AdaptHealth Corp. (AHCO) Q2 2022 Earnings Report, Transcript and Summary

Greetings, and welcome to the AdaptHealth Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Joyce. Thank you, Chris. You may begin.

Thank you, operator. I'd like to welcome everyone to today's AdaptHealth Corp. conference call for the second quarter ended June 30, 2022. Everyone should have received a copy of our earnings release earlier this morning, if not, I'd like to highlight that the earnings release as well as the supplemental slide presentation regarding Q2 2022 results is posted on the Investor Relations section of our website. In a moment, we'll have some prepared comments from Steve Griggs, Chief Executive Officer of AdaptHealth; Josh Parnes, President of AdaptHealth; and Jason Clemens, Chief Financial Officer of AdaptHealth. We'll then open the call for questions. Before we begin, I'd like to remind everyone that statements included in this conference call and in our press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements include, but are not limited to comments regarding our financial results for 2022 and beyond. Actual results could differ materially from those projected in forward-looking statements because of a number of risk factors and uncertainties which are discussed at length in our annual and quarterly SEC filings. AdaptHealth Corp. shall have no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, we will reference certain financial measures such as EBITDA, adjusted EBITDA and free cash flow, all of which are non-GAAP financial measures. This morning's call is being recorded and a replay of the call will be available later today. I'm now pleased to introduce our Chief Executive Officer, Steve Griggs.

Thank you, Chris. Good morning everyone, and thank you for joining us as we review our results for the quarter ended June 30, 2022. As always, we are indebted to our 11,109 employees for the contributions they make every day to AdaptHealth success. As we move into our second year together, we are very pleased on how well AdaptHealth and AeroCare have integrated operations and continue to take advantage of our scale as a full-service nationwide HME supplies provider. Results for the second quarter were consistent with our expectations and were characterized by many of the same themes that we've experienced in recent quarters. Our record revenues of $727.6 million, the sequential growth in our second quarter Sleep business and the improvement in our EBITDA margin gives us confidence that we are entering the second half of 2022 on a strong trajectory to achieve our guidance for the year, despite inflationary pressures and supply chain issues that have affected us. Turning to the Sleep business. We are pleased to report at quarter end, our census is up 16% from February 2022 when it hit its lowest level since the Philips recall began in June of 2021. 13 months into the recall, we have worked with our manufacturers to gain greater capacity and accelerate delivery of machines, thus enabling us to get more patients onto therapy in Q2. While we do not expect Philips to be back in the market any time before early 2023, the increased production we have started to see from other suppliers has become more reliable and we have substantially increased our capacity to schedule and setup patients. We have -- we are, of course, incurring additional shipping cost and other incremental expenses, but we expect those cost to decline as normal supply returns to the market. We continue to drive double-digit growth in our diabetes business. Consistent with the market. For the year-to-date non-acquired growth is 17% and we continue to expect solid growth for the remainder of the year. Even though growth in our non-acquired business was flat for the quarter, we feel comfortable with our guidance for overall non-acquired growth of 4% for the full year, largely driven by increased census in our Sleep business and our continued growth in our diabetes business. Like most companies, our company is challenged by inflationary pressures and other supply chain issues. While these issues, especially, shipping cost, including in the price of fuel for our 2,400 vehicles have impacted our results. I'm pleased that we've been able to mitigate the impact of these pressures through our purchasing scale and use of technology to drive efficiencies. Further, the labor synergies we achieve with the AeroCare merger have minimized the effect of broad labor inflation as is demonstrated by our labor holding steady as a percentage of revenue. As a result of these factors, our gross margin has stayed relatively stable over the past few quarters. Finally, we are largely insulated from higher interest rates since more than 75% of our debt is fixed. So our cost of capital has remained favorable. I will now turn the call over to our President, Josh Parnes for further details and an update on our strategic developments.

