Option Care Health, Inc.

Thank you for your patience, and please continue to stand by. Thank you. Ladies and gentlemen, thank you for standing by, and welcome to the Option Care Health fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star then 1 on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, you may press star then 0 to reach an operator. I would now like to hand the call over to Mike Shapiro. Please go ahead.

Good morning, and thank you for joining us for the Option Care Health Fourth Quarter Earnings Call. I'm joined this morning by John Rademacher, Chief Executive Officer. Before we begin, please note that during the call, we will make certain forward-looking statements that reflect our current views related to our future financial performance, future events, 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 comments. We encourage you to review the information in the reports we file with the SEC regarding the specific risks and uncertainties. You should also review the section entitled Forward-Looking Statements in this morning's press release. 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 our website. With that, I'll turn the call over to John.

Thanks, Mike, and good morning, everyone. To say that 2020 was an unprecedented and extraordinary year is quite the understatement. And reflecting back, I have never been prouder to be a part of the option care health team. We have risen to every challenge thrown our way, and through it all, emerged stronger and more focused than ever. We delivered strong financial results ahead of our initial expectations, effectively completed the vast majority of integration efforts, and most importantly, remained focused on the loved ones in trusting their care to our team. This would have been a strong accomplishment in ordinary times. So the fact that the team made all of this progress and delivered these results under the unexpected challenges presented by the pandemic is truly outstanding. With the performance and the results by the team, I have never been more confident in the road ahead as we emerge from the pandemic and focus on setting the standards in alternate site infusion therapy. As Mike will highlight in a few minutes, the fourth quarter continued our track record of delivering robust top-line growth, EBITDA expansion, and an improved capital structure. As we sit here today, we have clearly executed on the strategy we outlined shortly after the merger in the fourth quarter of 2019. And I am extremely proud of how the option care health team has performed in an extremely challenging environment. As the severity of the COVID-19 crisis began to emerge in the first half of 2020, we quickly developed mitigation plans and migrated to a respond, recover, and prosper mentality to ensure we adjusted quickly to the challenges while also remaining focused on the long term. As I've outlined previously, we have focused on four key tenets, accelerating top line growth, providing consistent high quality care, strengthening our balance sheet, and converting every claim to cash. And in 2020, we clearly delivered across all four key priorities. The Q4 double-digit growth is the result of tremendous collaboration in the field between our commercial and operational teams, who over the course of the year ensured that option care health could be depended upon by payers, our referral sources, and most importantly, our patients. to deliver unparalleled care in the face of adversity. We continued to execute our strategy to increase reach and frequency, and our team responded, even with the access restrictions caused by the pandemic. The chronic portfolio continued to grow in the mid-teens as we launched a number of new therapies and collaborated with payers to prioritize care outside the acute care setting. Our acute therapies, which are to a great extent correlated to hospital discharges and were effectively flat year over year through the third quarter, did post modest low single-digit growth in the fourth quarter, which is quite encouraging. Our relentless focus on the patient and delivering high-quality care in a cost-effective setting proved crucial throughout the disruption that COVID caused. our ability to quickly pivot and utilize our technology platform more fully through telemedicine features like virtual visits and discharge support, team collaboration tools that allowed our clinical teams and remote workforce to continue to excel, and by enhancing our digital capabilities to enable predictive analytics, repetitive process automation, and machine learning. All of these contributed to delivering consistent, high-quality care strong clinical outcomes, and exceptional patient satisfaction. We also took significant actions to improve the strength of our balance sheet by restructuring and paying down debt, efficiently managing working capital, expanding earnings generation, and through strong conversion of claims to cash. We began 2020 with a leverage ratio of six times and exited the year at 4.8 times with a clear glide path to getting below four times in short order. With all of the great work done by the team throughout the year, we are entering the late innings of integration efforts with technology deployment and harmonization efforts continuing the first half of 2021. The effective and efficient platform we have created is beginning to unlock operating leverage and align for much stronger capacity utilization, as evidenced by our EBITDA margin expansion. As we sit here today, a little over a year since the pandemic onset, we continue to manage through a very dynamic and challenging situation. We are by no means out of the woods, and we remain vigilant to ensure the safety of our team members and our patients. we continue to closely monitor drug and medical supply availability to help anticipate disruption in advance. And as new care models emerge, we are very well positioned to pivot based on our industry-leading technology suite. Our recently announced partnership with Amedisys is a prime example of how quickly we can respond to market demands with innovative new models. Reflecting on our first full year as a combined enterprise and having completed the far majority of integration activities ahead of schedule, I've never been more confident in this team, our unique platform, and the significant number of opportunities that lie ahead. We have persevered in the face of adversity to deliver across the spectrum. And as we shift from integration to acceleration, the unique platform we've created is clearly evident and poised to create sustainable value. We are the only independent national provider of infusion services with relationships with all national payers along with the broadest therapy portfolio across the industry. And as apparent in our 2021 guidance communicated this morning, momentum is clearly building in our revenue base, our margin expansion efforts, and our focus on cash flow generation. And we're just getting started. With that, I will turn the call over to Mike to review the financial results in a bit more detail. Mike?

