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Hello, good morning, and thank you for standing by. Welcome to the Accendra Health first quarter 2026 earnings conference call. Please be advised that today's conference call is being recorded. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to hand the conference over to your first speaker today, Will Parish, Vice President, Strategy, Corporate Development, and Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. I'd like to welcome you to Accendra Health's first quarter earnings call. Our comments on the call will be focused on the financial results of the first quarter of 2026, all of which are included in today's press release. The press release, along with the first quarter 2026 supplemental slides, which we will refer to throughout the call, are posted in the investor relations section of our website. Please note that during the call, we will make forward-looking statements that reflect the current views of Accendra Health about our business, financial performance, and future events.

Matters addressed in these statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected or implied here today. Our expectations, beliefs, and projections are expressed in good faith. We believe there is reasonable basis for them. However, there can be no assurance that our expectations, beliefs, and projections will result or be achieved. Please refer to our SEC filings for a full description of these risks and uncertainties, including the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q.

Any forward-looking statements that we make on this call, in our earnings press release, or in our supplemental slides are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law. In our discussion today, we will refer to non-GAAP financial measures and believe they might help investors to better understand our performance or business trends.

Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I am joined by Ed Pesicka, Accendra Health's President and Chief Executive Officer, Jon Leon, the company's Chief Financial Officer, and Perry Bernocchi, the company's Chief Operating Officer. I will now turn the call over to Ed. Ed?

Thank you, Will. Good morning, everyone, and thank you for joining us on the call today. It is great to be reporting our first full quarter as a standalone pure-play home-based care company. Accendra Health's first quarter results were in line with our expectations and included key accomplishments in our transformation into a leaner, nimbler, and higher-margin business. We are excited about where we will go from here.

First, I am pleased to report that the transition services and separation activities from Owens & Minor are on track and going according to schedule, allowing Accendra Health to fully function as a completely independent company from Owens & Minor. We are excited to be devoting all of our focus and energy to growing our leading position and capabilities in the home-based care space.

Another update that I want to highlight is that as of the end of the first quarter, we have substantially completed the exit stemming from our previously disclosed transition away from a large commercial payer, and the handover has gone as expected, with our team ensuring continuity of care for the patients while also minimizing our cost to transition the business.

To secure this smooth transition for patients, we engaged with another industry player to sell them the substantial amount of Accendra-owned equipment that was dedicated to the large commercial payer's patients. At the same time, we facilitated the transition of personnel along with other variable and certain fixed costs from Accendra to that same industry player. This solution provided the best outcome for all stakeholders, particularly patients, and also allowed us to quickly begin the rationalization of our corporate infrastructure as we pivot away from this large commercial payer.

Again, while we never want to exit a customer relationship, we maintained our financial discipline throughout the contracting and transition process, and we are excited to have the vast majority of this exit behind us. I'd also like to remind everyone that while we have exited our largest capitated agreement with this transition, we still have other smaller capitation agreements which are very attractive. Going forward, we will continue to be excited about pursuing both fee-for-service agreements as well as capitated agreements, which still can be very compelling under the right circumstances.

Staying with our payers, I am happy to announce that we recently reached an agreement for an exclusive multi-year extension with our largest commercial payer for soft goods, such as ostomy, urology, diabetes, incontinence, and others. This extension of the long-standing partnership provides certainty for our business in the years ahead. In order to provide more clarity around our payer mix, we have provided you with slide number 5 that clearly shows the diversification of our commercial payer portfolio.

As a reminder, with the notable exception of the large commercial payer discussed a moment ago, the vast majority of our commercial payer relationships are contracted at the individual state level and are then aggregated under the national parent organization in this slide for presentation purposes. Accordingly, we are well-positioned with a diversified commercial payer portfolio with no major renewals on the horizon.

In addition to the commercial payers just noted, approximately 20% of our revenue is from traditional Medicare. We are supportive of the government's recent efforts to eliminate fraud, waste, and abuse, including the upcoming Competitive Bidding Program. As one of the large national players in the market, we are proud of our ability to operate at scale as well as our track record of rigid compliance with government requirements while providing the highest quality of service to patients. Thus, we expect to continue to thrive in this new era.

Next, I would like to provide an update on several of our strategic initiatives, which are streamlining our business through centralization, standardization, and automation with the goal of driving top-line growth and reducing our overall cost profile, all while providing an industry-leading experience for patients. I'd like to start by highlighting our focus on sleep therapy. I'm pleased to report that our Sleep Journey program continues to deliver anticipated results with the sleep supplies portion of our sleep therapy category delivering strong year-over-year growth.

We are particularly proud of this initiative as it helps drive stronger fundamentals in the sleep supply category in the form of higher revenue per order, lower patient attrition, and better patient outcomes through higher therapy adherence rates. We expect this initiative to continue to drive higher patient therapy adherence through the efforts of our dedicated sleep coaches and other clinical initiatives.

Building on the success of our Sleep Journey, as well as our proven track record with our existing centers of excellence for other categories, we recently formed our Sleep Center of Excellence, which serves as a centralized and standardized expert-led team, which is responsible for the patient's first interaction with Accendra and the initiation of their PAP therapy.

This program is building a trusted patient-first ecosystem that balances operational efficiency with compassionate care. Our dedicated team manages order process, scheduling, and patient onboarding to ensure a consistent high-quality start to each patient's therapy journey. Our Sleep Center of Excellence is designed to cultivate patient satisfaction and loyalty by ensuring a consistent high-quality patient experience that we expect will enhance provider confidence in our already strong brand by driving growth in our referral pipeline.

This initiative has already seen a successful pilot in select markets during the first quarter with a nationwide launch continuing in the second quarter. The combination of the Sleep Journey and our new Sleep Center of Excellence will enable us to improve patient capture and patient adherence and to enhance the experience for all stakeholders, patients, providers, and payers, which should result in improved growth in the sleep category.

Finally, I would like to provide an update on our capital structure. In our press release this morning, we announced a comprehensive balance sheet optimization transaction, which will strengthen Accendra's balance sheet by paying off our 2027 maturities, significantly reduce total debt, and meaningfully extend maturities, while also affording the company financial and strategic flexibility with ample liquidity.

Jon will walk you through the details in a moment, but we believe that this comprehensive balance sheet optimization transaction lays the foundation for Accendra's long-term trajectory as a standalone business. With this behind us, it will enable us to devote 100% of our focus on the business. We are excited to remove any uncertainty about our 2027 maturities and any pressure they may have put on our overall valuation.

Before I turn the call over to Jon, I would like to reiterate how transformative the last several months have been for Accendra and how excited we are for the future. Our business today is dramatically different than it was prior to the divestiture of Owens & Minor. If you look at page six of the supplemental slides, you can see how we have transformed a company with gross margins in the 19% range and EBITDA margins of approximately 4% to a standalone home-based care business with nearly 50% gross margins and double-digit EBITDA margins.

If you move ahead to slide seven, you can see how much of the earnings and consistent cash flow of what is now Accendra Health backstop the P&HS business consumption of cash in the recent periods. With the divestiture behind us, we look forward to enjoying a much cleaner and less volatile cash flow profile. In closing, we couldn't be more pleased with the transformation we have delivered over the past several months. While we have much work ahead of us, we are excited about where Accendra Health is taking home-based care into the future. With that, I will hand the call over to Jon to discuss the financials. Jon?

Thanks, Ed, good morning. My comments today will cover our first quarter results and outlook for the remainder of the year, as well as the expected outcome of our current financing activity, which will lead to a much improved, simpler, and longer-dated capital structure with plenty of liquidity for the business. I will specifically speak to the balance sheet optimization transaction that we announced in this morning's press release.

Like recent quarters, almost all otherwise stated, my remarks today will focus on the continuing operations. The continuing operations financial statements represent the total Accendra Health. Also, please note that any discussion about the financial results and outlook for the company will cover only non-GAAP financial measures. You can find GAAP to non-GAAP financial reconciliations in the press release filed a short time ago and residing on our website at accendrahealth.com.

