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spk00: Greetings and welcome to Hanger's fourth quarter 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded. Today we will have prepared remarks followed by a Q&A period. Instructions for questions and answers will be provided after the formal presentation. It is now my pleasure to introduce your host, Seth Frank, Vice President of Treasury and Investor Relations. Please go ahead.
spk01: Seth Frank Good morning and thank you. Welcome to Hanger's fourth quarter 2020 earnings conference call. With us today are Vendor Officer, Hanger's President and Chief Executive Officer, and Thomas Crowley, Executive Vice President and Chief Financial Officer. Some of the information discussed today will include forward-looking information in the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause Hanger's actual results to materially differ from those we discussed today. Those risks include, among others, matters we have identified in the forward-looking statement portion of our latest earnings release and in our filings with the SEC. Hanger disclaims any obligation to update forward-looking information discussed on this call. And now, let's hand the call over to Vinik.
spk05: Thanks, Seth, and good morning. Thank you all for joining Hanger's fourth quarter and full year 2020 earnings call. I hope you and yours are staying safe and healthy. We were pleased with our results in Q4. The resilience and determination of the communities we serve, as well as the tenacity of our Hanger nationwide organization, to meet the continuing needs of our patients and customers were significant factors in our success, despite the national surge in COVID-19 cases in the fourth quarter. That said, COVID-19 continues to challenge our industry. We believe that a cohort of patients particularly those most vulnerable to the virus, such as the elderly and those with chronic health issues, may be delaying certain aspects of their orthotic and prosthetic care in deference to social distancing and other life priorities. So while we are pleased with our achievements, we remain cautious in the near term until key public health considerations become clearer. Looking at our overall fourth quarter results, net revenue totaled $277.3 million, a decrease of 7.8% compared to the same period of 2019. Adjusted EBITDA was $35.5 million. These results are notable, particularly in light of the fact that we made the critical decision to bring back the organization to pre-pandemic staffing levels essentially intact. In October, we fully normalized base salaries, eliminated furloughs, and returned hourly employees to full-time schedules. We took these actions because we remain convinced of the temporary nature of the pandemic-related business downturn. From a cash perspective, the results are quite remarkable. Across the entire company, we continue to make excellent progress on cash collections and managing our working capital needs. Looking at our business segments, In patient care, appointment volumes for Q4 were at 88% of the same period last year. This is an improvement compared to the 84% in the third quarter. So there is a recovery in place that did not go backwards despite the resurgence of infections during the quarter. From our perspective, O&P patients most vulnerable to a poor COVID outcome continue to be the most impacted by surges in infection rates and intensity of disease. Typically, these individuals suffer from chronic illnesses including diabetes. In general, it appears these are the patients that are currently more reticent to come in for care. Conversely, the less vulnerable and higher mobility patients needing higher technology prosthetic and orthotic devices were less impacted and constituted more of the patient encounters during the fourth quarter. Prosthetic volumes overall did improve modestly from third quarter levels. driving a sequential improvement in segment revenue excluding acquisitions. When compared to the fourth quarter 2019, prosthetics declined approximately 12%, driven primarily by lower mobility device volumes. Orthotic revenues continued to firm up as the year went on, and this was true in Q4. Orthotic revenues declined 8%, an improvement from third quarter levels. Customer orthotics performed relatively well, while off-the-shelf orthotics and shoes declined more than the category average. The products and services segment performed well in the fourth quarter, as prior investments, emerging strategic initiatives, and the strength of our leadership all came together. Our enhanced value proposition and our ability to provide greater efficiencies to our core customers among the independent ONP providers and skilled nursing facilities drove these results. COVID-19 continued to create business challenges in products and services during 2020. For the fourth quarter, segment net revenues declined 7.2%, an improvement compared to the 9.7% decline in the third quarter, while adjusted EBITDA actually grew by a million dollars year over year, a notable achievement for our team. Hanger's O&P distribution business continued to expand partnerships with large and small manufacturers, adding SKUs to our catalog and providing a unique one-stop shopping destination for independent O&P practices. The business has also positioned itself well as an essential partner for manufacturers seeking to maximize their impact with these independent O&P clinics. Our therapeutic solution subsidiary is also pivoting during COVID. skilled nursing facilities remain challenged, protecting their highly vulnerable populations, resulting in access to decision makers being temporarily hampered. We pivoted to remote teaching and education for therapists, which has allowed us to ensure patients get access to the best possible rehabilitative services. As I consider the results we achieved in 2020, they are, in