Bob Labick: Super. Thanks so much.
Operator: Thank you. Our next question comes from Brian Tanquilut with Jefferies. Please proceed.
Unidentified Analyst: Good morning. You’ve got Taji on for Brian. Thanks for taking my question. And Barb, we look forward to working with you. So to start off, maybe, Health, I’ll send the first question to you. We know the company has gone through a lot of change since you took over. So maybe can you talk about your strategy for the next few years? And what are the risks and other opportunities you see over the next one to two years. And also, I guess, how the value-based strategy fits within that?
Heath Sampson: Yes. Yes. No, I appreciate that. That’s probably the teammates that are listening or listening to the recording are going to be yes, there has been a lot of change. So – and all thanks to them. So you go across the board, if you think about what’s happened from a people perspective. Barb is sitting here and everybody else that’s joined the team. And even below that, there’s been a shift to new competencies within the people side. And there’s a couple that I really want to point out. We really got product capabilities, people that understand the life cycle and true future of where these services are going. We’ve added a lot of people there, development, technology people. And then, of course, innovation and then salespeople.
So there’s been a reallocation and rehiring of people that complement what we do every day in the field. So a lot of change and a lot of opportunity they’re processed across the board. Heavy discipline, daily, weekly, monthly from a process perspective and metric perspective is a new culture for us. And I couldn’t be more excited there. And then on the tech side, there’s been a lot, whether that’s infrastructure that’s going to help us scale all the way from company-wide ERP to platform – standard platforms across personal care, that’s happened, and then even below that. How are we adding value with getting analytics, using AI to help us really change outcomes. So it’s been across the board. Now that we have those components in place. There’s really just bringing that together and scaling that even more.
And that’s a big part of next year, is to finalize this new approach and ensure that we have the best service for each of our point solutions at the lowest cost. If we just finish that, which is our plan, and a lot of the questions that came before are around that. And then when we start bringing these services together and then also with the services that we have right now, and this gets to the kind of the broader strategy. And you hear a lot of people talk about value-based care, and this is where I want to spend a little bit of time. Value-based care to us, our customers, whether that’s a payer or whether that’s somebody that the payer has offloaded risk to, some other risk-bearing entity, Those are the people that take risk. They are our customers, but here’s what they value with us.
Because we do these services, whether that’s a device in the home, whether we have a person in the home doing personal care, whether that is somebody that’s driving or whether that’s somebody that’s connecting via our contact centers, we have access that they don’t have. So – but now because of our competencies around process and specifically around tech enablement, we can start tracking a member longitudinally and you put some clinical support behind that. We can actually start giving data and helping our customers change outcomes have higher satisfaction. As you know, CMS or states high expectations on ensuring that happens. So what does that do for us? It is just a trampoline or a further acceleration on selling our point solutions and being sticky.
And then on top of that, creating additional revenue sources we’re getting paid and sharing in those risk-bearing entities. So our strategy is meaning where health care is going. Growth in people that are getting older, people that are sicker and of course, the challenge is on cost. So just marries well with where our company is, where the market is going, and so that’s where we’re excited about continuing to do that each year and year.
Unidentified Analyst: Great. Really appreciate that. And then just one follow-up. I know that we’ve kind of talked about the margins pretty extensively. So shifting to cash generation, obviously this quarter posted solid results. So as we look post-2023, can you just talk about what gives you confidence in your ability to sustainably deliver free cash – positive free cash flow?
Heath Sampson: Yes. So if you look at our individual businesses, and I mean know these last couple of quarters, specifically in the mobility business, we needed to get past some of the COVID balance between payables and receivables. And we’re through that. And you see it. It’s showing up in Q3, and we expect that to continue. In the personal care and monitoring side, very strong margins right now. Those margins – though on the personal care side, we’re on the low end, I expect those to continue to get stronger as we finish our centralization, standardization, automation. So that business, very strong, rigid margin. It’s all about growth there. And then that’s where I’m going with the strategy that I talked about earlier, married with our new go-to-market strategy, those margins strong, how do we grow there.
So really the item that all of you are looking at and that we should continue to pay attention going forward, it’s the mobility or an NEMT margins. So the good thing for us because of all the work we’ve done over the last 18 months, two years, we have these contracts where we have a win-win with our customers. So this kind of downside risk on margins going what they were prior COVID are really low. We’ve kind of protected that side. Okay. Now how do we get back? How do we get back to stronger margins. And that’s with these efforts that we’re doing now, and they’re starting to take hold. And we will start seeing now and through 2024 that we will be moving up and gaining margin improvement as we exit 2024. We’ll probably be on the low end of our margin guidance, which was 9% to 12% that we’ve given.
But again, if you look at – and this is also the questions we had before and you go to that slide that has optimizing our cost structure, that’s kind of assuming middle of the road cost savings for 2024. We continue to execute on that, which we should that allow us to really have rigid and strong markets in NEMT. And if you put that all together, we’re going to continue to get scale as we grow from a revenue line perspective. And so again, I feel really good about what we’ve done. It’s working. And margins will be strong. So then we get to – as we exit kind of 2024, we’ll get back to that strong kind of $100 million, $100-plus million run rate cash flow just on our core businesses. So – and we have work to do. But generating cash now, we’ll generate cash in 2024, and it will continue to grow as we exit 2024.
