Greetings, and welcome to AdaptHealth's third quarter 2022 financial results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Joyce, General Counsel. Thank you. You may begin. Thank you, operator. I'd like to welcome everyone to today's AdaptHealth Corp conference call for the third quarter ending September 30, 2022. Everyone should have received a copy of our earnings release earlier this morning. If not, I'd like to highlight that the earnings release, as well as a supplemental slide presentation regarding Q3 2022 results, is posted on the investor relations section of our website. In a moment, we'll have some prepared comments from Steve Griggs, Chief Executive Officer of AdaptHealth, Josh Parnes, President of AdaptHealth, and Jason Clemens, Chief Financial Officer of AdaptHealth. We will then open the call for questions. Before we begin, I'd like to remind everyone that statements included in this conference call and in our press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements include, but are not limited to, comments regarding our financial results for 2022 and beyond. Actual results could differ materially from those projected in forward-looking statements because of a number of risk factors and uncertainties, which are discussed at length in our annual and quarterly SEC filings. AdaptHealth Corp shall have no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, we'll reference certain financial measures such as EBITDA, adjusted EBITDA, and free cash flow, all of which are non-GAAP financial measures. This morning's call is being recorded, and a replay of the call will be available later today. I'm now pleased to introduce our Chief Executive Officer, Steve Griggs. Good morning. Thank you for joining our call. AdaptHealth is a full-service nationwide provider of products and services for our patients at home and in the community, empowering them to live their healthiest lives. I'd like to express my appreciation to our 11,033 employees, including more than 1,000 healthcare professionals, who work daily to serve our 3.9 million patients. I'm very pleased that AdaptHealth today reported record net revenues of $756 million for the third quarter of 2022. Our performance reflects our revenue growth of 15.8% over the third quarter of 2021, with non-acquired growth of 6.1% for the same period. This reflects strong sequential improvement from the second quarter and supports our full-year non-acquired growth expectation of approximately 4%. The highlights for the quarter were the much better than expected performance in our sleep business, continued strong growth in diabetes, and the increase in the supplies to the home. In our sleep category, we continue to regain the ground we had previously lost due to the Philips recall. During the third quarter, we had 34% more starts than in the first quarter of the year, resulting in a record number of setups for the company. In addition, our PAP census, also a record, has grown 27% over the lowest point in February 2022. The increased census bodes well for the future revenue as the patients continue to use their PAP machines and will need supplies on an ongoing basis. Our performance in PAP setups has continued in October, and based on supply and demand, we expect strong PAP setups to continue for the balance of the year. Our Q3 performance of PAP setups was driven by our ability to source more units. This allowed us to quickly ramp up our PAP setups to serve our patients, especially those who have been waiting. As a result, we have incurred some additional costs, especially in commissions and expedited delivery and setup, which pressure the bottom line, but will benefit us going forward as we believe that our efforts are resulting in a growth in our share of the sleep market. I'm also pleased to report that we resumed mid-teens growth in diabetes. This reflects a notable increase from our second quarter growth rate. We continue to be confident in the sustained growth potential in diabetes, given the expanding acceptance of CGM as a critical component in managing diabetes and related comorbidities, further reflected in CMS's proposed expansion of coverage for CGM. Our supplies to the home product lines also outperformed expectations due to the commencement of an exclusive supply arrangement with a payer that we hope will lead to a broader value-based arrangement across more supply lines of business. These revenue increases give us confidence in the continued strength of our business and are a solid foundation to build upon to reach our 2025 net revenue target of $4 billion. While we are very pleased with our Q3 results and confident in the strength of AdaptHealth's business heading into the fourth quarter and into next year, we aren't immune from the general inflationary pressures facing all healthcare providers today. We continue to deal with disruptions to our supply chain from manufacturing delays and product recalls. In addition to the increased costs incurred to expedite PAP setups, the quarter's results were pressured by the unexpected recall of Philips PAP masks related to deficient safety labeling in August. While we were able to quickly mitigate the recall's disruption, we did see a loss of PAP supply revenue in Q3 while those mitigation plans were gaining traction. In a few minutes, Jason will provide more color on our financial results. I can say that we are pleased to see sequential improvement in our adjusted EBITDA margins for the third quarter. Although the improvement was not as much as we