Thanks, John. Good morning, everyone. And as you can imagine, we are very pleased with the fourth quarter financial results. We are finally at a point where the prior year fourth quarter is a truly comparable period, and growth rates represent apples-to-apples growth. A reminder, however, that the full year results for 2019 reflect only legacy option care results up through the merger date of August 6 and the combined results for the merged enterprise thereafter. Revenue in the fourth quarter of $805 million grew more than 11% year over year, driven by mid-teens chronic therapy growth and modest single-digit acute revenue growth. Site of care initiatives continue to resonate and directly benefit our chronic portfolio while at the same time, newer therapies introduced for conditions including myasthenia gravis and chronic inflammatory conditions contributed to strong growth as well. Acute referrals and revenue did improve modestly, and as mentioned, we did see some traction in acute therapies, which were effectively flat through the first nine months. We are clearly pleased with the overall revenue results for the quarter. Gross profit represented 22.8% of revenue, which is the highest quarter reported for 2020 and illustrates our scale leverage despite the mixed headwinds from our chronic portfolio, which is growing at a faster pace and carries a lower gross margin profile. And spending of $123 million was flat to Q3 spending levels and dropped to 15.3% of revenue, down from 20% in Q4 of the prior year. Adjusted EBITDA of $67.7 million in the quarter represented 8.4% of net revenue and up approximately 28% over prior year. And the EBITDA margin of 8.4% was our strongest on record and expanded over 100 basis points over Q4 of the prior year. The expansion was in part due to accelerated integration efforts and our ability to capture cost synergies rapidly in 2020. And while we expect to continue driving spending leverage, we would not expect to realize EBITDA margin expansion at that same pace going forward. But for the year, we generated $221.7 million of adjusted EBITDA, which is almost $7 million above our initial guidance range for 2020. In the fourth quarter, we generated over $25 million in cash flow from operations, which enabled us to voluntarily pay down $50 million of our outstanding second lien debt. We finished the year with over $99 million in cash after the debt pay down and more than a quarter billion dollars of total liquidity. While technically a 2021 event, I did want to take a moment to highlight the extinguishment of the entire second lien debt and repricing of our first lien debt shortly after year end. Given the robust market conditions and the strength of our enterprise, we opportunistically retired the entire second lien debt in January and and replaced it with incremental first lien debt under our existing credit facility. As part of the transaction, we repriced the entire first lien tranche at LIBOR plus 375, down from a spread of 425 basis points. The existing favorable covenant-like terms and maturity of 2026 remain intact, so we enter 2021 with even more flexibility under our improved capital structure. Shifting gears, I wanted to spend a minute on our guidance as communicated in this morning's press release. Our referral patterns across a broad portfolio of therapies and geographies continues to be volatile given the ongoing pandemic impact. But nonetheless, we see revenue growth of 6% to 7% incorporating a number of these dynamics. Additionally, we expect to deliver between $245 million and $258 million in adjusted EBITDA for the full year. Based on the scalable platform we established, we anticipate double-digit EBITDA growth and margin expansion. We also expect to generate at least $140 million in cash flow from operations, which also represents double-digit growth over 2020. Since the merger, we have relentlessly focused on improving our capital structure and improving our leverage profile. As a reminder, at the time of the merger, we were 6.2 times levered on a net debt basis. We drove our leverage profile down to 4.8 times at year end, and based on our guidance, we expect to be below four times by the end of the year. We will continue our focus on improving our capital structure and are encouraged by our progress to date. So in summary, we anticipate a very productive year, both in terms of executing on our growth strategy, leveraging our infrastructure to expand profit margins, and generating cash flow to further improve our capital structure and fuel further growth initiatives. With that, we'll open the call for Q&A. Operator?