First quarter of 2026 was notable for the completion of a previously discussed large commercial payer exit and the initiation of our comprehensive balance sheet optimization activity. Operationally, the business performed to expectations, and as usually occurs, the third month of the quarter proved the strongest. Cash flow and debt levels also reflected what we expected and typically see in Q1, which is early in the year softness leading to greater strength in the back half of the year.

Turn to slide 10 of the supplemental slides, you can see that we reported a revenue decline of 6.8% in the quarter, but excluding the impact of the aforementioned large commercial payer, growth would have been about 1%. The leading growth categories were sleep, excluding the payer impact, and urology and ostomy. The large sleep category grew over 4% and home respiratory fell about 4% when the impact of a large commercial payer change is excluded. Diabetes as off slightly versus the prior year as growth in insulin pumps did not quite offset a drop in CGMs.

Overall, growth rates were not where they need to be, but we expect improvement throughout the year and are seeing positive signs across a number of categories. To facilitate the transition of the large commercial payer, we sold patient service equipment for cash proceeds of $82 million, resulting in a book gain of $52 million. The positive income statement impact of this one-time transaction is not included in our adjusted EBITDA for the quarter, as I'll discuss further on this call.

If you look at slide 11, you can see that Q1 adjusted EBITDA was $58 million, again in line with expectations. We continue to see a lower year-over-year collection rate, inflationary product cost increases and higher health benefit expenses, all of which were partially offset by our cost savings efforts. Of course, pre-divestiture stranded costs elevated selling, general, and administrative expenses, lowering adjusted EBITDA. Cost reduction will continue to be a point of emphasis throughout the year.

Cash flow demonstrates the typical seasonal softness and free cash flow is slightly negative in the quarter following normal profitability, collection rate, and working capital sequencing. Also, it should be recognized that we had extraordinary payments in the quarter of $19 million to the IRS to conclude tax matters related to international transfer pricing activity between 2015 and 2018, and $22 million of previously accrued expenses relating to the P&HS divestiture. All this activity is detailed on slide 12 of the supplemental slides.

When looking at the cash flow statement, it is also important to note that, as I mentioned, the gains from the one-time sale of patient equipment relating to the large commercial payer is an adjustment to income in the operating activity section of the cash flow statement and is not included in adjusted EBITDA due to its one-time nature and the cash received from these sales sits in the investing activity section of the cash flow statement.

The vast majority of this activity occurred in Q1, there will only be nominal amounts recorded in Q2. Net debt was essentially flat compared to where we ended 2025 at $1.77 billion, and the entire organization remains focused on debt reduction. At the end of the quarter, we had $337 million of cash on the balance sheet and $195 million of available capacity under our committed revolving credit facility, continuing our pattern of maintaining very comfortable liquidity levels. Once again, we enter the quarter well in compliance with our debt covenants.

Now, as Ed mentioned, I want to discuss very exciting news on our capital structure. Pages 13 through 15 of the supplemental slides filed earlier this morning further detail the balance sheet optimization process. We have received commitments from existing creditors that will allow us to conduct a holistic reset of our capital structure and lay the long-term foundation for Accendra. Key benefits include a multi-year extension of our revolving credit facility, paying off our 2027 maturities, extensions of our 2029 and 2030 notes through exchange offers for longer dated new notes and meaningful debt reduction.

This comprehensive solution will provide the business with the appropriate level of liquidity and offer financial flexibility for our future. We have received commitments from our revolving lenders, Term Loan B lenders and bond holders for the balance sheet optimization transaction. Of course, such commitments will be subject to customary closing additions for agreements of this type. As detailed on slide 13, we will offer to all eligible holders of our existing notes the ability to exchange their old notes for new secure notes. The exchanges will include first lien and second lien notes that will mature in 2032 and 2033 respectively.

The offer for each series of existing notes will be further described in the offering document that will be available to all eligible holders of the existing notes. These exchanges are expected to result in meaningful deleveraging of up to about $115 million. Staying on slide 13, in connection with the exchange process, we plan to retire our Term Loan A due in 2027 with the issuance of the new first lien notes. Additionally, we plan to pay off our current revolving credit facility with cash and will be entering into a new $300 million committed revolving facility due in 2030.

The consummation of all these financing transactions will remove concerns about near-term maturities by extending our maturity runway by doubling the weighted average life of the debt capital structure to approximately 5.5 years while ensuring plenty of liquidity for a business that has over 80% recurring revenue, all while advancing our commitment to deleveraging. We look forward to the completion of these transactions in the coming weeks. This will be an enormously positive step in having a better capital structure suited for Accendra's strength.

In conjunction with the announcement of the balance sheet optimization transaction, we would expect to file an omnibus shelf registration. The company does not have a shelf registration at present, and in relation to the financing activity would be the most logical timing, and is simply a matter of prudent financial management and good corporate hygiene.

We are affirming our 2026 outlook for revenue and adjusted EBITDA. The financing activity I just discussed will impact interest expense and obviously free cash flow. We'll be refinancing our existing lower coupon notes, and while we're satisfied with the anticipated pricing of the new debt described above, we are estimating the annualized cash interest will be higher by about $40 million. We expect that approximately half of this incremental impact will occur starting the second half of 2026.

Finally, as we look ahead quarter-by-quarter, we see greater revenue growth in the latter months of the year, resulting in at least 65% of adjusted EBITDA coming in the third and fourth quarters. Following what we see as a decent inline quarter, we remain confident in the revenue growth ramping in the months ahead, better collection rates, cost savings, and consistently improving cash flow. We will remain ever diligent on de-leveraging the balance sheet as quickly as possible. With that, I'll now turn the call back to the operator for Q&A. Operator?

Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Kevin Caliendo with UBS. Your line is now open.

Kevin?

Kevin?

Oh, sorry, I was on mute. I apologize. Congrats on getting this all done, guys. It's, I'm sure it was quite laborious and really impressive that you got it over the finish line, so congratulations.

Thanks.

My question really is around free cash flow and how to think about it now post all this. Obviously, the higher interest expense and everything else. When we talk about sort of operating cash flow and then free cash flow back to the entity, what are the expectations now for 2026 and beyond, and how to think about it? I'm assuming we should just put it all to use in terms of paying down debt.

Yeah, absolutely, Kevin. It's Jon, by the way. Good morning. Anything we do generate will be used for debt reduction. You know, getting the exact number is going to be a little bit shaky until we get through this financing in probably sometime next month. You know, we know what we have ahead of us. Obviously, we have to pay for this transaction. We got the scheduled money going out for the P&HS separation, all of which was planned. As I said in my remarks, about half of the $40 million of increased interest expense will hit us this year. Still good cash flow year, still going towards all debt reduction. Coming up with the exact number, we'll probably need another month or two before we can actually peg it and forecast a number for you.

Got it. That's helpful. If I can just ask a fundamental question. just in terms of diabetes, what you're seeing there, how the market's continuing to evolve, how you feel like your position's there. Just love to get an update specifically on that. I'll let others jump in after.

Thanks, Kevin. This is Ed. If I think about diabetes, you know, in the quarter we saw, you know, nice growth in insulin pump. You know, we actually saw unit volume grow in CGM. We did see some price compression there when you look at the mix between DME and pharmacy. Let me talk a little bit more detail about DME versus pharmacy. You know, the pharmacy, you know, option has been in place for several years now. You know, now we're starting to get some empirical data that shows that when a patient uses a DME channel versus the pharmacy channel, we see adherence at much higher rates than what we see through a pharmacy channel.

You know, I think that is an opportunity for us to make sure that we're educating patients, we're educating the, you know, the providers of the benefit of the DME channel and that's really because you know, the follow-up that we provide as a company, in addition to that, the follow-up, you know, with the, with the provider that the patient has. You know, that's what we see when we see this trending out. We see it somewhat stabilizing the mix between DME and pharmacy, you know, the opportunity to actually see the benefits of patients and physicians using a DME channel versus the pharmacy channel.

Got it. Thank you.

Your next question comes from the line of Daniel Grosslight with Citigroup. Your line is now open.