would've liked, I'm confident in the initiatives our team has in place for the fourth quarter will result in further improved margins. Finally, before I turn the call over to our President, Josh Parnes, I'd like to provide an update on the supply of PAPs as a result of the ongoing Philips recall. As expected, our PAP partners have continued to expand their manufacturing capacity, and beginning in August 2022, we saw our supply of PAP units begin to exceed pre-recall levels. This has allowed us to begin to work through our backlog of PAP patients impacted by the equipment shortages over the past 15 months. Assuming this level of supply from manufacturers continues past November, December, and current indications suggest that they will, we expect to substantially address our backlog in early 2023. I'd like to turn the call over to Josh to provide further details and an update on strategic developments. Thank you, Steve. As we discussed during our Capital Markets Day in mid-September, our ongoing conversations with payers make it clear that there is a growing amount of interest in value-based care and what AdaptHealth can bring to the marketplace through its national presence, patient data, and broad product offering, combined with an efficient operating model. Our recent value-based agreements with two payers in large metropolitan markets have grown very nicely in a short amount of time, and initial results are very promising, with high-level technology integration resulting in greater care transparency and higher levels of patient satisfaction. For example, in connection with one of these opportunities, AdaptHealth's application design team developed an integrated portal allowing the payer's care and claims management teams to seamlessly order and monitor patient services. These integrations have allowed both parties to reduce the administrative expense associated with providing care for more than 20,000 patients. This technology is scalable and proprietary and available to deploy on behalf of additional payers. Accordingly, Adapt is increasing its focus on additional opportunities of innovative care models in the home. Consistent with the technology roadmap we shared at Capital Markets Day, AdaptHealth recently rolled out myAPP, which is a comprehensive patient app enabling channel of choice communication with the patient, as well as the ability to place and track orders and facilitate clinical coaching. myAPP will allow patients and physicians to access their data on their connected medical devices, which will help improve clinical outcomes at lower costs for our 3.9 million patients. Initial data is showing strong adoptions by our patients, with close to 5,000 downloads from the Apple and Android app stores and hundreds of digital orders processed in the initial 30-day launch with our diabetes patients. These investments are part of AdaptHealth's strategic plan to facilitate a complete digital path for all our constituents. By expanding the use of e-prescribing, as well as our payer portal technology and the AdaptHealth myAPP, we will provide full transparency with respect to what's being ordered, when and where it's being delivered, and access to healthcare data on connected devices. This information will allow physicians, patients, and payers to collaborate to drive better clinical outcomes while allowing AdaptHealth to reduce the administrative costs of maintaining service to the patient. These efforts are part of the initiatives underway to continue to increase productivity across all work streams and part of the reason that our revenue per employee today, approximately $262,000 per employee, is at its highest level ever, and we expect to become even more efficient as we head into the new year. As cost pressures continue, Adapt will benefit from its scale as we will be able to leverage our technology to take market share from less efficient competitors. With that, I'll pass the call over to our CFO, Jason Clemens, to review our financial results. Thanks, Josh. Good morning, thank you for joining our call. I'll discuss the third quarter operating results, our cash flow performance, and capital allocation, and conclude with a discussion of our 2022 outlook. For the third quarter ending September 30th, 2022, AdaptHealth reported net revenue of $756.5 million, representing year-over-year growth of 15.8%. Non-acquired net revenue growth was 6.1% for the quarter. We were pleased to see continued improvement in trends within our largest product category, sleep, where the non-acquired growth continues to exceed our previous forecasts. At the end of September 2022, our PAP rental census was 27% higher than the PAP rental census in February 2022, our lowest census month following the June 2021 Respironics recall. Our PAP rental census growth and the compounding nature of the PAP resupply business gives us confidence in increasing our revenue guidance for 2022. Our diabetes category delivered mid-double-digit non-acquired growth, reflecting sequential improvement relative to last quarter. While our respiratory category experienced an expected decline in non-acquired growth, the Q3 2021 census was elevated due to COVID cases. We were encouraged to see modest sequential growth from Q2 2022 levels. Accordingly, we are raising our guidance for net revenue Turning to profitability. While modest inflationary headwinds negatively impacted adjusted EBITDA margins in the quarter, we were pleased that we were able to sequentially expand Q3 2022 adjusted EBITDA margin to 21.2% versus 