Owens & Minor, Inc. (NYSE:OMI) Q3 2024 Earnings Call Transcript

Owens & Minor, Inc. (NYSE:OMI) Q3 2024 Earnings Call Transcript November 4, 2024

Owens & Minor, Inc. beats earnings expectations. Reported EPS is $0.42, expectations were $0.4.

Operator: Good day, everyone, and thank you for standing by. Welcome to the Owens & Minor Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Jackie Marcus, Investor Relations. .

Jackie Marcus: Thank you, operator. Hello, everyone, and welcome to the Owens & Minor third quarter 2024 earnings call. Our comments on the call will be focused on the financial results for the third quarter of 2024, as well as our outlook for 2024, both of which are 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 and quarterly reports on Form 10-Q.

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 am joined by Ed Pesicka, Owens & Minor’s President and Chief Executive Officer; and John Leon, our Chief Financial Officer. I will now turn the call over to Ed.

Edward Pesicka: Thank you, Jackie. Good morning, everyone, and thank you for joining us on the call today. I’d like to begin my remarks by acknowledging our teammates who were affected by Hurricanes Helene and Milton in the southeastern portion of the United States. While our distribution facilities in the region were largely unaffected, our North Carolina kitting operations was unable to operate regularly due to disruptions in local and regional infrastructure, which caused some delays in deliveries. This kitting facility has been fully operational for the past few weeks. More importantly, our teammates and their families face significant and, in some cases, unimaginable personal losses. We are working with these teammates and their communities to help them recover.

Turning to our financial and operational performance in the third quarter, we achieved top line growth across both segments, highlighted by exceptional demand for sleep supplies and diabetes in our Patient Direct segment as well as strong same-store sales within products and healthcare services. Also in the quarter, we utilized some of our cash to reduce our overall debt and made additional investments in both segments to drive greater long-term efficiencies. I am pleased with our progress, and I’m confident that we will maintain this momentum, leading to good sequential growth in cash flows in the upcoming quarter. Our Products and Healthcare Service segment once again reported solid mid-single-digit revenue growth. This strong performance was driven by the strengthening of our existing customer relationships and the successful onboarding of new opportunities.

Additionally, we continue to see prices stabilize in several of our key product categories, including gloves more recently. Our improved top line performance is a strong indication that our recent investments in our Product and Healthcare Services segment were the correct and prudent choices to drive long-term growth. Turning to our Patient direct segment. We are seeing positive returns from our investments earlier this year, which will drive growth through 2025. In the third quarter, we delivered mid-single-digit year-over-year top line growth, driven by strong demand across our served indications, most notably in our diabetes products and sleep supplies. Two examples of the investments to further improve our business were our sleep journey program as well as our enhancements to our revenue cycle process.

The sleep journey is focused on improving the patient experience from onboarding new patients to making it easier for patients to obtain the supplies they need. Both of these programs are examples of us not resting on our success. We also made progress with respect to our balance sheet, having reduced total debt by nearly $200 million in the most recent quarter, using cash on hand and bringing our total year-to-date debt reduction to approximately $210 million. In the coming quarters, we are committed to continuing our debt repayment while also investing in our people, products and processes. In mid-October, we shared an update to the Rotech Healthcare Holdings acquisition timeline, noting that we now expect the deal to close in the first half of 2025.

In a highly regulated industry like healthcare, it is common for the Federal Trade Commission to request additional information and documentary materials for their review process. Our team is working closely with the FTC and Rotech to respond as quickly as possible. And we remain confident the deal will close in the months ahead. Most importantly, though, the addition of Rotech to our Patient Direct offering allows us to better support and serve patients, providers and payers across the network, and we can more comprehensively serve patients with additional product offerings and improved service for patients with chronic conditions. In summary, we have delivered on our commitments for the first three quarters of 2024. Looking ahead, we are confident in our ability to demonstrate continued sequential growth and improving cash flows from the third to fourth quarter, positioning us well as we enter 2025.

As we look ahead to 2025, we recognize the Chinese tariffs on key categories such as facial protection and gloves will impact our industry. However, our manufacturing footprint and sourcing profile is not dependent on China, unlike many of our competitors. This positions us well in the upcoming tariff environment. Before I turn the call over, I want to take a moment to congratulate John Leon on his appointment as Chief Financial Officer. John has been a critical member of the team here at Owens & Minor over the last seven years, and I look forward to working with him in his official role as CFO. With that, I will now turn the call over to John to discuss our third quarter financial performance in more detail. John?

