Thank you, operator. Good afternoon, everyone, and welcome to Ascendr Health's fourth quarter earnings call.

Our comments on the call will be focused on the financial results of the fourth quarter of 2025, all of which are included in today's press release. The press release, along with the fourth quarter 2025 supplemental slides, are posted on the Investor Relations section of our website.

Please note that during this call, we will make forward-looking statements that reflect the current views of Ascendr Health about our business, financial performance, and future events. The matters addressed in these statements are subject to risks and uncertainties which could cause actual results to differ materially from those projected or implied here today.

Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations, beliefs, and projections will result or be achieved.

Please refer to our SEC filings for a full description of these risks and uncertainties, including the risk factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law.

In our discussion today, we will refer to non-GAAP financial measures, and believe they might help investors to better understand our performance or business trends. Information about these measures and reconciliation to the most comparable GAAP financial measures are included in our press release.

Today, I am joined by Ed Pesicka, Ascendr Health's President and Chief Executive Officer; Jonathan Leon, the company's Chief Financial Officer; and Perry Bernocchi, the company's Chief Operating Officer. I will now turn the call over to Ed.

Ed?

Thank you, Will. Good afternoon, everyone, and thank you for joining us on the call today.

I am pleased to welcome all of you to our very first earnings call as Ascendr Health. I'd like to begin by giving you my thoughts related to the strengths of Ascendr Health, and why we are so excited for our future, and where we are going.

First, it is important to understand the size of the market that we serve, or the size of the pie. Our expansive payer relationship gives us access to approximately 300 million Americans, of which the CDC estimates that 3 out of 4 adults are living with some type of chronic condition.

Our nationwide footprint makes Ascendr Health a premier choice for all constituents involved in the administration of care in the home-based setting. In this expansive market, we have developed high brand recognition and customer support and reliance on both Byram and Apria, our 2 primary go-to-market brands.

We have established this through leading service, consistency, and reliability. This continues to be validated by Net Promoter Scores that have exceeded the industry average for the last several years.

We also have a broad range of growing product offerings and capabilities, which provides us the ability to serve patients in the home in many of the largest and fastest-growing chronic condition categories. As a result of the foregoing, we are a national leader in home-based care for numerous chronic conditions which afflict millions of Americans, and our strengths are differentiators compared to the vast majority of the thousands of other participants in the industry.

As we look forward, we have a bullish outlook on the long-term demand for our unique offerings. Economic pressures continue to push care to the home-based setting, while the country's aging population is afflicted with a rising number of chronic conditions.

We are also optimistic about the strong long-term demand due to increasing awareness about proactive health management amongst a population which is still meaningfully underdiagnosed, specifically in the sleep category. Another area of opportunity for us is in the anticipated competitive bidding, specifically in diabetes, urology, and ostomy, all categories of strength for Ascendr Health.

As CMS, along with ourselves and other industry leaders, work to drive fraud, waste, and abuse out of the system, we believe that we are well-positioned for Medicare's competitive bidding process, considering our footprints, our efficient service model, and broad existing referral source recognition. To capitalize on the overall favorable backdrop, we are leveraging technology and automation to ensure that we provide an industry-leading home-based care offering built on: 1, being a trusted, reliable, and easy-to-understand partner for our patients and their clinicians; 2, an integrated, streamlined, and compliant reimbursement process for our payers, while at the same time maintaining a best-in-class revenue cycle management capabilities; and 3, providing a streamlined and cost-efficient channel to market for our manufacturing partners.

Just a few examples of the use of technology to both improve the customer experience while also lowering our cost to serve include the use of technology to automate payer qualifications, enabling faster and more accurate order validation, and improving revenue capture. Another example, building on the strength of our My Byram app, is the expected launch of our new My Apria app in Q2 of this year, which is expected to enhance the customer experience while also increasing operational efficiency and supporting patient therapy adherence.