20.6% in the second quarter. As Steve mentioned earlier, adjusted EBITDA was also negatively impacted by lost revenue from delays in PAP resupply shipping related to the Respironics recall in August 2022 of certain PAP resupply products due to deficient warning labeling. This recall and related supply chain disruption negatively impacted results by several million dollars, but we do not expect this to impact our operations in the fourth quarter. Within cost of goods sold, distribution expense remained elevated, specifically fuel cost incurred by our vehicle fleet and by some of our suppliers and couriers. Although we expect this cost to normalize over the next 12 months, we do anticipate negative pressure on adjusted EBITDA related to elevated fuel costs for the fourth quarter. On the labor side, expenses associated with our over-performance in PAP setups increased costs for the quarter, but this added cost will be offset over the next few quarters by the increased rental revenue related to our record setups. Additionally, we believe that the continued decline in the impact of the COVID pandemic has resulted in an increase in our employee benefit utilization over prior year, as employees return to more normalized utilization of elective and preventative medical care. As we enter the 2023 open enrollment season, we are working to optimize our plan offerings while balancing this increased utilization. The combined labor dynamics added about $6 million of expense in the quarter. We expect this trend to continue through the fourth quarter, resulting in the guidance update we announced this morning. For Q3 2022, cash flow from operations was $107 million. Free cash flow for the quarter, defined as cash flow from operations less capital expenditures, was $12.9 million. Capital expenditures of $94.2 million reflected considerable CPAP procurement activity, and we are very pleased with CPAP availability in the quarter. Turning to working capital. We had cash on hand of $110.7 million and an undrawn revolver at quarter end, with trailing 12 months leverage of 3.5 times, consistent with the second quarter. At the end of the third quarter, 78% of our debt was on fixed rates. DSO was 44 days for the third quarter, down from 51 days in the third quarter of 2021. The technology and workflow investments we made over the past year are driving these results. We continue to increase adoption of ePrescribe, and we made additional investments in hardening our claims editor engines. These changes are resulting in cleaner claims, lower denial rates, and more cash. Additionally, our patient pay collection rates continue to improve as we deploy our e-ordering and e-delivery workflow to get more accounts on auto pay. Inventory was up $22.7 million from the second quarter. We prepare for the typical reordering demand that occurs in the fourth quarter. During the third quarter, we completed $10.6 million in share repurchases under our previously announced buyback program. Turning to our 2022 guidance. As noted in the press release, we are updating the outlook to reflect year-to-date performance and anticipated ongoing impact from the temporary COGS and labor issues mentioned earlier. We now anticipate revenue of $2.95 billion-$3.01 billion, versus our previous range of $2.84 billion-$3.04 billion, and adjusted EBITDA of $620 million-$650 million, versus our previous range of $615 million-$675 million. This revised guidance translates to a Q4 2022 revenue range of $760 million-$820 million and adjusted EBITDA of $172 million-$202 million. Consistent with previous periods, our guidance does not include contribution from acquisitions that have not yet closed. I'll now pass the call back over to Steve for some final thoughts before we open it up for Q&A. Thanks, Jason. Over the past two years, AdaptHealth has undergone a significant transformation, starting with the impact of the COVID-19 pandemic and the combination of two large organizations, both of which were further complicated by a loss of a major supplier to our sleep business. We would like to once again thank our tremendous employees for their patience and persistence as we have overcome these and other challenges. As we look forward to the fourth quarter of this year and to 2023, we have high expectations for the company as these challenges recede. We expect our sleep business to return to normalized growth with continued opportunities for us, and the diabetes business to continue to benefit from greater adoption and regulatory acknowledgment of this important therapy. We also expect our respiratory business to return to its pre-COVID growth levels, but with a greater appreciation from clinicians and regulators as to the important role HME suppliers play in the critical care of respiratory patients. We are also optimistic that our supplies to the home business will benefit from the fact that we are a full-service HME provider, and its ability to meet the broad HME needs of our referral partners and payers will ensure sustainable growth for AdaptHealth. Operator, please open the line for questions. Ladies and gentlemen, we apologize for the delay. We'll now begin our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is coming from the line of Brian Tanquilut with Jefferies. Please proceed with your question. Hi, good morning. You have Taji Phillips on for Brian. Just thinking back to your diabetes segment, happy to see that growth is picking back up into that mid double-digit range. Just curious, if you can Could you discuss