Hi, guys. Thanks for taking the question, and I'll add my congrats to getting this debt restructuring close to over the line here. I have a couple questions on slide 60 of the investor presentation that you filed with the restructuring. For 2027, it looks like you're projecting out 4% revenue growth and 5% EBITDA growth around there. Is this how we should think about the normalized growth rate of the company, kind of a mid-single digit revenue growth rate and a little bit of margin improvement each year or do you think that will accelerate in 2020 and beyond? It also looks like unlevered free cash flow is about $20-ish million or so lower in 2027 versus 2026 in the presentation. Curious if you can just comment on that and how we should be thinking about some of the working capital investments perhaps you're making in 2027.

Hey, good morning, Daniel. It's Jon. I will tell you the 2027 numbers that we claimed this morning, certainly were the work product of a number of months of bottom-up numbers, but, you know, done a few months ago. I would certainly caution everybody on relying too much on those. As we get into our normal budget cycle later this year, we'll update 2027 in a more fulsome manner. Specifically to your question, I would say the growth rates that are there are a pretty decent proxy for what we'd expect from the business on a run rate basis going forward.

You know, cash flow-wise, yeah, we're putting some money back into the business in 2027 in expecting years out there. As I mentioned to Kevin, obviously, first commitment is always gonna be debt reduction. Hopefully going into a point and then putting back to the business to continue to grow the business. You're thinking about it correctly at a high level, but I would certainly caution everybody to not put too much relying on those numbers. They were wrapped up pretty detailed, but, you know, it's been a few months since we looked at that. Obviously, we'll update 2027 as we get into the latter parts of this year.

Okay, great. Then I just had one on the Sleep Journey and Sleep Center of Excellence, which is great to hear. I'm curious, is that joint effort, again, that Sleep Journey and Sleep Center of Excellence, how many markets is that live in right now? I was wondering if you can kinda speak to any specific stats in the markets that are live too, in terms of adherence rates and conversion rates versus the markets that are not currently live in.

Yeah. I'll start, and then I'll let Perry provide a little additional detail on it. You know, on the Sleep Journey, you know, that's been implemented over the past year. On the Center of Excellence, you know, focused on the sleep starts, that's starting to be rolled out now. Perry, why don't you cover a little bit more detail?

Yes. Thanks, Ed. From a Sleep Journey perspective, as Ed mentioned, it's been in process for well over a year. Every quarter, we see improvement in our adherence rate by single-digit percentage points every additional quarter. That has proven highly successful. One is adherence. Two, our average order basket has also increased with the Sleep Journey project.

From a CoE perspective, this has been initiated. It is in three of our markets with full implementation across the entire network by the beginning of the fourth quarter. It's a rolling process, and it's really to have an end-to-end optimization for both the patient, the prescriber, and the payer. Initiation of therapy in a centralized group, expert in handling sleep patients. From the early two markets, three markets that went live, we're seeing speed from referral to initiation of therapy improve as well as all the other indices of improved adherence and market basket size.

Great. Thank you.

Your next question comes from the line of Michael Cherny with Leerink Partners. Your line is now open.

Good morning. Thanks for taking the question, and I hope you guys are doing well. This is Ahmed Muhammad on for Mike Cherny. As we think about the results in the quarter and the outlook for the year, appreciate all the color that you've given. Is there any further color you can give on what drove the results this quarter and what's durable for the rest of the year across the various product categories? Two quick modeling questions. Is there anything to note on Aidance regarding the Optum onboarding and when is the debt refinancing expected to be completed? Thanks.

Okay. Ahmed, it's Jon again. I'll start to unpack that a little bit. On the quarter, basically, we've seen the same dynamics by category that we've seen for the last several quarters. Our growth really led by categories like ostomy, urology. As we mentioned, absent the large commercial payer change, grew very nicely as well. On the other side of the coin, diabetes pumps did well. CGM, not quite as well as we would have hoped. Other categories like home respiratory certainly underperformed our expectations as they have for the last few quarters. All in all, a very similar story to what we've seen in the past.

In terms of your question on Optum, you know, those preferred provider agreements take a while to ramp. We would expect that to continue to ramp throughout 2026. You know, it's nothing that is gonna be a dramatic change in performance of the business this year, similar to other group or similar agreements that we've won all along and recently but they do take a while to ramp. You need to sell into those. That's how we should be modeling the thinking about those. Financing-wise, I think was your last question, you know, we'll be here launching the actual exchange offer in the next week or two. Given the normal carriage of time you need to let those things stay in the market, we should be closing that transaction, I would say third week, mid to late third week of June.

Got it. Thanks.

Your next question comes from the line of Allen Lutz with Bank of America.

Good morning, and thanks for taking the questions. One for Jon. SG&A in the quarter was better than we expected. You called out benefits from cost saving efforts. As we think about the trajectory of SG&A over the course of the year, how should we think about the 1Q run rate and what's embedded in the guide for the rest of the year? Thanks.

Yeah. I'll start then let Ed finish. I mean, certainly Allen, cost reduction remains a significant focus for us and will be throughout the year. Keeping in mind that with the large commercial payroll in golf, we have been very rigid about taking those costs out and costs related to it as well. From a runway perspective, I would say, I would like to do better than that for the rest of the year, but it's probably not a bad number to start with.

Yeah. I think, we would anticipate it does get better. If we think about the large customer, you know, when we took the costs out, those costs came out towards the end of February and towards the end of March in a two-phase process. We should be able to get additional benefit of those for the remainder of the year, you know, as they came out, you know, as they came out between February and towards the end of March.

Very helpful. Thank you for that. Now that you've exited the largest capitated agreement, can you frame how big the smaller capitated arrangements are as a percent of the business? Is there any way to talk about the relative margin structure today excluding the largest capitated, but just between, you know, fee-for-service and the residual capitated agreements on the books? Thank you.

Yeah. If we think about I mean, we had the chart in the exhibits that actually showed some of our larger payers. None of those are I would say capitated agreements and then you look at what's remaining, you know, any other capitated agreement would be very small. You know, nothing meaningful to fall into those top five or six category, you know, five or six payers.

You know, and on the margin, I think it depends on it. It depends on the nature of it. It depends on the escalation of it. You know, when we look at capitated agreements, we are not opposed to them. We have them, and we, you know, they're a significant opportunity for us. Perry, I don't know if you wanna add a little additional color on it. Feel free to do so.

I think you've covered it. The cap agreements that we have today or the remaining cap agreements are small in nature. They're effective and efficient to run from an operational perspective so they provide a very positive yield. We are pursuing capitated agreements in the marketplace today. The marketplace is dynamic. The payers are continuing to look at opportunities to reduce their networks and align with providers like Accendra. I think our opportunities to pursue smaller capitated agreements remains very positive.

Great. Thank you both.

That concludes our question-and-answer session. I will now turn the conference back over to Edward for closing comments.

Well, thank you. Thank you everyone for the time today. You know, if I reflect upon the last four to five months here as a company, you know, a lot of accomplishments in the fact that, one, we have had the ability to sell our P&HS business. Teo, the balance sheet optimization, which we just completed today, now leaves us in the position as a leaner, more efficient, you know, company as we proceed going forward. With that, I look forward to the next several quarters to be able to have, you know, these dialogues, and we can continue to discuss the progress that the company is making. Thank you, everyone.

That concludes today's call. Thank you all for joining. You may now disconnect.

Hello. Good day, and thank you for standing by. Welcome to the Accendra Health's Fourth Quarter 2025 Earnings Conference Call. After the speaker's remarks, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Parish, Vice President, Strategy, Corporate Development and Investor Relations.

Thank you, operator. Good afternoon, everyone, and welcome to Accendra Health's Fourth Quarter Earnings Call. Our comments on the call will be focused on the financial results of the fourth quarter of 2025 all of which are included in today's press release. The press release, along with the fourth quarter 2025 supplemental slides are posted on the Investor Relations section of our website. Please note that during this call, we will make forward-looking statements that reflect the current views of Accendra Health about our business, financial performance and future events. The matters addressed in these statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied here today. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will result or be achieved. Please refer to our SEC filings for a full description of these risks and uncertainties, including the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law. In our discussion today, we will refer to non-GAAP financial measures and believe they might help investors to better understand our performance or business trends. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I am joined by Ed Pesicka, Accendra Health's President and Chief Executive Officer; Jon Leon, the company's Chief Financial Officer; and Perry Bernocchi, the company's Chief Operating Officer. I will now turn the call over to Ed. Ed?

