Option Care Health, Inc. (OPCH) Q1 2022 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Option Care Health First Quarter 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over your host, Mr. Mike Shapiro. Sir, you may begin.

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 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 the website. With that, I will turn the call over to John Rademacher, Chief Executive Officer.

Thanks, Mike, and good morning, everyone. Overall, after initial sluggishness due to the widespread impacts of omicron variant on our team members, customers, and patients, the first quarter proved to be a very productive start to the year for the Option Care Health team. We continue to invest in our future growth strategy, while navigating the challenging economic environment to ensure we provide unsurpassed patient care. As Mike will review in a few minutes, our first quarter financial results were very strong and I am pleased by our performance across the spectrum of financial and operational metrics we use to manage the enterprise. Specific to the first quarter of this year, note that the prior year comparable period was quite soft as we were just starting to see COVID vaccine distribution in the second half of the first quarter of 2021. We also benefited this year from a few one-time expense benefits that helped drive leverage in the P&L that we do not believe are likely to repeat. So while reported growth is very strong in the first quarter, as we anticipated, we believe the comps will balance out in the back half and we anticipate our growth profile normalizing to a greater extent. Nonetheless, based on our momentum coming out of the first quarter, we are raising our financial guidance for the year accordingly as Mike will discuss shortly. As we entered the year, we were in the midst of the COVID resurgence related to the omicron variant. This had a very disruptive impact on our referral patterns and local pharmacy operation. Given the resilience of our teams in the field, we were able to quickly respond after the omicron cases subsided and we saw a recurrence in normal operations by the end of the first quarter. While a few referral volumes continued to lag in certain geographies, we did see a gradual reopening in many of our referral sources. Our chronic revenue was especially strong in the quarter and was driven by our portfolio of chronic inflammatory therapies and newer therapies for multiple sclerosis, myasthenia gravis, muscular dystrophy and others. We also saw a few points of growth from therapies that were in short supply last year are now available including therapies for thyroid eye disease. As we discussed on our prior earnings call, we also entered the year with unprecedented inflationary pressures across the broad spectrum of goods and services we utilize. While the collective inflationary pressures was somewhat muted in the first quarter, we do see an increased impact in the balance of the year. We continued to thoroughly assess our labor competitiveness and we adjust compensation primarily at the end of the first quarter as part of our annual cycle. So the compensation increases are not fully reflected until after Q1. We are also seeing broad cost increases in key procurement categories including transportation, medical plastics and key supplies, business services and others. As always, the team is focused on finding new sources of efficiency to mitigate the inflationary pressures to the greatest extent possible, while ensuring the highest level of quality and patient care. The labor situation remains challenging, but we continue to recruit our team members every day and we are making investments to remain competitive both from a compensation and career development perspective. I believe we will continue to weather the storm reasonably well, while maintaining focus on fielding the best clinical team in the industry. Aside from the dynamics in the first quarter, we continued to invest in future growth initiatives. The team is making good progress on integrating the Wasatch Infusion acquisition, which we believe provides a tremendous platform in the growing Utah market, while also adding the unique patient infusion experience to our portfolio from which we can learn a great deal. We recently also closed on our acquisition of Specialty Pharmacy Nursing Networks or SPNN and we are excited about the national alternate site nursing platform we are establishing with our two recent acquisitions of Infinity Infusion Nursing and SPNN. We continue to believe this clinical platform will not only differentiate our nursing capabilities in the marketplace, but will also help enable future growth, especially amongst our chronic therapies. Regarding the SPNN acquisition, this is a unique team that has created a very robust clinical model to serve a broad array of customers including infusion pharmacies, specialty pharmacies, clinics and biopharmaceutical manufacturers. The Option Care Health team had a pre-existing and very constructive collaboration with SPNN and it was a natural progression for us to seek a stronger integration of our capability. We believe their model is distinct and highly complementary to our capabilities of our Infinity organization and we are just beginning to write the script on our unique national clinical platform take the back to bone. Reflecting back over the past 12 months, the team has executed on four strategic and economic acquisitions that have built upon the foundation we’ve established. Funded solely through free cash flow generation, these transactions have added commercial capabilities to our chronic strategy, help establish a national infusion nursing platform and expanded our infusion suite capability and we are just getting started. With our capital structure and strong cash flow, we continue to focus intensely on attractive acquisitions to further accelerate our growth. With our technology foundation and clinical expertise, I am confident in our ability to find attractive opportunities that will help further expand our presence in the ambulatory settings and post-acute space. So to wrap up my comments, while it is still early in the year, I am quite encouraged by the momentum coming out of the first quarter and the team is on track to deliver a very solid year. Despite a number of variables and risks that we continue to manage, we expect to perpetuate our track record of strong growth and accelerating cash flow in 2022. With that, I’ll turn the call over to Mike to review the results in a bit more detail. Mike?