what has changed from Q2 to Q3 to kind of allow that growth to pick up again in Q3, how that's tracking towards your annual growth guidance, if that's uplifting it, how you expect it to round out for the year, given that Q3 was a solid number. Thank you. Thanks for the question, and sorry for the delay, folks out there. This is Stephen. Yeah. The diabetes, we think Q2 was an anomaly and just a confluence of a bunch of things that happened that reduced the rates both for us and for other people within the marketplace. Seemingly, everybody has come back nicely, and we expect that same growth rate in the fourth quarter. Yep. This is Jason. To round that out, I'll remind everyone, we had 18% projected for the diabetes product line in terms of non-acquired growth for the full year. We'll likely come in a touch shy of that. We're making it up on the PAP side, as we discussed in our prepared remarks, resulting in an increase in revenue guidance for the balance of the year. Thank you. We'll move on to our next question, which is coming from the line of Pito Chickering with Deutsche Bank. Please proceed with your question. Good morning, guys. Thanks for taking my questions. It sounds like there are a lot of one-time costs incurred during 3Q, it was related to CPAP coming back online. Can you sort of help break out these one-time costs associated with expedited setups and the Philips recall? Is there anything else we should be aware of? I'm just trying to understand the 3Q margin bridge into 4Q margin guidance better. Sure, Pito. This is Jason. I'd really call out, I guess, three areas. We talked about labor and benefits, pegged at about a $6 million surprise for us. About half of that was increased benefits utilization. Don't know that we'll get relief there in Q4, but we don't think it will get worse based on what we're seeing. The other half was very associated with PAP setups. We set up more than we thought. We got more than we thought. We spent every dollar that we could to ensure folks are out there late night, over weekends, and getting product on our patients. We were obviously glad to spend it. The second bucket, we talked about the Philips recall on PAP resupply. In our prepared remarks, we spoke about several million dollars of impact bottom line. Peg that at $2 million-$3 million. We don't believe it will disrupt operations in Q4. We believe we're over the hump operationally there. Finally, distribution costs, led by fuel for us and for our couriers and suppliers. We think that trend will continue in Q4. Bigger picture, kind of next year, we think that these costs will abate as a percent of revenue. Okay, great. Next, to just quantify, how much was the expedited cost of the CPAP setups this quarter? You said $6 million for labor and benefits, half labor, $2.5 million on the Philips recall. What was the CPAP one-time cost for those additional setups? Yeah. $2.5 for Philips, when it comes to overall labor, it was $6 million. Half of that benefit utilization, half of that labor associated with PAP setup. Okay. Fair enough. All right. On the CapEx guidance increase that you talked about- Yep Can you just give us details of why it spiked so much in 3Q, then your guidance assumes more of a normalization in the fourth quarter. Not only I guess the question is what happened in 3Q and why should it not continue? How should we think about sort of CapEx as a percent of revenue in 2023? I thought it was going down with diabetes growing faster, which is a better sort of EBITDA CapEx conversion. Yep. Good question, Tito. I'd say that firstly, we were thrilled and a bit surprised at how many PAPs were available to AdaptHealth, that's what we're seeing is a huge increase in CapEx related to PAPs, which, we'll be glad to spend that money all day long. For $94 million of CapEx during the quarter, more normalized, it probably would've been about $80 million, maybe $82 million, something like that. That's what you're seeing is the increase. We expect that will continue in Q4 based on what we're seeing in the supply chain. I would expect that would continue in the first half of 2023. Now, as we get to second half 2023, we think that CapEx spend will come back down to normal levels. Certainly, we'll guide CapEx as part of our guidance release in the coming weeks, but that's the way to think about the roll-off of the CapEx spend. Great. Thanks so much. Thank you. Our next question is coming from the line of Kevin Caliendo with UBS. Please proceed with your question. Hi. Thanks for taking my question. You've talked about your script backlog and size for devices in the past. I think it was 1 million or 900,000, or some numbers that have been thrown around. Has that number changed at all? How should we think about, now that we're maybe a couple of months closer to 2023, how should we think about the way that backlog is fulfilled through the course of 2023 and the impact of maybe how the year progresses? Yeah. That backlog, when we mentioned that as an industry backlog of 900,000, and that was assuming that continued operations from the beginning of the year to the end of the year. Those obviously have changed dramatically. Really, the not getting enough to the market pretty much ended mid this year, probably August-ish. You could probably cut that backlog back by a third maybe, for the industry. We are eating into our backlog as we speak today and suspect that we'll be out of it early 2023. Depending on where other suppliers, depending on where you are at with your backlog, how much you