Thank you, Will. Good afternoon, everyone, and thank you for joining us on the call today. I am pleased to welcome all of you to our very first earnings call as Accendra Health. I'd like to begin by giving you my thoughts related to the strengths of Accendra Health and why we are so excited for our future and where we are going. First, it is important to understand the size of the market that we serve or the size of the pie. Our expansive payer relationship gives us access to approximately 300 million Americans of which the CDC estimates that 3 out of 4 adults are living with some type of chronic condition. And our nationwide footprint makes Accendra Health a premier choice for all constituents involved in the administration of care in the home-based setting. In this expansive market, we have developed high brand recognition and customer support and reliance on both Byram and Apria. Our two primary go-to-market brands. We have established this through leading service, consistency and reliability. This continues to be validated by Net Promoter Scores that have exceeded the industry average for the last several years. We also have a broad range of growing product offerings and capabilities, which provides us the ability to serve patients in the home in many of the largest and fastest-growing chronic condition categories. As a result of the foregoing, we are a national leader in home-based care for numerous chronic conditions, which afflict millions of Americans and our strengths are differentiators compared to the vast majority of the thousands of other participants in the industry. As we look forward, we have a bullish outlook on the long-term demand for our unique offerings. Economic pressures continue to push care to the home-based setting while the country's aging population is afflicted with a rising number of chronic conditions. We are also optimistic about the strong long-term demand due to increasing awareness about proactive health management amongst the population, which is still meaningfully underdiagnosed, specifically in the sleep category. Another area of opportunity for us is in the anticipated competitive bidding, specifically in diabetes, urology an ostomy, all categories of strength for Accendra Health. As CMS, along with ourselves and other industry leaders work to drive fraud, waste and abuse out of the system, we believe that we are well positioned for Medicare's competitive bidding process considering our footprint, our efficient service model and broad existing referral source recognition. To capitalize on the overall favorable backdrop, we are leveraging technology and automation to ensure that we provide an industry-leading home-based care offering built on: one, Being a trusted, reliable and easy to understand partner for our patients and their clinicians; two, an integrated, streamlined and compliant reimbursement process for our payers, while at the same time, maintaining a best-in-class revenue cycle management capabilities; and three, providing a streamlined and cost-efficient channel to market for our manufacturing partners. Just a few examples of the use of technology to both improve the customer experience while also lowering our cost to serve include the use of technology to automate payer qualifications, enabling faster and more accurate order validation and improving revenue capture. Another example, building on the strength of our MyByram app is the expected launch of our new MyApria app in Q2 of this year, which is expected to enhance the customer experience while also increasing operational efficiency and supporting patient therapy adherence. Finally, in a practical application of leveraging technology, enhancing the customer experience and overall focus, we continue to see success in the fourth quarter with our Sleep Journey initiative. I'm happy to highlight continued success in our sale of sleep supplies, which grew in the range of 8% to 9% for both the quarter and full year. Finally, we are pleased to finish the fourth quarter with the completion of the sale of our former Products & Healthcare Services business, Owens & Minor to Platinum Equity on December 31. I'd like to thank and commend all parties involved for working so diligently to complete the transaction in such a quick time frame. With the transaction now closed and final separation work well underway, Accendra Health is now devoting all of its focus and energy to strengthening our core home-based care businesses to achieve reliable and growing free cash flow, stable growth and debt reduction. We're entering 2026 as a much leaner and more nimble business with a much higher margin profile post-PNHS divestiture. We have already taken actions to lean out our business and expect to continue taking actions to eliminate costs to address the loss of a large commercial payer as well as stranded costs. Despite never wanting to lose a customer, we maintained our financial discipline during the process. Since that time, our focus has been to ensure smooth transition of patient care and minimize our cost of transitioning the relationship related to this contract. Finally, now that we have the sales proceeds in hand, we are well positioned to take a thoughtful approach to optimizing our capital structure, taking into consideration all stakeholders. We are committed to deleveraging, combined with metered investments as we move forward. This will be a continuation of what we did in Q4 with investments in technology, while also paying down debt by $65 million from ordinary free cash flow. Before I turn it over to Jon, let me reiterate my excitement about the strength of Accendra Health, the growing market that we participate in and where we are going as a business. With that, I will now turn the call over to John to discuss our financial performance in the fourth quarter and our outlook for 2026. Jon?

Thanks, Ed, and good afternoon. I want to start by reminding you that despite the closing of the divestiture at the end of 2025, we will continue to report our results on a continuing operations, discontinued operations basis for as long as accounting rules require us to show comparable results. And like the last couple of quarters, unless otherwise stated, my remarks today will focus on the continuing operations. The continuing operations financial statements are what you should expect from Accendra Health. I'm sure we all look forward to much reduced business complexity post divestiture as we move through 2026. Also please note that any discussion about the financial results and outlook for the company, will cover only non-GAAP financial measures. You can find GAAP to non-GAAP financial reconciliations in the press release filed a short time ago and residing on our website at accendrahealth.com. Fourth quarter results were largely in line with much improved cash flow and lower debt compared to the third quarter. In the fourth quarter, there was decent year-over-year growth in the key categories of sleep therapy, ostomy and urology as we have seen in recent quarters. Diabetes grew by almost 2% versus last year, an improvement as compared to flat year-over-year results in Q3 and insulin pumps led to quarterly diabetes category growth. The fourth quarter saw the initial impact of a previously discussed contract loss and price impact of a large commercial payer. Overall, this payer's impact on quarterly revenue was approximately 1% of what would have been over 3% growth. This impact on revenue will significantly increase throughout 2026 in aggregate to approximately $300 million in 2026 versus 2025 and approximately an additional $40 million in 2027. We anticipate that we will have completely lapped the impact of this revenue loss by the end of the first quarter of 2027. We are on our way to replacing this lost revenue margin. For all of 2025, revenue was nearly $2.8 billion, up a little more than 3%. Throughout the year, growth in the large sleep category as well as ostomy and urology led the way, a somewhat weaker collection rate compared to a strong 2024, also inhibited top line growth. Fourth quarter adjusted EBITDA was $90 million compared to $102.5 million in last year's fourth quarter. The change was driven by lower payment prices, inflationary product cost increases, higher health benefit costs and stranded costs that were only partially offset by lower other teammate benefit costs. For the full year, adjusted EBITDA was $375 million, up slightly from 2024. The same factors impacted the fourth quarter drove the full year results. Adjusted EBITDA results include $12 million of stranded costs in the quarter from the pre-divestiture business and $36.5 million for the full year. Beginning with our Q1 2026 results, we will no longer be specifically breaking out stranded costs because with the finalization of the divestiture, these costs will now be part of the operating expenses of Accendra Health. Expense reduction, including former stranded costs is a key component of our 2026 expectations. As I mentioned, we saw much improved cash flow in the fourth quarter and related debt reduction. For the fourth quarter of 2025, operating cash flow was $68 million, which includes $67 million of cash used by the former discontinued Products & Healthcare services business. So the continuing operations business generated $135 million of cash from operating activities. For the full year, while the consolidated business of both continuing and discontinued operations had a use of cash from operating activities of over $100 million, the continuing operations that going toward Accendra generated $154 million in cash from operating activities. As a reminder, the full year cash flow from continuing operations includes $98 million in cash costs to terminate the Rotech acquisition in the summer of 2025. For the continuing operations, free cash flow in the fourth quarter, defined as adjusted EBITDA less patient equipment capital expenditures, net of noncash convert-to-sell write-off expense and after consolidated interest paid, was $18 million in the fourth quarter and for the year was $98 million. This reinforces the strong cash generation profile of Accendra compared to the legacy business. At December 31, net debt was $1.8 billion, down $315 million from September 30 and down $46 million since year-end 2024. Prior to the closing of the divestiture, we had already reduced debt by $65 million from September 30. The net proceeds received from the divestiture of the Products & Healthcare Services business of $342 million are included in the December 31 cash balance. Also, as a result of customary final purchase price adjustments, including a working capital true-up, we expect to receive approximately $12 million to $15 million of additional proceeds in the spring. As divestiture closed, we used $66 million of proceeds to settle bank debt obligations under the AR securitization program that were entirely related to PNHS. This is all detailed in slides filed via 8-K just after today's market close and also residing on our website. In addition to the $282 million of cash on the balance sheet at December 31, we had nearly $220 million of available capacity under our committed revolving credit facility and $16 million available under a newly amended accounts receivable securitization program. The bottom line is that we believe there's ample liquidity available for the business. Also, we ended the year comfortably in compliance with our debt covenants. As we've been saying for months, all net proceeds from the divestiture will be used to reduce our debt balance. We have a long-range leverage target of 3x adjusted EBITDA, which we believe is very achievable and debt reduction continues to be a top priority for 2026 and beyond. We are also committed to maintaining a capital structure that supports the transformation of the business into a pure-play, cash-generative home-based care company. We are actively evaluating all options to optimize our capital structure into our engaging stakeholders to help ensure we come away with the structure that is the most appropriate for the new higher profit, better cash flow Accendra while protecting the interest of our shareholders. We believe this process will conclude in the near term. Turning now to the 2026 outlook. The slides I referenced earlier also include pages to assist with 2026 guidance and depict the key drivers from our 2025 results and our 2026 full year guidance. I'll begin by walking through the net revenue slide. We expect annual revenue to be between $2.55 billion and $2.65 billion. As you will see, the greatest impact results from the changes with the single large commercial payer discussed earlier. Of the $300 million-plus impact in 2026 compared to 2025, approximately 15% of the reduction versus prior year will occur in Q1 and 25% to 30% in each of the second through fourth quarters. This will be partially offset by volume growth and improved collection rates. Looking at the adjusted EBITDA slide as follows: we expect 2026 adjusted EBITDA to be in the range of $335 million to $355 million. Unsurprisingly, the large commercial payer change again has an outsized impact and will be somewhat mitigated by cost reduction directly related to this payer, other expense takeout and volume growth. The 2026 expense reductions have been identified for some time and a number of actions have been taken or slated to be taken on a rigid time frame. Finally, we included a levered free cash flow walk, which again shows the strong cash flow from the Accendra business. At the midpoint, we expect at least $100 million of free cash flow in 2026. Much of the cash flow projected in 2026 is spoken for due to the cost throughout the year to separate Accendra from Owens & Minor and cash outlays related to certain expense reduction activity that I mentioned earlier. This is only a 2026 issue and future free cash flow is expected to be comparable or better and will help drive further debt reduction. In thinking about quarterly cadence, between cost reduction ramping throughout the year to a full run rate benefit, the replacement of the previously discussed impact of the large commercial payer, the time needed to reduce stranded costs and effectively separate from Owens & Minor in the business' normal seasonality. We expect about 60% of the adjusted EBITDA to be realized in the second half of the year with the first quarter of the year being the weakest and Q4, the strongest. In conclusion, Accendra Health is a very different company than the pre-divestiture Owens & Minor. The investment thesis is much improved, and we are proud to be among market leaders in a growing and dynamic space and look forward to demonstrating consistent earnings and strong cash flow. With that, I'll now turn the call back to the operator for Q&A. Operator?