Finally, in a practical application of leveraging technology, enhancing the customer experience, and overall focus, we continue to see success in the fourth quarter with our sleep journey initiative. I'm happy to highlight continued success in our sale of sleep supplies, which grew in the range of 8% to 9% for both the quarter and full year.

Finally, we are pleased to finish the fourth quarter with the completion of the sale of our former products and healthcare services business, Owens & Minor, to Platinum Equity on December 31st. I'd like to thank and commend all parties involved for working so diligently to complete the transaction in such a quick timeframe.

With the transaction now closed, and final separation work well underway, Ascendr Health is now devoting all of its focus and energy to strengthening our core home-based care businesses to achieve reliable and growing free cash flow, stable growth, and debt reduction. We're entering 2026 as a much leaner and more nimble business, with a much higher margin profile post-P&HS divestiture.

We have already taken actions to lean out our business, and expect a continued taking actions to eliminate costs to address the loss of a large commercial payer, as well as stranded costs. Despite never wanting to lose a customer, we maintained our financial discipline during the process.

Since that time, our focus has been to ensure smooth transition of patient care and minimize our cost of transitioning the relationship related to this contract. Finally, now that we have the sales proceeds in hand, we are well-positioned to take a thoughtful approach to optimizing our capital structure, taking into consideration all stakeholders.

We are committed to deleveraging, combined with metered investments, as we move forward. This will be a continuation of what we did in Q4, with investments in technology while also paying down debt by $65 million from ordinary free cash flow.

Before I turn it over to John, let me reiterate my excitement about the strength of Ascendr Health, the growing market that we participate in, and where we are going as a business. With that, I will now turn the call over to John to discuss our financial performance in the fourth quarter and our outlook for 2026.

John?

Thanks, Ed, and good afternoon. I want to start by reminding you that despite the closing of the divestiture at the end of 2025, we will continue to report our results on a continuing operations, discontinued operations basis for as long as accounting rules require us to show comparable results.

Like the last couple of quarters, unless otherwise stated, my remarks today will focus on the continuing operations. The continuing operations financial statements are what you should expect from Ascendr Health.

I am sure we all look forward to much reduced business complexity post-divestiture as we move through 2026. Also, please note that any discussion about the financial results and outlook for the company will cover only non-GAAP financial measures.

You can find GAAP to non-GAAP financial reconciliations in the press release filed a short time ago and residing on our website at ascendrhealth.com. Fourth quarter results were largely in line, with much improved cash flow and lower debt compared to the third quarter.

In the fourth quarter, there was decent year-over-year growth in the key categories of sleep therapy, ostomy, and urology, as we have seen in recent quarters. Diabetes grew by almost 2% versus last year, an improvement as compared to flat year-over-year results in Q3, and insulin pumps led the quarterly diabetes category growth.

The fourth quarter saw the initial impact of a previously discussed contract loss and price impact of a large commercial payer. Overall, this payer's impact on quarterly revenue was approximately 1% of what would have been over 3% growth.

This impact on revenue will significantly increase throughout 2026, and aggregate to approximately $300 million in 2026 versus 2025, and approximately an additional $40 million in 2027. We anticipate that we will have completely lapped the impact of this revenue loss by the end of the first quarter of 2027.

We are on our way to replacing this lost revenue and margin. For all of 2025, revenue was nearly $2.8 billion, up a little more than 3%.

Throughout the year, growth in the large sleep category as well as ostomy and urology led the way. A somewhat weaker collection rate compared to a strong 2024 also inhibited top-line growth.

Fourth quarter adjusted EBITDA was $90 million compared to $102.5 million in last year's fourth quarter. The change was driven by lower payer prices, inflationary product cost increases, higher health benefit costs, and stranded costs that were only partially offset by lower other teammate benefit costs.

For the full year, adjusted EBITDA was $375 million, up slightly from 2024. The same factors impacting the fourth quarter drove the full year results.

Adjusted EBITDA results include $12 million of stranded costs in the quarter from the pre-divestiture business, and $36.5 million for the full year. Beginning with our Q1 2026 results, we will no longer be specifically breaking out stranded costs, because with the finalization of the divestiture, these costs will now be part of the operating expenses of Ascendr Health.