Thanks, John. Before jumping into the specific results for the quarter, I want to provide a few high level perspectives as there are a number of dynamics in the first quarter. First, recall that we do not provide quarterly guidance and the first quarter typically is a bit softer than subsequent quarters given modest seasonality in the business. Additionally, as John mentioned, the prior year first quarter was especially soft due to the continued pandemic impact with flat acute revenue growth and low double-digit chronic revenue growth in that quarter. So the softer prior year comp amplifies our year-over-year reported to an extent. We believe those considerations are key as we review the growth profile in the first quarter. Revenue growth of 20.6% was a result of solid performance across the portfolio. The impact of our recently completed acquisitions, namely Infinity, Wasatch and BioCure, none of which were in our prior year numbers, represented approximately 250 basis points of revenue growth. Acute revenue was up in the mid-single-digits as we saw referral trends rebound throughout the first quarter and again due to easier comps to last year. Chronic revenue growth of mid-20s was driven by a few factors. First, better supply chain dynamics enabled accelerated growth for certain therapies that were plagued by challenging supply chains and product shortages in the prior year, especially thyroid eye disease and immune globulin therapies. As John mentioned, we also saw very strong execution across our chronic inflammatory portfolio, as well as from our newer chronic therapies. Gross margin dollars grew similarly at 21.4% and gross margin rate was flat year-over-year as our continued focus on operational leverage offset the mix headwinds related to our faster growing chronic portfolio. As we’ve consistently articulated, we fight for every basis point, but we do see gross margin rate pressure going forward given our revenue mix, as well as the ongoing labor and supply chain inflationary pressures. Spending was well controlled in the first quarter as we continued to aggressively manage SG&A in light of emerging inflationary pressures. Spending grew 11.6% and dropped as a percent of revenue to 14.6%. As John mentioned, we’ve recognized approximately $5 million in one-time credits related to a variety of items including reserve adjustments and vendor credits. This obviously benefited the first quarter and I do not expect those to persist into the second quarter. Adjusted EBITDA of $77.8 million represented 8.5% of revenue and grew 49% over the prior year driven by factors previously discussed. Shifting to the capital structure, we generated $32.7 million in cash flow from operations and cash balances increased over $145 million at quarter end. Our net debt to leverage ratio declined to 3.0 times, less than half our leverage profile at the time of the merger with BioScrip less than three years ago. Additionally, I want to address some recent questions regarding our exposure to rising interest rates. Recall that last fall, we opportunistically refinanced and extended our entire capital structure under very favorable terms. As of the end of the first quarter, we had approximately $1.1 billion of total debt outstanding, $500 million consisting of fixed rate senior unsecured notes at 4.375% and $600 million in term loans with a floating rate of 275 BPS over LIBOR. As outlined in our most recent 10-K in conjunction with the refinancing, we entered into a $300 million in interest rate caps on the term loan. So effectively, $800 million of our $1.1 billion is fixed or approximately 70%. As a result, our exposure to elevated interest rate is relatively muted. So we feel really good where we are sitting from a capital structure perspective, as well as our access to capital to continue investing in the enterprise. Finally, based on a number of factors, including our first quarter results, the momentum of the business, our views on impending inflationary pressures, as well as the impact of the SPNN acquisition, we are increasing our expectations for the full year. For the year, we now expect to generate revenue of $3.75 billion to $3.9 billion. We have increased our adjusted EBITDA expectations to $320 million to $335 million. And while we do not provide quarterly expectations, given the tougher comps throughout the year, one-time spending benefits realized in the first quarter combined with an increasing inflationary pressures, we would anticipate the quarterly trend to be relatively flatter as compared to previous years. So as John mentioned, we continue to anticipate delivering a very strong year in terms of growth and cash flow generation. And with that, we’ll open the call for Q&A. Operator?

[Operator Instructions] Our first question comes from Matt Larew with William Blair. Your line is open.

