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Greetings, welcome to Owens & Minor Special Conference Call to discuss its proposed acquisition of Rotech Healthcare Holdings, Inc. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Jackie Marcus, Investor Relations. Mrs. Marcus, you may begin.

Thank you, operator. Hello everyone, and welcome to Owens & Minor special call to discuss our intention to acquire Rotech Healthcare Holdings, Inc. I'd like to call your attention to the supplemental slides related to the transaction posted on our website in the Investor Relations section. Please note that certain statements made on this call are forward-looking statements, which are subject to risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical facts are forward-looking statements and include statements regarding our anticipated financial and operational performance. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. These statements include, but are not limited to the statements in this release regarding the proposed transaction and opportunities related thereto and our expectations with respect to our financial performance. Forward looking statements involve numerous known and unknown involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements, including that the proposed transaction will not be completed on a timely basis or at all, and the risks that problems may arise in successfully integrating the businesses of the companies and the realization of synergies there from. The company has explained some of these risks and uncertainties in the SEC filings, including in the Risk Factors section of its annual report on the Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. Additionally, in our discussion today, we may reference certain non-GAAP financial measures and information about these measures and reconciliations to the most comparable GAAP financial measures are included in our annual report on Form 10-K. Today, I am joined by Ed Pesicka, Owens & Minor’s President and Chief Executive Officer; and Jon Leon, the Interim Chief financial Officer and Senior Vice President of Finance and Corporate Treasurer. I would now like to turn the call over to Ed.

