Apria, Inc.

Good afternoon and welcome to APRIA's third quarter 2021 earnings conference call and webcast. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you will need to press star then one on your telephone. Please note this event is being recorded. Leading today's call are Dan Stark, Chief Executive Officer, and Debbie Morris, Chief Financial Officer. Before we begin, we would like to remind you that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement that reflect changes that occur after this call. Descriptions of some of the factors that could cause action results to differ materially from these forward-looking statements can be found in the risk factor section of the company's annual report on Form 10-K for the year ended December 31, 2020, as supplemented by APRIA's quarterly reports on Form 10-Q for the periods ended June 30, 2021 and September 30, 2021, the latter of which is expected to be filed later today. In addition, please note that the company will be discussing certain non-GAAP financial measures that they believe are important in evaluating performances. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliation of historical non-GAAP financial measures can be found in the press release that is posted on the investor section of the company's website at www.apria.com. With that, I'd like to turn the call over to Apria CEO, Dan Stark. Please go ahead.

Thank you, operator. Welcome, and thank you all for joining us this afternoon to discuss our third quarter 2021 earnings results. I'm joined today by Debbie Morris, our Chief Financial Officer. I'll begin my remarks with some high-level comments on our results from the quarter, discuss some underlying trends and other activities in our business, as well as provide some thoughts on an industry-wide initiative that could have a meaningful impact on our business and the D&E industry over the long term. Then Debbie will provide a more detailed review of the financials and our guidance later on the call. Building on the momentum from the first half of the year and despite external headwinds, we delivered another solid quarter with revenue that was in line with our expectations while adjusted EBITDA and adjusted EBITDA-less PSE CapEx were at the high end or better than our guidance range. Our quarterly performance is reflective of our continued execution and operational improvements, coupled with the continued recovery in new patient volumes, despite significant industry disruption related to the Philips product recall and supply chain issues impacting other manufacturers. Third quarter revenue grew to $287.2 million, a 3.8% increase over Q3 2020. Adjusted EBITDA was 61 million, a 6% decrease from Q3 2020. And adjusted EBITDA less patient equipment capex grew to 38.9 million, a slight increase over Q3 2020. The surge from the Delta variant provided a meaningful boost in our new oxygen patient volume in the third quarter. The spike was so pronounced that new patient starts for oxygen per day in August was higher than any month during the peak of the COVID pandemic last winter. Now, keeping in line with the prevalence of the Delta variant, we have started to see new oxygen patient volumes decrease, but they are still at elevated levels compared to historical run rates. I'm proud of the entire organization for their perseverance in the face of difficult challenges. The APRIA team continues to execute at a high level and continues to deliver on our mission of improving the quality of life for our patients at home. While other potential issues could arise in the future, I have great confidence that our team will be able to navigate any challenge and will continue to operate at a high level. Now, on to the business. First, I'd like to discuss the Philips Respironics recall and other supply chain issues impacting our results. As a reminder, in June, Philips announced a voluntary recall for continuous and non-continuous ventilators. certain BiPAP, CPAP, bi-level positive airway pressure, and ventilator devices, all related to the polyurethane foam used in those devices. The recall notice instructed CPAP and BiPAP patients to discontinue use of their device and consult with their physician to determine the benefits of continuing therapy and potential risks. Ventilation patients were instructed to continue using their device and to consult with their physician to determine the appropriate next steps. To date, we have not experienced a significant number of patients stopping their therapy. In early September, Philips began the remediation process for CPAP and BiPAP units, and the process of repairing and or replacing those units is now underway. However, as of today, there has not been an approved remediation process for ventilators. We expect the CPAP remediation to continue into 2022. and we are hopeful that the ventilation remediation process will begin sometime this quarter. The supply chain disruption has also impacted our primary source of sleep equipment. Consistent with the rest of the industry, in the third quarter, we were on an allocation process based on historic purchases. Our allocation increased throughout Q3, but was below historic levels, thus impacting equipment availability for new patient starts. At the end of the quarter, we did identify another source for sleep equipment, and we started receiving units in mid-October. During the third quarter, we experienced a surge in incoming