Thank you, Steve. On the strategy front, we continue to look for ways that we can leverage our infrastructure to address the broader needs of the 3.9 million patients that we serve. We were able to do that by deploying technology that optimizes efficiencies and developing capabilities to identify gaps in care and make sure patients are getting what they need, when they need it, as well as, offering a comprehensive range of products and services to help patients wherever they are on their home health journey In addition to driving better outcomes by keeping patients at home and out of the hospital we are able to add value as an extension of their referring physician offices. We believe these investments position us well to advance our strategy beyond the traditional HME business model and into more risk and value-based payment arrangements. For example, during the second quarter, we signed two new agreements with a value-based managed care payers, with one on the East Coast and one on the West Coast we are leveraging our complete product offering, our geographic footprint and our patient centric technology to simplify and improve the experience for both payers and patients. This will add to our existing value based portfolio and we will continue to pursue similar creative arrangements. We remain committed to investments in technology that transform the HME experience for our patients, payers and referring physicians. For example, our e-prescribe platform continues to make home health easier for our referring providers by allowing them to eliminate the hassle and paperwork of outdated and error-prone ordering methods, such as fax. We continue to see greater than 50% adoption in the regions where this technology is rolled out, as well as quarter-over-quarter growth of 7.5%. Our new e-ordering capabilities are improving patient experience by providing channel of choice communication. Approximately 50% of all PAP and diabetes resupply orders in Q2 were processed electronically via our digital patient portal. Our e-delivery platform greatly increases transparency for order delivery, enabling every customer to rate interactions in real time and by providing real-time order tracking. 84% of deliveries in Q2 leverage this technology. This system also facilitates real time patient satisfaction survey results, allowing our branches to address any patient concern more timely. In addition to improving the experience for users, our combined digital platform for prescribing, ordering and delivery health control operating expenses, which we believe is particularly important given the current inflationary environment. We continue to believe that these technologies will allow us to keep our costs in line even as we scale and continue to grow. By making home health easier and more accessible for payers, patients and providers, we can continue to gain share and volume within the broader home health industry. As we look down the road, these proprietary tools are the foundations for both improving our patient satisfaction, as well as operating efficiencies and will help open the door to greater collaboration with our payers on alternative payment arrangements. With that, I'll pass the call over to our CFO, Jason Clemens to review our financial results.

Thanks, Josh. Good morning and thank you for joining our call. I'll discuss the second quarter operating results, our cash flow performance and capital allocation and conclude with a discussion of our 2022 outlook. We were pleased to again deliver revenue and adjusted EBITDA consistent with internal expectations, despite the ongoing impact of the Philips recall, ongoing inflation and supply chain challenges. For the second quarter ending June 30, 2022, AdaptHealth reported net revenue of $727.6 million, representing year-over-year growth of 17.9%. Total company non-acquired growth was a decline of 30 basis points for the quarter. We were particularly pleased with the growth in Sleep, by far our largest product category. PAP rental census is growing faster than we forecasted. In the first quarter outperformance in our PAP resupply business continued in the second quarter. Our respiratory and diabetes categories slightly missed topline targets, but we continue to believe that non-acquired revenue for the entire company will achieve our 4% guidance for the full year. We have not been immune to inflation and ongoing supply chain challenges, but we are very proud that our efforts to become more efficient and the scale and synergies resulting from the AeroCare merger have offset these pressures to a great degree. Specifically, cost of goods, which includes freight and fuel held steady as a percent of revenue against the first quarter. Additionally, despite a tough labor market, salaries, wages and benefits were also flat as a percent of revenue against the first quarter. We believe our operating results for the second quarter demonstrate that we are accelerating operating leverage by driving cost and inefficiencies out of our business model. We remain confident that we will achieve our full-year guidance that implies 21.9% adjusted EBITDA margin at the midpoint, which already reflects the impact from temporary mix shift toward sales revenue away from higher margin rental revenue. Free cash flow defined as cash flow from operations less capital expenditures was $26.3 million for the quarter, surpassing our expectations. Capital expenditures of $77.2 million remained in line with our guidance, representing 10.6% of revenues. We converted more inventory into sales, we compressed DSOs by three days and as planned, we decreased accounts payable. So we are very pleased with cash performance. At the end of the quarter, we had cash of $119 million and an undrawn revolver with net leverage as defined under our bank covenants of 3.4 times and trailing 12 months leverage essentially unchanged at 3.5 times. As previously announced, our Board of Directors authorized a share repurchase program. During the second quarter, we've repurchased 199,000 shares for $3.4 million pursuant to this program. Turning to guidance. As noted in the press release, we are maintaining the outlook we provided last quarter for revenue of $2.840 billion to $3.040 billion and adjusted EBITDA of $615 million to $675 million. Consistent with previous periods, our guidance does not include contribution from acquisitions that have not yet closed. I'll now pass the call back over to Steve for some final thoughts before we open it up for Q&A.