were able to mitigate along the way, we were pretty successful at minimizing ours. Some other people may take a little bit longer to get through theirs. That's helpful. In the context of thinking about that against your normalized, sort of 8ish% enterprise growth that you've outlined in the past, how does this impact how we should think about, and I'm not asking for guidance for 2023, but just how the way this backlog has progressed and played out, how that might impact this sort of 8% enterprise growth you've outlined? Kevin, are you still with us? Yeah. Could you hear me? I'm sorry. Operator, did we lose Kevin? Nope, Kevin is still on the line. Just to confirm, are you able to hear me as well? Yeah, I can hear you. Can you hear me? Yeah, Kevin, I can hear you. Yes, it seems like maybe we're having some issues with the speaker line. Just one moment, please. Operator, did we lose Kevin there? Now, can you hear me now? Yes, we can hear you now. Yep. Oh, okay. Sorry. The question was, as we think about the way you've just described the backlog and how that's played out, how does that impact what is typically a more normalized and what you've talked about 8% enterprise growth that you've outlined in the past? I'm not asking for 2023 guidance. I'm just trying to think about how the way this backlog has progressed versus what would traditionally be your normal enterprise growth that you would normally expect. Sure, Kevin. Great question. I'd start with, as we outlined the 4% non-acquired growth target in our original guidance for the year. That assumed PAP would be down, sleep overall would be down about 5% or 6% for the full year. Well, for Q3, we were up high single digits. We were just thrilled with the performance. The way I would think about it is, our typical 7% to 9% growth in sleep, that will likely outperform for the next several quarters as we're working through backlog and then come down to more of a normalized range. Again, we'll give specifics when we guide, but that's the right way to think about it. Okay, great. Thank you. Thank you. Our next question is coming from the line of Richard Close with Canaccord Genuity. Please proceed with your question. Yes, thanks for the questions and congratulations on the quarter. Maybe you could talk a little bit about the CMS proposed coverage expansion in diabetes and just thoughts on how that's going to potentially impact growth. Sure, Richard, this is Steve. Yeah. They're expanding the coverage for Type 2 diabetics and are proposed, assuming it passes. That just opens up a whole new avenue of patients that are available on Medicare basis, and we suspect that many of the commercial plans will follow suit. I think everybody believes that the growth rates that we've seen in the past two or three years on the CGMs will continue. Maybe not quite as high, but they'll still continue throughout the next two or three years. Okay. Can you go into a little bit more detail with respect to the exclusive payer relationship that you highlighted, I think that was in HME, and just how that came about and other opportunities maybe like that? Sure, Kevin, this is Josh. Thanks for the question. Yeah, there are actually two payer contracts with fairly large providers on both coasts that really were interested in doing something less traditional than fee for service in terms of value and looking at trying something, getting a foot in the water, seeing how we could connect with them through our payer portal. Really what they were looking for more than anything was a better experience on the customer side and on the payer side. Better claims utilization, better management of the patient, better case management. Really a lot of the discussion started around what we could do for them from a technology perspective, and really it's evolved into, if we take admin costs out from both sides in terms of the prior authorization functions and some of the other admin expense that typically happens between a provider and a payer, there was some savings to be had there. Really, like I mentioned in the prepared remarks, it's gone very well, and they're looking to expand that with us, and we feel this could be a good base case, and we're having discussions with other payers around this similar structure. Is there any opportunity to share in those savings? Sure, yeah. This is a shared savings model where essentially we're taking out admin expense by integrating directly with the payer. Then we're sharing the savings with the payer, also getting a broader share of their wallet. Okay, thank you. Thank you. Our next question is coming from the line of Joanna Gajuk with Bank of America. Please proceed with your question. Thank you. Good morning. Thanks. A couple of follow-ups. I guess, on the guidance, I understand you raised the revenues and lowered the margins. You talk about the items there. What about the PHE extension, the public health emergency? Does that change anything in your guidance? Hey, Joanna, it's Jason. Similar to last quarter, we had mentioned about a $3 million-$4 million improvement from PHE. That's rolled forward for this quarter. That's how to think about PHE. Okay. Second part on the guidance. You've raised your CapEx. Obviously, you have a lot of supply with the machines, so it's good. How should we think about the free cash flow? I guess, previously you talked about 5%-6% of revenue, so I guess that's coming down. Does things change when you think about your 7-8 long-term target for free cash flow? No. Certainly nothing changes in