Accendra Health : First Quarter 2026 Prepared Remarks

Published: 2026-05-11 10:29:17 ET ACH

Published on 05/11/2026 at 10:29 am EDT

Thank you, Operator, and good morning, everyone. I'd like to welcome you to Accendra

Health's First Quarter Earnings Call. Our comments on the call will be focused on the

financial results of the first quarter of 2026, all of which are included in today's press

release. The press release, along with the first quarter 2026 supplemental slides which

we will refer to throughout the call, 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 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,

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 am 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?

36 Edward A. Pesicka, President & Chief Executive Officer

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

today.

It is great to be reporting on our first full quarter as a standalone, pure play, home-based

care company. Accendra Health's first quarter results were in line with our expectations

and included key accomplishments in our transformation into a leaner, nimbler, and

higher margin business, and we are excited about where we will go from here.

First, I am pleased to report that the transition services and separation activity from

Owens & Minor are on track and going according to schedule, allowing Accendra Health

to fully function as a completely independent company from Owens & Minor, and we are

excited to be devoting all of our focus and energy to growing our leading position and

capabilities in the home-based care space.

Another update that I want to highlight is that, as of the end of the first quarter, we have

substantially completed the exit stemming from our previously disclosed transition away

from a large commercial payor, and the handover has gone as expected, with our team

ensuring continuity of care for the patients while also minimizing our costs to transition

the business. To secure this smooth transition for patients, we engaged with another

industry player to sell them the substantial amount of Accendra owned equipment that

was dedicated to the large commercial payor's patients, and at the same time we

facilitated the transition of personnel along with other variable and certain fixed costs

from Accendra to that same industry player. This solution provided the best outcome for

all stakeholders, particularly patients, and also allowed us to quickly begin the

rationalization of our corporate infrastructure as we pivot away from this large

commercial payor. Again, while we never want to exit a customer relationship, we

maintained our financial discipline throughout the contracting and transition process,

and we are excited to have the vast majority of the exit behind us. I'd also like to remind

everyone that, while we have exited our largest capitated agreement with this transition,

we still have other smaller capitation agreements which are very attractive. Going

forward, we continue to be excited about pursuing both fee for service agreements as

well as capitated agreements, which still can be very compelling under the right

circumstances.

Staying with our payors, I am happy to announce that we recently reached an

agreement for an exclusive multi-year extension with our largest commercial payor for

soft goods, such as ostomy, urology, diabetes, incontinence, and other. This extension

the longstanding partnership provides certainty for our business in the years ahead.

In order to provide more clarity around our payor mix, we have provided you with slide

number 5 that clearly shows the diversification of our commercial payor portfolio. As a

reminder, with the notable exception of the large commercial payor discussed a moment

ago, the vast majority of our commercial payor relationships are contracted at the

individual state level and are then aggregated under their national parent organization in

this slide for presentation purposes. Accordingly, we are well positioned with a

diversified commercial payor portfolio with no major renewals on the horizon.

In addition to the commercial payors just noted, approximately 20% of our revenue is

from traditional Medicare. We are supportive of the government's recent efforts to

eliminate fraud, waste, and abuse, including the upcoming competitive bidding program.

As one of the large national players in the market, we are proud of our ability to operate

at scale as well as with our track record of rigid compliance with government

requirements while providing the highest quality of service to patients. Thus, we expect

to continue to thrive in this new era.

Next, I would like to provide an update on several of our strategic initiatives which are

streamlining our business through centralization, standardization, and automation with

the goals of driving topline growth and reducing our overall cost profile all while

providing an industry leading experience for patients.

I'd like to start by highlighting our focus on sleep therapy. I am pleased to report that

our Sleep Journey program continues to deliver anticipated results, with the sleep

supplies portion of our sleep therapy category delivering strong year-over-year growth.

We are particularly proud of this initiative as it helps drive stronger fundamentals in the

sleep supply category in the form of higher revenue per order, lower patient attrition,

and better patient outcomes through higher therapy adherence rates. We expect this

initiative to continue to drive higher patient therapy adherence through the efforts of our

dedicated sleep coaches and other clinical initiatives.