Thanks, Jason. Over the past year, our employees from the legacy operations of AdaptHealth, AeroCare and many of our acquisitions have come together as one AdaptHealth. I would encourage you to visit our website and click on the "We Are AdaptHealth" video, which highlights the many accomplishments of our fully integrated organization. So again, I would like to thank our 11,109 employees for their united commitment to our mission of empowering our patients to live their best lives. We are pleased to announce our Capital Markets Day on September 16, when our team will do demonstrate how this commitment leads to superior results and create significant opportunities for our company and our shareholders. We will present specific achievable targets for the next few years and demonstrate how we are preparing for the unique opportunities beyond the current time horizon. With that, operator, please open the line for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from Brian Tanquilut with Jefferies. Please proceed with your question.

Hey, good morning. I guess my first question for Josh. You called out sort of the weakness, the relative shortfall in diabetes. And I know that's always been a strong spot for you guys. But maybe just any color or thoughts you can share on what is driving that? And how you're thinking about the recovery in that segment line?

Yeah. Thanks, Brian. So I think, in general, like, we look at this kind of quarter-to-quarter and generally from a year-to-date we're pretty happy where things are and kind of in line with our forecast. We do see some movement quarter-to-quarter as well as depending on where we were at last year. Last year we had a lot of acquisitions that came on ramping up the resupply, obviously, first six months this year not having much in the way of acquisitions is going to affect the growth rate there. But in general, we're not seeing anything structurally there that's concerning overall kind of performing where the market is right now.

Got it. And then I guess for Jason. I know you said in your prepared remarks that the expense lines and overhead basically came in line with your expectations, but any thoughts in the ability to maybe bring down G&A a little bit going forward or is that just operating leverage that we should wait for as the top line comes back with sleep and diabetes recovery?

Sure, Brian. So you might recall, I guess, two quarters ago we spoke about planned investments within G&A, specifically technology, we've referenced Oracle, also upgrades to the infrastructure for our OTL or e-delivery technology as well as the e-ordering platform that Josh referenced in his remarks. So at that time we also had planned for about 5% of revenue to be spent in G&A. And when you account for kind of add backs related to transaction costs. we’re spot on that number. So I wouldn't expect any operating leverage out of G&A until the end of next year, but again, these are planned investments. We are very confident these investments are going to get operating leverage out of the core part of the business. And so, we think they're smart ones.

Awesome. Thank you.

Thank you. Our next question is from Kevin Caliendo with UBS. Please proceed with your question.

Thanks, and thanks for taking my question. I just wanted to ask a little bit about the backlog, it sounds to me like your commentary suggests that maybe things are loosening up a little bit more than maybe you had expected a quarter or so ago in the second half, you're getting more supply. How does that compare to where you were before in terms of how much of the backlog you might be able to work through this year and how big do you think that backlog of patients sits now versus where it was last time you gave us an update on that?

Yeah, thanks. This is Steve. Great question. So the backlog generally maintained its level, but in this past quarter and in the first month of this quarter we have at least been able to set up what we've been able to get as new referrals. So the backlog stayed, we look that have a pretty successful third quarter as more product is available. So it's definitely ahead of expectations, both on ResMed and other suppliers. ResMed with their card to cloud certainly has helped considerably with that and then other suppliers coming on the market also. Then if that can continue then what you see is the compounding effect of those increased CPAP set ups continue to grow our revenue -- rental revenue and our resupply revenue, just as you've see in the compounding effect negatively for the first nine months of the recall.

