anything like that, but thinking about on December 31, where do you think your leverage will be at that point?

At a high level, we think it's going to be approximately one-turn lower between now and where we get to at the end of the year. Based on the achievement of the working capital that we're going to take out of the business, the operating cash flow, as well as our ability to continue to pay down debt. Look, we had a strong quarter again in Q4 on debt pay down and cash flow. We expect that to continue throughout 2023 and ramp I should say as we go through 2023.

Great. Thank you so much.

[Operator Instructions] The next question is from Lisa Gill with JPMorgan. Your line is open.

Hi, good morning. Thanks for taking my question. Just kind of going back to the last question, can you give us an idea of what your expectation is for cash flow this year would be my first question? And then secondly, when I think about the guidance range, it's really wide just given the $0.50 from top to bottom. Can you maybe just talk about what's in each end of the range? I know you talked about the $30 million is it on the bottom end that you don't achieve all the $30 million and the top is that you do or something else that is driving that big gap between the lower and upper end?

No. Lisa, thanks for the question. It is a big range and the reality of it is it's really the main component of that is what we're calling the destocking effect and when does that and we sit with our customers, and if I look across the industry, some customers I've talked to, as well as other studies been out there. And I saw a study that said about a third of customers are back to normal usage, about a third still have several quarters worth of product that they're going to use for destocking and about a third half close to a year's worth. So that window of trying to get that feel is what really is creating that range that's out there from now to the end of the year. I think in addition to that, kind of, as we move to the upper end of that range outside of the whole destocking conversation, it's really going to be focused on this -- on the operating model realignment, how fast can we get the benefit in place, how much of that can we achieve this year to help us push us up towards that upper end of the range. So that's the way we're looking at it and that's why it is a broad range this year at where we're at.

Thanks, Ed. And good morning, Lisa. Just to add to what Ed mentioned there, obviously, the band on earnings does bear on where we expect cash flow to be this year. In addition to that, it's early days in this operating model realignment program. And as we talked about in the previous question, looking at that leverage could be as much as a turn lower. I think that gives you an indication of how much cash flow we think we can generate this year. But again, as we work through the operating model realignment program, we'll have better visibility to that.

And I think it is a benchmark where we think it's going to be at least as much of what -- as what 2022 was, that can be your floor on that.

Okay, great. Thanks for the comments.

The next question is from Evan Stover with Baird. Your line is open.

Hey, thank you. I think part of the theme in the last couple of years has obviously been the thinking that S&IP and specifically the PPE portfolio in there would settle in above pre-pandemic, stock, demand, et cetera. I mean, I think that's changed. And I'm just wondering if in your outlook you're kind of -- you've kind of eliminated that thinking in how you forecast and where stockpile levels are et cetera in your customer base. Just trying to think about how you factor that into the outlook.

Yes. Evan, we think short-term that’s probably the case. What we've seen is, we haven't seen usage go down by clinicians and that's important just because COVID has moved on, it doesn't mean that the protocols are going away. What we have seen and this is an important something important to consider is if you think about the channels to the customers, whether it's our distribution channel or other distribution channels, those companies bought a tremendous amount of product that now have excess stock. You've got customers that have excess stock, because they build stockpiles up. So while the actual usage in burn rates in hospitals from what we believe is not going down, it's their utilizing stuff that they have in their stockpiles, think about a hospital who's having financial issues right now. And if they have a stockpile of PPE use that, because it saves cash flow, the product has already been purchased. Eventually, as that wanes, they're going to start to need the product. And as long as that usage within the hospitals or clinicians continue to be at that high level, that protocol level. We don't see it coming down back to 2019. It's just the gap right now of the destocking both from within hospitals and within the channels that's out there.

Thanks. That's helpful. On the medical distribution side, [Indiscernible] global products business. I mean, the firm level revenue is above what we and the Street expected. I think a large component of that's going to be trends in your medical distribution business. Can you talk about where you stand on net wins? How some of the wins and losses net out and feather in overtime? And what you're seeing in business development?

