Core Insights - Owens & Minor Inc. reported first-quarter 2025 adjusted EPS of 23 cents, an increase from 19 cents year-over-year, surpassing the consensus estimate of 20 cents [1] - The company generated sales of $2.63 billion, nearly flat year-over-year, falling short of the consensus of $2.66 billion [1] - The Products & Healthcare Services segment's revenue was $1.96 billion, down 1%, while Patient Direct revenue increased by 6% to $673.8 million [1] Financial Performance - Adjusted operating income rose to $61.3 million from $57.4 million, and adjusted EBITDA increased from $116.3 million to $121.9 million [3] - The company reaffirmed fiscal 2025 adjusted EPS guidance of $1.60-$1.85, compared to the consensus of $1.67 [4] - Owens & Minor forecasts 2025 sales between $10.85 billion and $11.15 billion, slightly above the consensus of $11.05 billion [5] Strategic Developments - Citi has been appointed as the exclusive financial advisor for the potential sale of the Products & Healthcare Services segment [2] - The CEO highlighted ongoing engagement in the sale process of the Products & Healthcare Services segment and expressed optimism about the Patient Direct segment and the strengthening of P&HS businesses [3][4] Market Reaction - Following the earnings report, Owens & Minor's stock experienced a decline of 7.86%, trading at $7.15 [5]

Financial Data and Key Metrics Changes - The company's revenue for Q1 2025 was $2.6 billion, up just under 1% as reported, but up 2.3% on a same-day basis compared to the prior year [16] - Adjusted net income for the quarter was $18 million or $0.23 per share, representing about 20% growth compared to $15 million or $0.19 per share last year [21] - Adjusted EBITDA grew 5% to $122 million versus $116 million reported during Q1 2024 [21] Business Line Data and Key Metrics Changes - Patient Direct revenue was $674 million, growing by 6% compared to Q1 2024, with a same-day growth of 7.3% [16] - The Products and Healthcare Services segment reported a decline of 0.8%, while on a same sales day basis, it grew 0.7% compared to the first quarter last year [18] - Operating income in the Patient Direct segment grew by 31%, contributing to a total operating income of $61 million, an improvement of about 7% versus Q1 2024 [20] Market Data and Key Metrics Changes - The company experienced continued growth in oxygen therapy, which began in Q4 2024, and expects growth throughout 2025 [17] - The Medical Distribution division saw good same-store sales, but lower glove prices and international sales offset this growth [18] Company Strategy and Development Direction - The company is actively engaged in discussions regarding the potential sale of its Products and Healthcare Services segment while continuing to run this segment with commitment [10] - Investments in revenue cycle management have led to record collection rates in Q1, with plans to extend these learnings to other divisions [9] - The company is implementing price increases in response to tariffs, effective in early June, while ensuring high-quality product delivery [13][14] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed guidance for the year, expecting improving results in each subsequent quarter, with at least 70% of earnings and cash flow generated in the second half of the year [24] - The company remains bullish on the outlook for earnings and cash flow for the remainder of 2025 [25] Other Important Information - The anticipated annual exposure of current tariffs on products is estimated to be in the range of $100 million to $150 million [13] - The company has opened new state-of-the-art distribution centers to enhance efficiency and service [11] Q&A Session Summary Question: Can you discuss the discussions with customers regarding tariffs? - Management indicated that they are working with customers to identify alternatives and have increased inventory to mitigate tariff impacts [26][29] Question: What is the impact of foreign exchange on the business? - Management noted that while there was volatility in the dollar, they are comfortable with the guidance for the rest of the year regarding FX [31][33] Question: What is the split of tariff exposure between segments? - The majority of tariff exposure is in the Products and Healthcare Services segment, with very little exposure in the Patient Direct segment [40] Question: How is the RoTEK acquisition being accounted for in guidance? - The debt from the RoTEK acquisition will not appear on the balance sheet until the deal closes, and guidance will be updated accordingly [47][49] Question: What is the expected free cash flow for the year? - Management confirmed that they still expect to generate good free cash flow and use it to pay down debt [52]