Hi, good morning. Congrats on another impressive quarter here. Just on the growth in the quarter, I understand this is somewhat challenging, but curious if you could try to perhaps break out what was from easy comps or a return on the supply chain side versus just underlying growth? And I guess, specifically, I mentioned it in – or if you like you are gaining even further traction with some of the payers you’ve signed agreements within recent years and do you sense that you are grabbing even more market shares on these newer therapies that are launched again where companies are looking to derisk launches by looking for a reliable scaled resource like yourself?

Hey, good morning, Matt. I’ll start and John can obviously provide some color. Yeah, so we tried to unpack it a little bit. Obviously, we are thrilled with the 20% growth headline. Again, I would say a couple points of that were due to therapies that frankly weren’t available or were had compromised supply chains and led to referral sources being reluctant to put new patients on service. About 250 basis points were from that three acquisitions that were closed going into the first quarter. Again, SPNN wasn’t included since we closed on that. So, and again, as you know there is a lot of moving pieces, but if you back those out, it would imply mid-teens growth and frankly, I think a couple of factors obviously as we mentioned, things definitely improved throughout the first quarter. And I think you hit on a couple of the themes, which is number one I think just our dependable presence allowed us to maintain and build upon our referral source relationships and entering into the quarter, we had extended and renewed all of our major payer contracts and I can assure you that the team is laser focused on growing and fostering deeper relationships with our portfolio of payers.

Okay. And then, you mentioned, SPNN, so I am curious now with SPNN and Infinity under the Option Care hood, maybe just refresh us on how you envision incorporating those businesses in terms of both servicing Option Care volume, as well as the broader market and if perhaps anything has changed with that thought process over the last six plus months as you’ve been stitching on together?

Hey, Matt. It’s John. Yeah, well I am really excited to close on SPNN and to start the process. As you would expect, it’s early days and we are really going to spend time working both with the Infinity and SPNN teams to make certain that we maximize that platform as we move forward. But couple things we had mentioned before, but bear us repeating is, look, we think that the similarities of the platform are fantastic. It’s complementary in nature. There are some unique things that both of those organizations bring and we are going to capitalize on that as we move forward. When we did the work behind the SPNN acquisition, there wasn’t a lot of overlap of the resources. So, it really extends our access to the very critical clinical capability in the nursing community. And so to expand that network and the size of that network, we thought it was a competitive advantage moving forward. Thinking broader questions, look, we are going to continue to use this platform to not only support our growth and think about how we are going to continue to have the resources necessary and the capacity to continue to grow as we both take share and make share in the marketplace. But we are also going to continue to support the external market on that. We like the fact that we can use this platform as a aggregator in the marketplace. It gives us an opportunity for us to really capitalize on market demand to be able to bring those resources forward. And this is a unique differentiated national platform that really allows us to continue to extend our leadership position.

Okay. Thank you.

Thanks, Matt.

Thank you. Our next question comes from Lisa Gill of J.P. Morgan. Your line is open.

Thanks very much and good morning. Mike, I just wanted to go back to your comment around rate pressure. Was that specific to your comment on the faster growing chronic portfolio or is it something that relates to the renewal of the payer contracts that you talked about? So, maybe if you could just talk a little bit about what you are seeing on the reimbursement side?

Sure, Lisa. Actually, the reimbursement environment has been, I’d characterize as relatively stable. Again, as we entered into those collaborative relationships especially with the national folks, they understand the value-based components of how we arrange our and establish our relationships. Really the rate pressure on gross margin that I was referring to is really around the mix shift of our revenue. Going forward, we’ve been pretty open that we see that acute portfolio growing in the low single-digits. Obviously, the chronic portfolio, which bears a conservatively lower gross margin profile, we expect to grow in the double-digits. And so, over time, in the first quarter, we were around 72% chronic, around 28% acute. Over time, as we shift more towards that chronic portfolio that will have considerable gross margin rate pressure although we view the chronic gross margin dollar growth opportunity is very favorable.

And then just – my second question was really just be around the referral trends that you saw in the first quarter. Obviously, that came out really well when we think about COVID having a strong impact overall in January kind of veining as we went into February and March, was that the same that you saw in your business that there was some amount of impact with omicron in January and it got better or were you still seeing referrals throughout the early parts of the progress in January?