Yes. Let me talk about both aspects, both retention and new wins. We've got the vast majority of our top 10 customers now under contract for multiple years. And that's something we haven't been able to do in the past. And there was been a keen focus on our -- from our team. In addition to that, if I think about some of the new wins, it would be taking a customer and I won't disclose the customer, but taking the customer where we have about 201 of our top 10 customers, that's $200 million worth of business. That's decided to get out of self-distribution and bring that additional $200 million, that's one of our top customer is about $200 million in revenue, bringing an additional $200 million through our channels and having us manage that product for them, that's another example of win. So and then the pipeline is probably as robust as it's been in a long period of time. So that's the kind of cadence we're on. In addition to that, there is merit and we talked a little bit about this. Because in the synergy side of our Patient Direct business, we're actually gaining synergies, because of those broader relationships we have with the acute care. And as hospitals and IDNs are looking for support into the home, that's actually helping that side of the business grow too. So it's a mix of, one locking up our existing customers for multiple years and that creates a tremendous amount of stability for you. Two, it's aggressively going after true new wins, which are takeaways from competition. It's also about looking at our customers in finding ways and identifying ways where, hey, they like what we're doing and taking self-distribution and other products and starting to put them through our channels. And then it's the cross over between our acute care and our Patient Direct segments.

Okay. Thank you. Final one for me. Alex, I might have miss the details here, but it sounds like there's more add backs from GAAP to non-GAAP that are going to be affected in 2023. If I got that correct, what does the $1.15 to $1.65 EPS guidance look like under the old method, presumably lower. I'm just wondering how to apples-to-apples the new non-GAAP treatments you're doing here?

Yes. Thanks, Evan. There's no change at this time for the reporting changes.

You know, the reporting changes won't affect EPS.

Okay. Sorry about the confusion and thank you.

There are no further questions at this time. I'll turn it over to Ed Pesicka for any closing comments.

Thank you. Excuse me. Thank you. Really what I want -- everyone on the call to walk away with is really three key points, I think that about our business. And it really first starts with our Patient Direct business and the fact that with the acquisition of Apria, with the strong performance of our Byram division, putting those two together, we've really changed materially the profile of our company. And the fact that now the majority of our profit and EBITDA comes from that Patient Direct segment. And as I talked about that Patient Direct segment, I think it's also important to recognize that the incredible growth we're seeing there. On a pro form a basis, we grew this quarter at more than 10% in that segment. And not only did we grow in that quarter 10%, the majority of our key product categories grew in double-digits, so it's not one category driving it. The other thing is not just growth in this segment. If you look at it on a pro form a basis, we're at nearly 11% profit margin and year-over-year on the pro form a basis, that's a 280-basis point expansion. That's because of the strong market growth relative to others in the industry, that synergy realization where we're far ahead where we expected we would be and in strong execution. Here's the second thing, our medical distribution, the business is performing extremely well. The business that's struggled in 2017 to 2019 with service and customer losses has stabilized. We've got a significant amount of key account wins in addition to that retention of business and we're seeing nice growth in that business both sequentially and year-over-year. And then finally, the third thing really is we recognize that our S&IP products were incredible to us as a company over the last several years to help us pay down debt, as well as change the profile of the business. We've got a cost structure issue we have as a total company. And we're going to address that aggressively with the operating model realignment. And that realignment is going to deliver $30 million expected in 2023, as well as a run rate at the end of the year by $100 million, long-term north of $200 million and between $250 million and $400 million worth of working capital and we're going to do that with a high sense of urgency and aggressiveness. Those three things that I just talked about are going to enable us to continue to drive, enable us to leverage and invest in growing our Patient Direct segment, which is going to allow us to continue to diversify going forward. It's going to enable us to really look at our products and healthcare services segment to leverage that to help grow the Patient Direct in addition to that expand relationships and grow proprietary product sales and all of that is going to help drive tremendous amount of free cash flow to pay down debt for us to continue to reinvest in the business. So again, appreciate the time this morning and look forward to talking everybody in the future. Thank you.