Good day, and thank you for standing by. Welcome to the Owens & Minor Second Quarter 2024 Earnings Conference Call. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your first speaker today, Jackie Marcus, Investor Relations. Jackie, you may begin. Thank you, operator. Hello, everyone, and welcome to the Owens & Minor Second Quarter 2024 Earnings Call. Our comments on the call will be focused on the financial results for the second 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 report 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 am joined by Ed Pesicka, Owens & Minor's President and Chief Executive Officer, and Jonathan Leon, the Interim Chief Financial Officer and Senior Vice President of Finance and Corporate Treasurer. 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. It's been an exciting past few weeks here at Owens & Minor. Last Tuesday, we shared with all of you our definitive agreement to acquire Rotech Healthcare Holdings, Incorporated. The addition of Rotech aligns with our strategy to strengthen and expand our existing patient-direct business as one of the premier suppliers to support home-based care. Combining our organizations allows us to improve our capabilities, broaden our reach, and ultimately improve our service levels to patients, providers, and payers. Furthermore, it accelerates our pace to achieve our long-term patient-direct revenue target of $5 billion by 2028, demonstrating our commitment to sustainable growth and driving long-term shareholder value. Turning to our second quarter performance, it was business as usual for Owens & Minor as we hit our internal expectations with another strong quarter and made progress against our long-term strategic goals we outlined during our Investor Day in December of 2023. The underlying strength of our business is evident, with top-line growth in both of our business segments and improved profitability. We are excited about the second half of 2024, as we expect to outperform the first half of this year, a continuation of historical trends with strong back half performances. While Jonathan Leon, our Interim Chief Financial Officer, will do a more thorough review of our financials, I would like to briefly highlight a few of our operational and financial achievements from the second quarter. Our Products & Healthcare Services segment generated $2 billion in revenue, reflecting a 4% improvement over this time last year. Our Medical Distribution division's strong second quarter was the result of exceptional same-store sales growth, enhancements in our supplier funding programs, and the onboarding of new business wins. Our Global Products division also experienced some growth at the top line and further improvements in profitability. At our Investor Day, we outlined our plan to optimize the PNHS segment through, one, leveraging the scale of the channel profitability, two, growing our Owens & Minor branded product portfolio, and 3, expanding into adjacent channels and markets. In our first two quarters of 2024, we are already making progress in these areas, with a particular focus on driving greater efficiencies that in the second quarter reduced our manufacturing, transportation, and distribution costs. These efforts, combined with inflation mitigating tactics, gave us the financial flexibility to reinvest in our business while also doing exactly what we said we would do, increasing the overall profitability of this segment. Our Patient Direct segment posted $660 million in revenue in the second quarter, a 4% year-over-year improvement, driven by strong growth in diabetes and sleep supplies. Our growth is even more impressive given the particularly strong second quarter we had this time last year. During the quarter, we continued to focus on our key initiatives, along with our alignment on the commercial organization within the Apria division, to improve growth in respiratory, oxygen, and the sleep journey. By the end of the quarter, we began to see that alignment deliver improved growth. As a reminder, we typically see stronger performance from this segment in the second half of the year, and we expect a similar outcome in 2024. From a longer-term macro perspective, our Patient Direct segment has considerable tailwind supporting our organic growth efforts. From a demographic perspective, there are an estimated 133 million Americans who suffer from at least one chronic condition, with 40% of American adults suffering from multiple chronic conditions and many more still not yet diagnosed, particularly in diabetes and sleep apnea. These demographic trends make us excited about our Patient Direct segment despite the groundswell of support for weight loss medications. Moreover, we are not currently seeing an impact from the use of GLP-1s on our served patient population. The diabetic patients we serve are primarily type one or insulin dependent, which requires continuous glucose monitoring regardless of GLP-1 use. With respect to sleep apnea patients, while GLP-1s may help some patients, there are still 80% of the population with sleep