I feel – this is John, look, as the quarter progressed, certainly the referral patterns got stronger. There is a constant rhythm to the business in the referral patterns that we saw. But they were constrained and look, I think everyone was dealing in early January through probably mid-February. Challenge is not only with their own staff and the infection rates of the omicron variant. But it did disrupt from that path given the national scale that we have, the market kind of acts independently on that. We saw probably a bigger impact in the December timeframe and then it started to vein by the time we got to the end of January and some of the Midwest lagged behind that. So, it got stronger and stronger and certainly we saw as I said in my prepared remarks, by the time we got to the end of March, things had gotten back to near normal or whatever the new normal is from our perspective both in impacts on our own staffing and some of the challenges from a labor standpoint with folks being impacted as well as the reference patterns starting to come back as we exited the quarter.

Great. That’s very helpful. Thank you.

You are welcome. Thanks, Lisa.

Thank you. Our next question comes from David Macdonald of Truist. Your line is open.

Hey, good morning guys. Couple of questions. First just a clarification, Mike. Did you say that acute was – excuse me and I realize that the comps were you know what they were. But did acute was up mid-single-digit in the first quarter? Is that correct?

Yeah, that’s right, Dave.

And is it – and I assume it’s fair to say that January was probably either flattish, modestly up or modestly down. So, again, if I look at some of the referral disconnect that you guys were having early in the quarter suggests really strong numbers in the last two months or at least in March. I guess, my question is, are you guys holding on to more volume in both businesses that may have used a different site of care pre-COVID and what are you doing on the sales side to potentially make those referrals more sticky and keep them being driven towards a different site of care?

Yeah, Dave, I think the way you characterized the progression throughout Q1 is right. I think as John mentioned, clearly, January was pretty sluggish out of the gate just given the omicron wave and I think we definitely saw a rebound throughout the quarter and again, we have a relentless focus on the acute referral sources, but again, that’s a lower growth proposition. But in the first quarter again, partially due to the easier comps last year, that definitely helped us post a mid-single-digit growth which we’re thrilled with. And again, I think throughout the year, as acute rebounded last year, the comps will become more proper. But nonetheless, very pleased with the acute portfolio in the quarter.

Yeah, and Dave, to your question around the stickiness of the referrals and the patient base, look we’ve spent a lot of time as an organization focusing around the quality of the care that we deliver certainly with our commercial resources around the reach and frequency and the reliability that we’ve been able to demonstrate with those referral sources over the last two plus years throughout that process. So, our focus as an organization has always been around the patients’ experience and that patient satisfaction. To previous questions that we’ve received and I think kind of to your question, we haven’t seen a lot of movements back for patients that are on long-term care with us that are those chronic patients reverting back to those other sites. Now, we understand the competitive dynamics and we don’t take any of that for granted. We want to make certain that we are driving patient loyalty by the services that we are providing and the care that we are delivering. But as of this time, the retention rates of the patients seems to be solid and something that is stable base from which we are building from.

Okay. And just one other question guys, you mentioned ongoing investments a couple of times in the prepared remarks. Just wondering if you could give a couple of what you view as the key areas of investment over the next 12 to 18 months? And then I am curious as you guys were renewing with your major payers, just any conversation during those contractual updates around the ambulatory infusion suites, site of care redirection, just anything incremental you can add there.

Yeah, Dave. As we’ve talked about previously, we are continuing on the path of building out a comprehensive network of infusion suites and in the conversations that we are having kind of across the spectrum with the payer community, there is a high level of interest there, knowing that the ability to have high quality care and an appropriate cost in a setting in which patients want to receive it, we are on the right path of that conversations both in the home but also in the infusion suite. And so, as we are looking at areas of investments as we move ahead, we are committed to continue to expand that out and to build out a comprehensive network in order to serve the needs of our patients and partners closely around site care initiatives and other aspects from that standpoint. The other aspect as we said is look, not going to necessarily unveil our strategic playbook, but we are looking for other areas to augment what we are doing. We know that we have a privilege position of being able to provide care in the home or in more of our infusion suites that we are always looking for the opportunities to expand service lines or to look for additional ways to increase the value that we are delivering to our patients to our referral sources to the payer community and really bring to biopharma as well. And so, we are going to continue to take a look and as we’ve always committed, we will be disciplined, but it’s going to be both strategic and economic in any moves that we make. But we really feel fortunate about the position we are in from a capital structure and we think that the opportunity is before us to continuing to look for ways to enhance the role we play in ambulatory settings and post-acute care.

Okay. Thanks very much guys.

Yeah. Thanks, Dave.