Thank you, Jackie. Good morning everyone, and thank you for joining us on the call today. I'm happy to be here to discuss our definitive agreement to acquire Rotech. At our Investor Day last December, we outlined our vision 2028 plan to grow, optimize and invest in our success. A critical component of that plan is to accelerate the growth of our existing patient direct segment to the combination of organic and inorganic initiatives to achieve $5 billion in annual revenue by 2028. The acquisition of Rotech fits squarely into our existing Patient Direct segment and directly aligns with the long-term strategy we outlined. Furthermore, the acquisition supports our expansion in the very large and fast growing home-based care space. We are excited to acquire a high quality company like Rotech, an opportunity that doesn't come along very often. This transaction also highlights our disciplined approach towards inorganic growth with a focus on strategic fit, value creation for shareholders, prudent capital allocation and most importantly, providing improved service and an enhanced experience for patients, providers and payers. As Jackie mentioned, we posted supplementary slides to our IR websites in our 8-K file this morning with the SEC. These slides, along with our comments will provide an overview of Rotech's business. The strategic rationale for the transaction, and the opportunity it affords us to drive value creation for our shareholders, along with the enhanced benefits for patients, providers and payers. Our Interim Chief Financial Officer, Jon Leon, is here with me today to discuss the financial highlights of this transaction. Jon will also discuss our preliminary second quarter financials and reaffirmation of our full year guidance released in separate 8-K this morning. Let's begin with a summary of the transaction on Slide 3. Our purchase price for Rotech is $1.36 billion in an all cash transaction or $1.32 billion net of the $40 million in anticipated tax benefits. We have fully committed financing in place and expect to use a combination of our cash on hand and incremental borrowings to fund the purchase price. We expect the transaction to close by the end of 2024 and is subject to standard closing conditions and customary approvals customary approvals. As I mentioned earlier, the acquisition of Rotech aligns with our strategy to strengthen and expand our existing patient direct business, as one of the premier suppliers to support home-based care. Combining our organization allows us to improve our capabilities, broaden our reach and ultimately, improve our service levels to patients, providers and payers. And furthermore, it accelerates our pace to achieving our long-term patient direct revenue target of $5 billion by 2028, demonstrating our commitment to sustainable growth and drive long-term shareholder value. On Slide 4, I want to take a few moments to share with you why I'm so excited about the opportunity and walk through the compelling strategic rationale as well as the value creation opportunity for our shareholders. First, the addition of Rotech both strengthen and expands our existing suite of products and services, improving patient access to these solutions, resulting in the generation of robust opportunities for growth across chronic conditions. In addition, Rotech also provides us with the access to durable medical equipment markets, including hospital beds, wheelchairs and mobility aids. Second, our combined customer base gives us the kind of platform payers want across one network. This will facilitate improved deficiencies for claim approval and payments, while also providing more flexibility for patients. Third, we will be able to serve more patients through our combined comprehensive suite of product offerings, geographic footprint and payer contracts. This will ultimately improve the continuity of service for patients across the country, living with the chronic conditions we serve. And finally, on the financial side, we identified synergies of approximately $50 million by the end of year three with further upside potential. The strength of our combined financial profiles and the cash flow generation is expected to improve our financial flexibility to invest in future organic and inorganic opportunities, and ultimately, drive significant value for shareholders. Jon will provide a deeper dive in the long-term financial implications shortly, but at a high level. As I just noted, the strategic rationale of Rotech acquisition provides a platform to accelerate growth when you consider. The current and future demographics of the United States, the estimated 133 million Americans who suffer from at least one chronic condition, the 40% of American adults suffering from multiple chronic conditions, and those individuals currently undiagnosed with chronic conditions. Being able to serve the patient with chronic conditions through one platform will be critical to providing better service to our customers, while also delivering long-term growth for Owens & Minor. Second, the acquisition will be accretive to our operating and EBITDA margins driven by improved efficiencies across the combined organization. We are also going to have greater free cash flow generation, which will give us more flexibility to deleverage our balance sheet and reinvest in our existing businesses. And finally, we're going to see financial benefits dropping to the bottom line with a neutral impact on our adjusted EPS in the first school year, and approximately $0.15 accretion in year two. Now, turning to Slide 5, Rotech's product portfolio aligns with the chronic and acute conditions our Patient Direct segment supports today in addition to the broader GME market. The addition of Rotech will diversify our mix of patients, our suppliers, our payers and our geographic footprint, all of which enrich our capabilities to serve the market. It is this diversification that will support our efforts to be the partner of choice in new areas, thus expanding our revenue streams and improving our service offerings, creating significant value for our shareholders by driving growth, expanding our reach and enhancing our ability to deliver superior service to patients. Rotech has a 40 year history as a privately held company that has grown to $750 million in annual net revenue and more than $200 million in adjusted EBITDA in 2023. They are truly among the best-in-class home medical equipment distributors, serving patients, providers, suppliers and payers nationwide with a proven track record of success. Their far reaching geographic footprint spans approximately 325 locations in 46 states providing growth opportunities to leverage their robust infrastructure in areas we have yet to enter. Now moving to Slide 6. At our December, 2023 Investor Day, we outlined patient directs key revenue mix by condition. When looking at the mix on 2023 pro-forma basis, it is clear that we will serve a well-balanced and diversified mix of chronic therapies with no one therapy representing more than 28% of the total business. That said, we will continue to strive to expand the smaller categories as well as expand into new categories. Similarly, at Investor Day, we outlined the payer mix with our Patient Direct segments. Based on this combination, our new pro-forma basis constitutes approximately 68% commercial payer, 27% Medicare, 4% Medicaid and 1% other. Rotech shifts our patient direct payer mix slightly away from commercial payers and more towards governments. It should also be noted that Rotech will also increase our rural and small suburban presence on a pro-forma basis. Overall, diversification provides us with a healthy product portfolio and payer mix that will enable us to better serve patients, providers and payers. Moving to Slide 7, when we chartered our long-term vision for the Patient Direct segment, we wanted to strike the right balance between using internal investments and M&A to achieve our 2028 target of $5 billion in annual revenue. Since we acquired Byram in 2017, we have grown a $400 million business to a $2.5 billion in annual patient direct revenue. To keep that momentum going in 2028, we want to continue to build strong brand recognition with a national footprint and local presence, use our proven model, which we believe will continue to drive organic growth, grow our business across our core disease categories, while expanding into new categories and drive organic growth through the reinvestment of savings from synergies and operating model realignment to drive organic growth, while continuing to use free cash flow to de-leverage. And finally, on the right side of Slide 7, we outline areas in which Rotech will assist in driving us to meet our 2028 goals. We can benefit from Rotech’s strong organic growth to help accelerate our Patient Direct segment path to. One, achieving $5 billion revenue target by 2028, meeting a revenue CAGR of 8% or greater, and exceeding our adjusted operating income target of $400 million. The team at Rotech has built an impressive organization and we are incredibly excited to welcome them to the Owens & Minor family and support our long-term goals. I will now turn the call over to our Interim Chief Financial Officer, Jon Leon, to review the pertinent financial information of the transaction and our preliminary results for the second quarter. John?