apnea that are not yet diagnosed. As I noted earlier, we announced our intent to acquire Rotech, which will be an expansion of our Patient Direct segment. Rotech brings a wealth of expertise in respiratory and home medical equipment, aligning perfectly to deliver exceptional care, innovative solutions, and top-notch service levels for patients, providers, and payers. Being just a few months into our long-term strategic plan, we are progressing as expected in both segments. Our team has done a tremendous job in just the first two quarters since launching our Vision 2028 plan at Investor Day. From driving efficiencies, to improving customer service, to building strong organic growth channels, and the plan to add Rotech to our Patient Direct segments, all of which proves we're on the right path and only just getting started. We remain dedicated to achieving the objectives set forth during our Investor Day in December 2023, and our performance thus far reflects that commitment. I would now like to turn the call over to our Interim Chief Financial Officer, Jonathan Leon, to discuss our second quarter financial performance in more detail. Jon? Thanks, Ed, and good morning, everyone. I will be providing an overview of our financial results and some key factors that drove our performance in the second quarter, as well as our outlook for the remainder of the year. Our revenue for the quarter was $2.7 billion, up 4% compared to the prior year, with solid growth in both segments. Products & Healthcare Services grew 4% overall as compared to the prior year, with 5% year-over-year growth in our Medical Distribution division as same-store sales and net new customer wins drove the top line change. Patient direct revenue of $660 million was up 4% compared to the second quarter of last year. Major therapy categories like diabetes, sleep supplies, and wound care had strong performance, although certain respiratory therapies such as NIV and oxygen were below expectations. Within Patient Direct, patient eligibility verification continued to regain momentum. However, a meaningful yet decreasing backlog of customers extended into the second quarter. We should be clear of these onboarding timing issues as we move through the second half of the year. Gross profit in the second quarter was $544 million, or 20.4% of net revenue, reflecting margin expansion of 11 basis points as compared to the second quarter of last year. This improvement is largely the benefit of investments in efficiency and productivity over the last several months. Our distribution, selling, and administrative expenses for the quarter were $469 million, up from $455 million in the second quarter of 2023. The increase is primarily due to sales growth, as DS&A was just below 18% of revenue for both this year and last year. GAAP operating income for the quarter was $20.3 million, up 87% year-over-year, and adjusted operating income was $76.3 million. Adjusted operating income was up 23% year-over-year. Interest expense for the second quarter was $36 million, down 12% compared to $41 million in the second quarter of 2023. This is largely due to the nearly one full term reduction in leverage in the last 12 months, partially offset by the impact of higher interest rates versus last year. In the second quarter, we recorded a one-time tax charge of $17 million, or $0.22 per share, related to a recent decision associated with notices of proposed adjustments that we received back in 2020 and 2021. This was just communicated to us in late June of 2024. Due to the nature of this charge, this item is included in our GAAP to non-GAAP reconciliation. The matter at hand, as we've discussed in previously filed SEC documents, is related to past transfer pricing methodology, which is no longer employed. There is an expected related cash payment to be made in the second half of the year in a range of $30 million-$35 million. We believe the matter will be concluded without further impact to our financial results. Our GAAP effective tax rate reflects this charge and was -89.9% for the quarter. The adjusted effective tax rate was 28.9%. Our GAAP net loss for the quarter was $31.9 million, or a loss of $0.42 per share, compared to the second quarter of last year, when the net loss was $28.2 million, or $0.37 per share. Adjusted net income for the quarter doubled to $28.2 million, or $0.36 per share, from $14.2 million or $0.18 per share during the second quarter of 2023. Adjusted EBITDA was $127 million, up 12% versus the $113 million reported in the second quarter of last year. Also, we generated $116 million of operating cash flow this quarter, a strong improvement versus Q1 of 2024. This allows to reduce net debt by $70 million. We anticipate a good cash flow generation year that will include typical lumpiness quarter to quarter, and we remain intensely focused on cash flow generation. With respect to our current outstanding debt, we have $171 million of a series of notes, which is due in December of this year. Earlier this week, we gave notice to redeem those notes at par in September and will do so with cash on hand. We remain committed to delivering our 2024 guidance. 