Financial Data and Key Metrics Changes - The company's revenue for Q1 2025 was $2.6 billion, up just under 1% as reported, but up 2.3% on a same-day basis compared to the prior year [15] - Adjusted net income for the quarter was $18 million or $0.23 per share, representing about 20% growth compared to $15 million or $0.19 per share last year [19] - Adjusted EBITDA grew 5% to $122 million versus $116 million reported during Q1 2024 [19] Business Line Data and Key Metrics Changes - Patient Direct segment revenue was $674 million, growing by 6% compared to Q1 2024, with a same-day growth of 7.3% [15] - The Products and Healthcare Services segment reported a decline of 0.8%, while on a same sales day basis, it grew 0.7% compared to the first quarter last year [16] - Operating income for the Patient Direct segment grew by 31%, resulting in a 173 basis point expansion [6] Market Data and Key Metrics Changes - The Medical Distribution division saw continued growth in same-store sales, but lower glove prices and international sales offset this growth [16] - The company experienced a significant increase in proprietary product sales running through its distribution channel, a key strategic initiative [16] Company Strategy and Development Direction - The company is actively engaged in discussions regarding the potential sale of its Products and Healthcare Services segment while continuing to run this segment with commitment [9] - Investments in revenue cycle management have led to record collection rates in Q1, with plans to extend these learnings to other divisions [8] - The company is implementing price increases in response to tariffs, effective in early June, while ensuring high-quality product delivery [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's performance and reaffirmed guidance for the year, expecting improving results in each subsequent quarter [22] - The anticipated annual exposure of current tariffs on products is estimated to be between $100 million to $150 million, primarily affecting the Products and Healthcare Services segment [12][27] - Management noted that the first quarter typically marks the payment of incentive compensation, impacting cash flow, but expects significant improvement in cash flow for the remainder of the year [20] Other Important Information - The company opened new state-of-the-art distribution centers in Morgantown, West Virginia, and Sioux Falls, South Dakota, to enhance its distribution network [10] - The company is awaiting a final decision from regulators regarding the planned acquisition of RoTEK, expecting to close in the first half of 2025 [8] Q&A Session Summary Question: Can you discuss the discussions with customers regarding tariffs? - Management indicated that the tariff exposure is estimated between $100 million to $150 million, primarily from China and Thailand, and emphasized the need to work collaboratively with customers to address pricing adjustments [27][28] Question: How should we think about the FX impact progressing through the year? - Management noted that while there was volatility in the dollar, particularly in March, the situation has calmed, and they are comfortable with the guidance for the rest of the year regarding FX [31][32] Question: What is the split between the tariff exposure in the PNHS and PD segments? - Management clarified that virtually all tariff exposure is in the Products and Healthcare Services segment, with minimal exposure in the Patient Direct segment [40] Question: How is the RoTEK financing accounted for in guidance? - Management explained that none of the debt will appear on the balance sheet until the deal closes, and they will update guidance accordingly [47] Question: What happens if customers refuse price increases due to tariffs? - Management stated that they cannot sell products at a loss and will work with customers to find alternative products that are lower in cost [61][64]

Company Performance - Owens & Minor reported quarterly earnings of $0.23 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and up from $0.19 per share a year ago, representing a 15% earnings surprise [1] - The company posted revenues of $2.63 billion for the quarter ended March 2025, slightly missing the Zacks Consensus Estimate by 1.43%, but up from $2.61 billion year-over-year [2] - Over the last four quarters, Owens & Minor has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - The stock has underperformed, losing about 40.6% since the beginning of the year, compared to the S&P 500's decline of 4.3% [3] - The current consensus EPS estimate for the coming quarter is $0.32 on revenues of $2.72 billion, and for the current fiscal year, it is $1.64 on revenues of $11.18 billion [7] - The estimate revisions trend for Owens & Minor is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Medical - Products industry, to which Owens & Minor belongs, is currently in the bottom 32% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Owens & Minor's stock performance [5]

