Owens & Minor - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 results were mixed: revenue rose 0.7% y/y to $2.632B but was slightly below S&P Global consensus ($2.662B), while Adj. EPS of $0.23 beat the $0.201 Street mean; Adj. EBITDA of $121.9M also exceeded the $116.7M* consensus. Values with asterisk are from S&P Global.
• Patient Direct (PD) drove the quarter with 6% y/y revenue growth, 173 bps operating margin expansion, and broad-based category strength (Sleep, Diabetes, Wound, Ostomy, Urology); P&HS saw same-store gains in Medical Distribution but faced FX and commodity headwinds.
• Management reaffirmed full-year 2025 outlook (Revenue $10.85–$11.15B; Adj. EBITDA $560–$590M; Adj. EPS $1.60–$1.85) and kept modeling assumptions intact (gross margin 20.75–21.25%, interest $138–$142M, capex $250–$270M).
• Tariffs are the key swing factor: annual exposure estimated at $100–$150M, concentrated in P&HS; SKU-level price increases begin in early June to pass through higher costs; potential working-capital timing impact flagged.

What Went Well and What Went Wrong

• What Went Well

  • Patient Direct strength and margin expansion: “operating income grew by 31% or $14 million, resulting in a 173 basis point expansion,” with Sleep starts higher and high-single-digit growth in Sleep Supplies; record collections in Byram from enhanced revenue cycle efforts.
  • Cost controls and leverage: DS&A down to 17.6% of sales vs 18.3% y/y; interest expense declined ~$1.7M y/y on lower average borrowings.
  • Execution and network capabilities: Opened new state-of-the-art distribution centers (Morgantown, WV; Sioux Falls, SD) and increased proprietary product penetration in distribution.

• What Went Wrong

  • Consolidated margin pressure: despite PD gross margin +40 bps, consolidated gross margin fell ~50 bps y/y on nitrile cost inflation and an “abnormally large” FX move within P&HS (about $3M negative impact to adjusted operating income).
  • Cash flow usage in Q1: Cash used in operations of $(35.1)M driven by inventory build ahead of DC openings and tariffs, incentive comp timing, and ~$23M of Rotech/P&HS sale process costs.
  • P&HS profitability is thin: operating income of $1.153M (0.06% margin) despite top-line stability; PD remains the earnings engine.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Owens & Minor First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. Thank you. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, Jackie Marcus, Investor Relations.

Jackie Marcus (Senior Managing Director)

Thank you, Operator. Hello, everyone, and welcome to the Owens & Minor First Quarter 2025 Earnings Call. Our comments on the call will be focused on the financial results for the first quarter 2025, as well as our outlook for 2025, all 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 that reflect the current views of Owens & Minor about our business, financial performance, and future events. The matters addressed in these statements are subject to risks and uncertainties, which could cause actual results to differ materially from those projected or implied here today. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them.

However, there can be no assurance that our expectations, beliefs, and projections will result or be achieved. Please refer to our SEC filings for a full description of these risks and uncertainties, including the risk factors section of our annual report on Form 10-K and our quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call or in our earnings press release are as of today, and we undertake no obligation to update these statements as a result of new information or future events, except to the extent required by applicable law. In our discussion today, we will refer to non-GAAP financial measures and believe they might help investors to better understand our performance or business trends. Information about these measures and reconciliations to the most comparable GAAP financial measures are included in our press release.

Today, I am joined by Ed Pesicka, Owens & Minor's President and Chief Executive Officer, and Jon Leon, the company's Chief Financial Officer. I will now turn the call over to Ed.

Ed Pesicka (President and CEO)

Thank you, Jackie. Good morning, everyone, and thank you for joining us on the call today. We hit the ground running in 2025, and we continue to progress forward on our broader long-term strategy, starting with our patient direct segment. We've had a tremendous start to the year. Our top line grew in the mid-single digits in the first quarter, and our operating income grew by 31%, or $14 million, resulting in a 173 basis point expansion. This exceptional performance was supported by many items. Let me share a few of them with you. Over the last year, we made an investment in the sleep journey. The objective of the sleep journey was to streamline the new start process and improve adherence for resupply, making it easier for customers to reorder needed products.

