Good day, and thank you for standing by. Welcome to the Owens & Minor First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, please press Star, followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star and number one again. Thank you. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker for today, Jackie Marcus, Investor Relations. Please go ahead. Thank you, operator. Hello, everyone, and welcome to the Owens & Minor First Quarter 2024 Earnings Call. Our comments on the call will be focused on the financial results for the first quarter of 2024, as well as our outlook for 2024, both of which are included in today's press release. The press release, along with the supplemental slides, are posted on the Investor Relations section of our website. Please note that during this call, we will make forward-looking statements. 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. 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. In our discussion today, we will reference certain non-GAAP financial measures, and information about these measures and reconciliations to the most comparable GAAP financial measures, are included in our press release. Today, I'm joined by Ed Pesicka, President and Chief Executive Officer, and Alex Bruni, Executive Vice President and Chief Financial Officer. I will now turn the call over to Ed. Thank you, Jackie. Good morning, everyone, and thank you for joining us on the call today. As I reflect on Q1, I am both pleased with our financial performance and encouraged by the continued progress we've made with our evolving operating model through the first 12 weeks of 2024. In addition, we were able to make investments related to our long-term strategic plan we introduced in December of 2023, and these investments are ahead of schedule. We are also making operational investments to bring higher levels of service to our customers and ultimately, the patients served. Finally, in Q1, we onboarded new customers in our medical distribution division, navigated the seasonality of our patient direct segment, and overall met our internal expectations. While Alex will do a deeper dive into our financial performance and expectations for the remainder of 2024, let me review a few of our financial and operational achievements from the first quarter. First, our products and healthcare services segment posted a 3% year-over-year improvement in revenue, with our medical distribution division delivering mid-single-digit growth as a result of the onboarding of new customers, in addition to attractive same-store sales. In our global products division, we saw growth in our U.S. proprietary product sales, driven by improving in-channel sales as a result of enhanced focus and new product launches. Overall, I'm pleased to see the flattening of the curve of our product sales, with unit volumes continuing to increase as prices continue to settle back to pre-COVID levels. Our patient direct segment posted a 5% year-over-year improvement in revenue. We anticipated the first quarter growth to be in the mid-single digits as a result of very strong growth in Q1 of 2023, along with the adjustments to sales territories as we invested in additional commercial resources consistent with our long-term strategic plan. Additionally, we were not immune from the impact of the cyber incident at Change Healthcare in late February, which did have some marginal top-line impact to our business. However, we are currently working with Change Healthcare to ensure we capture the associated revenue and receive full payment for all services and products rendered. And I'm also very proud of our responsiveness to this issue to mitigate the impact to our company. More importantly, I'm even more pleased with our ability to successfully limit the potential disruption of our customers' ability to receive life-saving products and supplies they need every day. At Owens & Minor, we believe Life Takes Care, and we felt it was our responsibility, regardless of the obstacles, to continue to process orders and make the essential deliveries as quickly and efficiently as possible to provide continuity of care when it matters most. Turning back to our broader business, we entered the next phase of our operating model realignment at the beginning of the year, with an emphasis on identifying and capturing meaningful growth and profitability in our patient direct segment. This added focus in 2024 will enable us to make assessments and take actions related to improving our already well-run patient direct segment. We are utilizing the operating model realignment to implement transformational opportunities to improve our business reimbursement and collection model, and to gain efficiencies and grow profitability in areas such as our sleep supply customers. At the same time, in our product and healthcare services segment, we have embedded past initiatives into our daily activity while continuing to bring recently identified opportunities to fruition. Our segment leaders and I remain keenly focused on network rationalization and operational excellence. Everything from optimizing our manufacturing footprint to our supply chain network. Throughout the company, these activities have taken meaningful investments and will continue to do so for the remainder of the year, but we believe they will result in greater profitable growth for years to come. Lastly, I'm encouraged by our year-over-year adjusted earnings improvement and many of our other key indicators. These improvements show the continued positive momentum, and we're in line with our expectations. Alex will discuss these financials in greater detail shortly. Our recent success demonstrates that we are on the right path and that our strategy is working. We all know there will be