Expense reduction, including former stranded costs, is a key component of our 2026 expectations. As I mentioned, we saw much improved cash flow in the fourth quarter and related debt reduction.

For the fourth quarter of 2025, operating cash flow was $68 million, which includes $67 million of cash used by the former discontinued products and healthcare services business, the continuing operations business generated $135 million of cash from operating activities. For the full year, while the consolidated business of both continuing and discontinued operations had a use of cash from operating activities of over $100 million, the continuing operations, the going-forward Ascendr, generated $154 million in cash from operating activities.

As a reminder, the full year cash flow from continuing operations includes $98 million in cash costs to terminate the Rotech acquisition in the summer of 2025. For the continuing operations, free cash flow in the fourth quarter, defined as adjusted EBITDA less patient equipment capital expenditures net of non-cash convert to sale write-off expense and after consolidated interest paid, was $18 million in the fourth quarter, and for the year was $98 million.

This reinforces the strong cash generation profile of Ascendr compared to the legacy business. At December 31st, net debt was $1.8 billion, down $315 million from September 30th and down $46 million since year-end 2024.

Prior to the closing of the divestiture, we had already reduced debt by $65 million from September 30th. The net proceeds received from the divestiture of the products and healthcare services business of $342 million are included in the December 31st cash balance.

Also, as a result of customary final purchase price adjustments, including a working capital true-up, we expect to receive approximately $12 million to $15 million of additional proceeds in the spring. As the divestiture closed, we used $66 million of proceeds to settle bank debt obligations under the AR securitization program that were entirely related to P&HS.

This is all detailed in slides filed via 8-K just after today's market close, and also residing on our website. In addition to the $282 million of cash on the balance sheet at December 31st, we had nearly $220 million of available capacity under our committed revolving credit facility and $16 million available under a newly amended accounts receivable securitization program.

The bottom line is that we believe there's ample liquidity available for the business. Also, we ended the year comfortably in compliance with our debt covenants.

As we've been saying for months, all net proceeds from the divestiture will be used to reduce our debt balance. We have a long-range leverage target of 3 times adjusted EBITDA, which we believe is very achievable, and debt reduction continues to be a top priority for 2026 and beyond.

We are also committed to maintaining a capital structure that supports the transformation of the business into a pure-play, cash-generative, home-based care company. We are actively evaluating all options to optimize our capital structure and are engaging stakeholders to help ensure we come away with a structure that is the most appropriate for the new, higher-profit, better-cash-flow Ascendr, while protecting the interests of our shareholders.

We believe this process will conclude in the near term. Turning now to the 2026 outlook.

The slides I referenced earlier also include pages to assist with 2026 guidance, and depict the key drivers from our 2025 results in our 2026 full year guidance. I'll begin by walking through the net revenue slide.

We expect annual revenue to be between $2.55 billion and $2.65 billion. As you will see, the greatest impact results from the changes with the single large commercial payer discussed earlier.

Of the $300 million-plus impact in 2026 compared to 2025, approximately 15% of the reduction versus prior year will occur in Q1, and 25% to 30% in each of the second through fourth quarters. This will be partially offset by volume growth and improved collection rates.

Looking at the adjusted EBITDA slide that follows, we expect 2026 adjusted EBITDA to be in a range of $335 million to $355 million. Unsurprisingly, the large commercial payer change again has an outsized impact, and will be somewhat mitigated by cost reduction directly related to this payer, other expense take-out, and volume growth.

The 2026 expense reductions have been identified for some time, and a number of actions have been taken or slated to be taken on a rigid timeframe. Finally, we included a levered free cash flow walk, which again shows the strong cash flow from the Ascendr business.

At the midpoint, we expect at least $100 million of free cash flow in 2026. Much of the cash flow projected in 2026 is spoken for due to the costs throughout the year to separate Ascendr from Owens & Minor, and cash outlays related to certain expense reduction activity that I mentioned earlier.