The result of this investment can be seen in the first quarter results, which showed a meaningful increase in our sleep starts and high single-digit revenue growth in our sleep supplies for the first quarter. In addition, over the last year, we've invested in additional commercial resources. This has enabled us to streamline territories while expanding the sales rep's bag, resulting in double-digit growth in three categories: wound supplies, ostomy, and urology. Additionally, we continue to identify therapy categories for expansion. For example, within home respiratory space, we launched an organic expansion into chest wall oscillation therapy. Finally, during 2024, we began to invest in our already strong revenue cycle management process with the goal of enhancing our collection rates. These efforts began with a focus in our Byram division. I am pleased to report that these efforts resulted in a record collection rate in Q1.

We are now moving the learnings to our Apria division and anticipate this program will be completed by the end of the year. With respect to our planned acquisition of Rotech, we are awaiting a final decision from the regulators and still expect to close in the first half of 2025. We have our financing in place, and we are ready to move forward. Moving on to our products and healthcare services segment. As a reminder, in February, we disclosed that we entered into discussions regarding the potential sale of our products and healthcare services segment. We remain actively engaged with a number of parties in the sale process for the segment, and I look forward to providing more information when it is prudent to do so.

In the meantime, we continue to run this segment with the same level of commitment and attention to detail around serving our customers and delivering high-quality products. I also recognize that the sale process creates a bit of a distraction in the day-to-day execution. Despite the effort needed to move the sale process forward, there were some great accomplishments in the quarter. Within our medical distribution division, we saw continued growth in same-store sales and an increase in proprietary product penetration. In addition, we have begun our distribution network automation efforts to drive long-term efficiencies. We successfully opened a new state-of-the-art distribution center in Morgantown, West Virginia, to serve the state of West Virginia and surrounding areas, anchored by a long-term agreement with WVU. We also recently opened another distribution center in Sioux Falls, South Dakota, to serve the Upper Midwest. Finally, let me address tariffs.

I will start by saying that at Owens & Minor, we are dedicated to delivering high-quality medical products to support patient care. To date, we have worked extremely hard to mitigate the impact of tariffs to our customers through cost reductions, investment in inventory, utilization of our U.S. manufacturing footprints, our multi-country sourcing approach, as well as offering untariffed product substitutions. However, in a business that operates at less than 1% profit margin, we can no longer absorb these costs. The costs absorbed to date include the 2024 tariffs on Chinese facial protection and gloves, ranging from 25%-50%. The tariffs implemented in March and April of this year ranged from 145% for imports from China to 25% for non-USMCA imports from Mexico and Canada, and 10% or more for imports from most other countries.

We anticipate the annual exposure of current tariffs on our products to be in the range of $100 million-$150 million. Accordingly, we are currently beginning to implement price increases in our P&HS segment that will be effective in early June. We have elected to impact only products affected by tariffs and not blend or use a weighted average method to spread tariffs across product categories. That said, we are using our diverse manufacturing footprint and our strategic sourcing options to offer our customer alternative products with lesser impact from tariffs. Our primary goal is to ensure our customers receive the high-quality and critical supplies and services that their providers and patients rely on every day. I am excited about what's ahead for our company, and I will now turn the call over to Jon to discuss our financial performance in the first quarter. Jon?

Jon Leon (EVP and CFO)

Thanks, Ed, and good morning, everyone. As we walk through details of the quarter and discuss the outlook for the business, please note that my remarks on today's call will cover only non-GAAP financial measures. All GAAP to non-GAAP financial reconciliations can be found in the press release filed earlier this morning. Now, let's turn to our first quarter results. The business delivered on almost all of our expectations in the patient direct segment and performed exceedingly well. Our revenue for the quarter was $2.6 billion, up just under 1% as reported, but up 2.3% compared to the prior year on the same day's basis, noting that there was one less selling day in Q1 2025 versus 2024. Patient direct revenue of $674 million grew by 6% compared to the first quarter of 2024. On a same-day basis, the year-over-year growth was 7.3%.