Thank you, Ed and good morning everyone. This transaction presents a fantastic opportunity for Owens & Minor to continue its growth and expansion in the home-based care space. As is our practice, we undertook a robust and thorough diligence effort, and I believe that by acquiring a high quality company like Rotech, we will be well positioned to accelerate growth in this very large and growing adjustable market. Let's next turn to Slide 8. As we outlined during our Investor Day, we take a very disciplined approach to M&A by evaluating transactions against a rigorous financial criteria and led by our goal of creating value for shareholders. We believe Rotech meets this by financial criteria well and have significant strategic benefits to patients, providers and payers, which Ed discussed earlier. The purchase price $1.36 billion or $1.32 billion, which factoring in certain tax benefits represents an attractive purchase multiple of approximately 6.3x LTM EBITDA or 5.1x, when factored in the benefit of identified run rate synergies. In terms of our sales and growth, we are confident that the integration will help our long-term growth rate and that we can benefit from the best go-to-market approaches across our strong brands. We also expect this acquisition to become a creative for our EBITDA margins will also improve in our free cash flow. As the Patient Direct segment becomes a large percentage of our business, our earnings and cash flow power grows. As Ed mentioned, we'll see improvement to our bottom line with adjusted EPS impact of the acquisition projected to be about neutral in the first full year and approximately $0.15 in year two and continue to ramp up in year three and beyond. We also anticipate achieving approximately $50 million in synergies by the end of year three; following the close with the potential for additional upside. These synergies will be realized through a combination of driving network and procurement efficiencies, heightened cash collection processes and enhanced customer onboarding and technology. Just to name a few. We intend to take a very thoughtful and deliberate approach to synergy recognition and will not rush into any changes that could impact the customer experience, but we are confident in the abundance of synergy opportunities. After the transaction closes, we expect to our book leverage ratio to increase to about 4.2x EBITDA on a trailing 12 month basis. This would be an increase from our recent ratio of approximately 3.5x. We will remain steadfast around de leveraging the balance sheet and expect to deleverage to below 3x book leverage in approximately 24 months closing. During this period, we may from time to time choose to deploy capital to ensure a smooth integration of Rotech into our Patient Direct segment. This transaction demonstrates our commitment to using our balance sheet most effectively as opportunities arise to position our company for sustainable growth and ultimately generated better customer experience and more shareholder value. In terms of financing this deal, we are fully committed financing in place for the purchase price of $1.36 billion and we expect to use a combination of cash on hand and debt to fund the acquisition. To summarize this slide, this acquisition of Rotech is very financially compelling. We have a proven track record for successful M&A and this transaction is great for customers, will deliver trackless financial benefits and will create further value for our shareholders. Now let's turn to Slide 9. Before I hand the call back to Ed, I want to reiterate our previously communicated 2024 guidance with revenue to be in a range of $10.5 billion to $10.9 billion; adjusted EBITDA in the range of $550 million to $590 million; and adjusted EPS to be in $1.40 to $1.70 for the existing business. To be clear, this guidance does not include any contributions from Rotech. In addition to the full year guidance reaffirmation, we have provided second quarter of 2024 preliminary financial results on this slide ended the 8-K file this morning. We will release final quarterly results and hold a conference calls to discuss those results before the market opens on Friday, August 2. Our entire organization is excited about this acquisition and look forward to welcoming our Rotech teammates. We believe the additional Rotech will leave us better position to serve the home-based care market and ultimately approved the financial profile of the overall business. Now, I'll turn the call back to Ed. Ed?