2025 Outlook - The company projects revenue between $10.85 billion and $11.15 billion[7] - Gross margin is expected to be between 20.75% and 21.25%[7] - Interest expense is estimated to be between $138 million and $142 million[7] - Gross capital expenditures are projected to be between $250 million and $270 million[7] - Net capital expenditures are expected to be between $180 million and $205 million[7] - The adjusted effective tax rate is projected to be between 29.0% and 30.0%[7] - Diluted weighted average shares outstanding are expected to be approximately 80 million[7] - Adjusted EBITDA is projected to be between $560 million and $590 million[7] - Adjusted EPS is projected to be between $1.60 and $1.85[7] - The outlook assumes stable commodity prices and foreign currency rates as of December 31, 2024[7]

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) [Q1 2025 Key Financial Results](index=1&type=section&id=Q1%202025%20Key%20Financial%20Results) Owens & Minor reported Q1 2025 total revenue of **$2.632 billion**, a GAAP net loss, but increased non-GAAP adjusted net income and Adjusted EBITDA Q1 2025 Financial Summary vs. Q1 2024 | Financial Metric | 1Q25 | 1Q24 | | :--- | :--- | :--- | | **Revenue** | $2,632 million | $2,613 million | | **Operating income, GAAP** | $0.1 million | $9.7 million | | **Adj. Operating Income, Non-GAAP** | $61.3 million | $57.4 million | | **Net loss, GAAP** | $(25.0) million | $(21.9) million | | **Adj. Net Income, Non-GAAP** | $18.1 million | $14.9 million | | **Adj. EBITDA, Non-GAAP** | $121.9 million | $116.3 million | | **Net loss per share, GAAP** | $(0.32) | $(0.29) | | **Adj. Net Income per share, Non-GAAP** | $0.23 | $0.19 | [Business Segment Performance](index=1&type=section&id=Business%20Segment%20Performance) Patient Direct segment drove growth with expanded operating margin, while Products & Healthcare Services experienced revenue decline and a significant operating income drop - The Patient Direct segment delivered **mid-single digit top-line growth** and a **mid-teen expansion in EBITDA**, with strong performance in Diabetes and Sleep Supplies[2](index=2&type=chunk) - The Patient Direct operating margin expanded by **173 basis points** year-over-year[1](index=1&type=chunk) - The Products & Healthcare Services segment saw top-line growth in its Medical Distribution division[2](index=2&type=chunk) Segment Operating Performance (Q1 2025 vs Q1 2024) | Segment | Net Revenue (1Q25) | Net Revenue (1Q24) | Operating Income (1Q25) | Operating Income (1Q24) | | :--- | :--- | :--- | :--- | :--- | | **Products & Healthcare Services** | $1,958.2 M | $1,974.8 M | $1.2 M | $11.5 M | | **Patient Direct** | $673.9 M | $637.8 M | $60.1 M | $45.9 M | [Strategic Developments](index=1&type=section&id=Strategic%20Developments) The company is actively pursuing the potential sale of its Products & Healthcare Services segment, with key strategic priorities including disciplined capital management, leverage reduction, and integrating the planned Rotech acquisition - The company remains actively engaged in the process for a potential sale of its Products & Healthcare Services segment[1](index=1&type=chunk)[2](index=2&type=chunk) - Future strategic focus is on disciplined capital deployment, achieving leverage targets, navigating potential tariffs, and integrating the planned Rotech acquisition[3](index=3&type=chunk) [2025 Financial Outlook](index=2&type=section&id=2025%20Financial%20Outlook) Owens & Minor reaffirmed its 2025 financial guidance for revenue, Adjusted EBITDA, and Adjusted EPS, notably excluding impacts from the Rotech acquisition, P&HS segment sale, or future tariffs Full-Year 2025 Financial Guidance | Metric | 2025 Guidance Range | | :--- | :--- | | **Revenue** | $10.85 billion to $11.15 billion | | **Adjusted EBITDA** | $560 million to $590 million | | **Adjusted EPS** | $1.60 to $1.85 | - The 2025 outlook excludes any impact from the planned Rotech acquisition, the potential sale of the Products & Healthcare Services segment, and potential tariffs[5](index=5&type=chunk) - The company does not provide guidance for the comparable GAAP measures because certain elements, such as exit and realignment charges, are unpredictable and cannot be forecasted without unreasonable effort[6](index=6&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 net revenue slightly increased, but decreased gross profit and higher operating expenses led to a significant drop in operating income and a GAAP net loss Q1 2025 Consolidated Statement of Operations (in thousands) | Line Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Net revenue** | $2,632,048 | $2,612,680 | | **Gross profit** | $526,013 | $535,529 | | **Operating income** | $124 | $9,696 | | **Interest expense, net** | $33,959 | $35,655 | | **Net loss** | $(24,982) | $(21,886) | | **Net loss per share (Basic & Diluted)** | $(0.32) | $(0.29) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased due to higher inventories, total liabilities rose from increased payables and debt, leading to a slight decrease in total equity Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $2,206,198 | $2,021,017 | | **Total assets** | $4,856,424 | $4,656,156 | | **Total current liabilities** | $1,960,215 | $1,852,052 | | **Total liabilities** | $4,285,445 | $4,069,792 | | **Total equity** | $570,979 | $586,364 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, cash used for operating activities improved, offset by increased accounts payable and inventories, while financing activities provided cash, resulting in a net cash increase Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | **Cash used for operating activities** | $(35,066) | $(52,962) | | **Cash used for investing activities** | $(48,200) | $(1,870) | | **Cash provided by financing activities** | $92,778 | $53,320 | | **Net increase (decrease) in cash** | $10,054 | $(2,130) | | **Cash at end of period** | $59,436 | $270,794 | [Segment Information](index=7&type=section&id=Segment%20Information) In Q1 2025, Patient Direct segment revenue and operating income grew significantly, contrasting with Products & Healthcare Services' revenue decline and sharp operating income plummet Segment Performance Summary (Q1 2025 vs Q1 2024, in thousands) | Segment | Net Revenue | Operating Income | Adjusted EBITDA | | :--- | :--- | :--- | :--- | | **Products & Healthcare Services** | | | | | 1Q25 | $1,958,164 | $1,153 | $24,218 | | 1Q24 | $1,974,837 | $11,486 | $32,972 | | **Patient Direct** | | | | | 1Q25 | $673,884 | $60,141 | $97,637 | | 1Q24 | $637,843 | $45,879 | $83,298 | [Non-GAAP Financial Measures & Reconciliations](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) [Reconciliation of GAAP to Non-GAAP Measures](index=9&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) For Q1 2025, GAAP operating income and net loss were adjusted to non-GAAP figures, reflecting core performance by excluding specific charges Q1 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | As Reported (GAAP) | Adjustments | Adjusted (Non-GAAP) | | :--- | :--- | :--- | :--- | | **Operating income** | $124 | $61,170 | $61,294 | | **Net loss / income** | $(24,982) | $43,055 | $18,073 | | **Net loss / income per share** | $(0.32) | $0.55 | $0.23 | Q1 2025 Net Loss to Adjusted EBITDA Reconciliation (in thousands) | Metric | Amount | | :--- | :--- | | **Net loss, as reported (GAAP)** | $(24,982) | | Income tax benefit | $(10,092) | | Interest expense, net | $33,959 | | Key Adjustments (Acquisition, Exit, D&A, etc.) | $122,970 | | **Adjusted EBITDA (non-GAAP)** | $121,855 | [Explanation of Non-GAAP Adjustments](index=10&type=section&id=Explanation%20of%20Non-GAAP%20Adjustments) Key non-GAAP adjustments for Q1 2025 primarily included acquisition-related charges, intangible amortization, and significant exit and realignment costs - Acquisition-related charges for Q1 2025 totaled **$16 million**, primarily consisting of legal and professional fees for the planned acquisition of Rotech[24](index=24&type=chunk) - Exit and realignment charges of **$31 million** in Q1 2025 included **$10 million** for kitting/manufacturing initiatives, **$7.1 million** in fees for the potential P&HS sale, and a **$6.8 million** accounts receivable provision for a non-operating customer[25](index=25&type=chunk) - Non-cash LIFO charges of **$8.6 million** for U.S. distribution inventories were excluded from Adjusted EBITDA[24](index=24&type=chunk)[29](index=29&type=chunk)

Group 1 - The article discusses the aggressive deal-making strategy of Owens & Minor, Inc. (NYSE: OMI), suggesting that the company has pursued many large deals in the past [1] - The investing group "Value In Corporate Events" provides members with opportunities to capitalize on significant corporate events such as IPOs, mergers & acquisitions, and earnings reports [1] - The coverage includes 10 major events a month, focusing on identifying the best investment opportunities [1]

Core Insights - Owens & Minor, Inc. (OMI) reported strong fourth-quarter results, exceeding analyst expectations for both earnings and revenues, leading to a 39% increase in share price [1][3] - The company's strategic transformation, including the potential sale of its Products and Healthcare Services (P&HS) segment and the acquisition of Rotech, has bolstered investor confidence [1][5] Financial Performance - OMI's fourth-quarter revenues reached $2.7 billion, a 1.5% year-over-year increase, surpassing estimates by 0.7% [3] - Earnings per share were reported at $0.55, exceeding estimates by 3.8% [3] - The Products and Healthcare Services segment grew by 0.5%, supported by stable same-store medical distribution sales [3] Segment Performance - The Patient Direct segment saw a 5% revenue increase, driven by strong demand for diabetes and sleep therapy products [4] - Despite a decline in home respiratory therapies, growth is expected to resume in 2025 based on positive trends observed late in Q4 [4] Strategic Initiatives - OMI is exploring the sale of its P&HS segment, which has attracted significant interest from potential buyers [5] - The company aims to reinvest in high-growth areas like Patient Direct, enhancing profitability and streamlining operations [7] Acquisition Plans - OMI is optimistic about its pending $1.4 billion acquisition of Rotech, which is expected to drive long-term shareholder value [9] - The acquisition is projected to generate at least $50 million in cost synergies by year three, with potential for quicker realization [10] Future Outlook - For 2025, OMI projects revenues between $10.85 billion and $11.15 billion, primarily driven by the Patient Direct segment [11] - Adjusted EBITDA is expected to be between $560 million and $590 million, indicating a 10% increase year-over-year [11] - The company anticipates adjusted EPS in the range of $1.60 to $1.85 per share, suggesting a 13% year-over-year growth [11] - A $100 million share repurchase program has been announced, reflecting management's confidence in the company's valuation and prospects [11]

