Accendra Health, Inc. (ACH) Earnings Call Transcript & Summary

Good morning, and thank you for standing by. Welcome to the Accendra Health Second Quarter 2026 Earnings Conference Call. Please be advised that today's conference call is being recorded. [Operator Instructions] I would now like to hand the conference call over to your first speaker today, Will Parrish, Vice President, Strategy, Corporate Development and Investor Relations.

Thank you, operator, and good morning, everyone. I'd like to welcome you to Accendra Health's second quarter earnings call. Our comments on the call will be focused on the financial results of the second quarter of 2026, all of which are included in today's press release. The press release, along with the second quarter 2026 supplemental slides, which we will refer to throughout the call are posted in 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 Accendra 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. We 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 in our earnings press release or in our supplemental slides 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'm joined by Ed Pesicka, Accendra Health's President and Chief Executive Officer; Jon 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 morning, everyone, and thank you for joining us on the call today. Before I dive into our second quarter results and the outlook for the balance of the year, I'd like to take a moment to address the announcement included in today's press release that I have informed the Board of Directors of my intention to retire by the end of 2026. The decision to retire is never easy. However, after considerations with my family and careful thought, I've decided that now is the right time. It has been an honor and privilege to serve as President and CEO for nearly 8 years. During that time, we initially stabilized the company when I joined, enabling us to successfully guide the company through the unprecedented challenges of COVID-19 pandemic, then navigate the company through post-pandemic environment, completed the sale of the PNHS segment and most recently executed our balance sheet optimization and debt realignment. Together, these milestones have transformed the company into a focused pure-play home-based health care business with a strong strategic foundation. With these important milestones largely behind us, I believe the company is well positioned for its next chapter. The timing is right to begin a thoughtful leadership transition that allows the next CEO to build on the foundations we've established, capitalize on the opportunities ahead and create long-term value for our patients, customers, employees and shareholders. Board has a long-standing succession planning process, and I'm confident that we will have a successful CEO transition. In closing, I would like to personally thank the Board of Directors, the company leadership team and our 6,000 teammates for all the dedication, hard work and support over the last 8 years. Now, let me turn to the business updates. Looking at our second quarter performance, our results did not meet the expectations we set for ourselves. At the same time, the quarter reflected continued progress in several areas that are critical to our long-term transformation. We successfully advanced our separation from Owens & Minor, remained on schedule with the transition away from a large commercial payer earlier this year and continue to strengthen the operational foundation of the business as Accendra Health. That said, our results also demonstrate that we have additional work to do to optimize our cost structure and improve execution. As I'll discuss in a moment, we have already implemented a number of these initiatives and have additional actions planned that are designated to streamline our operations, improve efficiencies and reduce costs. We also experienced several discrete headwinds during the quarter that we believe are temporary in nature and affect our near-term financial performance and cash flow. I'll provide more detail on these shortly. Importantly, the quarter also included several accomplishments that reinforce our confidence in the future. We made meaningful progress in a number of strategic initiatives that we believe have the potential to drive attractive growth beginning in late 2026 and continuing into 2027. Turning now to the key drivers of our second quarter performance. There were 3 primary factors that contributed to the variance from our forecast: one, revenue growth below our expectations; two, the timing of planned cost reductions; and three, slower-than-expected recovery of our collection rate. Starting with revenue. While we were pleased to see revenue growth improve sequentially from the first quarter to the second quarter, excluding the impact of the large commercial payer exits, overall growth remained below both our expectations and the level this business is capable of delivering. To accelerate growth, we have made targeted changes within our commercial and operational organizations to improve customer responsiveness, strengthen execution and reinvigorate our sales force. We are already seeing positive momentum, and several important initiatives are either underway or expect to begin contributing over the coming quarters. Starting with the renewal of our largest soft good contract with our largest commercial payer, which we discussed during the last earnings call, but was formally executed during the second quarter. This provides greater stability across an important portion of our commercial payer portfolio for years to come. Building on that success, we also signed a new sole-source agreement with a regional health system that is expected to launch in early 2027. In addition, we executed a broader enterprise-wide fee-for-service agreement with another payer that we believe will drive additional patient volume, improve capacity utilization and create meaningful value for both organizations. Moving now to cost reductions. Following our separation from Owens & Minor on December 31 and the transition away from the large commercial payer during the first quarter, we identified and eliminated more than $125 million of annualized costs. Soon after completing this takeout, we identified the need to allow the business to settle and stabilize from these changes before introducing additional cost reductions, which could have created disruption while we were, one, settling in as a new pure-play home-based health care business; two, completing the exit of the large commercial payer; and three, executing our balance sheet optimization. In addition, while our transition service agreements with Owens & Minor continue to wind down on schedule, those temporary interdependencies have limited our ability to fully optimize our organizational structure during the first half of the year. Although the timing has been somewhat later than originally anticipated, our commitment to improving our cost structure has not changed. Approximately 1 month into the third quarter, we have already executed the next phase of targeted cost reductions, and we'll continue evaluating additional opportunities in the coming months. Another example of our ongoing efforts to reduce our cost to serve is the pursuit of new arrangements with leading logistics providers for inventory management and fulfillment across select product categories. We expect the arrangements to go live later this year and believe they will both lower our operating cost and reduce inventory, thereby improving cash flow. Looking further ahead, continued investment in technology, automation and process improvement should enable us to operate even more efficiently while supporting future growth. Continuing with the theme of operational efficiencies and cost reductions, we continue to advance our national rollout of our sleep center of excellence during the second quarter. While there is still work to complete, we remain optimistic about this program's ability to contribute to both growth and profitability beginning in late 2026 and continuing into 2027. Finally, moving on to slow payment of collections from payers. We continue to see reimbursement collection rates below the historical norm of the business' typical performance. This has negatively impacted our revenue and adjusted EBITDA in the range of nearly $20 million in the first half of the year. The underlying cause is related to several factors, including growing pains associated with recent technology investments and slower payer payments. Jon will discuss this further in his prepared remarks, specifically related to some discrete inefficiencies with specific commercial payer processes that affected collections and increased AR. Importantly, we have already implemented mitigation plans with those payers and are seeing encouraging progress, and we expect this issue to recover towards the end of the year and into next year, but we acknowledge that this is taking longer than we initially anticipated. Looking ahead, as I mentioned earlier, we are excited about the commercial and operation changes, the logistics arrangements as well as several strategic agreements that we believe can increase throughput with key commercial payers and further strengthen our competitive position. It is also important to recognize the significant work completed this year to strengthen our financial foundation. In June, we successfully completed our balance sheet optimization, significantly reducing debt. In closing, while we are not satisfied with our second quarter financial performance, we are encouraged by the progress we continue to make in transforming the business. The operational actions underway, the commercial opportunities we have secured and the investments we are making today give us the confidence in our ability to improve execution, accelerate growth and expand profitability over time. As I look forward to the remainder of the year and into 2027, I believe Accendra Health is well positioned and I remain excited about the opportunities ahead for the company. Let me now turn the call over to Jon. Jon?