retrospect, truly remarkable. COVID has been, I hope, a once-in-a-lifetime merciless adversary. It has brought unspeakable loss and suffering that would bring anyone to their breaking point. As if this was not enough, the economic and social hardships brought by this pandemic have been difficult to fathom. And of course, this all occurred against a backdrop in the U.S. of historic social unrest. The tale of 2020, where it began How we ended the year and the manner in which we carry ourselves forward was a result, I believe, of the culture, values, and purpose that Hanger employees bring to their professional lives every day. In addition, for years we have executed on a comprehensive investment plan focused on differentiation. We have built clinical and business technology to support our teams, enabling them to increase their focus on patient care. This past year, we quickly innovated and adapted to remote work environments, incorporating PPE requirements and enhanced safety protocols in every clinic and office locations and countless other challenges. And this was done, I would remind you, while the entire workforce endured the challenges of a painful but necessary reduction in compensation. I know we did the right thing because we made a collective sacrifice under a common bond of understanding that we would come out of this on the other side together, intact and stronger. I could not be more proud of every one of our employees and I thank them again for their commitment, leadership and sacrifice. So by no means were we lucky. We made good investments and wise decisions and thus our strength as an organization today is better than it has ever been based on our financials, corporate reputation, and quality of care we provide. For 2020, our net promoter score within patient care, a key process indicator for the company, improved from 84 at the end of 2019 to 86. In contrast, our analysis of HCAHPS survey data from CMS of nearly 2,700 hospitals surveyed for 2020 showed a meaningful decline in NPS across a majority of facilities. This is understandable given the strains and demands of frontline workers doing their best under sometimes impossible conditions. That said, we take it as a point of pride that patient satisfaction improved at Hanger this past year. I believe the key reason for our continued upward trajectory is the commitment Hanger has made to our patients, referral partners, and payers around evidence-driven care models and outcomes research. We could have sidelined this agenda in 2020, but instead we doubled down. The pandemic showed us what we have always known, that the rehabilitation-based medical services we provide, enabling mobility and human potential, are absolutely essential, and that O&P is a must-have, not a nice-to-have, in the healthcare value equation. Our virtual classroom programs enrolled over 5,000 attendees from over 460 healthcare organizations. in order to ensure that our greater medical community, including our referral partners, stayed connected and engaged. Our investments in people are the most important allocations of capital we have. I was delighted on the heels of all we went through in 2020 that Hanger was recognized as one of America's best mid-sized employers in 2021 by Forbes magazine. Hanger was selected through an independent nationwide survey of more than 50,000 American employees working for mid-sized to large-sized companies. This is a great way to start the year. Looking at 2021, we have a clear and focused set of priorities intended to build on these core strengths that will propel us to growth this year and in the years ahead. Our multi-year growth strategy consists of four pillars, ensuring we are the employer of choice in our industry, providing outcomes-based clinical care, and improving the ease of doing business with us, all intended to achieve the fourth pillar, accelerating growth. In addition, during 2020, we implemented multiple programs to further enhance our commitment to diversity and inclusion. We initiated our corporate D&I pledge that includes a commitment to implementing a D&I employee council chaired by myself, as well as affinity groups and awareness networks for underrepresented populations to lift up our organization and support the communities we represent and serve. These programs are already underway. Hanger has also contributed funds to the Hanger Foundation, a 501 organization funded by Hanger, its employees, and other partners. The Foundation announced the creation of the Hanger Foundation Diversity Scholarship Program to do its part to create a more inclusive O&P profession by attracting more diverse candidates to O&P graduate programs. Accelerating growth is where all of this comes together in the form of greater organic and inorganic opportunities. We continue to be encouraged that our differentiators focused on clinical outcomes and patient engagement, The strength of our relationships with our referral sources, payers, and customers, combined with the exceptional clinical talent we have assembled, has positioned us well. I expect that in 2021, we will continue to deploy capital towards our M&A program, targeting strategic acquisitions of O&P clinics. I was delighted by the successful Midwest acquisition of one of the best-known players in the private, independent O&P world during 2020. This transaction and others like it will pay significant dividends to further our growth beyond what we generate internally. During the last 12 months, we've acquired nine independent ONP businesses of varying sizes and are very pleased with the teams that have joined us as a result. As you can see, we are excited about Hanger's future and are grateful that we've been able to manage through the pandemic safely while further strengthening our commitment of empowering human potential together. Tom will now provide you more specific details on the numbers. Tom?