obstacles in the future, and we believe that our focus to constantly improve the business will assist us in mitigating many of these obstacles, even those that we can't see today. We will remain focused on our long-term strategy and our future as an organization built on excellence. At our Investor Day in December of 2023, we outlined the five-year strategic plan, our vision for 2028, which is pillared by three key tenets: accelerating growth, optimizing our business to drive long-term profitability, and investing in our business. While we are in the early innings, we are doing exactly what we said we would, and we are seeing the results. I would now like to turn the call over to our Chief Financial Officer, Alex Bruni, to discuss our first quarter financial performance in more detail. Alex? Thank you, Ed. Good morning, everyone. I'll begin by providing an overview of our financial results and the primary factors that drove our performance in the first quarter of 2024. Our revenue for the quarter was $2.6 billion, up 4% compared to the prior year. We generated top-line growth in both of our business segments on a year-over-year basis. Products and healthcare services grew 3%, with medical distribution growth in the mid-single digits, and in our global products division, we saw growth in our U.S. proprietary product sales. Patient direct revenue was up 5%, which was partially impacted by the Change Healthcare cyber incident that slowed our ability to onboard new patients and renew eligibility for existing patients. Gross profit in the first quarter was $536 million, or 20.5% of revenue, compared to $497 million, or 19.7% of revenue, in the first quarter of 2023. Our gross margin expansion of 79 basis points can be attributed to three things. First, the profitability expansion in the products and healthcare services segment, driven by efficiency gains and the successful efforts of the operating model realignment program. Second, improved collections of patient direct sales. And third, patient direct sales growth, which carries a higher gross margin than products and healthcare services. Our distribution, selling, and administrative expenses for the quarter were $478 million, making up 18% of revenue. The $29 million year-over-year increase reflects higher variable expenses to support the growth in both segments, an increase in our teammate benefits, and our decision to make incremental investments throughout the company for future profitable growth. GAAP operating income for the quarter was $10 million, and adjusted operating income was $57 million. Adjusted operating income was up more than 20% year-over-year and was driven by the overall improvements in the products and healthcare services segment. The patient direct segment was impacted by expected investments in its future growth, regulatory reimbursement changes, and, to a lesser extent, the Change Healthcare cyber incident. Adjusted EBITDA was $116 million, up $8 million versus the first quarter of 2023. Interest expense for the first quarter was $36 million, a 16% decrease from the first quarter of last year, reflecting our prior work to reduce our total debt in 2023. Our GAAP effective tax rate was 19%, and the adjusted effective tax rate was 29%. Our GAAP net loss for the quarter was $22 million, or a loss of $0.29 per common share. Adjusted net income for the quarter amounted to $15 million, or $0.19 per common share. The significant increase in adjusted net income was driven by the factors mentioned above. Shifting to our capital structure and considering the investments we continue to make, as Ed outlined, cash flow generation and the change in debt levels reflected investments across the company, especially in inventory to support medical distribution, customer onboardings, and to maintain high-quality service levels. As of March 31st, our total debt was $2.2 billion, and net debt was $1.9 billion, up about 3% from last year-end. Through the remainder of 2024, we expect minimal net debt reduction as we make investments to drive long-term profitable growth. We remain committed to delivering our 2024 guidance. As a reminder, we expect revenue to be in the range of $10.5 billion-$10.9 billion, adjusted EBITDA to be in the range of $550 million-$590 million, and adjusted EPS to be in the range of $1.40-$1.70. Also, as a reminder, we expect seasonality to lead to a roughly 1/3, 2/3 split across the first and second halves of the year from an Adjusted EPS perspective, and we'd expect to deliver improvement in each sequential quarter. With that, I'll turn the call over to the operator for the Q&A part of the call. Operator? Thank you. We are now opening the floor for question and answer session. If you'd like to ask a question, please press star and number one on your telephone keypad. Our first question comes from Michael Cherny from Leerink Partners. Your line is now open. ... Good morning, and thanks so much for taking the question. Maybe if I can jump in first on Patient Direct, the dynamics in the quarter. You talked about the Change outage, not a surprise to anyone. Can you give a little bit more color on some of the magnitude of that Change outage and what you're seeing already in terms of visibility into improved payment rates and improved flows? Sure. Yeah, Mike, thanks for the question. Hey, on Change, I mean, first of all, I think you got to recognize what Q1 is. I mean, Q1 is, for Patient Direct, probably the most complicated, labor-intensive quarter of the year, as so many of the patients are changing insurance or payers, they're adjusting. So there's a lot of work associated with that. It had really a, I would say, a minimal impact on the top line, but it did have an impact on our collection. I'll also want to make sure that's