I am pleased to say that almost every therapy category showed good growth, and sleep supplies and diabetes once again led the way. Small categories like ostomy, wound, and urology also performed very well. We were encouraged by the continued improvement in oxygen therapy growth, which began in the fourth quarter, and feel comfortable saying that we have seen the bottom for that category and expect growth throughout 2025. The reported revenue for the products and healthcare services segment showed a decline of 0.8%, but on a same sales day basis, grew 0.10% compared to the first quarter of last year. Segment revenue totaled $1.96 billion for the quarter. The medical distribution division again showed good same-store sales, but lower year-over-year glove prices and lower international sales offset the med distribution same-store sales growth.

We were encouraged to again see an increase in the amount of our proprietary product sales running through our distribution channel, a key strategic initiative of ours. Gross profit in the first quarter was $526 million, or 20% of net revenue. Although gross margin expanded by 40 basis points in patient direct, a rise in commodity input costs, particularly nitrile, and an unbelievably large and adverse change in foreign currency rates within P&HS drove the consolidated gross margin rate down by about 50 basis points. Our distribution, selling, and administrative expenses for the quarter were $462 million, or 17.6% of revenue, compared to $478 million in last year's fourth quarter, which was 18.3% of revenue. Lower benefits costs and focused expense reduction and efficiency efforts drove the improvement in DS&A. These lower expenses were partially offset by costs related to the buildout of our two new state-of-the-art medical distribution facilities.

Adjusted operating income was $61 million in the first quarter, an improvement of about 7% versus Q1 2024. This included 31% segment operating income growth at patient direct. The products and healthcare services segment realized a larger impact from foreign currency in the first quarter than we usually see, and this negatively impacted consolidated adjusted operating income by $3 million. Interest expense in the first quarter was just under $34 million, down $1.7 million compared to the prior year's first quarter. This change was driven by lower average borrowings throughout the course of the quarter, partially offset by less interest income than we had in the first quarter of 2024. Our adjusted effective tax rate was 31.9% as compared to 29.2% in the first quarter last year. The increase is primarily due to the impact of a lower share price on equity compensation.

Adjusted net income for the quarter was $18 million or $0.23 per share compared to $15 million or $0.19 per share last year, representing about 20% growth. Adjusted EBITDA grew 5% to $122 million versus $116 million reported during the first quarter of 2024. As expected and discussed last quarter, we have what we believe will be the weakest cash flow quarter of the year. The consumption of working capital was driven by a number of factors, none larger than an increase in products and healthcare services inventory ahead of the opening of the previously mentioned new distribution centers, as well as in anticipation of tariffs. Additionally, the first quarter always marks the payment of incentive compensation to a number of our teammates.

This year, due to the timing of payroll at the end of the first quarter, accrued salaries declined by $22 million as compared to year-end. Also, cash expenses related to both the planned Rotech acquisition and the potential sale of the products and healthcare services segment totaled approximately $23 million. Cash outlays for most of these items are expected to reduce over the course of the year. This fact, along with the seasonal profit growth and seasonal improvement in the already best-in-class collection rates of patient direct, should lead to marked improvement in cash flow, which will be used for debt reduction as we continue to focus on returning to the targeted leverage debt range of two to three times EBITDA.

As you heard from Ed, we're actively making pricing changes to pass along the impact of tariffs in addition to reworking sourcing strategies, and we also are prepared to leverage our U.S. manufacturing footprint. The vast preponderance of potential tariff exposure resides in products and healthcare services, and the margin profile of that business obviously makes any tariff absorption impossible. While we believe we will be well-positioned to protect the business from a tariff impact, the possibility exists of at least an adverse timing impact on working capital as tariffs are paid ahead of AR collections. Importantly, as noted in this morning's press release, we have reaffirmed guidance for the year and continue to expect improving results in each subsequent quarter, and we still see at least 70% of earnings and cash flow generated in the second half of the year.

Overall, it's pleasing to have the business start the year largely as expected, and we remain bullish on the outlook for earnings and cash flow for the remainder of 2025. I'll now turn the call over to the operator for questions. Operator?

Operator (participant)

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

John Stansel (VP of Equity Research)

Great. Thanks for taking the question. Just want to dig in on the tariff side of this. Can you talk about the discussions you're having with your customers and how they are or are not planning around this, potentially changing behavior or approaching their sourcing? Thank you.