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Building on the success of our Sleep Journey as well as our proven track record with

our existing Centers of Excellence for other categories, we recently formed our Sleep

Center of Excellence, which serves as a centralized and standardized expert-led team

which is responsible for the patient's first interaction with Accendra and the initiation of

their PAP therapy. This program is building a trusted, patient-first ecosystem that

balances operational efficiency with compassionate care. Our dedicated team manages

order process, scheduling, and patient onboarding to ensure a consistent, high-quality

start to each patient's therapy journey. Our Sleep Center of Excellence is designed to

cultivate patient satisfaction and loyalty by ensuring a consistent, high quality patient

experience that we expect will enhance provider confidence in our already strong brand,

by driving growth in our referral pipeline. This initiative has already seen a successful

pilot in select markets during the first quarter, with a nationwide launch continuing in the

second quarter.

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The combination of the Sleep Journey and our new Sleep Center of Excellence will

enable us to improve patient capture and patient adherence, and to enhance the

experience for all stakeholders: patients, providers, and payors, which should result in

improved growth in the sleep category.

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Finally, I would like to provide an update on our capital structure. In our press release

this morning, we announced a Comprehensive Balance Sheet Optimization Transaction

which will strengthen Accendra's balance sheet by paying off our 2027 maturities,

significantly reduce total debt, and meaningfully extending maturities while also

affording the Company financial and strategic flexibility with ample liquidity. Jon will walk

you through the details in a moment, but we believe that this Comprehensive Balance

Sheet Optimization Transaction lays the foundation for Accendra's long term trajectory

as a standalone business. With this behind us, it will enable us to devote 100% of our

focus on the business. We are excited to remove any uncertainty about our 2027

maturities and any pressure they may have put on our overall valuation.

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Before I turn the call over to Jon, I would like to reiterate how transformative the last

several months have been for Accendra and how excited we are for the future. Our

business today is dramatically different than it was prior to the divestiture of Owens &

Minor. If you look at page 6 of the supplemental slides, you can see how we have

transformed a company with gross margins in the 19% range and EBITDA margins of

approximately 4% to a standalone home-based care business with nearly 50% gross

margins and double-digit EBITDA margins. Additionally, if you move ahead to slide 7,

you can see how much of the earnings and consistent cash flow of what is now

Accendra Health backstopped the P&HS business consumption of cash in recent

periods. With the divestiture behind us, we look forward to enjoying a much cleaner and

less volatile cash flow profile. In closing, we couldn't be more pleased with the

transformation we have delivered over the past several months, and, while we have

much work ahead of us, we are excited about where Accendra Health is taking home-

based care into the future.

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With that, I will now hand the call over to Jon to discuss the financials. Jon?

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155 Thanks Ed and good morning.

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My comments today will cover our first quarter results and outlook for the remainder of

the year as well as the expected outcome of our current financing activity, which will

lead to a much improved, simpler and longer-dated debt capital structure with plenty of

liquidity for the business. I will specifically speak to the balance sheet optimization

transaction that we announced in this morning's press release.

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Like recent quarters, unless stated otherwise, my remarks today will focus on the

Continuing Operations. The Continuing Operations financial statements represent the

total Accendra Health.

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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 accendrahealth.com.

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The first quarter of 2026 was notable for the completion of a previously discussed large

commercial payor exit and the initiation of our comprehensive balance sheet

optimization activity. Operationally, the business performed to expectations and as

usually occurs, the third month of the quarter proved the strongest. Cash flow and debt

levels also reflected what we expected & typically see in Q1 - which is early-in-the year

softness leading toward greater strength in the back half of the year.

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If you turn to slide 10 in the supplemental slides, you can see that we reported a

revenue decline of 6.8% in the quarter, but excluding the impact of the aforementioned

large commercial payor, growth would have been about 1%. The leading growth

categories were Sleep - excluding the payor impact - and Urology and Ostomy. The

large Sleep category grew over 4% and Home Respiratory fell about 4% when the

impact of the large commercial payor change is excluded. Diabetes was off slightly

versus the prior year as growth in insulin pumps did not quite offset a drop in CGMs.

Overall, growth rates were not where they need to be, but we expect improvement

throughout the year and are seeing positive signs across a number of categories.