Jonathan Leon: Thanks, Ed, and good morning, everyone. I will start by providing an overview of our financial results and review some of the key drivers of our third quarter performance as well as our outlook for the remainder of the year. Our revenue for this quarter was $2.7 billion, up 5% compared to the prior year. Once again, we saw solid growth across both segments. The Products and Healthcare Services segment grew 5% overall as compared to the third quarter of 2023 with nearly 6% year-over-year growth in our Medical Distribution division, driven by same-store sales gains as we’ve seen throughout the year. There was one more selling day this year compared to Q3 2023, which accounted for 170 basis points of the segment’s growth.

Patient Direct revenue grew by 6% compared to the third quarter of last year. Once again, diabetes and sleep supplies led the growth and most therapy categories experienced attractive growth as well. Respiratory therapies such as NIV and Oxygen continue to lag and are expected to begin to return to reasonable growth levels in 2025. Within Patient Direct, the backlog of new patient starts due to delays in patient eligibility verification, continue to slowly shrink throughout the quarter and has been reduced to nearly half of the peak levels we saw in the spring. This remains largely a timing issue and we are confident the number of patients with eligibility pending will continue to steadily decline. Gross profit in the third quarter was $560 million or 20.6% of net revenue.

Margins expanded by about 20 basis points from the second quarter of this year and were about 20 basis points lower than last year’s third quarter. You may recall that last year’s third quarter, we had a large LIFO credit due to a significant drop in inventory at that time and this drove the current decline in year-over-year gross margin. Our distribution, selling and administrative expenses for the quarter were 17% of revenue at $470 million, up from $453 million in last year’s third quarter when DS&A was also about 17% of revenue. The dollar increase was primarily due to sales growth. GAAP operating income for the quarter was $24.2 million, up slightly from the third quarter of 2023 and adjusted operating income was $84.2 million, flat with the prior year and 10% higher than the second quarter of 2024.

Interest expense for the third quarter was just under $37 million, down about $1.5 million compared to the third quarter of 2023. Continuing debt reduction, partially offset by higher interest rates versus last year drove this change. Our GAAP effective tax rate for the third quarter was 7.4% and the adjusted effective tax rate was 29.3%. Our GAAP net loss for the quarter was $12.8 million or a loss of $0.17 per share compared to the third quarter last year when the net loss of $6.4 million or $0.08 per share. Adjusted net income for the quarter was $33.1 million or $0.42 per share compared to $34.1 million or $0.44 per share last year. Adjusted EBITDA was $142 million, up over 5% versus the $135 million reported during the third quarter last year.

We generated $27 million in operating cash flow this quarter and we expect better operating cash flow in the fourth quarter, reflecting the quarter-to-quarter lumpiness we mentioned back in August. More importantly, debt was reduced by almost $200 million, which included the retirement with cash of the $171 million that was the remaining of our 2024 notes as well as $27 million in permanent reductions in term loans. It’s also worth noting that since we closed the Apria acquisition, we have now paid down over $0.75 billion of debt. Overall, we are pleased to have delivered on our expected financial performance through the first three quarters of 2024. Now as we look toward the end of the year, the segments are in good shape and expect to realize seasonal benefits.

There are, however, a few headwinds we have to consider. For example, in Products and Healthcare services, we continue to incur cost to manage around manufacturer supply chain problems stemming from hurricane-related infrastructure damage, which also has caused delay in procedural volume among many of our customers. Also, despite recent improvements, we had hoped by this time to have eliminated the patient eligibility backlog within Patient Direct and have those customers onboard and contributing to our results. Of course, with the passage of time, we are not able to refine our guidance and modeling assumptions for the full year. We now expect revenue to be in the range of $10.6 billion to $10.8 billion, adjusted EBITDA to be in the range of $540 million to $550 million and adjusted earnings per share with the overall range of $1.45 to $1.55.

This information and other key modeling assumptions were filed this morning under Form 8-K and reside on the Investor Relations section of our website. Again, I want to remind you that this guidance excludes any impact of the Rotech acquisition which we now expect to close during the first half of 2025. Now I’d like to turn the call over to the operator for the Q&A session. Operator?