As a reminder, to ask a question, please press star then 1. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from Pito Chickering with Deutsche Bank. Your line is open.

Good morning, guys. Thanks for taking my questions. Two quick ones right here. The first one is, can you give us an update on IVIG? Just refresh this in the fourth quarter. What percent of revenues come from IVIG? Walk through any supply constraints. Do you have positive connections on how we should think about IVIG throughout 2021? Sure, Peter.

Good morning. It's Mike. Obviously, this is a situation we've been very open with, and we've been monitoring closely. Again, we don't disclose product level specifically, but the way we've characterized it in the past is that it's approximately 20% of our revenue, and that held firm and is an accurate statement for the fourth quarter. I'd say as it relates to the supply situation, we continue to monitor it closely. The fractionators have been very open around the trends in plasma supply. collections, which is obviously the critical raw material for the therapy. But this is a situation where, as we've talked about, we have direct relationships, which in times like this really underscores the value of that supply chain strategy. And so we've also been opportunistically adding to our inventory levels to buffer. But thus far, we're cautiously optimistic but clearly this is something that we've incorporated into our thoughts around 2021 and something that we will continue to monitor extremely closely.

Okay, fair enough. And then a question for you on gross margins. Fourth quarter was very strong despite the mixed headwinds. Is this the right starting point for you for 2021? And as mix improves, should gross margins continue to improve throughout 2021?

I mean, look, our operations team is relentless on driving margin expansion. Again, we don't give quarterly guidance, and typically the fourth quarter is our strongest quarter of the year. But nonetheless, we would expect gross margin expansion going into 2021. And again, I think you highlighted a number of the key variables. We are expecting that as the chronic portfolio continues to outpace the acute and given the relative margin profile, that would represent a headwind. But nonetheless, the team is relentlessly focused on spending leverage and As an aside, one of the things we're really pleased with in terms of our margin results is that despite a lot of headwinds and cost inefficiencies this year around PPE costs, just overall delivery and supply chain. So while I wouldn't anchor 22.8 as the new measuring stick for every quarter, I would say that for the year we would expect to drive some gross margin expansion.

The only other thing I'd add is, look, as we've outlined, the investments we've made into our technology platform, as Mike said, really give us an opportunity to continue to squeeze on our productivity and capacity to make certain that we're optimizing that. And as Mike said, also, the operations team is relentless in their focus. And, again, we feel as if there still is some opportunity as we're thinking about the road ahead.

Okay, and then, you know, it's always tough to give, even ask for, you know, look at your quarter trends. But I'm curious, as this COVID spike, you know, has decreased and sort of Texas storms are behind us, just real curious, you know, what you guys are thinking about sort of the lessons learned from patients and hospitals in terms of pushing into home-based settings. I'm curious, you know, obviously there's been a lot of noise in the last sort of 90 days, but do you see increased sort of macro movement into the home setting? at this point.