Thank you. Our next question comes from Brooks O'Neil of Lake Street Capital. Your line is open.

Good morning. I just have one question. I am hoping you could just talk a little bit about labor pressures, labor shortages, particularly as it relates to nursing availability and pharmacist and whether you are seeing – having difficulty, filling roles or whether you are at pretty good shape in those two key areas?

Hey, Brooks, yeah, look, we are not immune to the pressures in the marketplace, but I would tell you that our strength is that we are fairing pretty well through that standpoint. To your specific question, part of the reasons for the acquisitions within Infinity and SPNN was to expand our nursing network. And at this point in time, we really don’t – have not run into capacity constraints or had to turn away patients on that. The other thing is, look, we’ve increased our clinical team size just naturally through Q1 based on our recruiting and moving that forward. So, on a positive basis, we’ve seen our time to build moving downward and so, we continue to be able to attract talents to the organization as opportunities arise with open positions. And from the clinical standpoint, the area I think that has got the biggest constraint is really around nursing and we feel that our model has that flexibility. Our full time nurses, our part time nurses and then access to per diem and this network allows to continue to meet market demand and continue to grow as we are looking forward.

Hey, Brooks. This is Mike, let me add is, just to put a little more granularity around, look, we have over 7,000 associates across the country. That’s over a $0.5 billion of labor cost. And so, as John mentioned, just remind and reiterate that we take most of our merit and adjustment actions at the end of the first quarter. And so I would characterize like most organizations, our adjustments are a couple points higher than they have been in previous years. And so that labor-related inflationary action, which again as John witnessed, we need to focus on recruiting our team every single day. That’s going to start to impact us more in the second quarter.

Okay. And just to clarify and I appreciate all that color. No big problem finding pharmacists either?

No.

No. I mean, for the most part, look, I mean, there is market nuances as you would expect from that standpoint. But in general, our ability to recruit and onboard teams, the team members has been strong.

Great. Thank you.

You are welcome.

Thanks, Brooks.

Thank you. Our next question comes from Pito Chickering of Deutsche Bank. Your line is open.

Hi there. This is Kieran Ryan on Pito. Thanks for taking my questions. So, if I add back the $5 million – excuse me – the $5 million in credits that you called out in 1Q, it looks like EBITDA margin came in around 7.9% adjusted to that. And then, taking in the midpoints of revenue guidance, it looks like we see about 8.6% through the rest of the year. So, some good sequential expansion, but that’s about 30 basis points below 2Q through 4Q 2021. So I was wondering if you can kind of just talk about some of like what the biggest swing factor is between the low and high end of the guide as it relates to the cost side through the rest of the year.

Sure, Kieran, it’s Mike. And you are thinking about it right. Look, I mean, we try to provide as much transparency as we can and while we are thrilled with the $77 million that we delivered in the first quarter, again there was in the first quarter the stars aligned, the signs were going in the same way. And we always see some one-timers here and there. They typically net to nothing to write home about, but in the first quarter we did have a net of around $5 million of benefit that we just wanted to underscore, folks think about that. So, yeah, if you back that off to kind of a normalized 72, and again argue that near close and there is always a lot of puts and takes. Yeah, the balance of the year would imply high single-digit-earnings growth and frankly, as John mentioned, we are seeing very strong momentum on the commercial side. But the reality is, the best of our estimate, there is $10 million to $12 million a quarter of year-over-year inflationary pressures, which collectively $13 million in the back half. That’s quite impactful. And so, we do see that with the labor adjustments emerging. The impact of crude oil derivative on everything from medical plastics to mileage reimbursement for our clinical teams in the field, that really ramped up in the first quarter. And so, to simplify really what we see going forward is continued commercial momentum offset by what are unprecedented inflationary pressures. But yet we are still laser focused on expanding the EBITDA margin to the extent possible.

Got it. Thank you. Thank you. That’s helpful. And then, just one quick follow-up. I know we’ve actually ask this for and – but, I think this is now the fifth straight quarter of – a fourth straight quarter of gross margin – despite the outsized growth in chronic and I know you guys are paying for every dollar there like you said, but just wanted to make sure that none of those timeline excess achieved, I think you called out you’d expect the gross margin contraction to – the gross margin pressure to continue – to return through the rest of the year. So, just wondering, is there anything specific in 1Q that allowed for now the quarter withstands in there or just still kind of – just holding the line effectively? Thank you.

