Option Care Health [OPCH] Conference call transcript for 2022 q2
2022-07-27 14:47:02
Fiscal: 2022 q2
Operator: Good day, and thank you for standing by. Welcome to the Option Care Health 2022 Earnings Conference Call. . Please be advised that today's conference is being recorded. I would now like to hand the call over to our speaker today, Mr. Mike Shapiro. Go ahead.
Michael Shapiro: Good morning. Before we begin, please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. 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 the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements except as required by law. During the call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website. With that, I'll turn the call over to John Rademacher, Chief Executive Officer.
John Rademacher: Thanks, Mike, and good morning, everyone. Overall, we are very pleased with the progress we have made in the second quarter and the financial results we delivered as reported this morning. Despite operating in a very dynamic environment, our team continues to execute our plans to realize our purpose of providing extraordinary care that changes lives. In the quarter, we increased the number of patients we serve and who entrust us with their care in the home or one of our alternate infusion sites. Throughout the second quarter, we also made strong progress on several fronts of our focused strategy. As Mike will outline in a few minutes, we delivered low teens revenue growth and mid-teens EBITDA growth, and translated that into strong cash flow. We continue to navigate a very difficult labor market and inflationary dynamics which presents challenges on a daily basis, yet we were able to leverage our strong infrastructure and continue our track record of delivering strong EBITDA growth and expanding EBITDA margins. And at the same time, we invested for the future growth, having closed on our acquisition of Specialty Pharmacy Nursing Network or SPIN early in the second quarter and opened 6 new infusion centers in key markets across the country. With respect to our results in the second quarter, we saw balanced growth across our portfolio of therapy, including low single-digit growth in our Acute portfolio and mid-teens growth in our Chronic portfolio. Despite modest hospital discharge volume growth at acute care facilities across the country and continued supply shortages in vital nutrition support products, we saw solid referral trends throughout the quarter. Given recent repositioning by some other market participants, we are confident that we are executing well relative to the broader market, and we remain well positioned to support market demand for the portfolio of acute therapies. I've spoken before about our commercial focus to ensure we have the appropriate market coverage through reach and frequency, and we are seeing the value of this disciplined approach. The investments we have made and continue to make into our care management center infrastructure to help ensure we are responsive to our acute care channel partners and referral sources have resulted in a more reliable and timely collaboration across our national network of 97 highly-connected and efficient pharmacies. We have created an increasingly effective, digitally-enabled platform for complex pharmacy administration and point-of-care services across the country. Our Chronic portfolio continues to grow in the mid-teens and the results are quite balanced across established chronic therapies as well as newer products that have rounded out our portfolio. With our comprehensive nursing network, we are well positioned to help payers meet the immediate needs of their members and move beyond the infusion event to help better support the whole patient and reduce the total cost of care. As we have discussed previously, we continue to operate in a challenging market backdrop with continued labor and cost pressures. Our focus on recruiting our existing team members every single day and recruiting new members to the team helps ensure that we have capacity and vital skills necessary to provide advanced care to our patients. The teams in the field are executing well to help ensure we have the right staff and the right therapies to provide extraordinary care. The inflationary cost pressures continue to present challenges, but we remain very focused on offsetting those sectors where possible, primarily through leveraging our technology to drive productivity and operating efficiencies. We continue to see widespread cost pressures across a broad array of inputs, including fuel and transportation, packaging and medical supplies and a variety of other categories, and we do not expect those pressures to subside anytime soon. As I mentioned earlier, we are thrilled to welcome the SPIN team to the broader Option Care Health Enterprise. And with the acquisition, we continue to make progress on creating a unique, skilled infusion nursing platform. Combined with our internal nursing organization as well as our acquisition of Infinity Infusion Nursing last fall, we have now established a leading clinical organization of more than 3,000 qualified infusion nurses to provide exceptional infusion services at the point of care to patients across the country. While we are in the early innings of integrating those organizations, we are more confident than ever that the SPIN and Infinity teams will be instrumental in our growth strategy going forward. Finally, we are investing for future growth through our expansion of infusion centers nationwide. In the second quarter, we opened 6 new infusion centers and now expect to open more than 25 in 2022. As a reminder, center expansion is a vital growth strategy as it enables us to provide more choice for our patients, drive clinical labor efficiency while also expanding our ability to collaborate with referral sources to increase our patient expenses. Through our consistent investment in site capacity, we now have more than 140 infusion centers across the country, and I expect this to be an area of continued investment beyond the current year. Our disciplined investment strategy focuses on improving access to care across geographies and therapies and improving the patient experience. Given our investment in infusion centers and technology over the past several years, we continue to cast a wider shadow, so to speak, into new therapies, more rural geographies and a broader base of referral sources. It's about providing consistent, high-quality care, whether you're in New York City, Kansas City or Carson City. So overall, the second quarter was very productive, and we continue to make solid progress on executing our growth strategy focused on providing extraordinary patient care in the post-acute setting. We delivered strong revenue and EBITDA growth in the quarter, and we increased our cash balances while making significant investments into our future, allowing us to tighten and raise our full year guidance. Before I hand it over to Mike to go into the results in more detail, I must recognize and highlight the incredible collaboration and focus of our teams across the country as they rise up to meet every challenge and maintain our focus of placing the patient and their families at the center of everything that we do. And with that, I'll turn the call over to Mike to review the results in a bit more detail. Mike?