This is only a 2026 issue, and future free cash flow is expected to be comparable or better, and will help drive further debt reduction. In thinking about quarterly cadence, between cost reduction ramping throughout the year to a full run-rate benefit, the replacement of the previously discussed impact of the large commercial payer, the time needed to reduce stranded costs and effectively separate from Owens & Minor, and the business's normal seasonality, we expect about 60% of the adjusted EBITDA to be realized in the second half of the year, with the first quarter of the year being the weakest, and Q4 the strongest.

In conclusion, Ascendr Health is a very different company than the pre-divestiture Owens & Minor. The investment thesis is much improved, and we are proud to be among market leaders in a growing and dynamic space, and look forward to demonstrating consistent earnings and strong cash flow.

With that, I'll now turn the call back to the operator for Q&A. Operator?

Good evening, and thanks for taking the question. Maybe if I can just dive in on some of the commentary you made, Ed, on investments.

Fully understand, I think we all do, the dynamics around debt paydown, but you talked about targeted investments. As you think about the business, especially with the Rotech deal being in the background, what do you see targeted investments looking like for the RemainCo going forward?

I think there's a couple different ways to look at this. When I talked about the metered investments, primarily in 2026, we're looking at investment in technology, as I talked about, to continue to lower our cost to serve as well as improve the customer experience.

If you're looking specifically around the M&A side, there may be an opportunity to do some tuck-ins. Again, I know our primary focus in 2026 is going to be around debt reduction.

Then those metered investments would be around technology to improve customer experience, as well as lower our cost to serve. We would consider, if appropriate, some small little tuck-ins.

Thanks, that's helpful. Just one more.

You talked about the rebuild of revenue recapture opportunity as you have the large customer rolling off. You signed the preferred agreement with Optum.

How is that going so far?

Look, we're still early in the process. We're starting to gain some traction.

As John talked even in his prepared remarks, the opportunity for us to fill in the gaps we know we won't fill in completely fill in the gaps, as you can see from our walk on revenue. It does create opportunity for us to redeploy resources to start to, backfill that revenue with other revenue, whether it be a preferred provider agreements or just expansion of existing contracts and relationships that we have.

Perfect. Thank you.

Thanks for taking my question, guys. One, just a numbers question.

John, how much was patient CapEx in the fourth quarter? How should we think about patient CapEx as a percentage of overall CapEx in 2026?

Kevin, it was about $45 million in the quarter, about $189 million for the year. If you think about 2026, as we've talked about, this payer customer that we're losing had a disproportionate amount of CapEx relative to the size of that agreement.

As you saw in our guidance, numbers coming down by $25 million-$30 million. If you think about patient CapEx, it's going to run roughly 95% of the total going forward.

Okay. That's helpful.

There's been talk of a manufacturer coming back to market who had been sort of out of the market for a while. Wondering if you have any update on that.

I was wondering if that could actually maybe provide a little relief on costs if another manufacturer were to come in, in CPAPs or vents and the like.

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

Great. I'll jump back in the queue.

Thanks, guys.

Hi, guys. Thanks for taking the question.

Really appreciate all the detail that you've provided in your presentation. If I could just kind of go to the adjusted EBITDA bridge for the '26 guidance, I'm curious if you can kind of maybe break down for us how much of that volume improvement I guess it will largely come through volume improvement, but how much of that is driven by Optum and perhaps other contracts that you haven't announced publicly yet?

How much is kind of non-Optum and non-contracted at the moment?

Daniel, it's John. I would not say there's a lot of preferred provider agreement built into that volume growth, and it's fairly well-spread across all therapy categories.

As Ed mentioned earlier, these contracts are attractive. It takes a while to ramp them up.

We have some upside built into the volume growth, but it is by no means the bulk of that, and it's pretty well-spread across customers and therapy categories.

Got it. Okay.

Then on your CapEx guidance, you're no longer guiding to net CapEx number, and it's in a footnote that's because I guess I don't know, it just says it doesn't include sales of patient CapEx. What are your expectations now on a net basis for CapEx?