I know you, I think, done six acquisitions year-to-date, if you are getting more comfortable about supply coming back to the market, does that make it easier to do further M&A going forward, because I know that we had been somewhat hamstring you in terms of getting deals done?

Well, yes, that certainly was a big factor in there. So I think we will be looking for more acquisitions and considering those more. I think we're past the Oracle conversion. That was part of it too. Getting caught up on all the activity we did in 2021. So we're in pretty good shape. And so, if we see something that's attractive, I think we'll be much more attentive to it than we were in the first half of the year.

Sounds good. Thank you very much.

Thank you. Our next question is from Joanna Gajuk with Bank of America. Please proceed with your question.

Hey, good morning. Thank you so much. So a couple of questions, I guess, so first the follow-up on the 4% growth for the full-year organic growth that you also continue to expect. So can you talk about how the Sleep business is tracking organic, because it sounds like things maybe a little bit better than expected, so any change there in terms of your expectations before I talk about, I guess, 5% to 6% decline for the year. So, kind of where you stand versus that for Sleep, specifically inside your guidance

Hi, Joanna, it's Jason. I'd be glad to take that. So first, I'd call out that we had expected the second quarter to be roughly flat in terms of non-acquired growth year-over-year. I mean, a big part of that is that, we're comping against a period that you can't really comp. I mean, it was a pre-Philips recall, full supply of PAPs on the market. So it is technically a comparable period from a financial aspect, but operationally, they’re just very different period. So we had expected roughly flat for Q2. So bigger picture, when we [Technical Difficulty] through the product lines0 we are highlighting a bit of a topline mess against our internal expectations within respiratory and within diabetes. Respiratory really related to the impact of COVID census, continuing to roll off, so a slight miss internally on respiratory. And then on diabetes, I mean, we had a tremendous Q1, Q2 was a bit lighter. But overall, I mean 17% growth, I mean, we're pleased with. So, on the other hand, with Sleep to your question. I mean we absolutely outperformed our internal expectations. We talked about the setups, Steve had referenced that. We are feeling through -- even the month of July we're feeling good about it. And so, the reason we feel so strongly about delivering the 4% for the full year is that, we have a few ins and outs. We don't know if respiratory and diabetes will continue to slightly under perform. But if they do, we're gaining confidence that Sleep will outperform and make up the difference.

Great. That's sound -- that good to hear. And I guess on the guidance, the PHE extension that are couple of million?

Yes. Yeah, the way to think about that is $3 million to $4 million a quarter, we had referenced that in previous calls. Frankly, $3 million to $4 million on a $3 billion business, that alone, there was no M&A that we have done since the last call. So in the aggregate, it just didn't hit the threshold that we felt that was important to raise the guidance. But that is a tailwind that we will have for Q3.

Great, thanks for that. And I guess, bigger question, it sounds like you've already are pushing hard on the value based purchasing and adding additional contracts to that, that's good to hear. Can you give us a little bit more flavor in terms of the magnitude of thing here? I don't know if you're willing to maybe just in the aggregate without the contract in terms of like how big really this business is in terms of, I don't know, volumes and revenues and also you give us a flavor for maybe margin expectation and -- for that part of the business. Thank you.

Hey, Joanna . I'll start on kind of the math side and then I'll pass it to Josh on the framework, which we think is important for folks to understand of those contracts. And so, in terms of the percent of the business, value based arrangements were kind of non-traditional fee-for-service arrangements account for about 3% of our total revenue. We are pleased with that part of the portfolio, the margin profile, to your question is very consistent with the overall margin profile for the rest of the company. But the stickiness of these contracts is very, very good because of the benefits and the value that we offer to payers and patients. So I'll pass to Josh to explain a little more.

