Impact on EBITDA Guidance
Q: How did supply chain, procedural volumes, and patient eligibility affect EBITDA guidance?
A: Management indicated that unexpected costs arose because customers can't get needed supplies for procedures, leading them to revise EBITDA guidance. Procedural volumes have slowed due to product shortages, impacting the business. The backlog in Patient Direct is improving and expected to positively affect Q4, but overall challenges led to a cautious outlook. "

2025 Outlook and Tariffs Impact
Q: What factors will influence the 2025 outlook?
A: Improvements in the Patient Direct segment, especially from streamlining the sleep journey, should positively impact 2025. Procedural volumes are expected to reset in January as deductibles renew. Upcoming tariffs of 25% on facial protection and 50% on medical and surgical gloves could pose industry headwinds but may benefit the company due to its manufacturing footprint outside China. "

Sustainability of Patient Direct Margins
Q: How sustainable is the strong margin performance in Patient Direct?
A: Management is optimistic about maintaining and improving margins, driven by fixed cost leverage and gross margin expansion. Efforts to streamline the sleep journey and improve onboarding have enhanced efficiency. Rigorous revenue cycle management and cash collection initiatives are yielding benefits. They expect continued year-over-year margin expansion, noting the business's seasonality with stronger performance in the back half of the year. "

Free Cash Flow Expectations
Q: Are you still expecting positive free cash flow for the year?
A: Yes, despite a softer third quarter with inventory builds, management expects improved cash flow in Q4. Initiatives to manage inventory, accounts payable, and receivable are progressing as expected. They anticipate better operating cash flow by December 31, citing effective working capital management during the quarter. " "

Opportunities for Share Gains
Q: Where are the best opportunities for incremental share gains?
A: Management sees opportunities in expanding the product portfolio, particularly in gloves, where tariffs could allow them to win new business due to their manufacturing footprint not being in China. Exiting low-margin business is ongoing. Onboarding new customers creates short-term headwinds due to initial lower profitability but sets up opportunities for improved performance in 2025. "

PHS Segment Growth and Outlook
Q: How did global products contribute to PHS growth, and what's the outlook?
A: Global products saw stabilization in glove pricing, significant given gloves are a major category. Potential future pricing movements due to tariffs are anticipated. New product introductions are contributing, with efforts to ensure inventory availability for new portfolios. The international business has shown sequential improvement during the year. "

Transportation and Storage Costs
Q: What affected PHS operating margins this quarter?
A: Margins were impacted by foreign exchange fluctuations, with currencies like the Malaysian ringgit strengthening against the USD, costing several million dollars in potential operating income. Increased transportation and storage costs also affected margins. Onboarding new customers contributed to lower initial profitability, with expectations of ramp-up over time. " "

CapEx Needs for Tariff Opportunities
Q: Do you need additional investments to capitalize on tariff changes?
A: No additional capital expenditure is required. Previous investments, such as adding ten production lines to their glove factory in 2020, have positioned them well. Facilities in North Carolina and Texas have available capacity for facial protection products, allowing them to take advantage of market opportunities without extra CapEx. "

Patient Backlog Causes and Resolution
Q: What's causing the patient backlog, and why the delay in resolution?
A: The backlog is due to changes requiring more manual work and loss of certain functionalities. Delays are also attributed to incremental demand causing constant new patient starts. Management views this as a "high-grade problem," working to clear the backlog while handling ongoing demand. There are no supply chain issues impacting this. "

Growth in Sleep and Diabetes Categories
Q: Can you quantify growth in sleep and diabetes categories?
A: While specific figures weren't disclosed, management noted that diabetes continues to lead with very strong growth. Sleep supplies are performing strongly and expected to improve as backlog and patient eligibility verification clear. These higher-margin categories contribute positively to performance. "