Yes, you know, it's John again. You know, I think we're trying to be balanced in our approach, and I think what you saw as we provided in guidance is that we believe there's going to be some puts and takes. I think the acceptance of the home as being a safe and effective setting continues to increase, and, you know, a lot of the referral sources have embraced that in ways that they may not have before the pandemic. On the other side of that, as the economy opens back up, as restrictions start to diminish, we do expect that the hospital outpatient departments are going to try to hold some of the patients that were being transitioned onto care in the home. So, you know, we'll expect some level of increased competition on that standpoint. We feel we're really well positioned based on the relationships we've formed and the performance of the team to really, you know, weather a pretty challenging and dynamic environment. But, you know, that's kind of the balance that we're trying to put in there as we're trying to be thoughtful about what 2021 is going to look like, you know, from that perspective. Great. I thank you guys so much. Thanks, Vito. Thanks, Vito.

Our next question comes from Matt LaRue with William Blair. Your line is open.

Hi. Good morning, guys. Two questions on the guidance, Mike. First, maybe it's just thinking about what you're contemplating for acute relative to chronic. You highlighted mid-teens chronic in the fourth quarter, which I think is even stronger than it was perhaps throughout the rest of the year, and acute relative creeping back up into the low single digits. But John, obviously you just alluded to some of the dynamics with essentially hospitals trying to retain more patients as COVID is less of a capacity problem. So maybe the first would be on that. And then the second relative to the guidance is I think EBITDA margin guidance is about 20 basis points lower for the year relative to the second half of 2020. And so maybe just to help us understand if there are any sort of cost coming back into the model or, you know, areas that maybe we should be thinking about in terms of EBITDA margin that we might have been thinking about?

Sure, Matt. It's Mike. I'll start, and John can certainly jump in. I think the way that, look, as we try to handicap our top-line expectations for the year, you know, to state the obvious, there's quite a few things moving. I think we're encouraged with the With the reemergence of acute, which we've been candid around our expectations and how we characterize the growth in the low single digits, I think that's a reasonable characterization for how we're thinking about this year. And with the chronic, again, remember, we did have some benefits in the midyear with site of care shifts with, you know, with HOPDs and outpatient clinics shifting site of care into the home. And so... you know, while we're thrilled with the fourth quarter results, you know, we've characterized the chronic as high single, low double digit growth profile. And again, in response to the first question, you know, obviously we're being a little cautious around the IG growth profile, which is our largest therapy franchise. The other thing I would say is the way we also characterize revenue and how we've oriented folks to think about the overall growth trends in the mid to high single digits. That's on a constant pricing basis. There are a handful of therapies, not to get into specifics, but we do think that some ASP declines could have a point or so of headwind from a top line reported growth perspective. That hasn't translated as much into the bottom line because, again, that also offsets with a lower cost to procure, but overall, you know, we feel comfortable with lower acute and obviously a higher chronic portfolio growth profile for the year. As it relates to the EBITDA margin, I mean, look, as I mentioned in my prepared comments, we're thrilled with the expansion. And based on our model, we expect that we'll continue to expand EBITDA margin going forward. You know, at our midpoint And again, it gets a little bumpy with intra-quarter, but our EBITDA margin at the midpoint is in the neighborhood of 50 bps of expansion year over year. So we're continuing to drive EBITDA margin expansion. And again, at the midpoint, around half a point of expansion for the full year with a revenue peak. base that's increasingly skewed more towards the lower margin chronic is something, you know, we feel really comfortable with.

Yep, that all makes sense. And then, you know, just maybe the second, obviously referral source changes, additions, what was the theme throughout the year? And, John, you've highlighted, you know, urgent care as an area that, you know, really saw an increase in referral sources. You both have discussed telemedicine and your technology platform potentially as something that opens up the aperture of referrals in the future. Could you maybe give us a sense for what, if there's a number you can put around the number of referral sources, if there's anything interesting thematically in terms of retention for new referral sources that you've seen here over the last several months? I think that'd be interesting to hear.