Michael Shapiro: Thanks, John. Overall, Q2 was a very solid quarter, with double-digit revenue growth that translated into leveraged growth at the bottom line and modestly better EBITDA margins despite the cost headwinds that John articulated. Additionally, our balance sheet has never been stronger, and with our relentless focus on translating revenue into cash flow, we are reporting record levels of cash and new lows in terms of our leverage profile, which are critical as we navigate the challenge. Revenue grew 14% and was consistent with our expectations. And as expected, growth was a bit more tempered relative to the first quarter due to higher prior year comps. Nonetheless, our Chronic portfolio continues to perform quite well and represented most of our revenue growth. Acute revenue was up in the low single digits despite mixed acute volumes reported by our health system partners, and we attribute our relative performance in our Acute portfolio to the investments John alluded to and our strategic focus on this portfolio of therapies. Gross margin of 22.1% declined versus the prior year as expected due to the mix shift towards chronic therapies and higher cost to deliver care. Despite the gross margin decline, we drove 9% growth in gross margin dollars based on the higher volumes. And SG&A grew considerably slower than gross margin as we fought to offset inflationary pressures, which allowed us to expand EBITDA margin despite the mix headwind. While we continue to focus on efficiency and cost savings to mitigate inflationary cost pressures which, as John mentioned, we do not expect to subside anytime soon. Adjusted EBITDA of $85.2 million grew 17% over the prior year and represented 8.7% of revenue. So despite the mix shift towards Chronic and unprecedented cost pressures, we continue to expand profit margins and demonstrate the scalability of the platform. Additionally, as we discussed earlier in the year, we have reversed our valuation reserves on our tax net operating losses, and as expected, our effective tax rate has migrated upward to 28.8% in the quarter as we now anticipate fully utilizing all NOLs. We generated over $104 million in cash flow from operations in Q2, and we increased cash balances by $58 million in the quarter despite paying approximately $60 million in the quarter to acquire SPIN. At the end of Q2, our net leverage ratio has declined to 2.7x, which is extraordinary given where we started this journey 3 years ago. As I mentioned earlier, our capital structure is quite strong. And with no maturities until 2028 and modest interest rate exposure, we believe we are in a strong position going forward. And based on the momentum exiting the second quarter, we are increasing our outlook for the full year accordingly. We now expect to generate revenue of $3.85 billion to $3.95 billion and adjusted EBITDA of $330 million to $342 million. Based on our higher earnings, we now expect to generate cash flow from operations of at least $250 million. So overall, we're quite pleased with the momentum halfway through the year and continue to anticipate a productive full year. And with that, we will open the call for Q&A. Operator?
Operator: . And our first question comes from Lisa Gill of JPMorgan.
Lisa Gill: Congratulations on a great quarter. Just really want to start with referral patterns. So you talked about Acute versus Chronic. So just curious what you're seeing today, really, in 2 areas. One, as we continue -- I hate to even talk about COVID at this point. But as you continue to see COVID ebb and flow, has that had any impact on referral patterns? And then secondly, John, as we think about site of care, it's become so important to manage care, really keeping patients in site to care like Option Care. Can you maybe just talk about what you're seeing in the environment today? And do the payers have any interest in moving more towards narrow networks as what they've seen this benefit from change in site of care?