recognized, this Change has been an incredible partner. They have worked closely with us. We've worked through it. You know, as we're coming through April, we're starting to see, you know, more and more of that work its way through the system. You know, but it was a labor-intensive process, and I think that's the thing that's important from an operating expense standpoint, significant labor-intensive process to do things more manually that used to—that were done instantaneously, from a system standpoint. So, you know, I, I think, you know, that had an impact this quarter on cash flow and had an impact on our receivables. You know, but as we get through Q2, we expect most of that to work its way through the system. Got it. And if I could just ask one more on Patient Direct. A number of recent developments across the CPAP market in terms of the OSA SURMOUNT data from Lilly, in terms of the Philips proposed and I think accepted settlement, or at least accrual relative to their CPAP devices. Anything you can provide us on updates on how you see the development of your sleep franchise and all things CPAP against the backdrop of your multi-year targets, and anything that's changed as we see some of these incremental data points on hopefully getting this market back to both, A, normalization and potential for demand changes over time? Yeah, I guess the way we look at it is, I mean, obviously, you've got the Philips, you know, with the issue that's out there publicly now. You know, that's been... If you think about it, Philips products have been really on hold for over a year here. And, you know, one of the things we've been able to do is continue to partner with others to bring the right amount of inventory in, so that way, we can hit the customer's needs. So that hasn't had an impact on us because other manufacturers have stepped up and increased production. You know, I think you'll continue to see that as we move forward. You know, the demand and starts on sleep continue to be strong for us. You know, that's probably that one, along with diabetes, are still our two fastest growing categories, growing faster than the overall segment. You know, so we anticipate that to continue. You know, and, you know, we talked a little bit about some of the work we're doing in the operating model realignment, specifically around sleep. I think that's important to make sure we understand the sleep journey better, so that way, we can continue to drive, you know, some strong growth in the future. Thanks, man. Yep. Our next question comes from Kevin Caliendo from UBS. Your line is now open. Thank you. Thanks for taking my question. I want to continue a little bit on Patient Direct. The margins, operating margins year-over-year fell about 35, 36 basis points. I know you talked a little bit about investments. You just mentioned how difficult it is in the quarter. I'm just, I guess what I'm wondering, is there any change of mix? Is there anything specific to that? Is there any way to think about how the margins should progress, or if there was any one-timers- Sure ... in there that would prompt the margins to decline year-over-year? And what you expect margins in the business, maybe, how we should think about the improvement or... I know we expect sequential improvement every quarter in the overall business, but how should we think about margins in that business on a year-over-year basis? Yes, we had a couple of different factors, I think, you know, to consider there. One is, at Investor Day last year, and even at the end of Q4 last year, we talked about this. So, you know, one, we are making investments in that Patient Direct segment with a significant ad of commercial resources. We talked about it back in December, you know, when we had our Investor Day and shared our 2028 strategy. And on that, we recognize two things happen when you do that. One is you do create some level of disruption as you're adding territories and expanding it out. You know, in addition to that, you know, the other aspect of it, we said that it takes about 12 months or so for those assets or investments to break even. So one of the things we should share is, we're actually ahead of schedule on adding those resources. You know, we think about it, we're trying to find the best assets to bring in the market, or in our case, our best teammates to add to the team, you know, and we were able to find much more of those at a quicker pace than we thought. So we had a little bit of extra expense associated with that. You know, and then it was also, as I discussed in the last comment, some of the processing costs and the extra time and that we had to put in to make sure we could get patients the product and get it out the door. That's another aspect around that. You know, but ultimately, if you think about long term, it kind of goes to the first question, your question, you know, we still remain extremely bullish on our Patient Direct segment. You know, from the market space we're in, from our positioning, how well the business is run, the investments we're making, not just looking at it in the short term, but looking at it from a long term. You know, those are the things that give us, you know, this extreme excitement around it and the bullishness in it. I think the one other thing to remember is, you know, we knew Q1 was going to be a little tough because if you look at it, you know, we're coming over some off of some strong, strong growth. You know, sequentially, I'm sorry, annually over the last two years. But again, you know, we're adding resources, we're doing what we need to do to deliver on that long-term target, and we remain extremely excited about the space. That's, that's helpful. If I can ask a quick follow-up. On sleep, you are gonna be