Yeah, Matt, it's John. So, you know, as we've highlighted before, great work by our commercial team really focusing around that reach and frequency as we had gone through a lot of the transformations of the team post-merger and part of the integration. I'll tell you, they have done a lot of work over 2020 and continuing into 2021 working focused around making certain that we have clear segmentation of our referral sources and identification of not only where we're getting referrals today, but who are the higher prescribers that we may not have relationships with. And so a lot of work has been done on that and targeting to make certain that the team is focused around those opportunities. I can tell you that on a preliminary basis, I'd say there are easily a couple hundred new referral sources that we generated new starts from in the fourth quarter. that were not part of our base heading into the fourth quarter. So the team is focused on that. We're, again, looking for those opportunities to expand into new settings and develop those new relationships. And we think that with the data and the data analytics team being able to really focus on that segmentation with not only augmenting our internal data with external data, but then being much more prescriptive in the analytical response of the team, we feel that we will continue to see that trend as we head into 2021.

Okay. Congrats on the great year. Thanks, Matt. Thanks, Matt.

Our next question comes from Jamie Purse with Goldman Sachs. Your line is open.

Hey, guys. Good morning.

Hey, Jamie. Good morning.

I wanted to ask a sales guidance question and focus on cadence throughout the year. Maybe the way I'll ask it is, Can you give us a sense of the typical 4Q to 1Q seasonality? Obviously, last year wasn't a clean year with the integration, and COVID this year won't be either. But just a typical seasonality measure that we can adjust from. And then, you know, any reaction to how Street's modeling the first quarter around $750 million would be great.

Hey, Jamie, it's Mike. I'll start. So I'll use typical and air quotes. Typically, the first quarter is the lightest of the year. There is some seasonality. You have benefit reauthorization. You have, you know, health care consumers that now face deductibles and higher co-pays. So we do typically see coming out of the holidays that, you know, the velocity does lighten up a little bit in the first quarter. And then you typically see a gradual ramp with the fourth quarter typically being the strongest of the year. You know, good question because I would caution folks thinking about the year-over-year growth that starting – Really, at the end of the first quarter last year, you know, last year was anything but typical in terms of referral patterns and revenue patterns with, you know, some spikes mid-year with especially chronic shifts from, you know, the acute care settings into the home. So I think the year-over-year could be a little choppy when you look at it on a quarter-to-quarter basis. But, again, overall for the year, you know, we obviously laid out what we think is some some impressive growth expectations. In terms of how, you know, commentary on the first quarter, I'm going to refrain from doing that. We typically don't, you know, opine on, you know, intra-year quarterly consensus models.

Okay, fair enough. Just one more on the guidance for the year. I mean, 6% to 7% growth is a pretty narrow range, and A lot of your peers are guiding some much wider ranges just given all that's going on. So the question is really just how do you get confidence in such a precise range? And also if you can just touch on how you're incorporating thoughts around procedure recovery in the acute business into your guidance. Thank you.

Yeah, Jamie. So one of the things that we talk about is the value of the balanced revenue portfolio that we have. On the chronic side, again, this is a lower patient turnover. So when you look at our revenue base on the chronic side, the far majority of our revenue in any month or quarter is for pre-existing patients that are already on service. So we have a very what I would call predictable referral-based revenue model. That balances, obviously, with acute, which is a little more volatile. But, you know, as we look at the balanced portfolio, clearly there's a lot of undertones around IG, around ASP, around reemergence of the acute care setting, new therapies that are emerging. But, you know, as we risk adjusted all of those, I take your point, you know, a 1% range is a little bit tighter than most, but rest assured we have a high degree of confidence that, you know, that that's an applicable range for us. Again, taking into account the number of varying components.

Okay, that's great. Thank you.