John Rademacher: Yes. Lisa, and yes, thanks for the question. So on referral patterns, as you outlined, look, it still is very local as communities are dealing with the BA-5 strain, and that's kind of putting a little bit of disruption in patient visiting doctors or receiving elective surgeries or other aspects of that, so it truly is localized. We're not seeing kind of national patterns. And as we called out it was, although moving in a forward direction around hospital admissions and discharges, as you see in others as they report, it was modest growth. A lot of our focus is really on making certain that we are well prepared as an organization, as a partner of choice for those referral sources that we focus around reach and frequency of our teams, that we've got the right therapies on the shelf and staffing models in order to do that. And so we expect that it's going to remain a little bit choppy market by market as we continue to deal with different variants of the COVID strain, but feel like we're well positioned to be a partner of choice. And the investments that we've made into our core infrastructure and the 97 pharmacies that are operating effectively and efficiently, we feel well positioned from that side. On the second part of your question, on site of care, look, we continue to have really productive conversations with the payer community around their thoughts around -- not only think about site of care initiatives and making certain that they get that balance of cost quality aligned with member choice, and we're working closely to help support those efforts across the board. A lot of the investments that we're making not only into the nursing community, but also into the infusion centers across the country really dovetail and fit well within that overall strategy of moving more of the care closer to the home or into these dedicated site of care to align with the payers initiatives. And we feel as if the progress that we're making, opening over 25 this year and 6 in the quarter, just continues to position us well as the partner of choice as they're thinking about their network design and the partners that they want in network moving forward. Along that, with kind of the back part of that question, is we are seeing interest in narrowing of networks or the qualifications that the payers are looking for as that moves ahead. And we've done everything as part of our strategic moves to make certain that we are on the right side of any of those narrowing, given that fact that we can provide high-quality care consistently and effectively. And as I said in my prepared remarks, whether in New York City, Kansas City or Carson City, we've got a national network that really drives that consistent, high-quality care in a setting in which patients want to receive it.
Operator: And our next question will come from David MacDonald of Truist. And David, your line is open.
David MacDonald: So just a couple of quick questions. I'm curious, just conversations with your payers in terms of as contracts start to roll forward in renewals, just conversations around potential escalators, just acknowledgment out of the payer community when you talk to them about inflationary environment? And then Mike, is the $10 million to $12 million per quarter, is that kind of still the right number? Any acceleration or deceleration in that is my first question.
John Rademacher: Dave, it's John. I'll start on just the conversations with the payer community. Yes. I mean, look, there is recognition of some of the pressures that are out there. I think as we've explained before, we really have 3 legs of our reimbursement stool. Certainly, the cost of the drug are clinical per diems and then the nursing. And we look at it across all of those dimensions as we're moving and negotiating our reimbursement rates with the payer community, so we're always looking for the appropriate balance across those 3 dimensions. And I think it's been well publicized. People know clearly that there are pressures from an inflationary and labor perspective, especially in the areas of nursing and some of the inputs that I highlighted on that. So we're very balanced in the way that we look at it, knowing that we've got to make certain that as an organization, we're working across all 3 of those dimensions. And no one's knocking on our door telling us that they want to give us more money, as you fully understand, but I think there's good recognition of some of the inflationary pressures. And we're going to continue to be focused on that as an organization as we're looking at renewal cycles and the way that we're contracting as we move ahead.
Michael Shapiro: And Dave, the only thing I would say on the inflationary pressures is we estimated $40 million to $50 million of annualized or, call it, $10 million to $12 million a quarter. Again, this is a broad estimate. I'd say as we think about the inflationary pressures, nothing has materially deviated from how we thought about the cost pressures when we connected 90 days ago on the first quarter call. And again, it's one of the things we're proud of is -- we continue to drive leverage in the P&L, with gross margin dollars growing 9% and SG&A growing slower. Part of it is just our relentless focus on efficiencies and searching for coins between the cushions on the couch, so to speak. So, so far, continuing to to report modest EBITDA margin expansion in what is unprecedented inflationary pressures, it's energizing for the team. But make no mistake, it's still challenging across several cost categories, as John mentioned.