the long term. In the short term, bigger CapEx obviously results in less free cash flow. If you look at the quarter of the $13 million that we printed, call it about $20 million of accelerated CapEx spending due to PAPs. When you kind of take those numbers net, you're looking at about a 4%, maybe a touch over 4% free cash as percent of revenue for the quarter. I'd remind you Q3 is one of our cash interest quarters, much like Q1. It's typically a lower quarter. Throw it all out in the mixer and we're feeling good about Q4. It's typically a strong cash quarter and big picture, there's nothing to change our overall view. Okay, great. I guess to that end, previously, we also talk about, with the sleep supply improving, that at some point, there will be more deals to be done because the visibility would improve. Any commentary around that? I think what we're seeing from what we saw so far in Q3 and what we're looking forward to in Q4 is a normalizing, somewhat normalizing, we hope, of the sleep market. Again, we're probably a quarter or two before sellers start feeling really good about supply and putting their businesses back on the market. I think just in terms of market dynamics on M&A, obviously not just us, but there's a lot less deals that are going on with rising interest rates. We are actively pursuing pipeline deals, we're still working pipeline deals in terms of M&A opportunities. From an ability to integrate, I think we're positioned very well, and we're looking for the right opportunities both regionally and also what could drive good synergies in terms of product lines. We're out there on the market. We're involved in a lot of kind of deal, just looking around and seeing what's available on the market now. I think from a PAP perspective, some of the PAP sellers you'll probably see come back online mid next year. Great. Thank you so much. Thank you. Once again, ladies and gentlemen, if you would like to ask a question at this time, please press star one on your telephone keypad. Our next question is coming from the line of Eric Coldwell with Robert W. Baird. Please proceed with your question. Thanks. Good morning. I was hoping to hit on your expectations for the CPI-U Medicare update coming in December and maybe on a gross basis as well as a net basis after the adjustment factors, what you're expecting. Looking at the slides, 26.3% of sales are government. How much of that is tied to CPI-U directly or also indirectly, and what are your thoughts on commercial payers following CMS's lead next year? Thank you very much. I have one more follow-up after that, too. Thanks. Yeah. Thanks. This is Steve. From our data that we see that our calculation for the DME space on inflation is right around 9%. We would expect that to get some sort of adjustment to that would bring that down less than that. I think the common agreement amongst folks is we're looking around 8.7. Again, we're going to wait for that data. That's kind of consistent with what we've seen in like providers that get similar calculations to us. I suspect it's going to be within tenths of a point one way or the other of that. Jason, you want to comment on the out- Yeah, I mean, just based on that, I think we caution everyone on this is our view, but I mean, who knows how this will play out? We'll know in another month. Right. That could translate to upwards of $80 million top line in 2023. Your question on the kind of the flow-through. It was more on the flow-through because I've had some of your compatriots in the market have suggested maybe a bigger PAGO adjustment or other adjustments this year that could bring the net benefit down to maybe a couple of three points or so. I'm just curious if you have that similar thought process. Well, the PHE, when that ends, there's some benefits that the industry has had, particularly in what we'll call the non-bid, non-rural areas. That is about $30 million, $35 million for us. That would go away unless there's some legislation proposed that extends it, but if that doesn't go through. The whole healthcare industry is working on the sequester, going from 2% to 6%. That's a law that happens that people generally expect that to go away or be delayed. As of now, there's nothing that says that, and that would be another 30-plus million dollars for us. It'd still end up being a net benefit, but it'd be much smaller depending on those three factors. Those are the three factors that make up the differences in the Medicare adjustment. As far as commercial payers, we're getting some increases and some adjustments, it's more on a line-by-line product basis. There's no wholesale increases that we've seen yet. We continue to negotiate with them. It's more been about the other things that Josh has already mentioned. I think that's kind of more the topic now, and just better improvements in making efficiencies in the system. I think they're more committed to that than giving price increases today. I've probably been a little more constructive on the reimbursement and regulatory environment than some, despite my better judgment, I have to bring this one up because I'm still getting questions on it. Love to get an updated thought on competitive bidding. seven weeks from now, we'll be in 2023, looking at 2024. I'm not aware that the government really has a framework for competitive bidding in 2024, maybe you've seen something more recently that would give you some thoughts. I wouldn't say impossible, but close to logistically impossible for it to happen in 2024, beginning in 