lapping a tougher comp coming up. I just maybe how should we think about the mix between sleep rental versus consumables growth, as we progress through the year? Yeah, I think at a high level, you know, yes, that's true, but we're still... You know, our sleep starts, we're not seeing a slowdown on those. You know, but you're right, you know, over time, you know, you are gonna have more and more consumables versus starts just because it's the law of numbers. So, you know, that's the way you should think about it. Can you just remind me, how do we think about the impact as that progresses over time? Does that mean higher gross margin, or like, what is the impact on that? I apologize for my ignorance on. I'm sorry, Kevin. The question is, what's the impact of what on gross margins? The difference between- Oh, as the mix, as the consumables start to grow faster, you know, as you said, like, the law of large numbers, consumables becomes a bigger part. Just, I just wanted to understand or make sure I understood what the impact of that is on the, on the margin. Is like, the consumables versus the rental, what does that mean for the, the gross and operating margins? Yeah, thank you. Thank you for repeating that, and good morning. Yes, that. So the growth, outsized growth in the Sleep Supplies will be favorable to gross margin. Okay. Thank you. Your next question comes from Daniel Grosslight from Citi. Your line is now open. Hey, guys. Thanks for taking the question. Just a couple on cash flow. First on CapEx, you kept guidance at $200-$240 for the full year. I just wanted to confirm if that's on a gross basis or net of sales, because obviously, if it's net, you're basically flat this quarter, which implies a pretty significant step up for the remainder of the year. And then on your commentary around basically net debt staying effectively the same. Is that implying that on a free cash flow basis, you're gonna see kind of de minimis free cash flow as kind of you rebuild inventory here? Yeah. Thank, thank you for the questions, and good morning. So on the CapEx, that is, in fact, gross CapEx, and we do expect increased spending as we head through the year. You know, again, reiterating that guidance range. Then on the net debt, we do expect that to stay relatively flat through the remainder of the year, reflecting our investments, not only in commercial capabilities, but also in inventory as we've made to support onboarding new customers, as well as driving service levels overall. Got it. Okay. And as a follow-up, I had similar questions on the cadence of margin improvement, but on the PNH segment. I know you've got a large client that's in the process of onboarding, so I was hoping to get an update on that, and then also investments across that segment, too. So would you be able to provide just a little more color on how you're thinking about those kind of big spend items this year and the cadence of PNH's improvement for the remainder of the year? Well, I'll take part of that one, let Alex add some color on it. So, you know, think about investments in PNHS. So there's a couple different areas we outlined at Investor Day, and we're already in the process of investing in. You know, one is in proprietary product portfolio expansion. So we brought resources in, and those are obviously operating expenses to continue to assess and onboard and bring in new additional expansion, new proprietary products. And one of the areas we've already launched is wound care, some additional of our own proprietary products in that space. In addition to that, from a commercial standpoint, looking to make the right investments in the commercial to beef up our external presence, as well as to get closer to the customer, and be able to provide more support there. The next aspect of it is both capital investment and operations. You know, we talked about continuous improvements, and it's really around optimizing our manufacturing footprint, as well as our supply chain. You know, some of that technology is gonna be invested with something simple as Vision Pick, to turn around and drive a higher accuracy of pick, more efficiency within our warehouses to drive operating expenses. So there's capital expense associated with that, but then there's also the operating expense on the learning curve. And then really on margin, we anticipate margin as those things start to take hold, to drive margin improvement within the business as the year and, you know, as this year and the future years progress. Yeah, thanks. So maybe just add a little bit more color. You know, similar to Patient Direct, we, we've made investments in PHS as, as I outlined from an OpEx standpoint, we've invested in commercial capabilities, for instance, and so a lot of those are already factored into the run rate. And, you know, in parallel with that, we're driving a number of transformational efforts that we do expect to continue to drive margin as we move forward. And then again, we've got the normal seasonality, where, the increased top line and operating leverage, we'd expect to drive some margin improvement as we head into the back half of the year. Let me put some little bit more, you know, facts behind that, too, is if you think about our 79 basis points improvement this quarter in gross margin, and you think about what we talked about last year in the operating model realignment, you know, one of the key things was sourcing. You know, so we worked extremely hard to put together a what I believe is a world-class sourcing organization that now internally is providing the ability to go out and find raw material at a lower price, and continue to be competitive. So as product prices are coming back down to pre-pandemic levels, we have the ability to go out and drive