David MacDonald: Okay. Just wanted to dig into labor a little bit further. Given the strength of the top line, I assume the answer to this is yes. But were you guys able to staff all the demand that you saw in the quarter? And then secondly, can you just talk about the leverage from continuing to put up these ambulatory infusion suites? And also, is there an opportunity to maybe replace or alleviate some labor pressure through further automating some jobs that maybe some people are actually doing right now?
John Rademacher: Yes, so I'll start on just the capacity models and the way that we operate from that perspective. As you said, Dave, we certainly were really strong in the quarter of being able to staff appropriately on that. Look, on a market-by-market level, there may be some challenges as on a day basis on a weekly basis on that. But for the most part, the team has worked extremely well and collaborative in order to do that. Part of the investments into the nursing community with Infinity and SPIN as well as the -- what we've done with the infusion centers is to help to expand and make certain that we've got that capacity, especially in the nursing area, in order to move that ahead. So we feel really good about the position we are. And I called out, look, we spend a lot of time on making certain that we are recruiting our team members every single day. We have been adding staff in markets in which we have the opportunity to continue to expand and grow, and we'll work aggressively to make certain that we have that capacity both in staffing as well as all of the products that are necessary for us to be able to move that ahead. So all in all, feel good about that.
Michael Shapiro: Sorry, go ahead.
David MacDonald: No, go ahead, Mike.
Michael Shapiro: No. John made the point. Go ahead, John.
David MacDonald: Okay. Just last question, guys. And John, I think you touched on this, a touch in your prepared comments, but our checks suggest there are some competitor pharmacy closures. Does this create an opportunity in Acute? And then is there the potential for that to become somewhat non-trivial over time?
John Rademacher: Yes. Look, the market is dynamic and continues to change. And certainly, as organizations reevaluate, reposition on that, we feel really good about the investments that we've made into our pharmacy infrastructure and our ability to support the acute therapies broadly within that standpoint. It's early to tell kind of what the long-term implications are. And look, there's -- it's a competitive environment across the board. We have many competitors in most of those markets as we move ahead. But the platform that we've created, the consistency and quality that we've invested in, the ability to drive that leverage for us and scalability within our infrastructure, all of that, we feel like we're well positioned to be a partner of choice for those referral sources. And also to capture our fair share or more than our fair share of demand based on the reach and frequency and the -- and really, just the expertise of our commercial as well as our clinical team.
Operator: And our next question will come from Matt Larew of JPMorgan.
Matthew Larew: Okay. Switched firms, not bad. I -- Matt from William Blair. Curious, Mike, if you could maybe break out the growth for us between the M&A or whether that's Infinity, new centers and organic. I think there's maybe more so than previous quarters, just a lot going on here, so maybe that would be helpful.
Michael Shapiro: Absolutely, Matt. So in the quarter, again, last year in the first quarter, we did have the BioCure result, which was admittedly one of the smaller acquisitions we've made. So in the second quarter, we did have the full results of Infinity and Wasatch as well as virtually a full quarter. That top line contributed a little over 2 points of the growth, so about 25% of our reported growth. From a new center perspective, that's not really how we think about it because, again, we simply view that as a point of care. So that's really -- I'd say the gains in our center penetration was up modestly in the quarter. But again, that's just part of our overall organic growth strategy. You've heard us talk about how around 20% of our nursing events were occurring in one of our centers. It's a couple of points higher than that in the quarter. We're probably around 21%, 22%. So nice momentum there. Not only are our nursing events obviously growing, but the penetration in the centers has crept up a bit as well.
Matthew Larew: Okay. And then just on gross margins, obviously, the last couple of years as this shift towards chronic has been occurring, crossbars still have been kind of modestly expanding. Just curious, this year on a year-over-year basis, could you maybe break out for us some of the more inflationary pressures? You referenced gas and travel, I think packing relative to sort of that portfolio shift, just so we could maybe better model future periods?
Michael Shapiro: Yes. So look, as I mentioned in the prepared remarks, and again, we've been talking about this consistently, with that chronic acceleration relative to Acute, we -- it is inevitable that we will be facing mix pressure at the gross margin rate line. Not to sound defeatist because, as you know, we fight for every darn basis point. In our gross margin, there are what we would refer to as the direct cost to administering care. So the compounding pharmacy technician, the oversight of the clinical pharmacists at our pharmacies, all of the medical supplies, the direct nursing labor for administration of the therapy as well as the transportation and distribution. Again, all of the therapies that leave our pharmacies are delivered directly to the patient's homes through UPS, FedEx or a courier. And so some of the categories, no surprise, that have been hit harder from an inflationary perspective. Obviously, the clinical labor we continue to, as John has mentioned, keep our ears to the rails at the local level to make sure we're competitive. So the clinical labor has seen some inflationary pressure. Upward transportation, packaging materials, medical supplies which are petroleum-based plastics, those that we have seen considerable inflationary pressure, especially around a lot of the transportation and medical costs.