spk03: Thanks, Bennett, and good morning. 2020 was certainly a remarkable year we will all not soon forget. While we all faced our own challenges when reviewing Hanger's performance, I'd like to spend a few minutes discussing how the company's financial results reflect well on its inherent ability to successfully overcome adversity. From an operational and financial perspective, Hanger's results can be summarized in three specific ways. First, the company responded early and decisively at the onset of the COVID-19 pandemic, and that provided it with the ability to get a head start and to confront the impact of the virus from a position of operational and financial preparedness. Second, The company's responses enabled it to achieve financial results that reflected a sound underlying level of revenue and earnings despite the pandemic. And third, our focus on liquidity enabled Hanger to emerge in an even stronger position today than it was a year ago at this time. During the fourth quarter, the company produced $35.5 million in adjusted EBITDA on $277.3 million in net revenue. This reflected a $6.9 million decrease in adjusted EBITDA and a $23.6 million decrease in revenue as compared with the fourth quarter of 2019. This brought our results for the full year to an adjusted EBITDA level of $105.1 million and net revenues to just over $1 billion. As Bennett discussed, despite the resurgence of the virus in the fourth quarter, we did not experience a regression in patient encounters or same clinic volumes from the levels experienced in the third quarter, and this enabled the company's performance to exceed what was expected. In looking at this performance within our patient care segment, appointments reflected a 12% decrease during the quarter, which compared favorably with a 33% decrease in the second quarter and a 16% decrease in the third quarter. This drove a same clinic revenue decline rate of 10.6%, which was generally consistent with the 10.3% we reported in the third quarter and is the approximate level we have experienced during the early weeks of 2021. For the year, our patient care segment experienced a 17% decline in patient appointments and an 11% decline in same clinic revenue. After considering the favorable effect of acquisitions, reported revenue for the year declined by 8.2%. Despite this decrease in revenue, due to the proactive measures taken within the patient care segment to pivot its operations and cost structure in response to the virus, it was able to produce a contribution margin of 17.6% during 2020, which was modestly lower than the 18.2% it reported in 2019. When reviewing the products and services segment results for the quarter and the year, we believe they are truly remarkable under the circumstances. While revenues declined by 7.2% in the quarter and 11.9% on the year, adjusted EBITDA grew by 1 million in the fourth quarter as compared with the fourth quarter of 2019. and for the full year was $29.3 million, was consistent with the level reported in 2019. In addition to the favorable effect of our cost reduction programs and results, this segment also benefited from a marked reduction in bad debt expense. Overall, due in part to the temporary $51 million reduction in personnel and other costs, realized over the second and third quarters, the company's consolidated adjusted EBITDA of 105.1 million reflected a contribution margin of 10.5%, which was reasonably close to the 11.3% we reported in 2019. Due to the swift actions of our employees and the cost measures that were put in place, while 2020 reflected a decline from 2019, that decline was significantly moderated. Additionally, operating responses we took to the pandemic did not reduce the company's capacity or otherwise harm its ability to return to normal levels of patient and customer volumes as the virus subsides in 2021. Those accomplishments and our revenue and earnings for 2020 tell only half the story. As we've discussed in prior calls, during the year, one of our most important objectives in response to the COVID-19 pandemic was to build liquidity. We're pleased to report that we achieved that objective. As of December 31, 2020, Hanger had $239.4 million in liquidity. This reflected an increase of 70.2 million or 41% over the level reported at December 31st, 2019 and 107.6 million or 81% increase since March 31st, 2020. The company benefited from 24 million in CARES Act funds during the year. While we did not include them in our reported adjusted EBITDA, they were a contributor to the company's liquidity position. In addition to the direct flow-through from earnings and the CARES Act funds, the company achieved substantial favorable changes in its working capital