additional sourcing to offset that, which is part of the reason why you saw the 79 basis points, you know, this quarter in margin expansion. And then on the other side of the house, there's some of the investments we're making on really, I'll call it the order to cash or cash collection cycle, you know, continuing to work on that to drive margin expansion in our PD. So what I want to make sure that everyone recognizes is that a lot of the work we did in the operating model realignment program is now embedded into the business, you know. And a great example of that is sourcing and being able to see margin expansion, and then some of the transformational change we anticipate this year in Patient Direct, you know, around sleep and around order to cash are additional opportunities to drive margin expansion as the year progresses. Next question, operator? Much. Our next question is coming from Eric Coldwell from Baird. Your line is now open. Thanks, good morning. I wanted to... You mentioned a couple of times the, order to cash and the improvements in patient bad debt or collections. Could you give us some ratios on the, the bad debt ratio or the patient collection improvement? Yeah, I think, you know, at a high level, you know, consider it right now, you know, in the—I would call it the low to mid-nineties, and there's an opportunity for us to continue to tick that up, and that's really what the focus is on. You know, Q1 is a tough quarter. Obviously, there was a lot of a lot of complexity in Q1. But, you know, the anticipation is that will continue to get better as the year progresses. Ed, where was that, say, a year ago or a few years ago? How has that ratio changed? I would say overall, Eric, it's relatively consistent, and it gets difficult, right? You know, if you go back and look at it from a Byram standpoint, when it was a standalone division within the segment, you know, we had really good collection. You know, bringing on Apria and doing an integration, you know, we continue to be able to derive some of the best practices across both of the divisions within the segment. You know, and now we really, after having digested the acquisition two years later, we believe there's an opportunity to take those best practices across both, as well as reimagine it a little bit, to drive, you know, several points of improvement, you know, that are out there from an availability standpoint. On the, on, on the call, there was, when you were talking about some of the, challenges, in Q1 here related to, I think, I think it was all Patient Direct, you, you obviously talked about the tough year-over-year comparisons, a little bit of Change Healthcare, the new sales tor-- territory, and realignment disruptions. But I thought I also heard a mention of regulatory changes. I'm not sure if that was related to sales or if that was related to profitability, but there was a mention in the prepared remarks about regulatory changes impacting the segment. I'm just curious if you could- Yeah. Dive into that. Yeah. Sure. I think we can dive into it. Thanks, Ed. Good morning, Eric. Yeah, so we, we were referring there to the PHE relief on the 75-25 funding. Oh, got it. Yeah. So just as a reminder on that, we had incorporated for either scenario playing out, you know, within our internal operating plan as well as our guidance. So we have levers to offset that, but, you know, that's what we're talking about there. Could you remind us on the magnitude? I think it was just a few million, right? But if you could remind us. It was not material, but it—we did not quantify it exactly. Okay. And I think— Go ahead, please. And, Eric, I think, you know, you think about it as, you know, when you're running the business, you know, you know you're gonna potentially have these headwinds, which you continue to look at what contingency plans you have in place. And, you know, I think, you know, opportunities, like we talked about earlier on the order of the cash opportunities on the sleep journey and other things, you know, our availability and the speed which we move in those can help mitigate those, which is why I think Alex's comment has been, "You know, we've contemplated those, and we have the ability to make sure that we're focused on that. Last one for me. In PHS, you've obviously talked about the inventory step-up to handle onboarding new customers, so it's clear that you have new large customers that need onboarding. At the same time, your other public competitor yesterday was future health system wins coming online later in their fiscal 25. So, you know, over the next few quarters, starting to onboard. And the other large competitor that's private, but puts out a fair amount of press, is also talking about a pretty constant stream of wins. So bottom line, I'm looking at the three largest players that make up the vast majority of the market, all talking about wins. Who's losing? And what is the net win-loss ratio in PHS? You know, are you overall gaining traction? Do you have some future business leaving? I'm just, I'm curious what's really happening, because I see all three of the big players talking about wins. Yeah, I would say we're, we're net winning right now. You know, there is a bit of a times trading paint, I guess, but we are- Yeah ... net winning, net winning on this. And I think we're being disciplined too, on both wins. And, you know, as we talked about a year ago, there was some business that we, you know, that we separated from because of the financial profile of it. So, you know, that's, I think, the way we've thought about it and the way we're gonna continue to think about it, is both disciplined on both sides of it. ... Okay, thanks very much. I appreciate the answers. Yep. Next question comes from Stephanie Davis