Mergers and Acquisitions - Owens & Minor is engaged in discussions for the potential sale of its Products & Healthcare Services segment, with no set timetable for completion[9]. - The company has entered into an agreement to acquire Rotech Healthcare Holdings Inc. for $1.36 billion, with a net purchase price of approximately $1.32 billion after tax benefits[10]. - Owens & Minor completed the acquisition of Apria, Inc. for approximately $1.7 billion, net of cash acquired, which is now part of the Patient Direct segment[11]. - The proposed acquisition of Rotech may not be completed as anticipated, with risks including failure to satisfy closing conditions[140]. Revenue and Customer Base - In 2024, sales to Vizient, Premier, and HealthTrust Purchasing Group represented 33%, 21%, and 10% of consolidated net revenue, respectively[29]. - The top ten customers in the U.S. represented approximately 23% of the company's consolidated net revenue in 2024[121]. - Approximately 65% of the company's consolidated net revenue in 2024 was from sales to member hospitals under contract with its largest GPOs: Vizient, Premier, and HPG[121]. - The largest Payor represented approximately 22% of the company's Patient Direct net revenue in 2024[121]. Operations and Supply Chain - The company operates a network of distribution centers across the U.S. to efficiently serve healthcare providers, utilizing advanced information technology for inventory and supply chain management[17]. - The company has significant investments in inventory and accounts receivable to meet customer delivery requirements, emphasizing efficient asset management[32]. - The company relies on a relatively small number of suppliers for the majority of patient service equipment and supplies, which could adversely affect results if procurement issues arise[129]. - Supply chain disruptions and increased costs, particularly related to international freight and commodities, may negatively impact the company's ability to meet customer demand and maintain profitability[161]. Competition and Market Environment - Owens & Minor faces competition from major manufacturers and distributors, including Cardinal Health and Medline Industries, as well as regional competitors[39]. - The company competes with national and regional healthcare providers in the Patient Direct segment, including AdaptHealth Corp., Lincare, and CVS Health Corporation[41]. - The home healthcare industry is highly fragmented and competitive, with potential disruptions from large technology companies entering the market, which may lead to a loss of referrals or revenue[154]. - The company faces increasing competition and pricing pressure in the medical/surgical supply distribution industry, which could adversely affect its market share and profitability[153]. Regulatory Compliance and Legal Risks - Compliance with healthcare regulations significantly increases the time and costs associated with obtaining and maintaining product approvals[49]. - The company is subject to numerous federal and state laws regarding the privacy and security of Protected Health Information (PHI) under HIPAA and other regulations[51]. - The company is subject to extensive regulation by various federal and state agencies, including the FDA and the EPA, impacting its operations and compliance costs[61]. - The company is subject to extensive federal and state healthcare laws, and failure to comply could result in investigations, civil or criminal sanctions, and loss of participation in Medicare and Medicaid programs[172]. Financial Performance and Risks - The company incurred research and development costs of $13 million, $13 million, and $12 million for the years ended 2024, 2023, and 2022 respectively[42]. - The company recorded a goodwill impairment charge of $307 million in the Apria reporting unit during the three months ended December 31, 2024, with no impairment charges in 2023 or 2022[152]. - Rising inflationary pressures may impact the costs of sourcing materials and could limit the company's ability to pass these costs onto customers, affecting profitability[168]. - The company may experience adverse effects on demand for its products and services due to poor economic conditions and changes in political environments, which could impact accounts receivable collectability[162]. Human Capital and Corporate Culture - At the end of 2024, the company employed approximately 13,500 full-time and part-time teammates in the U.S. and 9,700 teammates outside the U.S.