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Kevin Caliendo with UBS. Please go ahead.

Kevin Caliendo: Great. Thanks for taking my question, guys. First one, I guess, just Jonathan you made a comment that your guidance was affected by manufacturing supply chains, procedural volumes and patient eligibility timing around patient direct. Can you maybe talk about the impact of each of those, how meaningful each of those was when we think about the EBITDA guidance like what changed in essence, give us maybe some magnitude of that?

Jonathan Leon: Yes. If you want to kind of think about ranking it, Kevin. Certainly, we have been incurring costs throughout the quarter. A lot of our customers continue to talk about they can’t get what they need for the procedure volume and the surgical procedures to continue. So I would say that’s probably an unexpected driver that really made us take a second thought around the guidance for the rest of the year. That could come back very quickly, but we just don’t have a little light of sight into what that will be. Now we’ve been living with the backlog at Patient Direct really for most of the year, that continues to get better. We expect that will get better disproportionately positively in a positive way during the fourth quarter.

Obviously, we get to Q1, you start again with a lot of changing in health insurance providers at the customer level. But I would say we need to really get through the bigger impact is going to be the cost and getting our provider customers in distribution back online and getting the procedural volume that they expect.

Edward Pesicka: And I’ll add a little more color to that, that one right there that John just talked about is, I’ve talked to you both directly and indirectly leaders of various hospitals and IDNs across the US. And the hurricane-related issues and the product shortages that they’ve had has caused to some extent, delays in procedural volume. Again, I know that manufacturers are working as hard as they can to get products back online and back out to be able to serve the patients. But as that procedural volume slows down, and that could have an impact on the business. And if you think about it from a perspective, the seasonality in the P&HS business is really the fourth quarter is the largest quarter from volume that we would anticipate because it’s generally the largest quarter in procedural volume across the industry.

Kevin Caliendo: Got it. If I can ask a quick follow-up. So was there any impact of this on 3Q and if we didn’t have the weather and this patient direct issue, would your guidance have been the same, higher or lower? Just trying to understand sort of the magnitude of what did this impact 3Q? And was there anything else? Like what would your guidance have been ex the weather, procedural volume and patient eligibility issues?

Jonathan Leon: It certainly would have been higher, Kevin. I’m not sure that maybe the midpoint would have down a little bit, but I think we would have been closer to where we were at the — when we last reported guidance. So obviously we’ve been — we’ve had some EBITDA guidance issues all year. We’ve acknowledged that and that may have been a little from an EPS perspective. Not much change and maybe a little bit lighter than what we saw last time. So higher than what we put out this morning.

Kevin Caliendo: Got it. Thanks guys.

Operator: Our next question comes from the line of Michael Cherny with Leerink Partners.

Michael Cherny: Good morning and thanks for taking the question. A lot of moving pieces, as you mentioned. I appreciate the color regarding 4Q. How should we think about how those will set up into the jumping off point to 2025, as you sit here today, especially ahead of the Rotech acquisition closing, any more detail you can give us on where you see any potential macro puts and takes, operational puts and takes into ’25.

Edward Pesicka: Sure. I can start and then John can add some additional information. So if I think about the businesses, talk about Patient Direct first. Obviously, the work we put into the sleep journey will all have positive impacts on us in 2025. As we’ve worked throughout the last several quarters to make it easier to onboard new patients as well as making it easier to make sure that those patients can get their supplies renewed. Once that base is in the system, then it just continues on somewhat as annuity. So all the work put into that and what we saw within our Patient Direct business again this segment that should continue into 2025. On our Product and Healthcare Services segment, on some of the procedural issue volume or procedural volume because of some of the product shortages kind of resets on January 1.

As people hit their deductibles, they have additional procedures, which is normally why Q4 is the biggest quarter all those deductibles start beginning on January 1st, so it will reset there. I think the other wildcard that you really have out there and we talked a little bit about it is the tariffs that are coming on board. If we think about it, that facial protection is going to have a 25% tariff effective January 1, 2025, and medical and surgical gloves is going to have a 50% tariff in 2025. We talked a little bit about it in our prepared remarks. That could have a headwind on the industry, but it could also create a tailwind for us because of our manufacturing and sourcing footprint. So that could have an impact on the P&HS segment. So you think about the three things.