new patient volumes, which we believe bodes well for us as we increase our product inventory. Moving on to our operational performance, our team continues to execute at a high level, and as patient volumes and revenue have grown nicely throughout the year, we have been able to drive operating efficiencies. We have a very different situation in Q3 of 2021 than we had in Q3 of 2020. In Q3 2020, our incoming volumes were largely down, other than oxygen, which allowed us to flex down our variable costs. In Q3 2021, we have large incoming volume increases, which require processing and preparation for delivery, which don't allow us to flex down our variable costs. but the equipment availability challenges are delaying our revenue recognition. We expect that to work its way through as we increase our supply. From an M&A perspective, last quarter we announced the acquisition of Airway Breathing Company, which enhanced our presence in key markets in Virginia. I'm pleased to announce the ABC acquisition closed in September and is performing in line with our expectations. Our M&A pipeline remains active and robust, We look at deals of all sizes but take a measured approach and follow a rigorous evaluation process. We're looking to acquire strong local businesses that are financially attractive and are the right cultural fit for APRIA. One other item I'd like to discuss is a new industry initiative to help drive widespread adoption of e-prescribing. As some of you saw, in September, DME Scripps announced a strategic partnership with the four national DME providers Lincare, Apria, Adapt Health, and Rotec, as well as two industry trade associations, the American Association for Home Care and VGM, to help drive greater use and adoption of e-prescribe. We believe this is an important step in our industry and a significant step towards increasing widespread adoption of e-prescribe and DME. For too long, our industry has existed on a fax and paper-based legacy process for new referrals, which is fraught with multiple handoffs and friction points in the referral process. Currently, only a small amount of orders are transacted electronically, and while there's no forcing mechanism or mandate to get prescribers to switch to electronic ordering, we believe that a united industry message of moving to e-prescribe will accelerate the move to a future state. Our view is that this is a matter of when, not if, and that ePrescribe is the future for the industry. Widespread adoption of ePrescribe will help all constituents involved in the process, patients, referrals, and suppliers, by removing friction points and streamlining the referral process. Patients will receive equipment faster, while prescribers and suppliers will have less back and forth for needed documentation, which reduces the administrative burden for both. I suspect there will be questions about the financial impact. And what I can say is we are in the very early stages of this industry-wide initiative. Our aspiration is to see rapid and widespread adoption for ePrescribe. But realistically, we know this isn't something that will happen overnight. Rather, it will take some time to significantly increase adoption, and the benefits will increasingly grow over that time period. Yet we believe this will help drive meaningful efficiency and cost savings throughout the entire industry and for AFRIA. Before I turn the call over to Debbie, I'd like to provide a quick update or reminder regarding the current regulatory environment. First, the public health emergency has been extended for another 90 days until mid-January. As discussed before, the PHE provides an interim price increase for Medicare patients in the non-bid, non-rural areas of the country and keeps intact the 50-50 blended rate in the rural areas of the country. While the PHE extension was largely expected, the extension still needs to go through the mandatory process, and this is done in 90-day increments. In September, Medicare finalized a national coverage determination for oxygen that will expand home oxygen coverage and potentially reduce some of the administrative burden. Overall, the NCD is a positive for Medicare beneficiaries and the DME industry. And as a reminder, the suspension of sequestration was extended through year-end, and CMS permanently removed the budget neutrality rate adjustment or oxygen equipment that has resulted in a reimbursement rate increase for some oxygen systems. Both of these factors are tailwinds for APRIA, and we had already factored them into our guidance. To sum things up, we reported another solid quarter, and we are confident we'll be able to finish the year on a high note. Our industry is coming together to drive greater use of E-Prescribe, which will help drive operating efficiencies over the long run as adoption increases. Our team continues to execute at a high level, And while there have been some challenges such as the Phillips recall and other supply chain issues, we have been able to drive operational improvements and other efficiencies. I'd like to thank the entire Apria team for their dedication and hard work helping to drive these results. They are the heartbeat of Apria and they are the individuals that deliver our mission every day, improving the quality of life for our patients at home. I'll now turn the call over to Debbie to review our financial performance in more detail and provide our outlook for 2021.