Ed Pesicka (President and CEO)

Yeah, sure, John. Excuse me. Sorry. Let me again re-scope the tariff exposure. We think it's in the $100-$150 million range. We think as of right now, it's on that lower end of the range, but obviously, as product mix changes, that could change. That's why we have the range on it. The bulk of ours is really coming from China and Thailand, obviously, where we make our gloves and in some of the sourcing of more of the commodity-type products and smaller, very small impact really related to USMCA-type products coming from Mexico. Regarding our customers, look, we've got various contractual opportunities or contractual ability to be able to adjust prices going forward. We recognize from a customer standpoint, it's a difficult conversation. We've done, I think, really a good job over the last several months absorbing a significant portion of it.

Again, as a reminder, there were tariffs that went on facial protection as well as gloves that were effective at the end of last year as well as on January 1, plus the additionals. Some of the things we've done to help mitigate that for our customers is we increased our inventory significantly in the first quarter of the year to make sure we had product on hand. At 1% selling margin in this business, we can't afford to take on 145% tariff, and we have to work together with our customers to work through that. We are working with our customers to identify alternatives, products that can be substituted out at a lower cost, but those are the conversations we're having and will have going forward.

I think the other thing we're trying to do is, because this is such an administrative burden for customers and they're getting it from various suppliers, not just us, is to try to do it infrequently so you don't have so much administrative work associated with it. That's where we are in the process. It's a pretty fluid environment too, but we're going to have the ability to react as things change within the policies and the tariffs, and that's the way we're approaching it.

John Stansel (VP of Equity Research)

Great. And then just quickly on FX, obviously a headwind. It sounds like in the first quarter, the dollar has moved around a fair amount in March, April. You reaffirmed FX, I think, as of the end of last year. Just how should we think about the impact kind of progressing through the remainder of the year versus your expectations? Thanks.

Jon Leon (EVP and CFO)

Hey, John. It's Jon Leon. Yeah, I think we saw a lot of volatility in the dollar, particularly in the month of March, particularly in the Asian currencies where we do a lot of our manufacturing and sourcing. That has since subsided quite a bit. You're right, the dollar still moves quite a bit, but relative to what we saw in March, things are much calmer now. If we stay where we are today, I think the guidance will be fine. We don't expect too much volatility like we saw in March. Reminder, it's just in the P&HS segment only where we see that. What we know today, I think we're fully comfortable with the guidance for the rest of the year around FX.

Operator (participant)

Your next question comes from the line of Michael Cherny of Leerink Partners. Please go ahead.

Ahmed Muhammad Rahat (Research Analyst)

Good morning. This is Ahmed on for Mike Cherny. Thank you for the color that you gave on tariffs. I just wanted to clarify, is the $100-$150 million the direct impact of tariffs, or is it just the exposure, the potential exposure? Just to be clear, what exactly is embedded in the guidance? If there's any more color you could give there. As you think about price increases, will you be able to preserve spread, or is the goal just to preserve GP dollars? Thank you.

Ed Pesicka (President and CEO)

Yeah. So the tariff exposure, in essence, if you look at it at a SKU level, you try to take it to that level of detail, gone through it by country of origin, knowing what the tariff is, knowing what our product cost would go up, that's what it is in totality. Then from there, the expectation is that we're going to cover those dollars that come through. That's what we're expecting on an aggregate basis. Hopefully that helps when we talk about the $100-$150 million exposure. That is what is getting passed through so that way it can cover our cost increases.

Operator (participant)

Your next question comes from the line of Daniel Grosslight of Citi. Please go ahead.

Hey, this is Luis for Daniel Grosslight. Just a quick follow-up. What is the split between the $100-$150 million tariff exposure between the P&HS segment and the PD segment? Thank you.

Ed Pesicka (President and CEO)

Yeah, it's virtually all P&HS segment. I mean, we've gone through in detail analysis for our patient direct segments. And within the patient direct segments, the vast majority of the products are either made in the U.S. or qualify under the Nairobi Protocol. So there is very little exposure within our patient direct segment today associated with it. The one area, and it's a small category for us, you would think would be something like a bent metal area where you do have some of that stuff made overseas. But again, the $100-$150 million, it's virtually all in our P&HS segment.

Appreciate it. Thank you.

Yeah.

Operator (participant)

Your next question.