Matthew Larew: Okay. And then the last one. You referenced mixed volumes from health system parts, and I guess just curious maybe how much of that relates to some of the COVID dynamics around referral patterns that Lisa alluded to versus health systems coming back, and maybe reengaging more with their own internal offerings?
John Rademacher: Yes, Matt, it's John. Look, we have -- we continue to look at kind of those referral patterns. We have not seen major changes in the referral patterns that hospital systems are holding on in HOPDs or other places. I mean, where we have come competition has been strong on that. So the team is working aggressively to make certain that we are well positioned to the partner of choice, that we're doing everything we can around the patient registration and administration aspects to make it a smooth and efficient transition of care out of the inpatient or on to service for our chronic patients. So we haven't seen anything substantial, but it's competitive and it's always been competitive. Whether it's a in-kind competitor or a hospital-owned competitor, the dynamics continue to be as competitive as it's ever been.
Operator: One moment. And our next question comes from Joanna Gajuk of Bank of America.
Joanna Gajuk: I guess, first, actually a follow-up on something you mentioned in your prepared remarks, you mentioned a repositioning of other players. So can you tell us what you're actually referring to? And are you talking about your competitors? I guess, going down the footprint, we saw some of the changes at the site of care from employees being let go in some of these locations. Are you referring to this? Or there something else you're talking about when you refer to repositioning your other players?
John Rademacher: Yes, Joanna, it's John. Look, the market is dynamic, as I've said before. And we have -- there are certain markets in which several of our competitors are retreating from certain therapies, really, in the Acute area as they're kind of thinking about what their longer-term goals could be. We see this kind of market by market. There's kind of -- there's always interesting dynamics on that as competition ebbs and flows on that. As an organization, we've invested in a national network and a platform of highly-connected and efficient pharmacies to make certain that we are a partner of choice across all of the therapy sets that we are able to provide services, whether it's coming out of an acute facility or whether it's a patient that has chronic conditions. And so our focus remains steadfast in the investments that we're making, the partnerships that we're developing, our ability to collaborate closely with hospitalists, discharge planners, case managers as they're thinking about safe and effective transition of patients out of the hospital into the home or into an infusion suite. And so we feel like we're well positioned on that. The focus and the discipline that we've had in kind of our investment thesis remains solid. And our expectations are that as demand is in the marketplace that we are a partner of choice as they're making their decisions around where to spend patients and how to participate from that standpoint.
Joanna Gajuk: Okay. And I guess another, I guess, a follow-up here before -- Mike, my question. But when I was thinking about other players, and also you commented about the hospital systems and HOPDs, but also been hearing about hospitals also interested in setting up their own home infusion business. In particular, I think AmerisourceBergen talked about like a program that they offer to help hospitals. I mean, it sounds like they might be using third parties. So I don't know if this is something you're also seeing where hospitals coming to you directly to kind of have some sort of more close relationship or some sort of structure that kind of will bring more volume? Or can you just talk about those strengths there?
John Rademacher: Yes, Joanna. Look, we have always pharmacies as part of the competitive dynamics of the marketplace. And again, we have partnerships with some hospital systems in which we work very closely on that, and we continue to look at that as just the competitive dynamics in the marketplace. Yes, there are different organizations that align around supporting hospitals in that process and helping support their needs as they're looking at where they want to deploy their capital and how they're looking at their overall health care ecosystem. As an organization, look, we take all competitive threats seriously, and we really work hard to make certain that we are well positioned on that. I can say that in certain circumstances where hospitals do have their own hospital-owned infusion pharmacies, we still have strong partnerships. When you think about the ability that they have and the catchment area that they can provide for their patients in today's health care system where there is a lot of travel associated with going to centers of excellence and other aspects, given the national network we have, given the ability that we have to take a patient that may receive service in City A but they live in a rural setting a state or 2 states over, we can still be their partner of choice and help with that transition given that they don't have the catchment area to be able to provide that consistent high-quality service outside of their local geographies. So we're always getting the competitive dynamics. We're always keeping our ear to the rail. We believe that the investments that we made into our national network, we think that the outcomes that we drive from a clinical standpoint, and we think that the partnerships that we've developed with our commercial team just position us to be a partner of choice as they're making those decisions and looking for ways to support their patients in the local community and outside of that.