Thank you, Dan, and thank you to everyone who joined the call today. We delivered another solid quarter with third quarter revenue that was in line with our expectations and adjusted EBITDA and adjusted EBITDA-less patient CapEx, which was at or above the high end of our prior guidance. Our strong performance was driven by solid operational performance despite the surge in Delta variant and despite significant industry disruption related to the Philips product recall and supply chain issues impacting other manufacturers. Net revenue of $287.2 million was slightly higher than the midpoint of our guidance range. Adjusted EBITDA of $61 million was at the high end of our guidance range, and adjusted EBITDA less patient equipment CapEx of $38.9 million was modestly ahead of our guidance range for the third quarter. We experienced strong oxygen volume due to the Delta variant, and closed the ABC acquisition during the quarter, both of which contributed to exceeding the midpoint of our revenue guidance. In addition, our teams did a nice job of managing through the Phillips recall and supply chain shortages, and despite wage and cost pressures, adjusted EBITDA as a percent of net revenue was slightly higher than projected. Reviewing our third quarter results on a year-over-year basis, net revenue of $287.2 million increased 3.8% over Q3 2020. Excluding the airway breeding company acquisition, which closed in September, net revenue increased 3.5% year-over-year. The increase in net revenue is driven by growth in home respiratory therapy and OSA treatment. Home respiratory therapy was up 4.2% over prior year due to increased volume of patients requiring home oxygen therapy due to the Delta variant, and higher reimbursement levels, offset partially by lower ventilation therapy revenues due to COVID and the Phillips recall. OSA treatment was up 5.6% due to the increased volume of patients over prior year and increases in sleep supply, despite the reduction in new patients in the quarter as a result of the equipment shortages stemming from the recall and other supply chain challenges. Overall, net revenue growth was in line with our expectations provided last quarter, but lower on a sequential basis, largely due to the Phillips recall and supply chain challenges, which impacted sleep and non-invasive ventilation growth in Q3 of this year. Adjusted EBITDA in the quarter of $61 million was down 6.2% from $65 million in the third quarter of last year. As Dan mentioned, we had a very different situation in Q3 of 2021 than we had in Q3 2020. In Q3 of last year, our incoming volume was largely down, other than oxygen, which allowed us to flex down our variable costs. In Q3 of this year, we had larger incoming oxygen and sleep volume, which require incurring certain variable costs to process orders, qualify the patients, and prepare the orders for delivery. while the Phillips recall and supply chain challenges are delaying the setup of patients and related revenue recognition. In addition, other costs including distribution expenses, self-insurance, health costs, and costs of being public are up on a year-over-year basis. Adjusted EBITDA less patient equipment CapEx of 38.9 million was roughly in line with the third quarter 2020 of 38.6 million. While adjusted EBITDA was down year-over-year, Patient CapEx was also down year over year, given the recall and supply chain challenges and related shortage of equipment. Looking at the balance sheet, as of September 30, we had $216 million in cash and total debt of $382 million. Turning to our updated outlook for 2021, we have performed better than expected throughout the first three quarters of the year, despite some recent headwinds. We've continued to drive operating cost leverage, which has been better than projected throughout the year. The public health emergency has been extended through mid-January of next year. The suspension of sequestration was extended through year-end, and CMS permanently removed the budget neutrality rate adjustment for oxygen equipment that resulted in a reimbursement rate increase for some oxygen systems. We continue to spend extra time and resources to support our patient needs as it relates to the Phillips Respiratus recall. The labor issues facing healthcare in much of the country are impacting our business, and we're seeing some cost inflation in other parts of the business, including the supply chain and for certain DME equipment. We've been able to navigate and manage through these headwinds the last several months, and we've secured additional equipment in Q4 from another manufacturer. So we expect to see an increase in volume of sleep patients starting therapy. Looking ahead for the fourth quarter and full year 21, we've taken all these factors I just mentioned into consideration. For the fourth quarter of 2021, we expect net revenues of $282 million to $298 million. Adjusted EBITDA of $54 to $60 million. and adjusted EBITDA less patient equipment CapEx of $27 million to $31 million. For the full year 2021, we are increasing revenue in adjusted EBITDA guidance while narrowing the adjusted EBITDA less patient equipment CapEx guidance range, and we're now projecting the following financial results. Net revenue of $1.13 to $1.15 billion, up from $1.12 to $1.15 billion, Adjusted EBITDA of $228 to $234 million, up from $221 to $231 million. Adjusted EBITDA less patient equipment CapEx of $135 to $139 million, from $132 to $142 million. To sum things up, I'm pleased with our performance again this quarter and the other day. The APRIA team has and continues to perform well in the face of challenges. I, too, want to thank our entire team for their commitment to APRIA and to our patients and for delivering on our mission of improving the quality of life for our patients at home. Operator will now open it up for questions.

Thank you. To ask a question, you will need to press star then 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jamie Purse with Goldman Sachs. Your line is now open.