position during the year. When excluding cash, the current portion of debt, and tax refunds receivable, the company's underlying working capital position reflected a decrease of $59.7 million as compared with the prior year end. This favorable working capital change was the result of a multitude of factors, with perhaps the most important contributing element being found in the company's increased collections and resulting reduction of accounts receivable. During the year, through widespread revenue cycle management and collections initiatives, the company decreased its net accounts receivable by 30.8 million, or 19%. This decrease reflected gains that were substantially in excess of the 8.8% effect of the company's net revenue decrease for the year. This favorable collections experience also resulted in a decline in Hanger's combined disallowance and patient nonpayment rate from 5.3% in 2019 to 4.5% in 2020, and resulted in a six-day decrease in its day sales outstanding, from 48 days down to just 42. These favorable changes directly contributed to the company's reporting of $155.6 million in operating cash flow during 2020, and they resulted in a reduction in net indebtedness to $365.9 million. This enabled Hanger to sustain a 3.5 times leverage ratio despite the decrease in its reported adjusted EBITDA. Given this level of liquidity and net indebtedness, Hanger is in a stronger financial position today than it was a year ago at this time. As our revenues and adjusted EBITDA return to their normal run rate levels in a post-COVID environment, the company will find itself in a good position to continue its acquisition program in 2021 and to manage its leverage. I'll now provide a few comments on our capital expenditures before I turn to our outlook for 2021. During 2020, we expended $28.1 million in capital expenditures. These expenditures related to the purchase of property, plant, and equipment, as well as therapeutic equipment. Of this amount, approximately $7.5 million related to the company's build-out of its new distribution facility in Alpharetta, Georgia. While we paused the key systems projects related to our supply chain initiative in 2020, we did continue and complete the construction of that facility. This has enabled us to spread out the investment over several years as opposed to the more concentrated approach we had originally planned for 2020. We currently estimate that we will expend $35 million in capital expenditures in 2021, inclusive of the capital portion of our supply chain initiative. We are currently in the process of resuming our work on the supply chain and financial systems project. And despite the one-year pause, the company nevertheless benefited from approximately $4 million in savings during 2020 related to its supply chain initiative, primarily in the area of freight savings. Now I'll turn my commentary towards our overall outlook and key operating considerations for 2021. Obviously, I think we all recognize that a substantial amount of uncertainty and speculation remains about the course of COVID-19 and its lingering effects on our daily lives. While that uncertainty makes our ability to estimate our forward results exceedingly difficult, we nevertheless feel that providing you with insight into our best current thinking is warranted. The key premise behind our outlook is that COVID-19 will affect patient volumes at a similar rate as experienced in Q4 all the way through February. And then those effects will subside radically through the end of June with normal patient volumes and growth resuming in the second half of 2021. We've incorporated modest favorable effects from pent-up demand in our forward view for the second half of the year. In addition to other factors, any further adverse delays in vaccinations or a continuing delay in the return of normal activities could adversely affect our outlook. If the resumption of normal business volumes is delayed, we nevertheless currently have confidence that there has been no material underlying change in the nature of our business or capacity that would adversely affect our ability to eventually return our revenue and adjusted EBITDA run rate to pre-COVID levels. With these considerations in mind, our current outlook for 2021 is that Hanger will produce net revenues in the range of $1.145 billion to $1.175 billion in adjusted EBITDA of $130 million to $135 million. Our outlook includes the benefit of approximately $27 million in net revenues from the annualized effect of acquisitions completed in 2020 or closed prior to March 1st of this year. From a quarterly timing perspective, we believe that the first and second quarters will provide difficult year-over-year comparisons. The