Thank you, Jon. Before we open the line to questions, I want to finish with Slide 10 with why we are so excited about the transaction and the opportunities that it creates. One, it squarely aligns with the strategy we articulated at our Investor Day for the Patient Direct segment. Two, our combined capabilities and reach to patients, providers and payers will support improved service. Three, we can serve more patients through a comprehensive and broader suite of product offerings and improved service levels. Four, adjusted EPS will be neutral in the first year and approximately $0.15 accretive in the second year. Five, it will accelerate our long-term revenue growth and help us hit our $5 billion 2028 patient direct revenue target. Six, it will also be accretive to operating and EBITDA margins, as well as improving our free cash flow generation, which further supports our ability to quickly delever and reinvest in the business for the long term. And finally, it provides a significant synergy opportunity with further upside potential. I'm truly excited about the acquisition and the future of Owens & Minor. We have known the team at Rotech for many years and look forward to a shared vision. With that, we'll now open the call for questions. Operator?

[Operator Instructions] Our first question is from Stephanie Davis with Barclays.

I know on the presentation you gave us some color on book leverage, but from a like a standard net debt to EBITDA standpoint, can you tell us how you got comfortable with these levels even they're quite a bit higher? And how are you going to approach the pace of de-leveraging given some of the cash conversion headwinds this year?

Hey, good morning, Stephanie. It's Jon. so obviously the patient direct space, we are pretty excited about the EBITDA and cash flow, free cash flow that all these companies throw off, including Rotech. So going to just slightly over four, we're pretty confident that getting the overall patient direct cash flow generation and what we have from the entire business. We can get this leverage down fairly quickly. Rotech has been very nicely cash flow positive for quite some time and that combined with the cash flow generation of the overall business, we think we can delever pretty comfortably. And going up slightly before is a little higher than we would like to be at this point, but this attractive target came to market when it did and we saw something that we needed to own. And we'll just look to delever very quickly.

Follow up on that for the target coming to market. I was a little surprised that you decided to go deeper into the sleep space given some of the recent challenges in that. Is that just the function of Rotech coming to market first compared to other home care deals or should we think of more home care deals, I guess in the pipeline is another way of saying that?

Yes, I think at a high level, we're really bullish and on the opportunities within really the whole patient direct space, and this was just a critical and the key asset that came up that created the opportunity for us to go after and capture. When I think about the space specifically, probably more where Rotech is, and you look at a lot of the information out there where you've got a significant number of Americans, so six out of 10 have a chronic condition and four out of 10 have two chronic conditions. If you think about sleep too specifically in that area, yes there's GLP-1 out there and we do want a healthy America. But in the same sense, one aspect of this is the fact that if you have a patient, and I'll just do an illustrative example, a patient that's levels zero to four of need of sleep devices maybe the GLP-1 helps them move from a four to a three or a three to a two or a two to a one but there's still a significant number of people that are going to need the product need this product and GLP-1s doesn't necessarily cure the sleep issue. In addition to that, we also looked at it with the significant number of Americans with sleep apnea that haven't been diagnosed yet. Tremendous opportunity there. So those are some of the reasons why, how we got comfortable continuing in at least this part of our patient direct space. But we'll continue to look at and execute upon our strategy in patient direct. If we think about that, it's really we're going to try to continue to grow our base business through a new patient acquisition that's with organic investment. We are not pulling back on the sales reps and we added to continue to drive growth. We're going to continue to use technology to help us with things like reimbursement and we're going to continue to expand our products and services into adjacencies. And really that fourth one was this inorganic and this was the opportunity that came up and we seized on this opportunity.

Our next question is from John Stansel with JP Morgan.

Just comparing the pro-forma deck that you provided to the Investor Day deck, trying to make sure that I'm thinking about Rotech correctly. I mean it -- you've kind of called out here the skew moves away from commercial a little bit more towards government payers in back of the envelope. It seems like that would imply Rotech most of its revenue comes from government payers at this point. And then obviously the move up in diabetes and respiratory seems like a large majority of Rotche’s business would be in the diabetes and respiratory space. Is that about the right way to think about their business mix and then how do you kind of see this the pro-forma go forward mix changing over time?