Sure, Kieran. Yeah, as I mentioned in my prepared remarks, gross margin was within ten bps of where it was last year. So, relatively flat year-over-year. Part of the tailwind in the first quarter was that 90 year-over-year growth on the acute portfolio which again is considerably higher gross margin profile. So, that year-over-year growth definitely helped us on an year-over-year gross margin rate. The reality is, and again, you’ve heard us talk about it several times. We are relentlessly focused on every basis point and then growing those gross margin dollars. But again, with that seismic shifts towards the chronic portfolio, nothing has changed around our conviction that over time we will face some rate pressure.

Thank you.

Thanks, Kieran.

Thank you. Our next question comes from the Joanna Gajuk of Bank of America. Your line is open.

Yes. Good morning. Thank you so much for taking the questions here. So couple follow-ups. So, when you – I guess, your guidance for the year you are assuming but expect quarterly trends to be flat versus prior year. So can you clarify that are you referring to margins or something else. So, how should we think about that, because I guess, you just kind of talk about the inflationary pressures picking up in the rest of the year. So, I wasn’t quite sure what you were talking about when you said flat versus prior year?

Sure, yes, Joanna. So, typically, when we’ve articulated the seasonality in previous years, there was a more pronounced step from Q4 down to Q1 and then a considerable improvement throughout the year I think with some of the dynamics, what I was trying to articulate is, with some of the benefits and the easy comps last year, relative to, as John articulated, increasingly tougher comps throughout the year. We would expect as we reflect on our outlook for this year that would be a relatively flatter year from a successive revenue performance and EBITDA contribution. So, little bit of a flatter year relative to what we’ve seen in the past around seasonality.

Well, now that makes sense especially after you kind of talk about those inflationary pressures you said $10 million, $15 million header and that gets per quarter. So, I just want to clarify that. And then, another clarification, so the SPNN acquisition, right closing in April, so I thought it wasn’t in Q1 obviously and then also for the year, I guess, is it ROE maybe - or so to EBITDA?

Yeah, that’s about, maybe a little bit lighter than that. We didn’t – we disclosed it obviously the purchase price was $60 million. We paid mid-teens. So, think of it as a $4 million to $5 million contribution on an annualized basis. So, with the transition in, we’ll realize around three quarters that. So, around three, maybe not less than that, but that’s within the ball park.

Okay. And I guess, also, when you were talking about these inflationary pressures $10 million to $12 million, it sounds like that was labor, but then you also talk about these other supply or cost of supply, plastic and some transportation some other services, so are they included in this number? If not, I guess, are they also meaningful? Or I guess it’s compared to the labor pressure is, it’s a number that you’re not willing to quantify?

Yeah, when I use the ball park range of $10 million to $12 million, that would include our higher than typical inflationary pressures on labor as well as all of the – whether it’s medical supplies, transportation, et cetera. So that $10 million to $12 million is a rough estimation of the collective inflationary pressures.

Okay. That’s helpful. Thank you. And I guess, also lastly I have a question, when you talk about acquisitions and obviously you have a lot of free cash flow there and so, the balance sheet situation and you mentioned something post-acute care. So can you expand on that? I mean, is there something you are looking at kind of outside of the core infusion, because I guess last time we talked, it sounded like you – you are still kind of more focused on infusion. But I don’t know whether there is anything else you are kind of considering outside of the core home infusion?

Sure, Joanna. And look, I mean, as we reflect where we are, at the onset of the merger, obviously one of the commitments John and I made was to rapidly delever and improve the capital structure. So, as both of us mentioned where we are sitting today, we feel very good that we are at three times net levered and we have considerable access to capital. That obviously doesn’t lower the bar in terms of how we are thinking about strategic and economic investments. And I think, look, as John mentioned, what we’ve really established is a differentiated national clinical platform now with one of the largest clinical teams in the field with the largest independent pharmacy footprint to really support the post-acute space. I think as we reflect on the transactions that we’ve executed on, we’ve built a national per diem nursing network that’s second to none. With Wasatch we’ve expanded our patient experience in the infusion suite setting, which is going to provide earnings for years to come for the broader organization. So, I think, we are trying to orient folks is with that differentiated national clinical platform. I think it gives us a broader array of opportunities how to be a relevant partner to our payers and referral partners or providers in the field, not just maybe around the infusion in the home, but in the broader post-acute space.

Okay. Great. And I guess one last one on cash flow. I guess, you still have the NOLs, but when do you expect to start paying cash taxes?