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 with a midpoint of $1.55 per share and an overall range of $1.40-$1.70. Now, as in prior years, we expect to see modest sequential growth between the second and the third quarters, and greater sequential growth from the third to the fourth quarter. And again, I want to remind you that this guidance excludes any impact of the Rotech acquisition. With that, I'll turn the call over to the operator for the Q&A session. Operator? Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star one. Your first question comes from the line of Michael Cherny with Leerink Partners. Please go ahead. Good morning, and thanks for taking the question. My apologies. Can you press star one again, please? Michael, we lost you. Operator, why don't we move on to the next question, and Mike, we'll get back in line. Yep. Michael, your line is now open. Hi, can you hear me this time? We can, Michael. Okay, that was a first. We'll see if that happens again. Sorry about that. I don't know what happened. Yes. Call to Friday. That's right. I want to talk about some of the operational plans that you've had put in place, in particular, the progress you made on the product and healthcare services side. As you think about the moving pieces on margins, you were kind of flat sequentially. Where are the biggest opportunities to expand in the back half of the year? Is it volume? Is it that unlocking of the backlog of customers? And how does the dynamics around the tariffs that are expected to go into place impact or not impact you relative to the sourcing side? Let me take those probably somewhat in reverse orders. You know, from on the tariff aspect, you know, it's gonna have a minimal impact on us since, you know, a significant portion of our products are manufactured in our own facilities, whether that's in the U.S. or whether that's in Mexico, Honduras, so in the Americas. You know, our glove footprint is not in China. We have, as we've talked in the past, about more than half of our gloves we're making in our own factories, and those factories are in Southeast Asia, not in China. So you know, it's gonna have, you know, a minimal impact, really, on our proprietary or our private label products. You know, if I think about the levers we have in the back half of the year, you know, within our product and healthcare services, you know, it's the continued execution on sourcing. You know, as we've seen prices come down and overall, let's just take a main category, PPE. You know, we've done a really good job continuing to source raw materials at lower rates to make sure that, you know, as those prices come down, our costs are coming down correspondingly with them. You know, the other aspect of it is really in operational effectiveness in our PNHS segment. Continuing to look at our footprint, continuing to look at the right level of new advanced automation and technology in the warehouses to drive operating efficiencies. You know, so we saw some of the improvement this quarter in DS&A, or Distribution, Selling, and Administrative expenses. You know, there's where the opportunities continue to lie. You know, longer term, if we go back to our strategy, you're really, the longer term impact is the expansion of our private label or proprietary product portfolio. That takes time, you know, as we build the product portfolio out and then continue to work with our customers to show the value of it, you know, and then, you know, even further along the line is adjacency. So hopefully that helps talk about, you know, really how we're thinking about the impact of the tariffs, you know, how we're thinking about using, using our continuous improvement and operating model to continue to drive operating efficiencies out, and then some of the longer term and midterm opportunities. Thanks, Ed. If I can just ask a second, Sure ... on cash flow. Yeah, I know that was a big focal point earlier in the year when you gave guidance, you talked about some of the customer onboarding. Can you talk about the dynamics behind the reversal this quarter and how that should factor in, in terms of your cash generation versus use, over the course of the year, especially as you think through normalizing the onboarding of some of those large customer wins you had? Yeah, Mike, it's John. So obviously, we, as you mentioned, we talked before about the need to add inventory for those onboarding activity, and that could also slow down AR a little bit when you bring on large customers like we did in distribution. What you saw in Q2 was a little more lift in inventory, but that was offset by payables, and payables kind of offset that pretty nicely. Like Q1, we also had the quarter end on a Friday, which is actually beneficial to our payables. And we have been pretty successful in driving out payment terms where appropriate with certain parties. So that combination is gonna continue to help us out in the back half of the year. Keep in mind, we'll also get the