from Barclays. Your line is now open. Hey, guys. Thank you for taking my question. I wanted to ask another one on the Patient Direct business, just because you did mention that Change had a minimal impact on that side of the world, but it did see a bit of deceleration. Should we think about a re-acceleration of this as coming off of the tough comp? Or is it more going to be a function of a ramp-up of some of your sales investments that you've made, which may make it a little bit more back half weighted? I think really the latter is a better way to think about it, you know, well, we know the investments that we're making, you know, are gonna pay off. You know, we've done it in a much smaller scale over the last five years. You know, we are adding a person or two, several here or there. This is a broader push, you know. And so I think the latter is the way to think about this, as they start to get traction, you'll see the lift going out in towards the back half of the year. Understood. And then when I think about the priority of investments, you always had modernizing your back office IT systems as one of them. I imagine what happened with Change Healthcare makes this much more top of mind. So is this something where we can maybe see heavier upfront investments then in order to go and try to, to mitigate future risks like that? Yeah. Actually, Stephanie, you're actually absolutely right. That's something we've, we've discussed, and it's something that's in process already. You know, continuing to look at our, in our Patient Direct. You know, again, you do an acquisition, you know, one of the things we, one of the tenets we had on the acquisition was, don't confuse the customer right out of the gate. You know, we don't wanna have breakage, and I thought we, I think we did an exceptional job of that with acquiring Apria. You know, now you're two years in, you've kinda got it settled. You know exactly what levers you wanna pull, and one of those is making sure we have systems that can, can enable us to continue to grow, but enable us to have a stronger and more solid foundation. So that's exactly one of the, an example of an investment on some of the CapEx, as well as. It's just not all CapEx, there are some operating expenses associated with that, which you can anticipate, you know, this year and into the next year. As obviously, we'll go in a little more detail of what's in the plan, but the anticipation is, you know, in process already, is looking at that, our systems, to make sure they're solid and they can be leveraged, and we can drive, they can help continue to drive growth as we scale up. Putting that all together, I know you reiterated your guidance for the year. Could we see maybe a heavier weighting on investments and more of the growth towards the back half, given all these moving pieces? Yeah, I think that's, that's a pretty fair assessment. Yeah. Very similar to last year, too. I mean, very, very similar to last year also, because you then have the seasonality in the business. Think about last year, we had seasonality in the business. business. Think about last year, we had, you know, investments we were making upfront to drive operational efficiency. We saw those carry towards the back half of the year. So I think it'd be relatively consistent. Thanks for helpful. Thank you much. Next question comes from Allen Lutz from Bank of America. Your line is now open. Good morning, and thanks for taking the questions. Ed, you talked a little bit about some of the sourcing and improved collections that drove the gross margin higher. I think that's now a few quarters in a row where you've seen a nice improvement in gross margin. I guess, how should we think about sort of where we are in the timeline of those factors driving an improvement? And can you provide maybe a little bit more information on the progression of the gross margin line over the course of the year? Thanks. Yeah, maybe I can start with some qualitative, and then Alex can bring a little more quantitative in. So, you know, the anticipation is that we, you know, we continue to look to drive margin expansion throughout the year. You know, obviously, the sourcing and some of the other things are already embedded in the business, you know, and some of those were embedded in the business at the end of last year. So think sourcing, for example. By the time we got to Q4 of last year, some of that sourcing was already in there and helped drive the back half margin expansion within there. So again, we're starting, getting ready to start to overlap that. But, you know, the other projects, like the order to cash process, is another example of where we're gonna be able to drive, and we should anticipate some margin expansion within the business for that. You know, continuing to get, you know, that overlap effect on sourcing is another example where we can drive margin expansion. You know, but in the same sense, you know, that's the other... I don't wanna call it a headwind, but the other side of the equation also is, you know, within products is a good example. We're continuing to see prices come back down closer to where we were pre-pandemic, you know, but as we're driving the cost out, we're able to neutralize that and mitigate that. You know, we continue to work with our customers to help provide savings to them, you know, as many of our customers are continuing to look for that. So you think about, as we think about it, we had a 79 basis points year-over-year improvement in this quarter. You know, we would anticipate that we would continue to drive some level of improvement in the back half or the back three quarters of the year. Alex, maybe you can add a little more comments on that. Yeah. Thanks, Ed. Yeah, so on gross margin, as Ed