2024. I think once out of the pandemic, and the pandemic's over, we'll know at end of this month whether it gets extended or not. The administration is committed to the healthcare industry to give them 60 days notice. They're still committed to that. I think once post-pandemic happens, and they have transition of patients from pandemic to post-pandemic, then they might be able to start looking at that kind of stuff. I guess they start looking at it in mid 2024, or 2023, excuse me. Could possibly something happen in 2025? I guess so. Right now, in our discussions with CMS, it's pretty far on back burners. They have so many other things that they need to work on. Predominantly this, what happens post-pandemic, I think is mainly on their mind right now. All right. Thanks very much, guys. Yeah, Kevin, just to add on the competitive bidding thing, just one other thought that I think it's important for people to know is that, the reality is with price inflation that's happened over the last year, we even saw when CMS came out in 2021 with competitive bidding, that they basically pulled it back as prices went up. I don't see how that dynamic potentially doesn't happen again. If they theoretically were to roll out competitive bidding, like Steve says, in 2024 or 2025, the reality is with price pressures, inflation, gas prices, product prices up, suppliers are not coming in now. I don't see that, and really bidding much lower, than what the current rates are. Our general sense is that there's a floor to the rates and there's really not that much more room for people to go in terms of giving back. Again, we'll see. That's something else to consider there. Yeah. I entirely agree on that, too. Thanks, guys. I appreciate the comments. Thank you. Our next question is coming from the line of Whit Mayo with SVB Securities. Please proceed with your question. Hey, thanks. Jason, last year, I think you sized what you thought the PAP headwind was around the $30 million range, I think coming into this year, maybe it was in the $30 million-$40 million range. What is the number that you're circling today for either the headwind or the tailwind, from PAP earnings? Yeah. Whit, I recall we had pegged it at about a $65 million headwind in 2022. We think that we'll probably beat that by a touch, but I'd still peg it at $55 million-$65 million for the full year. As you think about working through the backlog at this point in time, I wouldn't anticipate that you could get 100% of that back over the next 12 months or so, but how do you think about working through that $60 million headwind over time? Yeah. I want to be careful just as this starts kind of linking into formal guidance discussion. If it's $55 million-$65 million this year of a headwind, I think it's safe to assume 50%-75%. That feels very conservative to me. Steve or Josh have a different view there, but that's how I'd think about it. No, I think that's right. It takes time, as it took time for the effect of the Philips recall to hit us. It'll take time for the ramp back up, but the ramp of continuous CPAP setups at this level, and then the resupply adding on top of that, it's pretty powerful. I think Jason, that's a pretty good range that he's given you. Jason, looking on the balance sheet, the inventories was up. Yep A lot, over $20 million sequentially. It's a little bit higher than the $10 million increase that you framed for, I think, Tito, on CapEx for the increased PAP purchases. Anything else that's influencing that number? Yeah, sure. If you look in our history, we do typically run hot on inventory, Q3. We're up over probably prior, I think it was up $12 million, $13 million in terms of a cash usage. Really that's planning for the typically large reorder activity across PAP resupply, diabetes, and supplies to the home that occurs in the fourth quarter. We expect to liquidate most or all of that into sales for the fourth quarter. Okay. One last one from me is, I've been trying to think about the PAP market and the impact on the replacement cycle. Do you have a view on the percentage of your patients today on census that have hit that four or five-year mark where they're due for a replacement PAP, but haven't been able to obtain one given how the reprioritization efforts have been focused on new starts? I'm just trying to size, thinking about the current census today, and how we might start to see an upgrade play out over the next 12 months or so. Certainly we were prioritizing for 12 months, new patients over five-year patients. We were able to start giving some five-year replacement machines out this quarter and a little bit last quarter. I think that part of our backlog will start decreasing also fairly rapidly over the next three to nine months. Okay. All right, thanks guys. Thank you. Thank you. Our next question is coming from the line of Pito Chickering with Deutsche Bank. Please proceed with your question. Hey, guys. Thanks for letting me back in. A couple sort of quick ones at this point. For Q, EBITDA range is pretty wide, so I want to understand what it takes to hit the bottom of the range versus the high end of the range, and where you think we should be modeling? Yeah. Good question, Tito. I'd start with, at that mid, to hit that implied $187, I believe is the Q4 number. On the top line, we put the mid at $790. We believe we'll land $790-$800, feels comfortable to us. There's a flow-through to gross margin and bottom line of about 55% on that, is our assumption. That kind of bridges you out from $160 printed in Q3 