first quarter will be adversely affected due to the residual effects of the pandemic, the adverse weather, as well as it being our normal seasonal lowest period of operations. The second quarter will likely be affected by the lingering transitional effects of COVID and due to the fact that we had a temporary benefit of $35 million in cost reductions, which aided our results in the second quarter of last year. With respect to the company's operating cash flow, It is important to recognize that the level we achieved in 2020 reflected a number of favorable factors that are not sustainable in 2021. As the company resumes its normal levels of operations, reinvestment in working capital will naturally occur. Accordingly, we believe our operating cash flow will be limited in 2021. It's also useful to note that our 2021 seasonal payment of incentive compensation and operations We'll reduce our liquidity levels in the first quarter as they do in every year. In closing, I believe Hanger and its employees evident something incredibly important in 2020. We demonstrated the ability to hit adversity head-on and to manage through it, both from an operating and a cash flow perspective. We showed the company's inherent tenacity and resilience. These qualities have enabled Hanger to enter 2021 as a company that is stronger, and better positioned than it ever has been before. With that, I'll turn the call back over to the operator to open it up for any questions you may have.
spk00: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key. To withdraw from the question queue, please press star then two. The first question comes from Brian of Jefferies. Please go ahead.
spk04: Hey, good morning, guys, and congrats on a good year given all the circumstances. But, Tom, I guess as we think about guidance, you know, I appreciate you taking the initiative of putting out guidance despite the uncertainty. As I think about the seasonality comments or the progression comments that you made, a couple of questions. Number one, you're expecting some inflection in volumes beginning after February. And I know generally you have pretty good visibility into your orders. So is that a good way to think about that? And then I guess if you were just to ask you for percentages in terms of the breakdown between quarters, how should that look? Yeah, Brian.
spk03: So, you know, first of all, from the visibility standpoint, I would argue that we do have some visibility, but not as much as obviously, you know, anyone would like to have. March is always traditionally the strongest month in the first quarter. We do have some good work and process levels, but it really is a bit of a bet on our part as to how this quarter pans out. And the hope that with all the vaccinations and positive effects occurring with COVID that we start to see at least some return to more of a normal environment. But again, it remains to be seen. From a standpoint of quarterization, really what you're looking at is a very modest, you know, sort of performance in Q1 from a percentage standpoint. I would, and then, you know, somewhat of a step up in Q2, you start to look at what it means for the year. You know, you could have 55, you know, 60%, you know, the company's EBITDA on the second half of the year when you look within the numbers.
spk04: Got it. And then, Vinit, you know, obviously you're sitting on a lot of cash right now, significantly above what you normally would keep on the balance sheet. And, you know, how are you thinking about capital deployment and the M&A environment? And also, like, just any changes to how you're doing M&A versus the historical hangar approach? You know, it looks like you had a pretty good acquisition in the Midwest that's more concentrated. If you don't mind just walking us through that, thank you.
spk05: Sure. Thanks, Brian. Look, our M&A program is pretty robust in the sense that, as I've mentioned throughout 2020, the pipeline is pretty solid. We get a lot of inbound inquiries, we've got a lot of conversations going on, and we're being very selective in who we're working with because we want to bring on the quality practice. And just to give you a sense of the landscape, the vast majority of the ONP businesses in the U.S. are very small-sized businesses. So, you know, we're being very selective in terms of who we speak with, who we're bringing on board. The conversations have been very robust, and there is a focus on M&A. You know, as I mentioned in my prepared remarks, we brought in nine businesses last year, and, you know, we feel pretty good about 2021 as well, given the nature of the conversations we're having. So, you know, we expect that trajectory to continue in 2021 at this point.