Joanna Gajuk: And I guess my question on the cash flow. So you raised your operating cash flow outlook, and sounds like you're expecting to use the NOS. I just want to, I guess, 2-part question on the cash flow. So one is, are you expecting to start paying cash taxes this year? And a second question, part of that, I guess, you raised the cash flow. So should we expect more M&A? Is there pressure on the smaller operators, so you're expecting to kind of spend more on them? Or should we think about the use of this increased cash flow?
Michael Shapiro: Yes, Joanna. So from a cash perspective, what we said is we don't expect to be a material cash taxpayer this year. We'll obviously update our thoughts around 2023, but the overwhelming majority of the NOLs will be used this year. And so there could be a very modest cash tax position in Q4, but nothing of note. Look, we're thrilled. And as you know, our mantra around here is the EBITDA only counts if it converts the cash in the bank. And given the dynamic market we're in, carrying a little bit higher cash balances, we think, is a prudent strategy. However, our thinking around deploying that capital, it's not our cash, it's the shareholders' cash. And we think the best way to create value for the shareholders is through deploying that in an M&A strategy. So simply because we're generating more cash doesn't lower the bar on our expectations around the strategic and economic merits of any opportunities. And to the extent that we think that there is excessive cash, we'll obviously look at alternative avenues through which we can return to the shareholders. However, at this point, our conviction remains that M&A is the primary strategy for us to optimize value.
Operator: And our next question comes from Brooks O'Neil of Lake Street Capital Markets.
Unidentified Analyst: This is Charlie Manting on for Brooks O'Neil. Just one quick question for me. Could you please talk about how the shift to value-based care might impact Option Care, and where might you see advantages in the new paradigm?
John Rademacher: Charlie, it's John. Look, we continue to have very constructive conversations with the payer community as things continue to evolve down that path. Those very constructive discussions, our focus has always been around creating favorable clinical outcomes. And we believe that the ability for us to continue to be well positioned to provide high-quality care at an appropriate cost in a setting in which patients want to receive that care makes us part of that longer-term solution that is being looked for. The platform that we've created and the ability for us to really be focused around that patient experience, member experience and that high-quality care, we think is something that allows us to continue to be in those robust conversations and part of the sale. I think as we're looking at value based, it's hard to define at this point. Each organization is looking at it a little bit differently on that, but total cost of care is something that they're beginning to really focus on, looking at the overall outcomes associated with therapy sets and care delivery. And we're doing a lot within our organization to make certain that we're well prepared not only to clearly articulate the outcomes that we can deliver, but more importantly, the experience from a patient standpoint and the quality of the care that they're receiving.
Unidentified Analyst: Okay. That was very helpful, and that's it for me. Operator, are you there?
Operator: Yes. Our next question will come from Pito Chickering of Deutsche Bank.
Philip Chickering: A follow-up 4-part question about why some of your competitors are actually in the markets. I guess, number one, why do you think they exited in? Is it because they didn't have enough scale? Number two, does this give you more leverage with the payers who are less for buyers, but still want to have home infusion savings? Number three, can you quantify how much of the market share you've captured at this point? And number four, does this bring down multiples for tuck-in deals going forward?
Michael Shapiro: Only 4 parts, Pito. That's good.