[92]. - The company has implemented enterprise-wide talent development and succession planning programs to identify future candidates for key positions[93]. - The Board of Directors emphasizes that effective human capital management is vital for the company's growth and success[99]. - The company regularly conducts teammate engagement surveys to solicit feedback and improve corporate culture[100]. Intellectual Property and Innovation - The company has patents and patent applications pending in the U.S. and other countries related to its surgical and infection protection products, with expiration dates ranging from 2025 to 2044[45]. - The company continuously reviews third-party proprietary rights to develop an effective intellectual property strategy and avoid infringement[44]. - The company’s intellectual property rights are crucial for maintaining competitive advantage, and failure to protect these rights could lead to revenue loss[192]. Environmental, Social, and Governance (ESG) Commitments - The company established the Owens & Minor Foundation in 2021, focusing on the environment, healthcare, and culture[95]. - The company faces risks related to its ESG commitments, which could impact reputation and stock price if not met[203]. - Voluntary ESG disclosures may be based on uncertain assumptions, leading to potential misinterpretations and revisions[204]. - Activism related to ESG initiatives could impose additional costs and adversely affect the company's business[206].

Financial Data and Key Metrics Changes - Revenue for Q4 2024 was $2.7 billion, up 1.5% compared to the prior year [25] - Adjusted net income for Q4 was $43 million or $0.55 per share, compared to $54 million or $0.69 per share last year [31] - Adjusted EBITDA was $138 million, down from $170 million reported in Q4 2023 [32] - Gross profit in Q4 was $580 million, representing 21.5% of net revenue [28] Business Line Data and Key Metrics Changes - Patient Direct revenue grew by 5% in Q4 2024, with strong growth in sleep supplies and diabetes [27] - The Products and Health Care Services (P&HS) segment grew 0.5% overall in Q4, with same-store sales growth in medical distribution offset by lower glove pricing [26][20] - Adjusted operating income was $95 million in Q4, an increase compared to the third quarter but lower than the previous year [30] Market Data and Key Metrics Changes - The IV fluid shortage impacted procedure volume and sales volume to distribution customers [26] - Home respiratory therapies such as NIV and oxygen declined year-over-year, but there are expectations for a return to growth in 2025 [28] Company Strategy and Development Direction - The company is focused on optimizing its P&HS segment and leveraging its Patient Direct platform for growth [9] - Plans to acquire Rotech are underway, with expectations to close in the first half of 2025, aiming to drive long-term shareholder value [10][14] - A share repurchase program of up to $100 million has been authorized by the Board of Directors [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the future of the Patient Direct business, citing positive demographic trends and expanding home treatment options [9] - The company anticipates mid-single-digit revenue growth for 2025, primarily driven by the Patient Direct segment [35] - Management remains focused on reducing debt and maintaining a debt-to-EBITDA leverage ratio between two and three times [38] Other Important Information - The company repaid $647 million of debt over the last two years, demonstrating strong cash flow capabilities [10][33] - A goodwill impairment charge of $305 million was recorded in Q4, primarily due to adverse financial market changes [32] Q&A Session Summary Question: Concerns about Rotech's performance - Management indicated there were no surprises in Rotech's results, consistent with expectations despite external legislative impacts [46][47] Question: Free cash flow and share repurchase strategy - The primary objective is to pay down debt, but share repurchase will be considered opportunistically if the stock remains undervalued [50] Question: Trends in Patient Direct growth - Management noted strong growth in diabetes and sleep supplies, with plans to improve performance in home respiratory categories [57][58] Question: Impact of tariffs - Tariffs are not significantly impacting the company, as most products are not sourced from high-tariff regions [72][74] Question: Capitated contract impact - The large capitated contract is not expected to have a meaningful impact on 2025 results, as current pricing is already modeled into projections [104][105] Question: Growth expectations for P&HS and Patient Direct - The majority of revenue growth is expected to come from the Patient Direct segment, with modest improvements in margins across both segments [111]