Thanks, Ed, and good morning. There is much to cover this morning, and I'll begin by reviewing results for the second quarter. Then I'll cover a few final details of the successful balance sheet optimization transaction that concluded in June, our outlook for the remainder of the year, and I'll wrap up with a couple of actions to be taken that will further strengthen our financial profile. As is now the norm, unless otherwise stated, my remarks today will focus on the continuing operations. The continued operations financial statements represent the total of Accendra Health. And please also 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 in residing on our website at essential health.com. In the second quarter of 2026, we faced headwinds in top line growth that was below our expectations and the collection rate waterfall model impact on income that is improving at a slower rate than we had expected. However, during the quarter and since the end of the quarter, much of the activity that we believe will positively impact our results late in the year is in flight and should benefit to top line margin, adjusted EBITDA and cash flow. As I walk through the quarterly results, I will speak to them excluding the impact of a large commercial payer that rolled off in Q1 so that everyone has a true like-to-like comparison. Our reported results, of course, include the impact of the payer in the prior year second quarter and its absence in the second quarter and first 6 months of 2026. With that backdrop, working through detail for the quarter beginning on Slide 7. You can see that revenue in the second quarter, excluding the aforementioned impact of the commercial payer grew at 2%. The improvement in growth rate from recent quarters was driven by the large and very important sleep category. On a like-for-like basis, we saw good mid-single-digit growth in sleep of about 5.5%, including a marked improvement in sleep equipment and continued strong growth in sleep supplies. Diabetes grew 4%, which was a 500 basis point improvement in the year-over-year growth rate compared to Q1. For the recent quarters, in Q2, we saw a very strong year-over-year growth in insulin pumps, partially offset by weakness in CGM. Off of similar to recent quarters, the Respiratory and Wound categories are yet to recover and were down year-over-year. On the positive side, Ostomy neurology, which have been growing nicely for some time, once again posted high single-digit year-over-year growth rates. These revenue trends are expected to continue through the third quarter before the impact of our improvement efforts begin to take hold. We are laser-focused on improving the underperforming categories, especially the higher-margin sleep respiratory categories and are encouraged by improving sleep growth rates and believe there's still plenty of upside. Looking at Slide 8. Second quarter adjusted EBITDA was just over $60 million, and it was a small margin rate improvement versus the first quarter. Adjusted EBITDA less patient service equipment, or PSC CapEx, was $16.3 million and down slightly from the first quarter as PSC CapEx was higher due largely to an improving outlook for sleeve starts in the coming months. However, the lower-than-expected growth rate and expenses as a percentage of revenue, which continued to run above historic rates, some of which is category mix related, or a drag on adjusted EBITDA and to our focal point for the second half of the year in 2027. The impact of our collection rate waterfall once again hampered revenue and earnings. The overall adverse impact in Q2 of the change in collections was approximately $10 million and was $20 million for the first 6 months ended June 30. It is important for everyone to understand that the income statement impact of the collections waterfall is derived from a rolling look-back analysis and are always reflective of current cash collection activity. And as a reminder, the collection of waterflow is a revenue cycle tool, which creates adjustments to gross revenue, which fall straight through to the bottom line. And during the second quarter and counting into the third quarter, the collection rate income statement impacting and cash receipts have been affected by recent inefficiencies beyond normal audit activity among certain key commercial insurers. Additionally, higher cost of net revenue and delays in cost reduction efforts has limited EBITDA expansion in the first and second quarters. As Ed mentioned, actions are planned underway to address both cost of net revenue and SG&A. From a working capital perspective, we saw the change in accounts receivable worsened in the second quarter and was largely driven by the state of inefficient audit issues with certain insurers that I just mentioned. While payer on issues are not uncommon for us and the industry, what we are temporarily dealing with is well outside the norm. Efforts are constructively trending toward resolution in the third quarter, and we believe realized cash flow will improve upon conclusion. Looking back at Slide 6 of the quarterly supplemental slides, which details free cash flow for the second quarter and 6 months ended June 30. It is worth