to $180 and change, in Q4. Despite the kind of utilization of benefits and kind of other costs that we expect to continue from Q3, we did, in the first week of October, make some pretty big changes or countermeasures, to both labor and operating expense. We expect a pickup there for the rest of the year, getting to the $187 mid. That's our base case, if you will. To the downside, could we incur further costs than what we're seeing in Q3? Possible. We feel that fuel, benefit utilization, kind of incremental PAP setup costs, we think that's pretty low risk. It's a risk to the downside. I'd say to the upside, it's really top line. If we continue to outperform, if we get, really on the respiratory side, kind of a clean exit from the kind of prior year COVID spike, and we grow sequentially in respiratory more than we did in Q3 over Q2, those I think are levers on the top side in terms of a beat. Okay, great. It's great news that ResMed is able to sort of crank through this backlog as fast. I'm just curious, can you help us quantify what the pricing is for the new CPAP machines sort of today versus, say, first quarter 2022, and how we should think about CPAP pricing for 2023? We're under contract, our contract is not up till January of next year. For the base unit, it's remained the same thing. They've had some surcharges for freight, which are still in there, which I believe were seven, eight, $12 or something like that. I can't remember the exact number. They've had those. We've also had some freight costs that we've incurred to try to move product around faster that's now discontinued, that will improve our CapEx numbers next year, to a pretty significant tune, $15 million-$20 million. That's all beneficial for us. I think We're anxiously looking forward to our contract negotiations coming up in a few months. I guess, just any color on sort of, how much of a headwind do you think that vendor pricing could be for next year? If you had to ballpark it. It'll be an interesting conversation, I'd hate to give my friends any hints. All right. Fair enough, totally understandable. I guess, last question here, again, I know you're not giving 2023 guidance, just curious, how would you think about the PHE headwinds next year versus where the tailwinds, the new CPAP starts? PHE in theory is there to help out when things aren't normal. Just trying to figure out if we should be viewing them as a headwind, as a bridge to 2023, or if it's irrelevant with all the ramp-up of the new CPAP starts. Thanks so much. The PHE, I think it affects different products different ways. I think on the CPAPs, I don't think that PHE is playing much of a factor. I think it's more driven than supply, obviously. Now that comes out, so if we have ample supply and return to normal growth rates, sleep should be fantastic. I think post-PHE for oxygen and respiratory, I think it kind of peaked at the end of last year, beginning of this year. It's come down since then. We've had some sequential improvement from Q2 to Q3. So I think that gets back to normality in 2023. Diabetes, I think PHE helped diabetes a little bit. But this regulation that's proposed right now should help it too, going forward. So that should be good. Basic DME, I think hospital discharges are constrained right now because they're having a hard time discharging people. So I think that's going to get resolved, so DME should come back. Supplies to the home, we feel like we're making great headwinds with our partners and payers. So I think all of our product categories have positive outlooks for 2023, as opposed to, they're both ups and downs in 2022 and 2021. So I think it's back to more normality. That's fantastic for us because we do have the ability, we're operators, we do have the ability to control cost and be able to get things operating much more efficiently. We haven't been able to control some of our external stuff from supply chain. That appears to be going away, so it should be back to business as usual in 2023. So we're looking forward to it. As you all are thinking about the jump-off point coming out of 2022, top line, I would probably throw it all in the mixer and say it's a wash, right? There's likely upside on the DMEPOS fee schedule. There's PHE headwind. Theoretically, there's a sequestration headwind. There's a lot of ins and outs, but if you assume high level, that's a wash. Then you add in top and bottom line, the range I gave Whit on PAP. So whether you think that's $25 million-$40 million or so based on the numbers I've provided him, that's a decent way to think about a jump-off point. From there, as you said, we think it's normal operations when it comes to non-acquired growth and just sort of margin improvement across the business and we're looking forward to a good 2023, and certainly we'll be specific here in the coming weeks. Great. Thanks so much, guys. With that, ladies and gentlemen, we have reached the end of our time for the question and answer session. I would like to turn the floor back over to management for concluding comments. Thanks, everybody, for attending our call this morning. We appreciate the support, and once again, we'd like to thank our fantastic employees out there. They've been through a lot over the past couple of years, and we're all looking for a more normal environment where we can do great things for our patients, our referral sources, and our payers. Thanks again, and appreciate everybody. Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation, and you may disconnect at this time.