seasonality in the back half of the year, particularly Patient Direct, which will have very, well, gets very attractive cash flow as the year goes on. And their, their contractual allowances will will, should drop as the year goes on as well. So, I think we'll see more efficiency, probably we'll see more efficiency in working capital, around payables, receivables, and inventory, and I think we're going to see a lift. Now, keeping in mind that what you're looking at is a point in time at the last end of the quarter, so we're actually were more efficient in Q2 than, you know, we saw, for example, average inventory was lower than it was at the very end of the quarter, so we were able to get that cash flow and reduce debt. I think as the year goes on, that working capital efficiency and the seasonality of the business will drive pretty attractive cash flow compared to the first half of the year. ... Will you have meaningful cash flow conversion over the course of the year? I know that was a point of contention earlier in the year. We will do. Yeah, I would be very disappointed if we didn't do quite a bit better in the second half than we've done in the first half. Got it. Thanks so much. Your next question comes from the line of Kevin Caliendo with UBS. Please go ahead. Good morning, guys. Thanks for taking my question. First, can we talk a little bit. There's been a lot of interest around what's going on with shipping costs and how it impacts the channel. You know, the tariffs are one thing, but the shipping costs, the ones that we can track anyways, have risen dramatically. And I guess I'm trying to understand how it impacts you, how it impacts the industry. Does it help you that you nearshore, and does it make your products that are manufactured domestically more attractive? Just trying to understand the impact across the channel. Yeah. So first, primarily an impact on the P&HS segment, not necessarily in the patient-direct segment. You know, yes, yes, for those products that we're manufacturing nearshore, you know, it has, it creates some level of an advantage for us. But again, I talked earlier that, you know, about half of our gloves, we're making in our own factory in Southeast Asia and bringing them over. You know, it's impacted us in a couple different ways. You know, as we started to see those rates start to rise, you know, we have made some investment in incremental inventory coming over in advance of some of those larger increases that we're seeing in the marketplace. You know, but ultimately, you know, this is gonna have a bigger impact on those that do primarily all of their sourcing or the vast majority of their sourcing from overseas. Look, it's a headwind that we know we have in the business. You know, it's also part of how we utilize our operating model to continue to try to offset that, whether it's, you know, advanced shipments, you know, prior to some of those increases, but also continuing to look at different ways to more efficiently bring the product over. But, you know, it is gonna create some level of a headwind in the business in the back half of the year. So what you're saying is you're trying to get product in sooner, maybe you're gonna build up more inventory before it starts to affect the prices or, you know, as much as you possibly can, in hopes that customers will be willing to buy those sooner because they know the prices are likely to go higher. Does that in general look- It may not even necessarily them buy the product sooner. It's just to have a better landed cost on the product than not. Good. Maybe this is one for Jonathan. The Patient Direct ramp in the second half, is there, it's a little bit more than normal seasonality, it looks like to me. Can you just give us a little bit of comfort or rationale behind why there will be this acceleration? I know there were investments, but if you can maybe go a little deeper on that, that would be great. Yeah, Kevin, the biggest factor, as I indicated in my remarks, was that we're still dealing with a backlog in Patient Direct that frankly is a holdover from change that we probably underestimated the extent of that impact in Q1 to Q2. You know, we have a normal queue of people waiting for supplies all the time, but this is substantially larger than it would normally be. And those are primarily sleep patients, so it's a little more profit associated with them. So if you factor that... We are catching up. There's a lot of manual effort to go into that catch-up, but we are catching up, and we're clear to that backlog. So you take that combination then with the normal seasonality, seasonality in the business, we're pretty confident in a, in a much stronger second half. I'll just add two other things. One is we clearly understood that when we added additional commercial resources, that would create some level of, you know, I'm going to call it disruption, but some level of impact in the beginning of the year here, with the expectation that it takes about 12 months for them to provide a positive impact. So we'll see that as that progresses