Ed Pesicka (President and CEO)

I'm sorry. I'll just add one more comment on tariffs. Again, recognizing that there's a lot of conversation we have to have with customers. In the industry today, we're not the only ones trying to pass this on and needing to pass it on. Really, across the industry, it's both manufacturers and/or distributors and/or suppliers that are needing to do this because of the margin rates we have within the space.

Operator (participant)

All right. Your next question comes from the line of Kevin Caliendo of UBS. Please go ahead.

Kevin Caliendo (Managing Director)

Morning, guys. Thanks for taking my questions. First one, I just want to understand a little bit on the guidance. The Rotech financing is in place, but it doesn't look like the interest expense has changed. How are you accounting for that in the guidance? Is the financing set up such that it won't really start to pay until the deal closes? You'll update the guidance then? I just want to understand how that dynamic works.

Jon Leon (EVP and CFO)

Yeah, Kevin, it's Jon. None of the debt comes onto the balance sheet until we actually close the deal. The term B-loan will begin to accrue interest before the end of May, keeping in mind that we are expecting to hear from the FTC in early June. At that point, once we hear from the FTC, it gives us an opportunity to close the deal to review the guidance. Without knowing exactly that outcome and not having the debt on the balance sheet right now, we've left the guidance alone and not impact any of the EBITDA from Rotech or the debt. Does that make sense to you?

Kevin Caliendo (Managing Director)

Yeah. No, that's helpful. I know the debt came in maybe at a higher rate than you had expected. Are any of your assumptions around Rotech accretion changed in any way, shape, or form? Or how should we think about that? It's not in most people's models yet, but I'm just wondering how you're thinking about it. Are you going to just plan to update us when the deal closes?

Jon Leon (EVP and CFO)

Yeah. You will recall that we had it neutral the first full year, then accretive in the second year. I think it was like $0.10, $0.15 or an exact number, but we will certainly update upon closing. You are correct. The debt came in roughly 50 basis points than we had anticipated at the time of the deal.

Kevin Caliendo (Managing Director)

Okay. Just one last one on free cash flow. Sorry if I'm hogging the phone here a little bit. On the last quarter, you gave kind of a cash flow bridge, right? EBITDA with CapEx of around $260 million and the interest expense guidance, which remains the same. One thing I guess that's different now is obviously the working capital looks a lot different than maybe you had anticipated. The last commentary you made to us publicly was that there would be like $100-$150 million of cash flow available depending on working cap. Do you still anticipate, given what you did with inventory, that the free cash flow this year would be meaningful or $100 million or more? Is that still in play?

Jon Leon (EVP and CFO)

Yeah, that's still in play. No change to the outlook for the cash flow. You're right. There's a lot of numbers in play this quarter. I would say most were largely anticipated. I would offer probably the cost around the strategic initiatives, both the planned Rotech acquisition and the potential sale of P&HS, a little higher than we thought, particularly on the Rotech side. Other than that, it's as we expected. There's no change in the outlook for cash flow for the year. We still expect to be able to generate good free cash flow and use it to pay down debt.

Kevin Caliendo (Managing Director)

Fantastic. Thank you so much.

Operator (participant)

Your next question comes from the line of Eric Coldwell of Baird. Please go ahead.

Eric Coldwell (Managing Director)

Thanks. Good morning. I have a few. I'm curious if you could share with us the incremental tariffs that you actually realized in Q1 from those that were already in effect and those that went into effect January 1st. What was the impact on the quarter itself? Obviously, some of the pricing decisions hadn't gone into effect at that point on your side.

Ed Pesicka (President and CEO)

Yeah, it really didn't. Based on the inventory we had in place, Eric, it really did not have an impact on Q1.

Eric Coldwell (Managing Director)

Okay. Good. Then the second quarter here, the quarter that we're in, I'm curious just from a phasing standpoint with the models. You were just asked about the Rotech debt and when the financing comes in. It sounds like maybe there could be a slight mismatch on timing on the term coming in in May. There's also the tariff increases, and you're talking about pricing that starts to go into effect, I believe, in early June. Is there a bit of a gap here for a couple of months before your pricing efforts take effect? If so, what is the potential impact of tariffs here in the second quarter? Would you be on still a bit of a delay because of the timing of when inventory flows?