noting that cash interest paid in the second quarter includes $12 million for the payment of interest that had been accrued for the exchange 2029 and 2030 unsecured notes, which had to be cash settled with the exchange of those notes. Also, looking ahead, we will not experience the cash impact of higher interest rates from the balance sheet optimization transaction until December when we make the first interest payment on the new first lien and second lien notes. Turning to the balance sheet. With the successful completion of our balance sheet optimization transaction, total debt of $1.72 billion was down by almost $400 million since the end of March, and net debt was more than $55 million lower over that period. And recall that we have doubled the weighted average life of our debt structure nearly 5.5 years and have no maturities until 2029 and the recurring revenue nature of the business backstop by committed revolving credit facilities will continue to ensure plenty of liquidity. As a reminder, the successful reset of our capital structure, please see Pages 9 and 10 of our supplemental slides. Free cash flow fully levered as defined on Slide 6, is now expected to be breakeven to slightly positive for the full year 2026 due to the change in expected annual adjusted EBITDA and the higher cash interest I just described. While cash flow will not be what we expected in 2026, our confidence in the cash generation strength of the business and a consistent ability to generate around $100 million annual free cash flow in a less muddy of the year remains unchanged. Additionally, at the end of July, we closed on the sale of a small noncore asset and expect another small noncore asset sale to close in late Q3 or early Q4 that will provide incremental cash flow. As we think about the remainder of 2026, we have to recognize the second quarter underperformance as well as the now later timing of the benefits of revenue growth, productivity gain projects and cost savings actions. Sitting here over 1 month into the third quarter, we are seeing some positive signs, particularly around expense reduction and the collections waterfall income statement impact, but it's not enough in the remaining 5 months to catch up with previous guidance. As a result, and as shown on Slide 11, we have revised the 2026 full year outlook for revenue to be between $2.45 billion and $2.55 billion, and a full-year adjusted EBITDA to be between $300 million and $320 million. Unsurprisingly, we expect the fourth quarter to be much stronger than the third quarter, which will provide a kickstart to 2027. In the coming weeks, we expect to be launching actions that will better position the company's balance sheet and protect key assets. First, we expect to activate a small at-the-market equity program. We're still finalizing the details of the program, but we expect to have the ATM effective in the near term. We intend to use the proceeds from these sales to reduce outstanding indebtedness, which will allow for a deliberate continued deleveraging of the balance sheet through the occasional issuance of equity into the market at prevailing prices. Also, the business has significant tax attributes that are often forgotten about. The quantum of net operating wealth carryforwards alone going into 2027 will exceed $200 million. This has meaningful value especially to currently depressed market capitalization. As many companies in similar positions do, we want to help ensure protection of that value. There are counterintuitive and confusion rules around deemed ownership changes caused by trading activity that could jeopardize often inadvertently those tax attributes. So in order to help avoid very costly footfall by one or more shareholders, we will be putting a net operating loss or NOL rights plan in place. Not only will this help protect shareholders from an inadvertent and adverse impact on the valuable NOLs. These type of plans do not need to limit plan or desire shareholder activity since certain shareholder activity can be exempted from the NOL rates plan. and the plan is limited in duration, and it can be easily and quickly canceled if or when desired. Following the successful balance sheet optimization transaction, the animal rights plan and anticipated ATM program are additional steps to further improve and preserve the financial strength of the company. Finally, with the earlier announcement around Ed's intention to retire in the coming months, this could be Ed's last earnings conference call. In the event it is, I want to make sure to take the opportunity on behalf of all 6,000 Accendra teammates to thank Ed for his guidance and leadership over the last several years. The company looks very different from when Ed arrived and walked into a bit of a storm and it's been a very active 8 years and it has been the person to guide us through. Personally, I want to thank Ed's mentoring, partnership and always reminding me through his example, that no matter how hectic things are to never take yourself too seriously and to stop and laugh. Thanks, Ed. With that, I'll turn the call back to the operator for Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Kevin Caliendo from UBS.