Yeah. So just touching a little bit more on that. So from a macro perspective, in terms of the opportunity, as you know, kind of a lot of these contracts, the sales cycle is generally pretty long. So a lot of discussions and others have been for a while and continue to happen and we continue to build our pipeline out. And what I think is unique here is that, our ability to leverage some of the new technology that's come online internally with matching it up directly with the payer to be able to offer cost savings and kind of a value-based arrangement that allows us to take some risk on these patients. A lot of these contracts are kind of ramp. So initially you'll take them on with a kind of pilot period, not necessarily pilot, but a Phase 1 where you get one product line and the fact that we have multiple product lines, allows us to feed more product lines into that value based arrangement as we go further along. So again initially exciting, but we'll continue to look for these to ramp over time as well as, like you said, look for other opportunities and continue to push on that front.

Thank you so much.

[Operator Instructions] Our next question is from Pito Chickering with Deutsche Bank. Please proceed with your question.

Hey, good morning guys. Thanks for taking my questions. And apologies if I missed this, and you mentioned the diabetes organic growth rate of 17%. But can you walk us through the organic growth for each product division during 2Q and what you assume in the back half of the year to get the 4% organic growth.

Yeah. Sure, Pito. So diabetes running a touch light against the 18% that we've got included in guidance. As we stand here today, do we think Q3 and Q4 will be above 18%. I don't know that we're confident enough to say that. I mean, stand down a potential recession and those are high-priced product. So we have a very insulated portfolio we believe from overall recession, but if there is a potential drag, it's likely in that diabetes products. So don't misinterpret that as we don't think we're going to get close to 18%, but I don't know that we're going to beat it In terms of respiratory, we're running a bit light. We talked about 5% within respiratory. Again, that's COVID census rolling off, they are rolling a little faster, we will lap that probably mid to late Q3. And so we expect Q4 to be back in line, so we feel pretty comfortable there. The HME and other product lines, we forecast that at 3% to 4%, it's running about in line, maybe a very touch light. I mean I know everything we've seen on electives, a minor slowdown. I don't think it's anything that we're losing Sleep over in terms of the overall delivery. But the big news I think for the quarter is Sleep. I mean we had projected a negative 5 % to negative 6% non-acquired growth rate for Sleep back when we produce guidance. We think we're going to beat that, maybe handling. I mean we were a touch positive for Q2, which against a very difficult comparable comp period that we talked about. I mean we were thrilled with that. So if the themes continue, we're very comfortable with 4% for the full year.

So just to make sure that. I mean, with 3.7% in 1Q and 3 basis points in 2Q, that's implying organic growth rate of 6% in the back half of the year. That's right range we should we think about, right?

Correct.

Okay, fair enough. At then can you actually remind me of sort of what is the other revenue line is sort of now your third largest divisions. What is in the line and how is that growing?

Yes, sure. So I'll pass off to the guys for a little operational detail, but in terms of what's in it. The value based arrangements that we just discussed is included in there as is our customer rehab products are in that line item, that’s a very steady and stable business for us. We've got orthotics, which is a very, very rapidly growing business. We've done I think of an admirable job signing up new business with very well-known hospital systems that they've been very happy with that product line and it's continuing to grow. We've also got infusion within that product line. I mean we've built up a nice little portfolio there of essentially a collection of infusion businesses from companies we've acquired over the last 18 months, and we're starting to run them together. Hospitals are interested in more and more of those services. And so that -- those are some of the reasons you're seeing that other growing quite a bit. I mean I think it gets much bigger. We won't be discussing, do we break out the next category to give some visibility to that

Okay. And then last question here, the guidance for the back half of the year implies 3 basis points to 4 basis points of margin expansion. Can you just walk us through what the key drivers of the margin expansion? Thanks so much.