Ed Pesicka (President and CEO)

Yeah. I think at a high level, Eric, the way we think about it and the way we've thought about it and the way we've done it from a timing standpoint, by having the new pricing in early June, based on what's in inventory and what our normal flow-through should be and based on the inventory we had in the first quarter, that's when we need to start to do it as the higher-priced stuff starts to flow through our system. That timing lines up pretty good on when the products go flow through our system and when those price increases go into effect.

Eric Coldwell (Managing Director)

Got it. In a scenario—I completely understand what you're saying and most others are saying in terms of having to pass the pricing on to a large or entire extent—some of your competitors may not pass all of the pricing on. They may use that as a bit of a competitive advantage or take advantage of a tough situation for clients and use that to gain share. Some manufacturers have said they're not going to raise prices or not going to raise them fully. Some manufacturers have also said they're going to spread tariffs across all products and not go SKU by SKU, country by country. There could be some mismatch in the pricing on specific products. If you're, for example, taking 145% on a certain China product, but a competitor might be taking a lesser amount on that particular product.

We also have a hospital and maybe more health systems that have said they're just not going to take price increases. I mean, Vanderbilt's been pretty clear on this. What happens if a customer says no? Do you just lose the sale, or do you bend a bit? I'm just curious what happens in these situations where maybe the pushback is great.

Ed Pesicka (President and CEO)

Let me take—there's a lot in that question, Eric. Let me just take first is the approach on tariffs. If others are blending or using a weighted average tariff approach, it's completely not aligned with what the tariffs were implemented or designed to do. I'll give an illustrative example here. If you've got a Chinese product selling for a dollar and a U.S. product selling for $ 1.30, and the company decides to do—instead of doing the 145% tariff on that dollar product—decides to just spread it at 25% across everything, that means that dollar product goes up to a dollar 25, and it's still below the U.S.-made product price. You're still encouraging people to buy the lower-cost Chinese product. That is not the intent of the tariffs.

In tariffs, there are increasing costs for Chinese-made products that ultimately will help lean towards buying products that are either made in the U.S. or in tariff-friendly or U.S.-friendly countries. That is why we have taken the approach to actually implement the tariffs based on the way they have been laid out, not turn around and blend it and raise prices on every product regardless of where it is made. We have taken a pretty direct approach on that. Second of all, there are requirements that do not enable or that will stop us from selling products at a loss. We just cannot do that due to various requirements that are out there. I think with our customers, we are going to work with them. We are going to work with them aggressively to find them other products potentially that are lower cost than what the tariff-implemented product is and focus on that.

That's what we have to do because, again, what we can't do is sell products that have significant loss on them because we're absorbing the tariff cost. That's the intent of what we're going to do within this.

Eric Coldwell (Managing Director)

Thank you for that. The last one for me, Rotech, Jon mentioned the debt was about 50 basis points higher than originally forecast. That process, since you first announced the deal, has been going on for nearly a year now. As you've reported in your various debt and financing presentations, as you reported over time, Rotech's financials actually did deteriorate a bit. Revenue and margin profile came in. I'm curious now that a year has passed, is the acquisition target performing at the levels you built into your original base case of neutral in year one and $0.15 accretive in year two?

Jon Leon (EVP and CFO)

Yeah, Eric, it's Jon. Yeah, the answer to the question is yes. Rotech continues to perform as we expected. 2024 came in very much right on top of our deal model. The declines that people saw were largely anticipated and largely resulted from a lot of COVID-era benefits that the industry got to realize that fell off in early 2024, like 75/25 P/E going away. We saw the same thing in our current patient-direct business. We fully anticipated those changes in 2024. Overall, Rotech performed exactly as we expected in the deal model and doing so through the first quarter of 2025.

Eric Coldwell (Managing Director)

Okay. Thanks very much.

Operator (participant)

That concludes our Q&A session. I will now turn the conference back over to Ed for closing remarks.

Ed Pesicka (President and CEO)

Thank you, everyone. I appreciate you taking the time to join us this morning. I'm excited about where we're going as a company. We really have a bright future ahead of us as we continue to operate and execute on our long-term strategy. With that, I look forward to sharing progress with you later this summer. Thank you.

Operator (participant)

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.