Hey, thank you. Maybe just to start with the respiratory business, it sounds like that was benefited by just the demand related to the Delta variant. Can you size that for us a little bit better? What percent of your respiratory census is related to COVID at this point and just how to think about the unwind of that and rebuild of more traditional respiratory patients, you know, over the next few months and quarters.

Yeah, Jamie, let me take a shot at answering the question. So if we look really on a year-over-year basis for the quarter, you know, there's a few factors as I attempted to summarize, one being the oxygen favorability. A year-over-year basis because, you know, sorry, I should say COVID, including oxygen and sleep and IV. On a year-over-year basis, I say we're up about 4 million due to COVID because of the, obviously, the census bill along with the increase in patients throughout the corridor. So that's kind of on a year-over-year basis. If you look on a just in corridor, so standalone of Q3, The volume, you know, we have O2 favorability from oxygen, but it's offset by NIV. It's really offset by all the other products, NIV, sleep, negative pressure, and other equipment. So in the quarter, you know, net volume from COVID is about a million dollars. So it's on a net revenue basis.

Okay, okay. And then just on the sleep business, I wanted to get a little bit more color on two components here. Just first, the The new patient request, it sounds like you're getting a lot of requests. Can you just describe that a little bit more detail? When that started, is it because you guys have access to supply because of your relationship with ResMed and others do not? And then separately, do you have the ability to meet that demand given the new relationship with this other manufacturer?

Hey, Jamie, it's Dan. Good question. So we saw a pretty pronounced increase in incoming volume really early July as soon as kind of the Phillips recall hit and there really weren't any units available that weren't ResMed or another manufacturer. We saw a sustained increase in incoming volume throughout the quarter, and we continue to see it through October and early November. We have access to equipment, but if we had more equipment, we would have much more growth in the quarter and in the fourth quarter from a from a sleep equipment and sleep supply standpoint, we're really gated by how much volume we can get from a product supply standpoint. So, you know, obviously that's a big reason we went out and made sure we had another supplier, and we expect to start working that through. So we have a little bit longer delay right now when a patient starts or we receive a referral. We do get patients set up, but we could – we could have more if we can get our hands on more. So I think that's probably one of the variables when we think about Q4 around sleep revenues and how it actually translates into PSE CapEx. It's probably one of the wild cards as we think about the end of the year.

Okay, great. And last one for me, just last quarter you talked about a $30 million potential impact in guidance related to the Phillips recall. Just wondering how you're thinking about that number now, if that's been somewhat de-risked, just given we're three months later, you've got another manufacturer that you can source from. Just, you know, any updated thoughts on that $30 million number? Thank you.

Yeah, Jamie, I would say for Q3, it was pretty close to what we had anticipated between sleep and non-invasive ventilation. For Q4, we think it is somewhat de-risked. So that number for Q4 is, I'd say, a $10 million to $15 million range. It's largely dependent on when the equipment arrives. So we have a schedule of when it's coming in and obviously gearing up capacity. We have Our team does an amazing job at getting out units as equipment comes in. So it's largely dependent on it coming in early, the difference and the impact of the year. And for ventilation, as I think Dan hit on in his opening remarks, we're hoping that there's some FDA approval and remediation starting in Q4 or decided in Q4, but we're not anticipating it starting until the beginning of the year. So if that was to happen, that could also impact the quarter, you know, if it happened earlier.

Okay, great. Thanks for the call.

Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Your line is not open.

Thanks, thanks, and thanks for taking my call. I wanted to understand a little bit about the impact inflation is having on CapEx and how to think about it going forward. Just in terms of, is it meaningful? Is it changing anything for you? Should we think about this as a potential headwind to your CapEx spend in 2022?

Yeah, Kevin, good afternoon. I think currently it's a headwind as it relates obviously to a new manufacturer coming into the market because of the demand for the product. I think the question will be when we get into 22 when Philips is back to producing units at a normal pace, the other manufacturers producing normal units at a regular pace, what will we see? So I think we're anticipating now we will see some, we expect some level of inflation on the CapEx next year. To what degree, I think largely depends on the supply chain and how available the products are.

Okay, that's helpful. Can you maybe talk a little bit about the DME TOS, the size, which businesses were impacted in 2021 and what could happen for 2022? How should we think about the potential impact one way or the other with those rates. Just try to – we're just trying to size it and understand sort of what it could mean.

Kevin, are you – Go ahead, Kevin.

Go ahead. I was just trying to – Kevin, I was just trying to clarify. Do you mean the rate – the CMS potential rate increase?