Ed, congratulations on the retirement. I hope that all works out well for you and the company and the like, but congrats. It certainly been. There's a lot to digest here, obviously, the payer situation, I don't quite understand how that evolves over time, but maybe if you can talk a little bit in specifics around what happened there. And then two, have there been any other -- like I'm looking at the numbers and looking at what is implied in the second half, and obviously, the fourth quarter is a bigger ramp, is there anything else affecting what's implied for the second half of the year? One of your competitors talked about their contract being ripped up and having a negative impact with a price increase on supply? Is there anything like that impacting the second half of the year? And then I guess, lastly, should we take what's implied for the fourth quarter? Is any sort of run rate? Is that a more normalized thing? I'm not asking for 2017 guidance. Obviously, there's always seasonality in your business. But whatever puts and takes or one-timers are in there, just trying to think about what is the proper way to think because there's so many moving parts here, what's the proper way to think about the run rate going forward?

Thanks, Kevin. I'll start. I'll take us. So really I think there's 3 things you want -- you're asking us to help you digest. One is on the payer that being the collection area, the second being supplier impacts, and then third is, is Q4 kind of representative of what we would think go forward would be. Let me start with the suppliers and then I'll hand it over to Jon and to Perry to add some other commentary on this as well as the other 2 topics. So -- when I think about our suppliers, we really do have good relationships with our suppliers. We have those relationships -- we haven't had a supplier come to us and say, "Hey, we're tearing up the agreement. We're going to move on and going to a different path". I think what we do really well is we find ways to work together with our suppliers. Ultimately, they're looking to grow their share. Those suppliers are looking to find partners that can help them do that. I think as a company, you have to balance that because you have -- especially in categories where there's a lot of suppliers, you have to balance that with what's best for the patient as well as finding ways that we can win together. That may be an overused phrase, but finding ways that we can help them grow their share, in the same sense make sure we're managing our supplier portfolio. So that way, it can help us offset some of the costs we have as well as the normal pressures you have from reimbursement. I think competition, when I think about suppliers and I think about it across categories, some categories are deeper suppliers, some are much more narrow. Overall, my perspective is competition within the categories is actually good for the business. When I say the business, it's also good for the industry. And where we're sitting here today is we don't see and we don't have any of those suppliers that have come to us and torn up an agreement. I think the other thing we do really well is we know in most of our contracts won that most. We know when our contracts expire and making sure we have the right plan long enough in advance to work with those suppliers to get to a renewal state that works for both parties or make different decisions, if that's what it takes. So that's where we are. I can't talk about where others are and how they manage it, but that's how we think about our supplier community. Let me maybe turn it over to John to cover a little bit on some of the collections and the impact on the waterfall. And then, we'll come back to the last 1 here, the fourth quarter and is that a fair picture of what the run rate of '27 would look like. So Jon?