Is the delta going to be reduced significantly because of that contract rolling off?

Overall, I would still expect about 30% of the gross to be the number that you see in the sales of patient CapEx. Remember, when calculating any cash flow off of that, that number, that 30%, is already in your adjusted EBITDA number.

We wanted to be clear that we're not double-counting, so that's why we've presented the way we have today. When you think about the dollars coming back, it's roughly 30% of the total.

Got it. Thank you.

Great. Thanks for taking my question.

Just wanted to touch on, in the adjusted EBITDA bridge, the manufacturer cost increases and inflation. Seems like it's outpacing pricing growth.

Is that concentrated to a particular category or area? How should we think about that as a durable trend?

I would tell you, John, certainly I wouldn't call it a trend. I'd call it more of an opportunity for us.

I would not particularly tell you it's linked to any one supplier. It's a trend we have seen it for a while, but it's clearly a focal point for us as we enter 2026 and beyond.

We view it as an opportunity to really grow the EBITDA from where we are today.

Great. Then you mentioned that you're kind of considering all options to kind of optimize the balance sheet.

Can you just spend a little more time talking about kind of your levers around balance sheet optimization? Sounds like there's kind of imminent changes you think you could be making.

The way we think about this is, obviously, with the sale of P&HS business and with cash on hand on the balance sheet plus with the improvement in net debt in the fourth quarter beyond that, anytime you have a major transaction like this, it creates the opportunity for us to step back and really assess our capital structure. It gives us the opportunity to assess our capital structure holistically.

I think we have to, and we will look at it based on the business that we have, what Ascendr is. It's a business today that has a much different working capital requirement than what the legacy business was.

It's a business that we do have relatively predictable PSE or CapEx on it. It's a business that has much stronger margins than the legacy business.

I think that's important to understand that as the backdrop as we have the transaction that's closed, we have the cash on hand. It gives us an opportunity to really step back and reassess.

Daniel, one thing I would add to Ed's comments, which I fully agree with, is we obviously have some things we have to address, and we have some maturities that are in '27, debt becoming current later this quarter, which is the "have to." To Ed's point, everything else will be opportunistic in making sure we have a capital structure that fits the new business model.

Thanks very much. I wanted to go back to that recent question on manufacturer costs increases and inflation.

If we can, I want to be clear on this. Are you seeing broad-based cost increases across multiple manufacturers and categories?

Is it general market environment? Are they passing tariffs on to you guys?

Trying to figure out what it actually is. Is it related to primarily a specific manufacturer, a specific product line?

Then how does that compare to the past? Because obviously, this is a new chart for us.

Thanks for giving it to us, but we don't really have the historical context on it. Then finally, Jonathan, you said you saw some opportunity there to improve upon it.

What's in your control? What opportunities are in your control?

How do you improve upon it?

Yes, I guess I'll add a little more color on it. Eric, it is not across every single category that we participate in.

It's in some of the more major categories where this is normal process we see every year to some extent, and we have the ability to offset it with a couple different areas. We have the opportunity to potentially offset it with, mid-year, all these contracts aren't locked in for the full year.

There's ones that are phasing in during the year. I think it creates opportunity for us to work closer with various manufacturing partners to look at different pricing models and growth incentives and other things like that.

That's where we think about it and where we're going to be able to go after it and attack it. I think that hopefully frames it out.

It's not necessarily tariff-related. It is more related to normal inflation that we've seen historically, and then our ability now to work that down as the year progresses.

Um

I think that's what, I don't want to speak for you, John, but I think you probably meant that as the year progresses, this is the number we have right now, there's opportunity for us to continue to work with our manufacturing partners to mitigate and reduce some of that.

That's super helpful. Could I do one follow-up?

Sure.

Collection rate, also on that same chart, you mentioned in the prepared commentary that collection rate, I think you said it was a bit of a headwind in '25, which impacted growth, but clearly that would have been a big drop-through to profit. You're looking for some improvement in '26.