Our next question comes comes from Brooks O'Neill with Lake Street Capital. Your line is open.

Brooks O' Good morning. I have two questions. So recognizing that the integration efforts with BioScript are pretty much complete or melding into your other actions, could you highlight the two or three key business optimization steps you hope to accomplish in 2021?

Good morning, Brooks. It's John. Yeah, so, you know, I think as we've highlighted, we will have some, you know, some, you know, follow-up activities in 2021 as we continue our path of integration. It's a smaller amount of effort, but we still have, you know, some of the technology deployment as well as harmonization efforts that will move through the year. So, you know, the team's still focused there. In our comments, a lot of our focus will be really around primarily moving from integration to acceleration, I think, as we highlighted. Our goal is to really now start to focus on the use of the data and data analytics to drive a lot of the business performance. So from the commercial team standpoint, it's focusing around that targeting, segmentation, and really driving the referrals into the process. From an operations standpoint, it is really focusing around leveraging the technology to optimize the interoperability and continue to focus on the efficiencies that we know we can drive as we begin to harmonize and optimize the technology platform. And I'd say the third area that we'll continue to focus on is just the patient experience. We're spending a lot of time right now making certain that we understand through journey mapping and other aspects to really capitalize on that patient experience and making certain that we have a clear line of sight for the unique needs of the different patients based on chronic condition and or therapy that they will be receiving. So we're really focused around those areas, and we think that creates sustainable long-term growth. I'd be remiss if I didn't highlight that, look, we spent a lot of time on the culture. We are focused as a team to make certain that we took the best of both organizations as we move forward. And I would tell you that we still are focusing around that high-performance culture and to make certain that we're, you know, optimizing employee engagement and we're really focusing our energy and efforts around, you know, diversity and inclusion and other aspects that drive a high-performance culture and continue to create a sustainable competitive advantage for option care health.

That's great. And then, again, recognize that no one knows the direction of interest rates as we move through 2021, but, Mike, as you continue to focus on strengthening the operating performance and lowering the debt, would you expect an opportunity to lower the rate on your debt as well as lower the absolute amount of debt you have in 2021?

Hey, Brooks. Yeah, I mean, this is an area we're really pleased with the progress we've made. You know, a year ago, again, we were – we were around six times levered. Our cash interest run rate was around $110 million. And we were at L plus 450 on the first lien with a lot of second lien. Right now we're entering the year with a cash interest run rate of around 70 to $75 million. So we've taken $35, $40 million. That's more than $3 million a month in cash interest savings. And again, with the with the first lien structure that we have right now at L-plus 375. You know, we feel really comfortable around where we are from a leverage profile. Having said that, look, improving our cap structure and debt reduction will continue to be the measuring stick. You know, with $140 million plus in cash flow from operations, we expect CapEx to be, you know, as we've talked about in that $30 million range. And with cash interest coming down and integration costs coming down, you know, the cash generation is expected to be robust this year. And so that gives us the opportunities to, you know, evaluate how best to deploy that. And whether it's in further gross debt reduction or through strategic deployments, that's something that, you know, we're spending a lot of time thinking through.

Cool. Thank you very much. Looking forward to 2021.

Our next question comes from Kevin Fishbeck with Bank of America. Your line is open.

Okay, thanks. So I guess when we think about you guys, I think kind of the long-term building blocks for the growth is 5% to 7% top line and 12% to 15% EBITDA. I think you guys are going to do the higher end of that growth there, but the EBITDA range starts off a little bit lower. So just wanted to see if there's anything that you're thinking about that might push you to the lower end of the range, even though the revenue growth looks pretty strong.