One is all the work we’ve done with the sleep journey on our rev cycle, that momentum just carries into 2025. Should procedure volumes slowdown in Q4 because of some of the product shortfalls, that resets on January 1. And then the tariffs can have, will have an impact. It’s just to what degree that’s yet to be seen.

Michael Cherny: And then if I could just ask one more. You mentioned in the press release the dynamics of some of your recent share pickup. I know the dynamics of share gain has been a base point recently across the market. Can you give a little sense on where you’re seeing your best opportunities for incremental share gains, especially Ed, as you had previously commented about walking away from some of the lower-margin business. And on that latter point, do you feel like your customer base is at a point now where that low margin exit at least on the Product and Healthcare services side is done?

Edward Pesicka: I don’t want to say done. It’s never finite. There’s still — we’re still assessing that. But I would say on the onboarding, I think there’s a dynamic also on the onboarding. Like we onboarded 1 of our biggest customers, and we’re pretty much getting through that here in Q3 and we’ll wrap up in Q4 on that one customer. Generally speaking, that does create a headwind in the business as you bring them on. The year one is the least profitable year, I would say, out of a five-year deal. So we’ve got the full impact of this year of that big onboarding, which should create opportunities as we move into 2025. From an opportunity standpoint, I think there’s opportunities really in two spots in P&NH since we’re talking about that business.

One is opportunity to expand our product portfolio. I talked a little bit about gloves and our glove footprints. I think as some of these tariffs go into place, it does create an opportunity for us to win some new business. I think we get fixated so much on winning business on winning distribution business, but we look at the segment as a whole, whether it’s winning product business at existing distribution customer or outside of the channel or inside of the channel. So we think that, that creates an opportunity for us in 2025 these tariffs and our footprints not being products coming out of China.

Michael Cherny: Okay. Thank you.

Operator: Our next question comes from the line of Allen Lutz with Bank of America.

Allen Lutz: Good morning and thanks for taking the question. Really nice margin performance in Patient Direct. Can you talk about the sustainability of this margin moving forward? I know that you talked about moving through backlog and there’s still some work to go and you’re still investing in the commercial part of that, but just trying to think through margins in the quarter were really strong. How should we think about the trend from here?

Edward Pesicka: I’d say what’s nice if you dig deeper into the business, the margin expansion came really both in fixed cost leverage on OpEx as well as on overall gross margin. And as we think about that business, it’s because of the amount of effort we’re putting into continuing to optimize the business. I know I’ve talked about it now two or three times our sleep journey. We really tore that apart over 2024 here to understand how do we make it easier, so that way we can onboard patients faster. The longer you wait to onboard and longer it takes you to onboard patients. One, it has an impact on the patient because they’re not getting the products they need, but two, it has an impact on the business. The amount of effort that we put into that this year has shown us how we can streamline our onboarding practice.

So that has an opportunity to continue into 2025. And the same thing with product renewal, making sure that the patients get the product when it’s available to them. So that way, again, they can have the high level of service. I think as we really cut through all of it in our Patient Direct business, ultimately, the end customer is the patient. So we have to have an impeccable service. As long as we maintain that high level of service, we’ll maintain those that customer base and creates the opportunity to pick up additional customers. So the relentlessness, I would say, in our patient direct business to not rest on our laurels and what we’ve already accomplished. And again, the sleep journey is a great example of that, tearing it a part of how we’ve done it and making sure we have it, making sure it’s easier for the patients going forward.

The other area of revenue — of margin expansion is really around the revenue cycle and cash collection, making sure we have a rigorous process and that’s another area we worked relentlessly on this year and starting to see that benefit. Every dollar that you don’t collect ends up being $1 lower on the bottom line. So that’s helped us also. So the expectation is just like you’ve seen in the past years, we would expect year-over-year to get some type of margin expansion, overall margin expansion in the business. And I think we also have to recognize that the business is seasonal, that we normally see improvement in the back half of the year versus the front half of the year overall because of the volume and the seasonality in the business. So really bullish on what we can continue to do in our Patient Direct business and excited about the work the team has done in 2024 to really improve our processes, which ultimately improve our service to the end user of that being the patient.