Yes. So the payer audits, whether commercial or government or are constant in our business. So that's nothing unusual there. But was unusual as a couple of months ago, we started seeing the actual -- not number of the -- number of items audited actually begin to increase at an exponential rate. And that had a twofold knock on us. One, it was actually -- we weren't getting paid as we were under audit for -- have been under audit for a lot of these issues. . Secondly, the volume that we were seeing was causing us to take resources, humans of other projects like our automation work that we're working on to improve our collections profile and address these audits. So it's a very, very manual process. Jan do change at delivery, or so they didn't want. We have to go back and actually find all the documentation, prove it to the commercial payers. So as the volume has increased at a unprecedented level, we have been getting paid and we're spending more time and resources to actually solve these audits. So it had a knock-on effect, both on our improvement efforts as well as our cash collections during the quarter, and it's running into the third quarter. As we mentioned and I mentioned in his room bucks as well, the good news is we are making significant progress in the last couple of weeks with these payers. We have a plan forward to resolve the issues, and we're pretty confident we wrapped up in the third quarter, which, one, bring more cash back into the company, and second, allow us to actually go back and to focus on those automation issues, which are been going on for several months, but to actually improving our collections overall. So when what happens from a P&L perspective, as these age out, again to older aging buckets, they are buckets -- they begin to go through that waterfall calculation and run the P&L in addition to collection. So it's an unprecedented, unusual, and we're pretty confident just a temporary blip here that we'll solve in the coming weeks.

And then maybe I'll wrap it up on the last 1 here, that being the Q4. Yes, Q4 will be -- is expected to be our best quarter, and Q4 will be the jump-off point really for 2027. Obviously, you're correct, there is seasonality in the business. Some of the things that give us comfort as we look forward on that is, and I talked a little bit in my prepared remarks, we did see some nice revenue growth sequentially from Q1 to Q2. I talked about some new agreements. We got a new sole-source agreement with the regional health care system. That will go into place really in late 2026 and will carry into '27. We just signed a nice size fee-for-service agreement with a payer. That again will go into effect later in the year, where they will be narrowing the network too. So we see some really positive signs and benefits that will happen from a top line standpoint in late '26, early '27. The other aspect of that is really from a sales execution. We have made a few adjustments within our selling organization to reinvigorate the team, and we'll see that happen later in the year. I think the other thing that impacts us in late '26 and into '27, as we talked a little bit about some additional expansion of our sleep center of excellence as well as lastly, on cost reductions. And then what Jon just talked about really on the payer and the collection aspect of it, that has a delayed impact. You get that fixed. And then, on the waterfall, it will help you in the future as you start to look at -- as you're looking in the rearview mirror. So those are the things that really, I'll call it, really late in Q4 and '26 that should then translate into '27. Hopefully, that takes care of those 3 questions or points you needed us to cover there.