[Operator Instructions]. Your first question comes from Michael Cherny of Leerink Partners.

Maybe if I can just dive in on some of the commentary you made on investments. Fully understand, I think we all do the dynamics around debt pay down, but you talked about targeted investments. As you think about the businesses, especially with the Rotech deal being in the background, what do you see target investments looking like for the RemainCo going forward?

Yes. I think there's a couple of different ways to look at this. And when I talked about the metered investments, primarily in 2026, we're looking at investment in technology, as I talked about, to continue to lower our cost to serve as well as improve their customer experience. I think on the -- if you're looking specifically around the M&A side, there may be an opportunity to do some tuck-ins but again, I think our -- I know our primary focus in 2026 is going to be around debt reduction. And then those metered investments would be around technology to improve customer experience as well as lower cost to serve and we would consider, if appropriate, some small little tuck-ins.

That's helpful. And just one more. You talked about the rebuild of revenue recapture opportunity as you have the large customer rolling off. You signed a preferred agreement with Optum. How is that going so far?

Look, it's still early in the process. We're starting to gain some traction. But as Jon talked even in his prepared remarks, the opportunity for us to fill in the gaps, we know we won't fill and complete -- completely fill in the gap. So you can see from our walk on revenue, but it does create opportunity for us to redeploy resources to start to backfill that revenue with other revenue, whether it be a preferred provider agreement or just expansion of existing contracts and relationships that we have.

Your next question comes from Kevin Caliendo with UBS.

One, just a numbers question. Jon, how much was patient CapEx in the fourth quarter? And how should we think about patient CapEx as a percentage of overall CapEx in 2026.

Yes, Kevin. It was $45 million in the quarter, about $189 million for the year. If you think about 2026, as we've talked about, this customer -- customers that were losing had a disproportionate amount of CapEx relative to the size of that agreement. So as you saw in our guidance numbers coming down by some $25 million, $30 million. But that -- you think about patient CapEx was going to run roughly 95% of the total going forward.

Okay. That's helpful. Just wondering if there's been -- there's been talk of a manufacturer coming back to market who had been sort of out of the market for a while. Wondering if you have any update on that? And I was wondering if that could actually maybe provide a little relief on cost if another manufacturer were to come in CPAP or events or and the like.

Yes. Obviously, I can't comment on what other companies are planning on doing, but should another manufacturer come back into the space, I think it would create a different competitive dynamic in the market.

The next question comes from Daniel Grosslight with Citi.

Really appreciate all the detail that you've provided in your presentation. If I could just go to the adjusted EBITDA range for the '26 guide. I'm curious if you can kind of maybe break down for us how much of that volume improvement I guess it will largely come through volume improvement. But how much of that is driven by Optimum and perhaps other contracts that you haven't announced publicly yet? And how much is kind of non-Optimum and noncontracted at the moment?

Yes, Daniel, it's Jon. I would say -- I would not say there's a lot of preferred agreement built into that volume growth, and it's fairly well spread across all therapy categories. So as Ed mentioned earlier, that these are -- these contracts are attractive. It takes a while to ramp them up. So yes, we have some upside built into the volume growth, but it is by no means the bulk of that, and it's pretty well spread across customers and therapy categories.

Got it. Okay. And then on your CapEx guidance, you're no longer guiding to a net CapEx number and I see a footnote that's because I guess I don't know. I just said it doesn't include sales, patient CapEx. What are your expectations now on a net basis for CapEx? And is the delta going to be reduced significantly because of that contract rolling off?

So overall, I would still expect about 30% of the growth to be the number that you're going to see in the sales of patient CapEx, remember when calculating any cash flow off of that, that number, that 30% is already in your adjusted EBITDA number. So we wanted to be clear that we're not double counting. So that's why we've presented the way we have today. But when you think about the dollars coming back, it's roughly 30% of the total.

The next question comes from John Stansel with JPMorgan.

I just want to touch on in the adjusted EBITDA bridge. The manufacturer cost increases and inflation seems like it's outpacing pricing growth. Is that concentrated to a particular category or area? And how should we think about that as a kind of durable trend?

Yes. I would tell you, John, it's -- certainly, I wouldn't call it a trend, I'd call it more of an opportunity for us. And I would not particularly tell you it's linked to any one supplier. It's a trend. We have seen it for a while, but it's clearly a focal point for us as we go enter 2026 and beyond. And we view it as an opportunity to really grow the EBITDA from where we are today.

Great. And then you mentioned that you're kind of considering all options to kind of optimize the balance sheet. Can you just spend a little more time talking about your levers around balance sheet optimization. It sounds like there's kind of imminent changes you think you could be making?

Yes. The way we think about this is, obviously, with the sale of NHS business and with the cash on hand on the balance sheet plus with the improvement in net debt in the fourth quarter beyond that, any time you have a major transaction like this, it creates the opportunity for us to step back and really assess our capital structure. It gives us the opportunity to assess our capital structure holistically. And I think we have to and we will look at it based on the business that we have, what Accendra is, it's a business today that has a much different working capital requirement than what the legacy business was. It's a business that we do have relatively predictable PSC or CapEx on it. And it's a business that has much stronger margins than the legacy business. So I think that's important to understand that as the backdrop of, as we have the transaction that's closed, we have the cash on hand. It gives us an opportunity to really step back and reassess.