Allen Lutz: Great. Thanks, Ed.

Operator: Our next question comes from the line of John Stansel with JPMorgan.

John Stansel: Great. Thanks for taking my question. Just wanted to think through Products and Healthcare Services growth on the top line. I think you called out kind of the 170 basis points from the extra working day. Positive commentary about new wins contributing as well as medical distribution same-store sales. Can you just kind of give some color as to how global products contributed in the quarter? And then kind of how you’re thinking about that growth going forward as we kind of jump off into ’25?

Edward Pesicka: Yes. I mean global, again, we think about the segment holistically and the two are really intertwined together. Overall, from a global product standpoint, though, within the business, we continue, well, one, we saw stabilization in pricing for gloves. I think that’s important because that is one of our bigger categories. I think as we look into the future, there’s a lot of movement potentially on gloves and pricing with tariffs and other things impacting that part of the segment. We continue to see albeit slow growth of our new products that we’re bringing into market. We’re learning as we do this. It’s something that really hasn’t been done. It owns a minor and as we continue to bring the products in. So for example, we’re making sure we have the inventory in stock ready to go as we’re starting to launch a new product portfolio and that continues to do well.

And then overall, and just as a general comment, I would say our international part of that business has improved also in the third quarter, and we’ve seen some sequential improvement in our international business during the year.

John Stansel: Great. And then just one quick one. Within the operating profit contribution for P&HS, step down from 2Q on a margin basis. Is there just anything to note there particularly or just kind of normal course?

Jonathan Leon: No, John, there were just a couple of things that popped up during the quarter, certainly. A big one will be foreign exchange. You would have seen both currencies in Thailand and Malaysia strengthened significantly during the quarter compared to the USD. So that cost us a few million dollars of potential operating income there. As well, we saw increases in transportation and storage costs. And as Ed mentioned earlier, onboarding of new customers, those first several months aren’t the most profitable and profitability tends to ramp up over time.

John Stansel: Great. Thanks.

Operator: Our next question comes from the line of Stephanie Davis with Barclays.

Stephanie Davis: Hey, guys. Thanks for taking my question. And, Jonathan, congrats on making it official.

Jonathan Leon: Thanks, Stephanie.

Stephanie Davis: I was hoping we could call out some of the puts and takes of free cash flow this quarter, just given some of the moving pieces with weather and macro. And with that in mind, are you still expecting positive free cash flow for the year or is that moderated a bit?

Jonathan Leon: Yes, we are. And we kind of expected that the third quarter will be a little softer and the inventory would build a bit during the quarter. Actually, as always I mean the snapshot at September 30th wasn’t doesn’t necessarily reflect what’s going on during the quarter. Cash flow is better during the quarter allowed us to pay down a lot of the debt. We also had the debt from the ’24 notes, but we still pay down incremental debt beyond that. But inventory did rise late in the quarter with payables to a certain extent. So we do expect that to improve as we get into fourth quarter. And we do expect no change in the expectation for a much better free cash flow as we get into Q4 compared to Q3 and we’re not really surprised by the, I’ll call it, relative softness to Q2 that we saw this past quarter.

Stephanie Davis: So I guess, following up on that, you did call it a bunch of initiatives to improve cash flows last quarter, right? You talked about like managing inventory ramps, improving AP and AR terms. Is there any updates you can give us on that?

Jonathan Leon: I would say it’s going as expected. Certainly, on the inventory side, which is our biggest driver, we are somewhat dependent on our manufacturer supplier partners. So when things get delivered and how we manage that process will dictate where we land to the plan at the end of the quarter. But it was like I said the quarter was better than it actually looks on September 30th. We actually had fairly effective working capital management during the quarter. And I think you’ll see more of that come to fruition as we get through the buying required for the Thanksgiving and year-end holidays and manufacturer shutdowns, we have that planning well in hand. And I think by the time we get to the December 31st, you’ll see a much improved operating cash flow result for the fourth quarter.

Stephanie Davis: Super helpful. Thank you.

Operator: Our next question comes from the line of Eric Coldwell with Baird. .

Eric Coldwell: Thanks. Good morning. So you’ve mentioned the strong growth in sleep and diabetes a few times, but would you care to quantify those growth rates in those two categories, at least directionally?