I would say that most of the payer mix for Rotech is very heavily commercial. Maybe a little less commercial than the current Patient Direct segment, but still pretty heavily commercially focused. As to the product mix, Rotech is certainly -- fairly heavily deep into sleep and oxygen and they're followed by vents. The team that has done a really nice job the last few years of growing their diabetes business, but it's roughly 5%, 6% of their total business right now. They've also recently picked up some capitation business, so it's a nice diversified portfolio. So I would say, certainly, they're probably more focused on sleep respiratory of sleep oxygen and vent, but with a nicely growing capitation in diabetes space as well right now. So it adds to a pretty next well-balanced portfolio to the overall pro-forma patient direct business.

And then just kind of can you give us a sense relative to the market, how you view kind of Rotech growth over time kind of back pre ’23?

So you got to be careful until you go back pre ’23, because we all had pretty nice oxygen vent growth coming out of the pandemic. But Rotech has consistently been at or above market grower very consistent with our existing patient direct business and we expect that to continue going forward.

Our next question is from Michael Cherny with Leerink Partners.

This is Dan Clark on for Mike. Noticed in the deck, Rotech has about 300 account execs. How are you thinking about your current sales footprint given you just hired 300 reps fairly recently, or excuse me, 80 reps fairly recently? Do you think you're at a good number there?

Yes. Here's the way we think about it is one, with part of the transaction, once it closes, we do not want to create confusion for the customer, whether that be the patient, the payer or the provider. We believe that the footprint we have added continues to exist. We believe that they have got a strong footprint also in Rotech in the commercial team. Look with an acquisition, you get to that point, you are going to assess all aspects of the business. But really out of the gates, our main theme is to make sure we don't confuse the customers that we have today and make sure we maintain the relationships that we have today with our customer base.

Our next question is from Allen Lutz with Bank of America.

It seems like Rotech is somewhat similar to the patient direct business overall, but the margin profile of Rotech is materially higher. Can you talk about some of the drivers of why that margin differential exists and is there any opportunity to close that over time?

This is Jon, I will start by saying one, it's a really well-run business at Rotech, so we give that metric team a lot of credit. Second, it does have to do a lot -- a bit with the product mix. Obviously, as I mentioned earlier, they're very much -- very large into sleep ventilation oxygen, diabetes has been come on nicely smaller. But those respiratory categories tend to carry higher margins. Specifically, things like sleep supply, diabetes, though it's a very nice large growing market tends to carry a lower margin profile, which we are very big in particularly from the bottom side of the house. The mix is going to be the biggest driver of the margin profile. Obviously, as it talks about his remarks, we're having very well-balanced product portfolio. This is going to be our highest margin profile business line that we have. As we grow more respiratory margins will grow with diabetes, which is very nicely growing, does carry a larger -- little slower, little lower margin profile line overall.

I think the other thing, we think about this on is we think about integration and synergy, very similar with the acquisition of Apria, but we actually looked at best practices on both sides and intend of generating overall better service and improvement in the Patient Direct segment. As we begin understanding the business deeper and we start to think through the integration process, we're completely comfortable with taking best practices from either direction and putting them together. And that's going to be some of the drivers of the synergy. As Jon said, Rotech was an extremely well run and is an extremely well run business, and I think there's learnings we can take from that and bring it back to the entire Patient Direct segment and vice-versa. So that's the other way we're thinking about the delta and profitability.

And then for a quick follow-up for Jon, can you talk about the CapEx profile of Rotech? What are they spending annually and then are there any notable synergies from capital expenditures?

Yes. So very much like our Apria business, the respiratory side business is pretty heavy patient CapEx. So way to think about Rotech is roughly 13%, 13.5% of their top line will be for CapEx. That's going to be for growth and for patient care predominantly, but we certainly do expect some synergies around procurement and efficiency and how we go-to-market with that equipment. So that's something we'll take a hard look at over time.

We have reached the end of our question and answer session. I would like to turn the conference back over to Ed for closing remarks.

Thank you, operator. First, I want to thank everyone for joining us on the call this morning. The addition of Rotech to the organization is an extremely exciting opportunity for us. We have strong beliefs that this deal will help us expand not only our established patient direct business, but the overall company. And it would also be accretive across many, many of the metrics we have, and we look forward to sharing much more of around the second quarter earnings, that call is going to be August 2. So again, thank you everyone have a great day, and look forward to catching up with everybody on August 2, when we can go through the detailed results of our second quarter. Thank you everyone.