The only thing I would add as a comment, which I fully agree with is we obviously have some things we have to address and the maturities that are in '27, so debt coming current later this quarter, which is the half to. But to Ed's point, everything else will be opportunistic in making sure we have a capital structure that fits the new business model.

The next question comes from Eric Coldwell with Baird.

I wanted to go back to that recent question on manufacturer cost increases and inflation. I want to be -- if we can, I want to be clear on this. Are you seeing broad-based cost increases across multiple manufacturers and categories? And is that -- so is it general market environment? Are they passing tariffs on do you guys trying to figure out what it actually is? Is it related to a specific primarily a specific manufacturer, a specific product line? And then how does that compare to the past? Because this is -- obviously, this is a new chart for us. Thanks for giving it to us. But we don't really have the historical context on it. And then finally, Jonathan, you said you saw some opportunity there to improve upon it. What's in your control? What opportunities are in your control? How do you improve upon it?

Yes. I guess I'll add a little more color on it. So Eric, it is not across -- it is not across every single category that we participate in. it's in some of the more major categories where there's -- this is a normal process we see every year to some extent, and we have the ability to offset it with a different -- a couple of different areas. We have the opportunity to potentially offset it with mid-year all these contracts aren't locked in for the full year. There's ones that are phasing in during the year. And I think it creates opportunity for us to work closer with various manufacturing partners to look at different pricing models and growth incentives and other things like that. So that's where we think about it and where we're going to be able to go after and attack it. So I think that hopefully frames it out. It's not necessarily tariff related. It is more related to normal inflation that we've seen historically and then our ability now to work that down as the year progresses. And I think that's what Jon -- I don't want to speak for you, Jon, but I think you probably meant that as the year progresses, this is the number we have right now. There's opportunity for us to continue to work with our manufacturing partners to mitigate and reduce some of that.

Yes. That's super helpful. If I could do one follow-up?

Sure.

Yes. Collection rate also on that same chart. You mentioned in the prepared commentary that collection rate was a bit of a -- I think you said it was a bit of a headwind in '25, which impacted growth, but clearly, that would have been a big drop through to EBIT to profit. You're looking for some improvement in '26. What gives confidence what are the drivers of the improvement? Basically, what happened? And how do you -- it's not a huge number, but how do you fix it?

Yes, Eric, I'm actually very confident in that rebound in '26 because the pullback we saw was largely due to some of the technology investments we made in '24 and '25 that just you make the investments, there's a learning curve, things have to get worked out. We worked out the kinks. So that just really set us back a little bit. The technology we put in place, we'll be all very confident will be additive to our collection rate going forward. So I will tell you the pullback that you saw is minor. But does fall through. you're correct about that, but really related to the onboarding or the implementation of new investments to improve in the future. So still really happy with where the rate is overall, but I mean it came up a very strong '24 had some investments we had to work through, and it's going to get better than '26.

What is your bad debt rate? Now that you're a stand-alone pure play, maybe you can talk about that a little bit.

We had not contemplated talking about debt. It's not disclosed, but I'll tell you I put it up against anybody else in the business.

You want to give us a [ Brent Bastia Volkswagen ] kind of ratio here?

I'll respectfully pass on the opportunity to do so.

Your next question comes from Allen Lutz with Bank of America Securities.

This is Dave on for Allen. Maybe just to kick it off, just more on the revenue side. your sleep growth was 89%. It looks to be a slight step up quarter-over-quarter. Just would love to know what's driving that. And then would just also love to get a sense of the underlying health of the market across some of the other categories outside of sleep and diabetes and what's contemplated in guidance here for drivers of growth. I guess, from a volume and pricing perspective, specifically for home respiratory therapy, ostomy, wound care.

Yes. So I think talk about the sleep category and what's been driving it. We've talked a lot about it over the last year was our sleep journey. And Perry and the team across the business have spent a significant amount of time understanding that sleep journey from patient capture upfront. But as important, if not more importantly, the residual reoccurring revenues associated with sleep making sure that it's easy for -- easy for the customers, that being the patient to get the reorders and that revenue cycle continuing. So that's helped out tremendously with it. I think overall, too, I think you got to be cognizant in the sleep category. It's a growing category. More and more people continue to get diagnosed with sleep apnea. That continues to expand, and it creates opportunity for additional growth there. I think in diabetes, too, it's a little bit of a mix. We saw -- in the fact that with diabetes, we saw volume go up slightly more than what our overall growth rate was. And that's -- we got a little bit of the pharmacy DME mix in there that's driving that. And I guess overall, the anticipation is you've got low single-digit growth in most of these categories on average, some of them above that, some bit lower than that expected in 2026. And the growth plan is that plus several other initiatives we have in various categories to expand beyond that. So hopefully, that frames it out, what we're seeing right now.

I guess just real quick one clarification point. I think you mentioned some of the benefits from the pharmacy DME mix. I guess, is that now a tailwind on the diabetes side. Is that what you're mentioning or at least was -- is the expectation?

Yes, no tailwind at all. That's kind of -- it's just a one channel versus the other channel.

We're still seeing the shift from pharma to DME -- sorry. DME to pharma. Yes.

Got it. Yes, I just want to clarify that. And then, yes, I think there's a lot of, obviously, great color you guys provided on the various drivers of cash flow here. But I just wanted to take a step back. And I would just love to get an understanding of what the biggest swing factors are here for the year on cash flow. From your standpoint where you sit, where you have visibility into and maybe ones that are less so. Just what are the biggest swing factors we should think through here?

I think the biggest stand-alone single item there is if you're looking at the slides we've provided is the transaction break fee and the transaction financing fees, that's $98 million. It's probably the biggest one-timer there.

Yes. It's important to realize also, Dave, that Accendra Health compared to legacy Owens & Minor, the working capital business, it's completely different. This is a business that runs with very little of any working capital consumption. And we have opportunities to improve on that as well. So it's cash generative. It's a recurring revenue business with really strong working capital. dynamics behind us. We're very, very different than what you guys are used to about.

This concludes the question-and-answer session. I'll turn the call to Ed Pesicka for closing remarks.

Thank you, operator, for that. Look, this is an extremely exciting period in the history of Accendra Health. We, myself, personally, we're all extremely excited about what the future has as a pure-play supplier in the home-based care space. and I look forward to continuing to providing updates and sharing our progress with you as we continue through the year. So thank you.

This concludes today's conference call. Thank you for joining. You may now disconnect.

Good day, and thank you for standing by. Welcome to Owens & Minor's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Parrish, Vice President, Investor Relations.

Thank you, operator. Good evening, everyone, and welcome to Owens & Minor's third quarter earnings call. Our comments on the call will be focused on the financial results for the third quarter of 2025, all of which are included in today's press release. The press release, along with the third quarter 2025 supplemental earnings slides are posted on the Investor Relations section of our website. Please note that during this call, we will make forward-looking statements that reflect the current views of Owens & Minor about our business, financial performance and future events. The matters addressed in these statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied here today. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs and projections will result or be achieved. Please refer to our SEC filings for a full description of these risks and uncertainties, including the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law. In our discussion today, we will refer to non-GAAP financial measures and believe they might help investors to better understand our performance or business trends. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release. Today, I am joined by Ed Pesicka, Owens & Minor's President and Chief Executive Officer; Jon Leon, the company's Chief Financial Officer; and Perry Bernocchi, the EVP and CEO of the company's Patient Direct segment. I will now turn the call over to Ed. Ed?