in the year. And the other thing, if you look at Q2 year-over-year, last year, Q2 growth rate was pretty strong. You know, so those are some other factors that give us the comfort in the back half of the year and the growth. Great. Thank you, guys. Thanks, Kevin. Your next question comes from the line of John Stansel with J.P. Morgan. Please go ahead. Great. Thanks for taking the question. Just following up on the point around Patient Direct, is there just a way to frame, given you have some visibility into this backlog, about how you think about the impact on Patient Direct top line growth? And then now that we're kind of a month into the third quarter, is this something that you think now is, you know, this change is kind of coming in the rearview that will be more of a 3Q benefit, or is this something that kind of could progress into 4Q? Yeah, John, it's Jon Leon. The way to help you think about it, so what happens, you know, the eligibility verification process had become very manual, very quickly, and we're doing a very good job of clearing that, getting better at that, and bringing on new providers to help us with that process. A way to think about it, and I wouldn't call it a backlog, but at any point in time, there's a queue of 10,000 customers waiting for supplies, and that we saw that into June grow to as much as 50,000. So that is getting better now. That will get into the third quarter, will continue to get better throughout the year, but that has certainly impacted the growth. And as I said earlier, a lot of that is predominantly sleep supplies, and that's very attractive margin business that we're waiting to get online. Great. And then just kind of thinking about gross margins, that they stepped down sequentially from the first quarter. Now, I normally think of this as kind of gross margins stepping up throughout the year. Is that kind of slight step down that you saw, is that more kind of attributable to the Patient Direct, I guess, mix shift? ... or is there other factors you'd highlight about kind of what drove that? And then I would assume, given your reaffirmed guidance, we should just see a bit of a steeper ramp into the back half for, for gross margins. Is that kind of the right way to think about it? That is the right way to think about it. Yeah, mix shift in Patient Direct can be meaningful, and we've talked about before that the sleep and respiratory areas have higher margin, things like diabetes, which has been growing very nicely for us. Great. Thank you. Your next question comes from the line of Stephanie Davis with Barclays. Please go ahead. Hey, guys. Thank you for taking my questions. Now that you've had a little bit of time to just have the market digest the Rotech acquisition announcement, I was hoping you'd tell us about some initial feedback from your payer and provider customers and how they're thinking about the deal. Yeah. I'll just talk a little, maybe I'll just start it at a high level. You know, I think it's been clear the feedback, you know, has been that this is clearly in line with the strategy you talked about, you know, about continuing to invest inorganically, specifically in the Patient Direct space, continuing to provide a better solution. You know, it's still early on, you know, we you know... So to get the patient and the payer feedback, you know, that's still in process, but overall it's been extremely positive. You know, I think overall, from a standpoint, we believe that this is gonna ultimately provide a much better experience for the patient. You know, the ability to focus on a single company to support them, as well as to be able to get their products hopefully, you know, potentially more efficiently. And then the same with the payers, being able to, you know, have, you know, continue to work with us. So, you know, it's early on. I think, you know, we'll continue to gather that information, but, you know, that's where we are on it right now. To follow up on Patient Direct, you did call out some weakness in the quarter on NIV and oxygen. Could you call out any trends or if that's more of a one-off with the O2 business, just given the exposure at Rotech? No, I would tell you what we've, it's now a couple quarters now, Steph, and we've talked about when we're not doing what we should be doing, expect to do in terms of growing NIV and oxygen. I would call that unique to us. I'm confident saying that's unique to us, and we have plans in place and working on that to remedy that in the back half of the year. Okay. Maybe some learnings from the new deal. Thank you much. Exactly. Exactly. Your next question comes from the line of Daniel Grosslight with Citi. Please go ahead. Hi, thanks for taking the question. I want to go back to some comments you made around cash flow and that being meaningfully you expect that to be meaningfully better in the second half versus the first half. You know, that would put you in kind of solidly positive free cash flow territory for this year versus your commentary last quarter, where you thought you would be effectively flat, or no