mentioned, we do expect that to continue to improve throughout the year. There are the three key drivers here on the products and healthcare services side. The main driver is the sourcing savings that's driving improvement within our cost of goods sold. And then on patient direct, there's the two drivers. One, just margin expansion driven by the improvement in collections that we've talked about in our investments in revenue cycle in general. And then we've got favorable mix, essentially, between patient direct and products and healthcare services. So insofar as patient direct is growing faster than products and healthcare services, that will drive gross margin expansion overall for the company.... If, if you look at just the normal seasonality of the business in both segments, as we get into the back half of the year with top-line growth and operating leverage, that'll also aid with margin expansion as, as we get towards the end of the year. Great. Thank you. And then just a quick model question. I see a $50 million gain on a sale. Can you just provide some commentary on what that was? Thanks. Was it? Yeah, but it wasn't a total of $50, but the biggest one was the- Yeah Go ahead, home office sale. Yeah. We did have a gain of $7.4 million on the sale of our home office here in Mechanicsville, Virginia. That hit ENR. Got it. Thank you. Before we proceed, if you'd like to ask a question, please press star and number one on your telephone keypad. Our next question comes from Michael Cherney from Leerink Partners. Your line is now open. Michael, are you there? Hi, can you hear me? Yeah, we got you, Michael. You got back in line for a second. Sorry. Second set of questions. Go ahead, Michael. I wasn't even muted, which I usually do as a mistake. Is there any way you can give us some directional color, given you don't formally guide on cash flow? The reason I ask is you mentioned the dynamic of net debt staying steady over the course of the year. I know the CapEx investments are spelled out. Just would have thought there'd be a little bit more of a cash build given the reiterated EBITDA. So just curious if there's any moving pieces in the middle of that conversion you can give us some color on. I'll start just on a directional. I think at a high level, you know, one is we're making some investments in inventory to bring on new customers, continue to drive service. You know, I want to make sure it's clear that there's opportunity there as the year progresses. You know, when you bring on a big new customer, you have a tendency to add a significant amount of additional inventory because you want service from day one to be impeccable. You know, and as we learn them and they learn us better, there is an opportunity to tweak that down a little bit. You know, I think, you know, also from a receivable standpoint, as we continue to work on our order to cash, you know, there's opportunities, you know, there may be some opportunities there. But I think we wanted to be, you know, disciplined in our assessment that, you know, what we have today, you know, the timing on how we can tweak those, you know, may take, you know, maybe sooner rather than later. And then on CapEx, I think the expectation is, you know, as we continue to see growth in areas like sleep, you know, we're gonna need CapEx. And as we continue to put some auto, you know, automation and other technology to drive efficiency, there's gonna be some capital deployment as the year progresses. So, you know, that's more, you know, qualitative of how we're thinking about it, as well as, you know, where there is potential levers and/or opportunities as the year progresses. Okay. I assume free cash flow will be positive for the year, though? Is there any framework we can use relative to history, even if it's less based on the inventory build? Yeah. Thanks, Mike. So I'll just add a little bit more color here. So we expect fairly minimal free cash flows for the remainder of the year. We expect net debt to remain pretty much where it is. And this obviously reflects our investments that we're making from an OpEx standpoint, as well as CapEx, as well as some of our transformation efforts that are hitting exit and realignment. So our expectation is that where our net debt is right now is roughly where we would exit the year, and then obviously, leverage is a function of, you know, our adjusted EBITDA guidance at the end of the year. Okay. Thank you so much. As of right now, we don't have any questions. I'd now like to hand back over to Ed Pesicka for final remarks. Thank you. And thank you, everyone, for joining in the call. You know, before I make some closing business comments, I'll make a personal comment. I want to shout out Sentara Health. You know, we think about our purpose: life takes care. Less than two days ago, our daughter and son-in-law delivered their first daughter and brought her into the world, and our first grandchild. So Sentara Health, you know, and Sentara, everybody there, the experience was exceptional. So to the clinicians and all the support staff, thank you. With that, you know, as you did hear today on the call, you know, the team and I, we are extremely excited about 2024, a year where we're gonna continue to make investments to drive long-term growth. I also want to thank our teammates across the globe. I want to thank our customers, our partners, and of course, our shareholders. You know, we are going to, as a leadership and an organization, continue to execute on our strategy. I really look forward to sharing the progress with you over this, over this during the summer and our next earnings call. Thank you, everyone. Thank you for attending today's conference call. We hope you have a wonderful day. You may now all disconnect the call.