Thank you, Will. Good afternoon, everyone, and thank you for joining us on the call today. Earlier this month, we announced a definitive agreement with Platinum Equity to sell our Products & Healthcare Services segment, which includes both the Medical Distribution and Global Products divisions. Built on a strong foundation, we believe P&HS will be better positioned to compete in today's evolving market under Platinum Equity's private ownership model. We are also excited to be retaining an equity interest in the business due to Platinum's operational expertise and commitment to building on the customer-centric legacy of the business, which will be critical to the future growth of P&HS. The Owens & Minor name has long been associated with our P&HS business and thus will follow that business in the transaction. As we near the close of the transaction, we are excited that we will be rebranding the public entity to better represent our trajectory going forward. So as I think about the future, following the divestiture of a Product & Healthcare Services, I am thrilled that we can fully align around a single business. Our capital allocation, strategic priorities and execution are no longer split. They are unified around advancing the future of home-based care through Patient Direct. And by retaining our higher-margin Patient Direct business, we will generate improved and more consistent cash flow. Accordingly, we will prioritize debt repayment in the near term to grow our financial flexibility while investing in technology to lower our cost to serve and improve the customer experience. Now I would like to begin by sharing some of the opportunities we're seeing in the market and how these trends we're tracking continue to support our business, a business that we have grown and strengthened over time. Beginning with our acquisition of Byram in 2017, we have spent the past 8 years firmly establishing ourselves as a leader in the home-based care space. During this time, we have expanded and diversified our payer relationships while broadening our product offering and capabilities. This, combined with our coast-to-coast network gives us the reach and infrastructure to provide support for patients across multiple chronic conditions, including diabetes and sleep apnea. These conditions are not only widespread, they're growing, which creates a tremendous opportunity for us to make a meaningful impact. Over 37 million people in the United States have been diagnosed with diabetes and an estimated 96 million adults aged 18 and older are living with prediabetes according to the National Institutes of Health. In order to capture future growth from these tailwinds, we will focus our investments on technology and automation, which will, one, improve the patient's experience; two, allow us to quickly scale our business; three, increase awareness; and four, further reduce our cost to serve. Another core area for us is sleep apnea, where it is estimated that 85 million adults in the United States have some degree of OSA with approximately 70 million of those presently undiagnosed or undergoing the diagnosis process. While the use of GLP-1s has increased in recent years, recent studies published by the Lancet expect the use of GLP-1s to reduce the prevalence of OSA by only 4% over the next 25 years. This is a significant opportunity for us to serve these future patients. It also further demonstrates the value of our preferred provider agreements where new patients are encouraged to begin their lifelong treatment journey with us, supporting better health and a better quality of life. Earlier this year, CMS proposed rules regarding competitive bidding around home-based health care and DME. Since entering the home-based care space, our top priority has always been and will continue to be ensuring patients receive the products and services they need, reliably and on time. While competitive bidding programs have historically raised questions about patient choice and supplier access, we believe our scale, expertise and the quality of the products we distribute positions us as a standout partner in any environment. As we await further guidance from CMS, we are actively collaborating with industry partners and advocacy groups to maintain a strong, transparent dialogue that keeps patient outcomes at the center of the conversation. Before I turn the call over to Jon to discuss our third quarter financial performance and our thoughts on the year-end, I would like to close my thoughts today on where we're going in 2026. With the divestiture of Product & Healthcare Services expected to close in the first quarter of 2026, we are incredibly excited about the future as a Pure-Play business in the home-based care space. As our business grows organically through our preferred provider agreements such as our recently announced agreement with Optum and an aggressive sales strategy, we are diligently focused on controlling our balance sheet through debt paydown, managing operational cost controls and lowering the cost to serve and accelerating our cash flow generation. As we close out 2025 and look forward to 2026, we will begin the next evolution for Owens & Minor, with myself, Jon and Perry Bernocchi, the Executive Vice President of our Patient Direct business, remaining at the helm of our organization. I would like to thank all our teammates who have done a great job of staying focused on serving our customers. With that, I will now turn the call over to Jon to discuss our financial performance in the third quarter and our outlook for the rest of 2025. Jon?

Thanks, Ed, and good afternoon, everyone. We were very excited to announce the signed agreement for the sale of the Products & Healthcare Services segment a few weeks ago. I've had the pleasure of getting to know and working with the Platinum Equity team and absolutely believe they are the right owners for the P&HS business. Further, we're extremely excited about our future as a Pure-Play Home-Based Care company with all the positive attributes that come with it, as Ed detailed. We look forward to having a simpler business model and a cleaner investment thesis. We also believe our ability to dedicate investments solely into the subtractive space will lead to much greater results for all stakeholders. As you will recall from last quarter, the Products & Healthcare Services segment is being accounted for as an asset held for sale discontinued operations. So unless stated otherwise, my remarks today will focus solely on the continuing operations, which, as a reminder, is made up of our Patient Direct business and certain functional operations and identified stranded costs from the separation. Also, please note that any discussion about the financial results and outlook for the business will cover only non-GAAP financial measures. You can find GAAP to non-GAAP financial reconciliations in the press release filed a short time ago and residing on our website. Turning now to the third quarter results. Revenue was $697 million compared to just under $687 million in the third quarter of last year. Last year, in the third quarter, there was a $6 million onetime revenue benefit from a multiyear claims reprocessing matter. This impacted the growth rate by about 80 basis points. In the quarter, there was decent year-over-year growth in the key categories of sleep therapy, ostomy and urology. Diabetes was nearly flat compared to the third quarter of 2024, but showed better year-over-year performance compared to the second quarter. We continue to ramp up efforts to recapture stronger diabetes growth through improved therapy adherence and capturing more customers across our entire ecosystem of both DME and our own pharmacy channel. Overall, we would expect revenue in Q4 to show a similar year-over-year growth rate but be seasonally improved from the third quarter in absolute dollar terms. For the 9 months ended September 30, revenue was nearly $2.1 billion, up 3.4%, with last year's Q3 onetime benefit that I just mentioned, having a 30 basis point impact on growth compared to 2024. Similar to the quarter, growth for the year-to-date period was led by sleep therapy, ostomy and urology as well as smaller categories, including chest wall oscillation, which although is still small, has shown a phenomenal growth and demonstrates our ability to successfully expand our therapy portfolio. Adjusted EBITDA for the third quarter was $92 million compared to $108 million in last year's third quarter. Here, that same onetime $6 million benefit from last year falls straight through to adjusted EBITDA and hindered reported EBITDA growth by nearly 500 basis points. Additionally, product cost increases and higher health benefit costs were only partially offset by lower general costs such as delivery, outsourcing and occupancy expenses. It is important to realize that the third quarter adjusted EBITDA from continuing operations, of course, includes the normal adjustments to EBITDA of interest, income taxes, depreciation and amortization and less than $1 million of exit and realignment charges. So the $92 million earn is an appropriate representation of cash earnings before interest and taxes. This return to a higher earnings quality is quite different from what we've been able to report over the past several quarters. There will certainly be periods of time where there are cash adjustments in the adjusted EBITDA figure, but this is an example of what is meant when we refer to a cleaner and simpler investment story as a result of the divestiture. For the year-to-date period, adjusted EBITDA was $285 million, a reported 6.3% increase compared to $268 million for the 9 months ended in 2024. On the larger year-to-date adjusted EBITDA amount, last year's third quarter onetime $6 million benefit was an approximate 230 basis point drag on the year-to-date growth rate. Third quarter results include $11 million of stranded costs, which is the same as last year's third quarter and the second quarter of 2025. Year-to-date stranded costs were $25 million versus $39 million for the same period in 2024. We continue to believe the annualized stranded costs from the divestiture will be approximately $40 million. Adjusted net income was $0.25 per share, which compares to $0.36 per share in the third quarter of 2024. For the 9 months ended September 30, adjusted net income per share was $0.80 versus $0.64 in the same period last year. We are affirming our guidance for 2025 full year of revenue between $2.76 billion and $2.82 billion, adjusted net income between $1.02 and $1.07 per share and adjusted EBITDA between $376 million and $382 million. Based on my earlier comments around fourth quarter revenue, we expect full year revenue to come in toward the bottom of the guidance range. On the guidance assumption slide that has been posted to the Investor Relations section of our website, you will notice that the interest expense range has increased as a result of a change in the allocation of these expenses between continuing and discontinued operations. We believe the increase in interest expense will be offset by lower stock compensation expense. And as a result, the EPS guidance range is unchanged. Turning to the balance sheet and cash flow. At September 30, net debt was $2.1 billion. Since year-end 2024, the increase in debt is related to the expenses to exit the previously planned Rotech acquisition, which were paid in June of approximately $100 million and more recently, cost to remedy a challenging start-up of a new kitting facility for the Products & Healthcare Services segment, which has led to a temporary inventory imbalance. Work needed for that P&HS kitting facility is ongoing. And as a result, the net debt level at the end of this year is expected to be only slightly lower than at September 30. While detrimentally impacting third quarter cash flow, as shown in the consolidated cash flow statement, the overbought inventory from the start-up will benefit customer demand across the P&HS business lines in the coming months and reduces the cash needed to be spent over that same time period. It's important to recognize that more than 100% of the cash used from operating activity in the 3 and 9 months ended periods was due to the discontinued operations and that continuing operations, inclusive of stranded costs, generated cash from operating activity. In fact, in measuring levered free cash flow as adjusted EBITDA from continuing operations, less CapEx from continuing operations and less all interest costs across both continuing and discontinued operations, there was $28 million of free cash flow in the third quarter and $78 million through the first 9 months of the year. Before taking questions, I'd like to say we're very bullish on the outlook for the Home-Based Care business and recognize that it's a very exciting time in the history of Owens & Minor. We look forward to getting on the road, sharing our enthusiasm and having the market better appreciate the attractiveness of the home-based care space. With that, I'll now turn the call back to the operator for Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Michael Cherny with Leerink Partners.