spk04: Got it. And then last question for me, you know, obviously COVID delayed some of your initiatives, whether it's, you know, the supply chain systems rollout or the ERP. You know, is it safe to assume that all that goes full steam this year and we should expect the benefits that you've outlined in the past once we get into 2022?
spk03: Yeah, we are recommencing, as we described, both the supply chain and the financial systems projects. Fortunately, we did continue some critical ones last year and, in fact, have already been receiving the benefits from that to the tune of approximately $4 million in 2020. So those are going to continue in 2021 and obviously already demonstrate almost the lion's share of what we would expect out of the program. And, you know, from a capital standpoint, I think, you know, we've outlined it pretty extensively in the 10K. But, you know, we've seen a nice moderation in terms of the amount of capital we'll put out where it won't be as dramatic as it was originally thought it might be. Awesome. Thanks, guys.
spk05: Thanks, Brian.
spk00: The next question is from Larry Solo of CJS Securities. Please go ahead.
spk02: Great. Thanks, guys. And I echo Brian's comments. You know, congrats. A tough environment. A very good year. Just a few follow-ups. You mentioned, you know, some pent-up demand. I assume you're building in. some of that into your guidance. I think prosthetics decline 8% for the year. It doesn't seem like, I don't think you're losing share. So how do you sort of, you know, I guess it's a balancing act between hopefully some of that comes back in, but, you know, you continue to have this sort of, you know, COVID, at least the tail where some of these patients are not coming in. How do you balance that, you know, as you look out over the next few quarters?
spk05: Sure. You know, I can give you some color, Larry, on, you know, how we're thinking of the next few quarters, especially when we think about the pent-up demand. You know, we certainly believe there's probably three buckets in terms of how to think of this pent-up demand. I'd say, you know, the one bucket is what I alluded to in my prepared remarks on there's a cohort of patients that are like the lower mobility patients. that, you know, have these other comorbidities and they're electing to stay in and are reticent to come in for care. So, you know, our guess is that they will over time as they get vaccinated, as the environment around them allows them to come in for care, they will come in for care that they haven't been coming in in terms of getting, you know, their adjustments or their replacement devices. So I'd say that's one group of patients. Then there's another group of patients who I believe have these underlying conditions, such as foot ulcers, that, you know, they may not have taken care of their ulcerations through this period of the pandemic. And that deteriorates, you know, when that deteriorates, it could end up in amputations. So that, you know, that in-home care that hasn't been given to these patients is These patients probably haven't moved around a lot either. So that also contributes to some pent-up demand. And last but not the least, there is this whole concept of the seesaw of the elective surgeries that, you know, they were on again and then off again and then on again. So as these three buckets start clearing up, we should see some pent-up demand being released. Larry, we don't see that happening overnight. It will happen over time. But that's how we're thinking about especially the second half of the year.
spk02: And you guys mentioned, I know, you know, in terms of on the acquisition front, I think in terms of guidance, I think there was $27 million included sort of in the 2021 revenue guidance. You know, you completed, I think you spent like $30 million on acquisitions in 2019 and $50 or so million last year, $25 million I think already this year. How do you view sort of the ramp in profit contributions? I know sometimes acquisitions, you know, at first take about 12 months before you sort of – get to the full fruition of the profitability. With COVID sort of impacting a lot of 2020, is there sort of, you know, a tailwind that's been, you know, that you may see over the next couple of years where you get benefit, even some acquisitions you did in 19 and in 20, you know, as we look out over the next few quarters?