We do not expect to be a meaningful cash tax – to have a meaningful cash tax obligation this year. I mean, we will revisit going into 2023, but for this year, we are quite confident that that won’t be a meaningful outflow for us.

Okay. Great. Thank you so much for answering the questions.

Thanks, Joanna.

Thank you. Our next question comes from Jamie Perse of Goldman Sachs. Your line is open.

Hey, good morning guys. Two quick questions from me. Mike, you talked about aggressively managing SG&A just given the environment. Can you talk about where you are finding sustainable or incremental opportunities to do that?

Sure, I mean, look, obviously, entering the year, there is some discretion around when not if we make certain investments for future growth entering the year. Frankly, the balance is maintaining the current operations, as well as finding the funding for future investments and frankly entering the year, we were a little more thoughtful on the pacing of some of those more discretionary categories. To your point though, Jamie, I think, we continue to push the team around finding ways to become more efficient, whether it’s through technology to utilize more automation on the patient registration and onboarding and support processes around our billing and collecting efforts. Like every other enterprise, we are looking at our bricks and mortar investments and looking at do we did all of the administrative facilities and capabilities that we need. And so, look, I mean, through this technology, we continue to find value on the margin around how to become more efficient and that doesn’t let up and that doesn’t ever stop. And so, I think that is we’ve articulated the value of this business and that gives John and I the confidence that going forward, despite inflationary pressures, we are still highly confident we’ll grow spending considerably slower than the gross margin dollars.

Okay. And I want to follow-up on the first part of your answer that some of the investments that drive growth, is that to say that at some point when the – maybe macro environment is more stable, you can reinvest in some of those opportunities and accelerate growth. Am I thinking about that right? Or just wanted follow-up on that comment.

Hey, Jamie, it’s John. So, a couple things. One as Mike said, look, we have been investing in the technology infrastructure. And so, we are utilizing some of the advanced tools around repair the process automation, we are looking at machine learning and other aspects to really drive efficiency in the way that we are operating. To that, look, we continue to take a look at not only the structure and design, but the recent frequency of our commercial team and our commercial resources as well as thinking about different ways to partner up and down the value chain from biopharma manufacturers to the patients themselves and looking for those opportunities for efficiencies. Any of the things that we are doing on the SG&A side, just to be clear, we are not doing anything at this point in time that’s constraining our ability to grow. Where we are prioritizing on investments is on areas of productivity, efficiency and expanding our reach into the marketplace. We understand the unique position that we are in and we want to capitalize on that. But we are also disciplined. I mean, there are things where we can be thoughtful around the way that we are adding overhead staff as opposed to production staff. There is ways that we can take a look at the needs of the business and reorient around it in a more efficient way. So, I don’t wanted you walking away thinking that we are holding back on making investments or spending dollars to continue to capitalize on the privilege position that we hold and the unique position as the only national provider of infusion services.

Okay. Understood. My last question is just around your approach to guidance. It’s a dynamic macro environment modeling these days is as hard as ever. How do some of these macro dynamics just impact your approach to guidance? Are you just incorporating more room for unknowns and things like that into guidance this year? Just any color on your approach would be helpful.

Sure, Jamie, look. I mean, obviously, as you know, John and I would tend to be more conservative in how we approach our thoughts externally. We operate in a very robust forecasting mindset where every single quarter we are looking at dozens of distinct therapies with – each with their own growth and supply chain dynamics. No two metropolitan areas are created equally and - or operate equally. And so, we model out several variables on a therapy level, on a geography level, as well as on a cost component level. And so, you can imagine, we model out a significant number of scenarios and what we are obviously focused on doing is handicapping those and providing you all with thoughts that represents a conservative view. But yet also to your point acknowledges the fact that there are considerable variability in a very dynamic environment that we are operating in right now, which that’s part of the lure of this industry and what we love about it. But it also is something that we take to heart as we articulate obviously we recognize our credibility as contingent on not doing what we said we are going to do and so we are very, very thoughtful on how we model out a variety of the variables we are facing.

Alright. Thanks for the all the color.

Thanks, Jamie.

Thank you. I am showing no further questions at this time. Let me turn the call back over to John Rademacher for any closing remarks.

Yes, thanks, Celery. Thanks for joining us today. As we discussed, we had a very strong Q1 and we are looking forward to continuing with the momentum as we move through the year. I hope you have a wonderful day and please stay safe. Thanks everyone.

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.