This is Dan Clark on for Mike. First one from us. I appreciate all the color you gave on kind of results in 3Q and how you're thinking about the rest of the year. At a high level, how should we think about the durability of these trends going into 2026? And then would love to hear as a follow-up, just kind of how you're selling into the Optum channel is going thus far.

This is Ed. I'll start. Selling in the Optum channel, it's new. We're -- we just recently signed the preferred provider agreement. We're tracking where we expect to track on that, but it's going to create more and more opportunities for us as we move forward. Regarding going forward in '26, we haven't published '26 data or information yet. We'll do that when we get closer to -- when we get -- when we report the full year results for the business.

Yes. I would just add, Dan, there's really not much secular going on that would change those trends. I'll remind you that we discussed in our 10-Q filed tomorrow morning that there'll be a large customer loss in the continuing operations in 2026 that will impact the full year. But absent that, we expect a fairly strong 2026. As I said, we'll put guidance out with the fourth quarter results.

The next question comes from the line of Kevin Caliendo with UBS.

I guess it's sort of a follow-up to that in terms of trends. Like how should we be thinking about this company's business or outlook for 2026? Is there anything you can kind of lay out in terms of how the trends are migrating, how we should think about modeling it broadly speaking? I know you're not here to provide guidance, but there's obviously so many moving parts and how to think about run rates or anything like that would be super helpful. And the same sort of around free cash flow for 2025 and maybe how to think about free cash flow trends beyond where we are? I appreciate the color on what the sort of normalized cash flow was this quarter?

Yes, Kevin, it's Jon. I'll take a crack at starting that. So if you think about the trends going forward, the continuing operations, you can see not dissimilar trends on an organic basis as you would normally see. I think we'll have -- absent the exiting one customer, which we have talked about quite a bit. And as I said, there's more detail in our 10-Q, you'll see tomorrow all of that. But absent that, I think we'll have a pretty decent top line growth rate, call it, organically, if you will, absent that loss and some margin improvement and cash flow improvement given the absence of that loss of that contract because that we've talked about before, that is not a margin attractive or necessarily cash flow positive contract that's being lost. So that will certainly improve. From a free cash flow perspective, on a continuing ops basis, as I tried to outline in my prepared remarks, I think you expect Q4 to look a lot like Q3 from a continuing ops basis. I think we will have some nice free cash flow. As we go to '26, again, the trend shouldn't necessarily change. We'll be losing the heavy CapEx burden of that one large contract, but we will have stranded costs that we have to -- we'll begin to actively take out once the divestiture closes. And as well, there's the start of the other divestiture-related costs that we'll be paying really more so in the back half of 2026. So I would expect it to be not terribly dissimilar to '25, recognizing that we'll have a number of those one-off costs around the divestiture, which we have generally sized and are part of the press release we put out around the divestiture itself.

That's helpful. If I can ask a quick follow-up. The balance sheet -- there's so many moving pieces on here and current debt and timing. I know there's a lot going on here. So it's hard to get a full picture just on this one point in time. But relative post the acquisition or post the divestiture, excuse me, and where you sit, you have obviously talked with your credit agencies and everything else, your lenders. Are there -- is there any risk to covenants or anything that needs to change within those covenants coming out of this post sort of now that you've announced the deal and everything else is done and you're a month past -- or is that all fine?

No, we're good. Not at all. We just actually sent our covenant compliance to lenders and agencies in the last 48 hours. Very comfortable in compliance, and we expect to remain comfortably compliant throughout.

[Operator Instructions] The next question comes from Daniel Grosslight of Citi.

I was hoping you could provide a little bit more detail on how these preferred vendor agreements work and as we think about the loss of Kaiser next year, you've mentioned many times that, that's not an attractive piece of business from a margin perspective. But how many of these larger preferred vendor agreements do you think you would need to sign to kind of fill that Kaiser hole on the profitability from a profitability standpoint?

I'll start with that. And then obviously, we'll have Perry add some color onto this too. I mean, I think we did lose the large customer contract. It was a unique contract in that sense. And as Jon talked about it, when we looked at the EBITDA compared to CapEx on it, it was not a very positive cash flow generating business. So that alone will take very, very little additional revenue to pick up and cover that. And again, not to cover the revenue, but to cover the EBITDA and the cash flow. And then in addition to that, Perry, let me let you add additional color on what you're seeing and how you're thinking about those preferred provider agreements and the ramp of them.

Thanks, Ed. And from a standpoint of the Optum agreement, it's in its early stage. As Ed said, we have 450 forward-facing salespeople that are marketing to over 100,000 potential referral sources within Optum. What it does do is give us a preferred position within the Optum closed network as Apria and Byram as the leading home care home-based DME provider. So that is a go-to-market strategy from a push and a pull perspective within Optum. To Ed's further point, it will take less contracts or less revenue growth to cover the loss of the contract that we are losing, given everything that Ed outlined and Jon outlined. It won't take much for us to replace from a margin -- from a gross margin and an EBITDA perspective.

Got it. And just as a follow-up, I wanted to dig a little bit more into that issue in P&HS that is weighing on free cash flow. I think you mentioned with the kidney client. Can you just maybe explain that in a little bit more detail? And it is a little bit tough to look at your cash flow and balance sheet given cash flows on a consolidated basis and balance sheet is continued and discontinued operations. So maybe if you can help just parse out where in that -- in the cash flow statement, that headwind sits?

Yes. So I think there's a couple of things. I know Jon in his script, he tried to basically parse out as much as he possibly could, what the free cash flow looks like from a continuing operations basis based on continuing ops EBITDA, the CapEx as well as consolidated interest in the space. This has to do with -- we are opening up a new kitting facility outside of the U.S. There's normal start-up costs associated with that. And the biggest thing was the over acquiring of inventory to make sure we could make the kits and had it on there for scale. It's something that will work itself out through the next quarter plus, but it really is associated with a brand-new start-up of our kitting facility outside of the U.S. to make sure we have the ability to have diversified kitting both in the U.S. and external U.S. for our customers. And the bulk of that will show up in inventory as well as the change in payables we saw in this quarter. So Jon, I don't know if you want to add additional...

No, it's basically right. In my remarks, I mean, what we're doing now is making sure that, that burns off effectively that we serve all the customers' needs in the kitting business. And that has -- that defers other need for other capital across the business, both kitting and otherwise for the rest of the year. So it should burn itself off, but it will take a few months to do so.

This concludes the question-and-answer session. I'll turn the call to Ed for closing remarks.

Great. Thank you, operator. It's really an exciting period in the history of Owens & Minor. We're incredibly excited about the future as a pure-play supplier in the home-based care. And I look forward to sharing this progress with everyone early next year. So thank you, everyone.

This concludes today's conference call. Thank you for joining. You may now disconnect.