Yeah, exactly.

So there's a few components, as you know. So sequestration, which is currently scheduled to go back into effect on 1-1, and that's roughly a million and a quarter, you know, a million, a million, a quarter, a quarter, so $5 million a year. That's one thing that there's lots of discussion on currently, so that may or may not happen. We're assuming it will at this point. The second is the PHE ending. As we mentioned, it's extended now through January. It goes in 90-day increments. So to the extent that stops, it's a $2 million impact quarter. So we have headwinds depending on what happens in timing. Those are things we thought would happen this year. They were delayed into next year. So it depends on when they happen next year. And then, of course, we have budget neutrality, which is positive, right? That's of rate increase and that's roughly a million and a quarter and that is nothing to do, that's here to stay. And lastly, from a pure government perspective, there's the CMS rate adjustment. And the rate was published as of June 30, that was 5.4%, effective 1-1-22. It's subject to an adjustment of productivity factor. So we don't know firmly what that is, but that would offset some of that downside. So there's a few puts and takes. And, you know, we're not providing guidance yet given the rate, clarity on the rate coupled with the volume. And on the volume side, I think we have some tailwinds as well that we can hit on. But I think from a pure rate, does that answer your question, Kevin?

Yeah, no, that's helpful. And if I can ask just a last follow-up because it was a perfect segue. What are some of the other, besides that, what are some of the other headwinds and tailwinds we should be thinking about for 22?

Well, I think from a volume first, obviously as the Delta variant slows down, we'll have some oxygen volume headwinds. We anticipate volume coming down. On the flip side of the other products, which is pretty much across the board, but particularly sleep and non-invasive ventilation, given the recall, and the supply chain challenges that exist today. There's your potential one for volume tailwinds, because as Dan mentioned, the volume is here. It's at rates we haven't seen. It's just a matter of when there's enough equipment to process those orders. And then how sticky that is and how long we maintain a higher percent of fleet share.

Go ahead. All right, thank you so much. Thanks, Kevin.

Our next question comes from the line of Ralph Giacobi with Citi. Your line is now open.

Great, thanks. You know, I guess first on the inflation commentary, is there any opportunity for you all to sort of pass that through depending on sort of magnitude, or it's just something you're going to have to manage through in terms of efficiencies?

Yeah, Ralph, this is Dan. We don't have – the way most of our agreements are structured, you know, it's a risk we absorb normally. There may be some small opportunities to do that. Now, obviously, from our Medicare book of business, that inflation is somewhat offset through the CMS increase, but most of our other agreements are – our line item agreements that are over longer term. So I would reiterate what Debbie said just maybe in her prepared comments was just the team's done a phenomenal job of managing through this thus far. And, you know, whether it's making it up through productivity and increases there, that's largely the way it's happened so far. So it's been, it hasn't, It's significantly impacted us yet, and we're doing everything we can, obviously, to make sure that we're implementing technology, driving efficiencies, and driving improved productivity to make sure that we can overcome some of the inflation issues that are facing us.

Okay. That makes sense. And then I want to go to your commentary on prescribing and, you know, even in the release you talked about sort of game changer type comments there. Is there any way to frame or help us to quantify or timeframe just any quantification around what that could mean? Because it sounds like it's obviously important, but, you know, I get to talk through the frame or think about numbers around what that could mean for efficiencies. Thanks.

Well, I'll let Debbie take a little bit from the term. I don't know if we can even quantify it at this point, but, you know, I think there's, I think the best analogy is the SureScripts move in the pharmacy business, and that's basically the playbook we're trying to replicate within our industry. From an industry perspective, we want ePrescribe to be successful and to be widely adopted, not just the DME Scripts platform. The whole industry benefits from less administrative burden. And so, you know, we expect the ME scripts to be slow out of the gate and grow over time. You know, I think, you know, it was a number of years for SureScripts to really get up and going and really driving the volume. We hope to cut the corner on that a little bit. But it's going to take an industry effort. And, again, it's multiple e-prescribed platforms out there. And our goal at the industry level is to make sure that we drive e-prescribed in general. Um, but also, uh, you know, obviously with our, with our new company that we're invested in and DME scripts, we'd like to make sure that that's successful. Uh, but really overall he prescribed just will take tremendous amount of administrative burden out of the, out of the process.