Yes, sure. So some of that is the Sleep rental, I mean -- I think we discussed this previously. I mean, that's coming is essentially 100% adjusted EBITDA margin, because the true variable cost there is just the acquired equipment, which is the CapEx lines. Next, we've got just the scale factor as you get into the later parts of the year, particularly Q4, the resupply businesses are huge in Q4. I mean a lot of that has to do with patient deductibles, set to reset at the beginning of the year and/or just cut over to new insurance carriers on account of change in employers or the employers change -- making changes. And so what you see is, the patient behavior of essentially ensuring that they are spending every dollar of the health care wallet wisely. And it's just a huge quarter. In the meantime, we've got extra variable cost to deliver, but the fixed cost structure isn't changing. So we always have a natural progression of margin enhancement over the course of the year, driven primarily by those dynamics.

Great. Thanks so much guys.

Thank you. Our next question is from Whit Mayo with SVB Securities. Please proceed with your question.

Hey, thanks, I might follow on that last questions maybe a different way. I mean, Jason is sitting where we are halfway through the year. You've got a pretty wide range out there. And I mean, do you feel like you're tracking to be closer to the low end, the midpoint, the high-end just trying to maybe take your temperature on where you feel you're tracking within the range, I mean, the low end looks like you could be flat year-over-year in the high-end, up over 20%. So I don't know any help or color around just how you feel about where you're tracking within the guidance range?

Yes, sure thing, Whit. I mean, I guess I'll probably give you an expected answer. I mean straight down the middle is where we are tracking. Now kind of the gives and takes that could change that throughout the balance of the year, of course, we were thrilled with the sleep performance in Q2. So if supply remain steady and/or increases, which as we stand here today, we believe it will, that's going to be a tailwind, both top line and then certainly bottom line. I would say next factor is arguably diabetes, if all things remain equal and we are kind of steady as she goes. We think we're right at that mid. Now do we accelerate in the second half as some of the manufacturers has indicated they believe will happen. Well, that's obviously to the good and if recession is more than expected, and that's a drag on the business, that's more to downside. But as we stand here today, I'd say mid is where we feel comfortable with diabetes. So, I don't know, Steve, Josh, if you got anything to add on that?

No, I think the big swing could be the continue of the PAPs. As we sit right here, July was a great month, August should be a great month and -- but we don't know our allocations for September, October, November, December. Last year, if you remember, we are expecting this boom December and our allocations we're pitiful. So we feel like a lot of that's been corrected and suppliers have a lot more confidence. But they're not willing to guarantee anything to us. So we still have to live on that apprehension at least for the next few months.

That makes sense. Jason, AR days, as you mentioned in your prepared remarks, definitely came down about three days or so. Maybe talk a little bit more about some of the internal initiatives there, perhaps some of the M&A integration, just any color on sort of what's happening around the cash flow?

Yeah, for sure. And then I think there is a few folks jumping at the bid on this question, because we were thrilled with the performance. Integration is a component, as you referenced. You might recall, DSOs spiked to 50, even 51 in Q3 of last year. That was a lot of change over to a single tax IDs for the AeroCare and the AdaptHealth merger activity. But then following July 1, I mean we had about 15 or so acquisitions that we also brought in. And so you've just got that dynamic of on-boarding a whole lot of business from a whole lot of operating system. So big picture, that's what you're seeing as we move into Q3 and we've integrated the Rev Cycle operation and we're delivering the performance that we're seeing. I mean, you want to talk a little dynamic patient pay other factors, guys.

Yeah, I mean. Well, first of all we'd like to brag on our RCM team. They are fantastic, they've done an incredible job, but -- and the process is something that we look forward to continue to improve and continue to do, but the process is much better. But this was a new process for a significant part of the company, certainly for the AeroCare folks and certainly for any kind of new acquisitions that come in there. And just to [Technical Difficulty] to get used to how that works. And as a flow paperwork and getting paperwork in the system quicker, faster, better getting this to the payer quicker, faster and better and getting resolutions to a quicker, faster, better. And so that team we're very proud of them again and they're doing a great job. And so we expect continued great results for them throughout this year and certainly beyond.

Okay. Great. Thanks guys.