John Rademacher: Yes, so let me start. Look, we're not going to hazard a guess around why people do what they do. Our focus is around our strategy and our execution. What I can tell you is all along, we've looked at the strength of the platform that we've created and and our ability to be a partner of choice at the local level, right? Health care is local. As much as we do to use our scale and the technology to create a highly reliable and interconnected network, it still is local. And the investments that we've made into our care management centers, our staff, the quality of our services is something that we meet -- really meets the needs of the marketplace and meet the needs of our referral sources on that. And so we're going to be steadfast in our strategy our execution. And we -- as said, time and time again, we love the balance of the portfolio across the Acute and Chronic, and our ability to use that to drive leverage growth and scale as a competitive advantage. We have invested a lot within our commercial resources to make certain that we have that reach and frequency, that we were well positioned in the relationships that we're developing in those local markets, in the ability to identify opportunities to partner more deeply with them. And again, we'll look at any opportunity to continue to push that forward, to continue to deepen those relationships and continue to find ways to serve more patients. Because we truly believe that a patient that serve by Option Care Health receive the best care available in the home or in one of our infusion suites. On the overall, look, it's early to tell around what this will be. I can also though just continue to reimport, every market is competitive. There's multiple competitors in every single one. And so look, we like our positioning and we like the investments that we've made, and we think that the disciplined approach that we brought puts us in a really strong position to feed on any opportunities that come to us. But way too early to tell around what any repositioning may do. And it's incumbent on us and our team to make certain that we're deepening the relationships and that we're capturing demand as it is available in the marketplace.
Michael Shapiro: Peter, it's Mike. The only thing I would add is, look, as you know, as we talk about kind of the market participants in relative shares, these are all estimates. We don't have real-time market share metrics from IMS. And as John said, look, we're focused on being responsive to our referral partners in certain markets. And it's early days, but -- and again, back to John's comments, it's about being dependable and reliable. When the call comes in 4:00 on a Friday afternoon, can we be responsive? And that's something we pride ourselves in. And if that -- if that continues, we're confident in the momentum on the Acute side. From an M&A perspective, look, I mean, we're not seeing meaningful moves in multiples and valuation yet. Again, we're not -- we're going to be very thoughtful looking at what are the strategic opportunities, and we're going to be disciplined in how we value those. But we're not seeing any seismic move in valuation expectations.
Philip Chickering: Okay. Fair enough. And then on the supply chain, in the script, you talked about shortages in Nutrition. I guess, you're looking at your broad portfolio, are there any other areas that you're seeing or worried about seeing shortages in? And on shortages, are these more revenue impacts or gross margin impacts or no impact at all? I'm just wondering?
John Rademacher: Yes. Look, on what we called out, certainly in nutrition support, I mean, it's well publicized around some of the challenges that have existed in the marketplace with plant closures and other aspects. And so our team has done a tremendous job of helping to navigate through that and make certain that we can support not only our existing patient census but where we can take on new patients and looking at formulary alignment. And we have dedicated, and really, expert dietitians that are part of our team that work tirelessly to make certain that all of our patients receive the nutrition support necessary as they're executing around the therapy plans. Look, there's always going to be some of those spot outages. We've got other situations where electrolytes and trace elements for our principal nutritional are under constraints. There's also some modest constraints around some of the other products as things ebb and flow from a supply chain standpoint or plant closures or repair aspects. And so we've got a dedicated team in our trade relations strategic sourcing who are just adept, that kind of beating the bushes and making certain that our teams in the field have the products that they need to make certain that we can meet the demand that's in the marketplace. So we work extremely hard, and I believe, extremely effectively to try to minimize, mitigate or adjust around that. Mike, I mean, if you want to -- on the impact to revenue or margin?
Michael Shapiro: Yes. Look, I mean, obviously, a lot of our therapies are orchestrating and compounding complex therapies for a patient-specific prescription. And so as we think about like parenteral or NRL Nutrition, if you don't have that one trace element, that one electrolyte that's critical, it's a real clear orchestration not only of the therapy input, Pito, but it's also making sure we have the right infusion pump, the right infusion set that, again, is a PVC derivative. All orchestrated. And so look, our team makes it look easy, but it's anything but. And so I would say, from your perspective, whether it's certain medical plastics, certain infusion pumps with conductors and chips, whether it's nutritional compounds that our pharmacy techs compound under a hood, it does have an impact on the top line and margin. But again, thus far, knock on wood, our procurement team manages this 24/7, and we've fared relatively well.
Operator: And I'm showing no further questions at this time. I would now like to turn the call back to John Rademacher for closing remarks.
John Rademacher: Yes. Thank you for joining us this morning and participating in our second quarter earnings call. To sum it up, we are very pleased with the performance of our team, the progress we are making against our strategic initiatives and the continued strengthening of our balance sheet. We expect that there will continue to be challenges and know we have work ahead of us to achieve our goals. However, we are focused on execution, and we look forward to making continuous progress. Take care and be well.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