free cash flow, this year. So I'm just curious, what changed in your thinking? Where are you outperforming your initial expectations? And I just wanted to confirm that that cash flow commentary also contemplates that, you know, $30 million+ payment in the back half of this year. Well, yes, it does, first of all, Dan, it's Jon. Secondly, I would tell you the increased confidence in cash flow comes around our the focus and the visibility into the working capital activities currently underway. You know, we've talked about last couple quarters about the inventory ramp and, and talked earlier about inventory being a little bit higher now, for some shipping purposes, getting ahead of that curve. But even throughout most of the second quarter, we saw inventory be pretty well moderated compared to Q1, ramp a little bit late in the quarter. But I think as we think about that and we get a little smarter about our AP and our AR, and getting better terms from folks, I think you'll we're pretty confident that, cash will get better as the, as the year goes on. Got it. I'm sorry, Dan. I was going to say, we're seeing better collections on a regular basis out of Patient Direct too. Yeah. Got it. Okay. Okay. And there were some legal expenses this quarter, I think, related to the Apria. Just curious what's driving that, and if you expect to see increased legal expenses for the remainder of the year versus this quarter? No, nothing going forward. That was a one-time settlement of an action that began before we bought Apria. So that has now been settled and behind us, so there'll be nothing else going forward associated with that. Okay, great. Thank you. Your next question comes from the line of Eric Coldwell with Baird. Please go ahead. Thank you very much. I apologize if I missed a couple of these. For some reason, I have had a hard time with the connection here, just a little bit hard to understand some things. In 2Q, did you break out the difference between Medical Distribution growth and products growth that combined to get you to the 4%? Did you give the growth rate? No, we didn't. We did not. Can you? Well, Eric, I think we said med distribution grew 5%, and the overall segment grew 4%, so, I think- Okay. Yeah, I didn't hear that. It's been a bad connection today. Yeah. Okay. And then, on the, cash flow, I know you've given a number of reasons why it improves, but I still am not sure why the original guidance was flat, and now it's so much different. What... Was it that you're just fundamentally managing the business differently, or... things you expected, through Q1 up to the last call, just they're, they're turning out differently than you originally expected? It just seems like a, a very different conversation 90 days later than it was 90 days ago. I think that's fair, Eric, and I think it comes down to is, one, is focus. You know, as we continue to look forward, you know, I think we've got better visibility now into forecasting of where we think their opportunities in the lever are. You know, and then it's execution on some of the initiatives we have to drive working capital improvement. So, you know, that's those three major factors are where it is. It's, you know, the focus, it's, you know, improved forecasting and, you know, our ability to execute on some of those opportunities. Great. And I'll just gonna go back to the Medical Distribution growth of the 5%. Would you be capable of breaking out how much of that growth was market versus new wins? Yeah, I think it's- Same-store versus new wins. Yeah, I think it's, you know, if I think about the two of them, they're relatively consistent. I mean, so what's hard to do is, you know, our same-store sales, if we look at our same-store sales, they're consistent with that 4%, and then our wins, you know, are consistent to help move that up further. And then there's still some remnants of some other losses we've had in the past that are rolling out. So that's the way I would think about it is from that standpoint. Got it. Okay, thank you very much. I appreciate it. That concludes our question- and- answer session. I will now turn the conference over to Ed Pesicka for closing comments. So thanks, everyone, and, you know, excited and thankful that everyone joined the call today. Now, if we think about, you know, the future at Owens & Minor, we're extremely excited about what's yet to come in here. You know, we continue to execute on our long-term strategy. We continue to focus on our operating model. You know, we continue to get excited about the potential and future integration and approval with the Rotech, rolling that into our Patient Direct business, which will provide, we believe, significant better service for our patients, providers, as well as the payers. And really pleased with the progress we've made to this point in time in our product and healthcare services business. So with that, appreciate the time today and look forward to talking again next quarter. Thank you. This concludes today's conference call. Thank you for your participation, and you may now disconnect.