Thank you. Our next question is from Ben Hendrix with RBC Capital Markets. Please proceed with your question.

Hey, thanks guys. Quick question on your investments in technology, you had mentioned that your e-prescribe platform had 50% adoption in regions where it's rolled out and that 50% of your PAP and diabetes resupply were electronic. Can you discuss maybe the gating items that govern adoption going forward and increase penetration of your technology platforms. Kind of how you see timing unfolding and what that could mean for margins? Thanks.

Sure. Thanks. So this is Josh. As you know from an e-prescribed perspective, a lot of that is our sales team has shifted from kind of sales reps that go in and introduce himself to the doctor to really working on the technology side with the physicians' offices and driving change management there. As you know, e-prescribe in the HME space is really serving to document the entire medical necessity lifecycle of that order, and therefore there is a fair amount of training and change management that needs to go into that. So the fact that we have 50% plus adoption in areas where this is rolled out is pretty monumental if you think about the amount of work and change that needs to happen both at the physician practices and at the hospital case management level. So we're very proud of the team really to be able to take that initiative and drive that change. On the e-order front, on the resupply and the diabetes, a lot of that evolution is driven by two things: number one, the technology development and as that gets more intuitive and I referenced channel of choice communication with the patient. So a lot of that is really identifying where the patient likes and is more comfortable getting communicated with and being able to drive resupply and general communication to that channel where that patient or customer is more comfortable ordering product. And then secondly, really there is a change management aspect from a patient perspective where they're used to getting calls or emails or even postcards back in the day to ordering digitally. And when you're dealing with a little bit of -- some of the senior population on some of these product categories being able to drive adoption there is somewhat of the gating item. But number one, as the baby boomer population ages, as well as our technology gets more intuitive, we're going to see more adoption in those categories as well.

Thank you very much.

Thank you. Our next question is from Mathew Blackman with Stifel. Please proceed with your question.

Hi, I just wanted to -- this is Colin on for Matt, by the way. I just want to have a quick follow-up on M&A. I was wondering if there's been any change since last quarter regarding your M&A appetite? You guys acquired several during the quarter, but they were really announced on the 1Q call, should we think about you hitting the historical $100 million to $150 million in acquired revenue be inclusive of the Community Surgical acquisition you guys did at the end of last year?

That's the right way to think about it, Colin. I mean I think -- frankly it’s an upper kind of tax purposes and other factors. I mean you can think of that as a ’22 deal. I mean it's done in the last day last day of last year, but all the integration work and all the heavy lifting is what we've been focused on for 2022.

Right. And then a quick one on the other segment. You talked about hospice, orthotics and home infusion really being drivers here. How should we think about that business -- those business is really ramping up and what's a good sustainable growth rate you guys think is realistic or that could be more of an Analyst Day question?

Yes. It's more of an Analyst Day, but that business -- we like it, the orthotic side of it is very strategic to get it to health systems and ley it to other business. So we like that. I think that business will grow significantly in the probably low double digits. The infusion businesses, we're still getting our feet wet in that. The growth right now is just going to be on the operations that we have, that we've been -- part of an acquisition. So we have really expanded that business. I wouldn't look for any significant growth there. And then the other stuff. All kind of plays into what Josh alluded to, as we get these contracts and as we get the better relationship with these health systems, we can bring all these products to that health system at a pretty low sales cost for us. And so that's what we're probably excited more about anything else. So that has some growth potential for us too.

Got it. Thank you very much for taking my questions. I'll hop back in the queue.

Thank you. There are no further questions at this time. I'd like to turn the floor back over to Steve Griggs for any closing comments.

Well, once again, we just like to thank our fantastic employees who have done a great job over these past few years, in particular, now with not just the pandemic, but also the Philips recall and having to deal with taking care of our patients and sticking to our mission, which is to empower our patients to live their best lives. And we appreciate the support of all of our shareholders and appreciate the support of the people on the call and thanks again.

Thank you. This concludes today's conference. You may disconnect this time. Thank you for your participation.