Yep. Okay. Um, and just, just the last one. I mean, I know it gets asked a lot, um, just in terms of M and a and pipeline, um, You've started to, and we've seen some smaller deals. Just give us a sense at this point, as time has gone, whether sort of the disruption and supply chain issues and the like, are you seeing incremental opportunities? Is that not really relevant to sort of the M&A discussion? Just any general comments around sort of the pipeline there. Thanks.

Yeah, Ralph, we continue to see opportunity. We continue to have an active pipeline. We engage deeply, but we do continue to be selective, and obviously we don't share details of what we do and don't do. But we are looking at buying business that are solid and accretive and that integrate well into our culture, as Dan mentioned. So not all of them meet that criteria when we get under the covers. So we definitely, there's activity, and sometimes I wish we could put that in front of everybody, but we can't. But there is activity and we continue to be diligently looking at it and believe that there is opportunity there that we're going to continue to pursue. All right. Fair enough.

Thank you. Thank you.

As a reminder to ask a question, you will need to press star then one on your telephone. Our next question comes from the line of Kevin Fishbeck with Bank of America. Your line is now open.

Thank you. This is actually filling in for Kevin. So thanks for taking the questions. First, I guess the clarification on the Q4 guidance when we compared to the prior guidance that was implied by Q3 guidance. So the revenues are higher and is it largely because of the acquisition that you completed? And can you remind us the size of annualized revenues for that deal?

John, it's roughly $20 million a year. So, yes, you're right. So we've increased for ABC and then the acquisition as well as we've made some adjustments to the Philips assumptions in there. And that's why you see, you know, the bottom of that range that was applied before get a little higher and the top get a little lower, so it's a little tighter. On the adjusted EBITDA, you see the range go up. And that's primarily because of the operating efficiencies and how we've been able to continue to run the business. And the adjusted EBITLS CapEx, you see we took that down slightly, mainly because of the opportunity to buy equipment. So we could have chosen not to buy equipment, but we really think, you know, have the opportunity to buy the equipment and process the volume of sleep that we have is a prudent thing to do. So that's really what drove that EBITLS CapEx number coming down a bit.

because actually that was my second clarification, so on the higher capex, because it's, I guess, similar in terms of the, you know, when I compared it Q4 guidance versus what was implied, so now the guidance for capex was raised by, I want to say, like $5 million or so at the midpoint. So how should we think about next year in that respect? Is that a good bandwidth? It sounds like there's some maybe accelerated purchasing you're doing, but I guess then you're not purchasing from other suppliers. So how should we think about, you know, the next year? I know there's a lot of variability and uncertainty, but any way you can kind of help us frame how we should think about that next year?

Yeah, without providing guidance yet for next year, you know, we're projected to run, if you look at that midpoint, about 8.2% from a capex, which still is lower than normally we would run, right? I think, you know, I said before it's 8% to 9%, 8.5% in our current product mix. So what you're seeing in Q4 is that opportunity for incremental sleep equipment. So that will differ from 2022, or depending, actually, I should say, if the volume continues to be up, the incoming volume, and there's ample supply, then we would invest more CapEx next year as well. But when it comes to some of the other, like the ventilation, that we wouldn't anticipate having significant CapEx or any because of the decline in the census that's occurred because of the recall. So it's a little too early to give I think generally speaking, being in that 8% to 9% would still be a reasonable assumption going forward.

Okay. That's helpful. And I guess on the RICO, so I appreciate the comments you implied at, I guess, Q4, maybe tracking better in terms of the headwind. And so how do you think about next year's, you know, headwind from that? How much spillover do you expect in the first half of next year?

From how much spillover? From what? I'm sorry.

For the RICO impact, the headwinds from the RICO.

Well, you know, when we listen to others, right, some of the headwinds could go into the second half of next year. But we do believe, given another manufacturer in the market, an accessibility to product that, you know, hopefully if it continues to be manufactured at a steady pace, and no disruptions in the supply chain. I think we'll see things in the first half of next year. You know, again, a little too early to say this for sure, but we'd expect in the first half to start to get back to normal.

Okay, that's all I had. Thank you so much. Thank you.

There are no further questions. I will now turn the call back to Dan Stark for closing remarks.

Thank you. I just want to say thank you again to both the APRIA team for just their consistent, solid work and the perseverance through a lot of difficult challenges. And I want to thank everyone as well for joining us today. We know that time is a precious commodity, and we certainly appreciate you spending time with us and learning more about the APRIA story. And we look forward to keeping you updated on it. So thank you. And everyone take care. We'll talk soon. Take care.

Bye-bye. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.