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

I have 2. I'll just throw them both that together. Maybe one, building on that 4Q dynamic, as we think about the moving pieces in the build, appreciate that you recognize the seasonality, but what do you think you have, let's call it, within your control versus your customers in the market waiting for you if you can kind of risk weights to make sure that we understand the bridge to 4Q even know you don't explicitly have quarterly guidance out there? And then, the other question is just on the tax agreements, I heard you, John, on the dynamics behind it, but why now the net operating losses has been in place for a long period of time? What was the Board's rationale for doing this now?

Great. I'll take the first part of this and let Jon take the second part of it. So what are some of the levers we can pull now? One, I talked a little bit about some of the cost reductions we have in store. Some of them we've already started to take action on in the first month of this quarter. But I want to reiterate, we took out well north of $125 million of annualized cost as we rolled into this year, and that happened in the first quarter, as we completed that. But we did take a pause because we wanted to stabilize the business. And then now, we've already started additional cost reductions. I think on the revenue growth standpoint, some of those factors, part of that is also just purely implementation speed. We have working with the supply -- or working with the customer to get those contracts. Once you get the contracts finalized, to start to move the patients towards us. So that becomes sales execution aspect. And then lastly, we're working with some logistics providers within the industry that, that can help us as we move some of the supply and logistics work to them that can drive operational savings for us as well as working capital savings. And again, that is just speed to get those implemented. So -- and then I don't want to lose the fact that our commercial organization from a business development standpoint is continuing to look for the next thing and the next thing to fill the pipeline. And then lastly, just pure commercial execution, those are other things that don't need to wait until we get to 2027 when we start to see the impact of the new sole-source agreements or the new fee-for-service agreement. Hopefully, that helps. And then let me turn it over to Jon to talk a little bit about the tax aspect.

Yes. Mike, there were 2 real drivers that really answered the question of why now. One, as we were wrapping up the balance sheet optimization transaction, we asked ourselves and outside advisers, What else should we be doing at the same time just the overall financial profile and the strength of things. And animal rights plan, which I wasn't familiar with came to our attention and to -- we were educated about a very convoluted structure and the rules around there really confusing. Additionally, in the last few months, we have seen some large shareholders come into the stock. And as you know, 13S, 13Gs are very delayed. And when we went back and did a very high-level kind of study, we saw that we have well over half of -- well, let me back up a second, based on the rules of this transaction through Section 32 rules, we saw that we were halfway to potentially having a problem should the shareholders continue to buy. We have large 5% shareholders come in, and we don't know about it obviously after the fact. So when we saw those couple of things happen, and then, we talked to Tax Council, they brought this to our attention. We brought to the Board as a fairly not uncommon way to protect those NOLs, it's something that we weren't aware of before. And obviously, that companies -- public companies don't always go back and check their Section 382 studies on a regular basis. So it was just the right time to clean it up. It's brought our attention, and we look back to trading history and saw that it was probably a prudent thing to do to protect shareholder interest and the value of those NOLs.

Your next question comes from the line of John Stansel from JPMorgan.

Can you just spend a little bit more time talking about what drove the need for a pause in some of the cost-outs? As we think about that -- I don't want to conflict 2 separate things, but is it driven by the need for the increased audit support that was more manual or anything else just as we think about the resumption and kind of going full speed ahead into context since the back of the year into '27?

Sure. Yes, I think to simplify it is -- I made -- in my prepared remarks, I did make a comment that we took out more than $125 million of annualized cost. And I think it was just really related to the massive amount of costs that we took out of the business. Part of that is due to the transition of the large commercial payer contract that we had. In addition to that, removal of stranded costs. So there was just a massive amount taken out as well as we were in the middle of divesting or in the middle of the transition service agreements with the sale of our PNHS segment. Those things combined just made us step back and say, let's let everything settle in, let's make sure we didn't break anything while we did that and then reset and start to move forward and do it again -- or look at it again, where there's other ways we can attack the cost. It really didn't have to do with the collections issue, the collection issues really, as Jon described earlier, that was partially we were taking resources and putting resources in that as well as transferring resources from their day job to work through some of these payer audits.

Great. And then just quickly, if I could squeeze in a question. The noncore assets that you're selling, can you just talk about the assessment you did, kind of how you came to the conclusion that there was a better home for them? And how we should think about that kind of going forward on the portfolio side?