spk03: Yeah, Larry, this is Tom. There is, you know, there is that ramp you're describing where it is somewhat, you know, depressed, irrespective of COVID, you know, in the first year after an acquisition, and then it gradually improves from there as that acquisition is fully integrated. I think it's important to point out that, you know, we've been doing around this level of acquisitions each year for the last several years. And so some of that ramp up already was occurring for the cohort, you know, that was the 2019 cohort in 2020. And certainly there's a little bit of that ramp in 2021 from the 2020 cohort. And then, you know, that portion of the 27 that has occurred in Q1, you know, would be pretty modest in contribution this year. I wouldn't see it as an excessive amount of overall pickup then in earnings, just that it kind of layers into the company's earnings naturally as we go. And then I do want to go back to my response to an earlier question. analyst question regarding quarterization, you know, I had sort of cited 60% in the second half, and that's typically normal. I would actually argue that in 2021, it's going to be closer to 70% in the second half when you look at the effects of the first half, just to make sure we have that clarification. I don't know, does that answer your question, Larry, on the M&A?
spk02: Yeah, absolutely, it does, absolutely. And obviously you're, you know, really expecting a back-end load a year. Just another couple of quickies. I saw in the MD&A you mentioned that there are a couple or several larger size independent O&P providers or you know, having some financial struggles during 2020, which is not a surprise. And I think it caused you to maybe interrupt or even stop distributing some products to them. Sort of a two-pronged question there. Is there any real significant impact on the distribution, you know, products and services as you go forward? And is there, you know, and how do you think, is there any benefit, you know, over the shakeout of some of your competitors as you look out in terms of operations and in terms of maybe potential acquisitions?
spk03: Yeah, first of all, in terms of that reference in the MD&A, that gets to some of the customers of the distribution business in 2019 where we'd had some bad debts and some difficulty with them. And it was just a few customers that were having some difficulty during that year, you know, that we chose to part ways with during that year. But I wouldn't characterize it as large, you know, large providers overall in the industry or that it's indicative of an overall trend? And then I'll turn it to Bennett to just add more color to that.
spk05: Yeah, Larry, you know, we've been obviously having conversations with most of the independent providers from a distribution perspective and also from a potential, you know, M&A perspective. And, you know, we feel that, you know, the conversations have been very productive in the sense that, we can get to see how strong these providers are. I think a lot of assistance they got from the government, whether it's the PPE loans or the Medicare payments that they received, did help these providers. When we engage in conversations with these providers, It's more about looking for the stronger providers to come on board to, you know, to propel us into further growth as opposed to looking for the weaker providers to come on board. So that's the conversations we're having. We're just, again, pleased with the businesses we brought on board last year. Every single one of them was solid with solid management teams, and that's the focus we have in our M&A program. It's pretty selective.
spk02: Okay. And then just appreciate that, Collin. And then just last question maybe for Tom. Obviously, 2020 was, you know, a fabulous year for operating and free cash flow, especially, you know, as we look back, what we thought it was going to be, you know, during April and May. You mentioned, you know, I understand the benefits of 20, and obviously there's going to be some, you know, drop in 21. You mentioned sort of operating cash flow will be I don't know what the word was, but it sounded like it's going to drop significantly. I know you don't guide to this number, but can you give us an idea of what it might be?
spk03: Certainly. So if you take the $156 million of operating cash flow last year, $24 million of that came from the CARES Act funds. And then there was another $60 million that came from our reduction of working capital. So we won't have that $84 million in 2021, you know, to assist the company that's operating cash flow. So if you were to go to a normal year, you know, being in, call it the $70 to $80 million operating cash flow area, the company will have a greater majority of that $60 million that it will likely have to reinvest in working capital. as the company's revenues and overall business profile returns to normal. So you could go ahead and look at that number as a very important number in your calculation.
spk02: Got it. Great. Appreciate all the call. Thanks, guys.
spk00: This concludes our question and answer session and today's conference. Thank you for attending the presentation. You may now disconnect.
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