What gives confidence? What are the drivers of the improvement?

Basically, what happened, and it's not a huge number, but how do you fix it?

Eric, I'm actually very confident in that rebound in '26 because the pullback we saw was largely due to some of the technology investments we made in '24 and '25. You make the investments, there's a learning curve, things have to get worked out the kinks, so that just really set us back a little bit.

The technology we put in place will certainly all of us very confident will be additive to our collection rate going forward. I would tell you that pullback that you saw is minor, but does fall through, you're correct about that, but really related to the onboarding and or the implementation of new investments to improve in the future.

Still really happy with where the rate is overall, but it came off a very strong '24, had some investments we had to work through, and it's going to get better in '26.

What is your bad debt rate now that you're a standalone pure-play? Maybe you can talk about that a little bit.

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

You want to give us a breadbasket, both swagging kind of ratio here?

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

All right. Thanks, guys.

Hey, thanks for taking the question. This is Devon for Allen.

Maybe just to kick it off, just more on the revenue side, sleep growth was 8% to 9%, looks to be a slight step-up quarter-over-quarter. Just would love to know what's driving that, and then would just also love to get a sense of the underlying health of the market across some of the other categories outside of sleep and diabetes, and what's contemplated in guidance here for drivers and growth, I guess from a volume and pricing perspective specific for home respiratory therapy, ostomy, wound care.

Thank you.

I think talk about the sleep category and what's been driving it. We've talked a lot about it over the last year was our sleep journey.

Perry and the team across the business have spent a significant amount of time understanding that sleep journey from patient capture upfront, but as important, if not more importantly, the residual reoccurring revenues associated with sleep, making sure that it's easy for the customers, that being the patient, to get their reorders and that revenue cycle continuing. That's helped out tremendously with it.

I think overall, too, I think you got to be cognizant in the sleep category, it's a growing category. More and more people continue to get diagnosed with sleep apnea, that continues to expand and it creates opportunity for additional growth there.

I think in diabetes, too, it's a little bit of a mix. We saw in the fact that with diabetes, we saw volume go up slightly more than what our overall growth rate was.

That's we got a little bit of the pharmacy DME mix in there that's driving that. I guess, overall, the anticipation is you've got low single-digit growth in most of these categories on average.

Some of them above that, some a bit lower than that, expected in 2026. The growth plan is that plus several other initiatives we have in various categories to expand beyond that.

Hopefully that frames it out what we're seeing right now.

Thanks, Ed. I guess just real quick, one clarification point.

I think you mentioned some of the benefits from the pharmacy DME mix. I guess is that now a tailwind on the diabetes side?

Is that what you're mentioning, or at least is the expectation?

No. No.

No tailwind at all. It's just a one channel versus the other channel approach.

We're still seeing the shift from pharma to DME. DME to pharma, yes.

Got it. Yep.

Just wanted to clarify that. Then, I think there was a lot of obviously great call you guys provided on the various drivers of cash flow here, but I just wanted to take a step back and would just love to get an understanding of what the biggest swing factors are here for the year on cash flow, from your standpoint, where you sit, where you have visibility into, and maybe ones that are less so, just what are the biggest swing factors we should think through here?

I think the biggest standalone single item there is, if you're looking at the slides we've provided, is the transaction break fee and the transaction financing fee. That's $98 million.

It's probably the biggest one-timer there.

It's important to realize also, Devon, that Ascendr Health compared to legacy Owens & Minor, the working capital business is completely different. This is a business that runs with very little, if any, working capital consumption.

We have opportunity to improve on that as well. It's cash generative, it's recurring revenue business, with really strong working capital dynamics behind it.

Very, very different than what you guys are used to in the past.

Got it. Thanks, John.

Thank you, operator, for that. Look, this is an extremely exciting period in the history of Ascendr Health.

Myself personally, we're all extremely excited about what the future has as a pure-play supplier in the home-based care space. I look forward to continuing to providing updates and sharing our progress with you as we continue through the year.

Thank you.