Sure, Kevin. It's Mike. I'll maybe start. Look, I mean, when you look at the midpoint, you know, the midpoint of our EBITDA growth range is, you know, 13%, 14%. I think, you know, it's early in the year, I think, as we've tried to establish an era of conservatism. Obviously, John and I want to be you know, conveying that numbers that we're outlining are very high confidence expectations for ourselves. And I think we're entering a year, I'd say, with a number of things we're keeping an eye on. PPE costs remain inflated. You know, with a highly remote workforce, there are still some inefficiencies that we're managing through and how and when we emerge from the pandemic. and how we manage through the IG supply situations. I think that just, you know, led us to a little bit more conservative on the EBITDA range, but there's no deviation from what we believe, which is this is, as a base case, a mid-teens earnings growth engine. Some years will be a little bit higher than that. Some years might be a little bit lower than that.

Okay, now certainly going back to that earlier question about a wider range during COVID, I think Makes sense. Just want to make sure I wasn't missing something. I guess, secondly, when you talked about, I guess, the long-term view of chronic, you know, being in the kind of high single digits, what's the long-term growth rate, remind me again, that you think are acute? And, you know, how close to that normal growth rate will you be by the end of the year in your guidance?

Yeah, it's John, Kevin. You know, I think when we're looking at the opportunities that are in the pipeline, so I'll start with that on the chronic, is, look, we expect that that high single digits, you know, is something that's going to continue. There's a significant number of... of new therapies that are, you know, going through the FDA process to seek approval. And, you know, many of them require healthcare professional oversight and are infused drugs. So, you know, we think we're really well positioned with our business development team to continue to participate you know, within those launches as well as, as Mike said, build on the strong patient census that we have today within our existing chronic portfolio. So that we think is good. But, you know, there's always those, you know, moves to, you know, either ASP adjustments or generic events that down the line could affect the revenue but not necessarily have, you or would have a more muted impact on earnings and EBITDA given the lower acquisition costs. On the acute side, look, we were encouraged by what we saw in emerging and coming out of the fourth quarter with low single digits from that standpoint. We hope that as the marketplace opens back up and people begin to return to normal, for scheduled physician visits, scheduled procedures, then we'll start to see that rebound continue into the year. I think the low single digits is the right measure on the acute. And again, a lot of those products are generic today. A lot of those products are certainly in the shorter duration. And so the acquisition of new patients will be a critical aspect. as we're thinking about the acute side as we move ahead. But, you know, we love the balance of the portfolio. We love the ability that we have to really offer a full spectrum of therapy sets. We want to be the partner of choice to the referral sources so they have that one stop. And we think with the expansion and really the breadth of our payer relations, We think that with the breadth of our product portfolio and we think that with some of the new products coming in the pipeline that we will have access to, we think we're really well positioned for the growth that we've outlined.

Okay, and then maybe last question. I think in your prepared remarks you talked about exactly what the term was, something along the lines of, moving from integration to acceleration. I guess you guys are already growing pretty well. Just wanted to understand what acceleration means in your views. How should we think about that?

Yeah, as I outlined, we believe that our team is starting to get really well set from a commercial standpoint on the use of data analytics to guide them around segmentation as well as setting their course around targeting as we move forward. And so, you know, our focus there is making certain that, we continue to expand our reach and frequency and that we're capturing demand that's in the marketplace. We also have the opportunity to, you know, on an organic basis to continue to optimize the performance of the business and our operating model to be able to squeeze the operating leverage out to continue to expand and accelerate our bottom line growth. So, we're maniacally focused on those opportunities. And I think as a team, we believe that coming out of a lot of heavy work and a lot of great work by the team on integration, as well as a lot of the dynamics in the marketplace with COVID, we now are more focused than ever on making certain that we are that partner of choice for our referral sources, and that should create additional opportunities to accelerate Top line, bottom line. But as Mike said, look, we're trying to be thoughtful in the way that we're providing guidance and we're trying to be disciplined knowing that there's puts and takes in the environment that we're operating in.