Jonathan Leon: No. I don’t know because you know we don’t disclose that, but I would certainly say diabetes continues to lead the way. Sleep supplies were, again, really strong. And as we talked about, as Ed mentioned, also as that backlog and patient eligibility verification clears, that was going to be even stronger. And as you know, that’s a little better margin business for us. But diabetes given the size of the category, we’re still seeing very strong growth there. And as I mentioned, we’re still not where we need to be on NIV and oxygen. But we’re still really pleased with all the other categories, in the smaller categories, whether it be wound, ostomy, urology, doing very well at the same time.

Eric Coldwell: I was trying to get a sense on how much of the strong growth, whatever it is, is working through the backlog as opposed to more current real-time market demand and/or share capture whatever it is that’s driving the growth.

Jonathan Leon: I would suggest the third quarter was more real-time market demand. It’s a high-grade problem and that we’re clearing a backlog while incremental demand comes in. So we’re working furiously to clear that backlog, but it’s, we’re also pleased with the incremental demand that we see every day.

Eric Coldwell: And on the patient backlog that built earlier in the year, I think some was Change Healthcare. We also heard rumblings in the spring about inability to get some of the sleep product over. Were there other factors or what were the main factors that drove the patient backlog? And then my last follow-up is why has it taking longer than you expected to work through that?

Jonathan Leon: Yes. I would say on the first part of your question, no supply chain issues. It’s still the change issue, the manual work that needs to be required, the loss of functionality, some of that change did offer that we no longer have. And some of the delay is, quite frankly, due to the incremental demand that we’re seeing. So we have a queue of backlog. We have a queue of constant new starts every day. So something we need to manage and work through, but again, a bit of a high-grade problem to have.

Eric Coldwell: Got it. Okay. Thanks very much.

Operator: [Operator Instructions] Our next question comes from the line of Daniel Grosslight with Citi.

Daniel Grosslight: Hi, guys. Thanks for taking the question. As you think about perhaps taking advantage of some of the tariffs that are coming into effect in 2025 with your current manufacturing footprint. I’m curious if there are any additional investments that you need to make, whether it’s a whole new plant or increasing the lines at current plants. Just anything that you’ll need to do in terms of CapEx to be in a good position to perhaps take share once those tariffs are in effect.

Edward Pesicka: Yes. I think there is an increment, there is not incremental capital we need to spend to be able to continue to produce the products we need. If you do recall, we did a large investment back in 2020 related to our glove factory, added 10 additional lines. That facility can run 24/7 at capacity. We also continue to have our operations in North Carolina as well as Texas for facial protection as well as the fabric for facial protection that has capacity availability. So that’s how we’re thinking about this as we move forward. So there really isn’t any incremental capital investment that would be required.

Daniel Grosslight: Got it. Okay. And John you mentioned that there were some increase in transportation costs this quarter unexpectedly. Is that the cost of shipping or maybe if you can just dig in a little bit deeper into where you’re seeing the biggest increase in transportation costs and how you’re handling that for the next year or so?

Jonathan Leon: Yes. It is shipping as well as storage as well. We’re seeing increased storage costs. I mean as inventory fluctuates, we have to account for that and make sure we have the capacity in place for that. And secondly, everything from ocean freight to ground transportation has risen a little bit on us over the last several months. It’s not really new news, but we have to match through that into Q4 and into 2025.

Daniel Grosslight: Got it. Thank you.

Operator: We have no further questions at this time. I will now turn the call back over to Ed Pesicka for any closing remarks.

Edward Pesicka: Thank you, operator. And, obviously, I want to thank our teammates, our teammates who were impacted by the hurricanes as well as the teammates that supported them. So that way they could overcome the adversity that we had impact that impacted us in the third quarter. When I think about the future, I’m incredibly excited about what’s yet to come for Owens & Minor. From continuing to drive greater efficiencies across the business, a lot of that you heard about today in our Patient Direct in both the sleep journey as well as in our rev cycle management as well as to the approval and integration of Rotech into our Patient Direct business. Finally, I look forward to getting together with everyone in early next year to talk about the progress we’re making, close out 2024 and clearly define where we’re going in 2025. So thank you, everyone.

Operator: This will conclude today’s conference call. Thank you all for your participation. You may now disconnect.