Hey, Kevin, it's Mike. As we continue to expand our access to capital, I think we've characterized the organic horsepower under the hood of being that mid-teens growth. I think we still feel confident in that, which we think is a quite attractive base organic case. And as we think about access to capital, that's where we can deploy to further collaborate with our payer partners around value-based relationships or are there other technology or service offerings to add additional branches of the tree? And so part of the acceleration is beyond what I'd call the organic horsepower.

Okay. All right. So that's helpful. So you're basically saying no change right now in kind of the growth outlook, but you're feeling good about doing better there and then layering on potentially deals on top of everything to be upside. And you're looking at it upside right now. Okay. Perfect. Thank you.

Yep. Thanks, Kevin.

Our next question comes from Mike Potusky with Barrington Research. Your line is open.

Hey, good morning, guys. Just a couple of questions. Mike, of the 23-7 interest expenses core, how much of that was cash interest? I mean, was there other stuff in there, or was that mostly all cash interest?

Yeah, no, it's a good point. There's a little bit of – There's a couple of things. If you remember, we did pay down some of the second lien opportunistically in the closing innings of December. So there is some write-offs of deferred financing costs, and there's amortization of OID, et cetera. But I'd say the majority of it is cash.

Is it around 20 or roughly cash interest, roughly?

Yeah, maybe a nudge below, but somewhere in that neighborhood.

And then this is a much longer-term question. Looking beyond 21 and maybe even beyond 22 to where you guys may be sort of closer to three times levered as opposed to 4.8 times levered, as you sort of look at capital allocation, obviously you guys have sort of most of the map covered. So I would assume M&A of infusion businesses at least won't be a big part of it. You've made tons of investment in technology. How do you guys think about capital allocation sort of over a three- to five-year period? I mean, is it looking at adjacent businesses or, you know, can you just speak sort of, you know, a longer-term strategic vision in terms of capital allocation things?

Sure, Mike. I'll start and we'll defer to John for his perspective as well. I think that's something that really gets us excited. As I mentioned earlier, you know, CapEx is quite efficient in this business under 1% of revenue, you know, with interest declining and integration out-of-pocket expenses declining. You know, we expect the cash generation to increase, and through both earnings growth and cash generation, you know, the leverage profile will continue to drift southward. And so as we think about how to deploy capital, we take that very seriously, and With the footprint, as you highlighted, we can reach 96% of the U.S. population today, so buying assets to shut the doors is probably not the most efficient use. Now, we've said we will continue to look at opportunistic industry consolidations where there might be some unique aspects or regional strengths that would be complementary to ours, but I do think there is a component, and again, I think we're going to be very thoughtful to make sure that any deployment is both economic and strategic, how do we leverage the technology and the clinical fabric, which is inherent in everything we do, and are there services, technologies, or other capabilities that can further distinguish us and expand the value that we can bring to our referral sources, our physicians, and our payer partners?

Yeah, and the only other thing I'd add is, look, you know, we're spending time and, you know, as we come out of now the integration effort and have the ability to put some more focus to this, I mean, we are looking for, you know, those near adjacencies, right? As Mike said, there are certain aspects where we can deepen the value that we deliver to the payers, to our referral sources, to our hospital partners, right? And so we are looking for those type of opportunities. We'll, again, be opportunistic with some industry-in-kind, you know, ventures, taking a look at those type of opportunities. But we really think that, you know, augmenting our service model, looking for additional value drivers, and then participating in a greater way in following patients on a longitudinal basis is and providing those additional services we think will be an opportunity for growth and new vectors of growth for us as we're thinking about the business ahead. Okay.

Thank you very much. Appreciate it.

Thanks, Mike.

There are no further questions. I'd like to turn the call back over to John Rademacher for any closing remarks.

Great. Thanks, Michelle. In closing, we are very pleased with the strong results in the face of a very challenging year, and we're very excited about the momentum we are carrying into 2021. We are well positioned to capitalize on the shifts that are happening in healthcare, focused on the effective dispensing of specialty drugs and the delivery of care in the home. We look forward to updating you throughout the year on the progress we are making. Take care and please stay safe.