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To facilitate the transition of the large commercial payor, we sold patient service

equipment for cash proceeds of $82 million dollars, resulting in a book gain of $52

million dollars. The positive income statement impact of this one-time transaction is not

included our adjusted EBITDA for the quarter, as I'll discuss further on this call.

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If you look at slide 11, you can see that Q1 adjusted EBITDA was $58 million - again, in

line with expectations. We continued to see a lower year-over-year collection rate,

inflationary product cost increases and higher health benefit expenses, all of which were

partially offset by our cost savings efforts. Of course, pre-divestiture stranded costs

elevated selling, general & administrative expenses, lowering adjusted EBITDA. Cost

reduction will continue to be a point of emphasis throughout the year.

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Cash flow demonstrated the typical seasonal softness and free cash flow was slightly

negative in the quarter following normal profitability, collection rate and working capital

sequencing.

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Also, it should be recognized that we had extraordinary payments in the quarter of $19

million to the IRS to conclude tax matters related to international transfer pricing activity

between 2015 and 2018 and $22 million of previously accrued expenses relating to the

P&HS divestiture. All of this activity is detailed on slide 12 of the supplemental slides.

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When looking at the cash flow statement, it's also important to note that, as I mentioned,

the gain from the one time sale of patient equipment related to the large commercial

payor is an adjustment to income in the operating activities section of the cash flow

statement and is not included in Adjusted EBITDA due to its one time nature -- and the

cash received from these sales sits in the investing activities section of the cash flow

statement. The vast majority of this activity occurred in Q1 and there will only be

nominal amounts recorded in Q2. Net debt was essentially flat compared to where we

ended 2025 at $1.77 billion and the entire organization remains focused on debt

reduction.

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At the end of the quarter, we had $337 million of cash on the balance sheet and $195

million of available capacity under our committed revolving credit facility, continuing our

pattern of maintaining very comfortable liquidity levels. And once again, we ended the

quarter well in compliance with our debt covenants.

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Now as Ed mentioned, I want to discuss very exciting news on our capital structure.

Pages 13 through 15 of the supplemental slides filed earlier this morning further detail

the balance sheet optimization process. We have received commitments from existing

creditors that will allow us to conduct a holistic reset of our capital structure and lay the

long-term foundation for Accendra. Key benefits include a multi-year extension of our

revolving credit facility, paying off our 2027 maturities, extensions of 2029 and 2030

Notes through exchange offers for longer dated new notes, and meaningful debt

reduction. This comprehensive solution will provide the business with the appropriate

level of liquidity and offer financial flexibility for our future. We have received

commitments from our revolving lenders, Term Loan B lenders and bondholders for the

balance sheet optimization transaction, and, of course, such commitments will be

subject to customary closing conditions for agreements of this type.

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As detailed on slide 13, we will offer to all eligible holders of our existing notes the ability

to exchange their old notes for new secured notes. The exchanges will include first and

second lien notes that will mature in 2032 and 2033, respectively. The offer for each

series of existing notes will be further described in an offering document that will be

available to all eligible holders of the existing notes. These exchanges are expected to

result in meaningful deleveraging of up to about $115 million dollars.

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Staying on slide 13 -- in connection with the exchange process, we plan to retire our

Term Loan A due 2027 with the issuance of new first lien notes. Additionally, we plan to

pay off our current revolving credit facility with cash and will be entering into a new $300

million committed revolving facility due in 2030.

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The consummation of these financing transactions will remove concerns about near-

term maturities by extending our maturity runway by doubling the weighted average life

of the debt capital structure to approximately five- and-a-half years while ensuring plenty

of liquidity for a business that has over 80% recurring revenue all while advancing our

commitment to deleveraging. We look forward toward the completion of these

transactions in the coming weeks. This will be an enormously positive step in having a

better capital structure suited for Accendra's strengths.

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In conjunction with the announcement of the balance sheet optimization transaction, we

would expect to file an omnibus shelf registration. The company does not have a shelf

registration at present and in relation to the financing activity would be the most logical

timing and is simply a matter of prudent financial management and good corporate

hygiene.

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We are affirming our 2026 outlook for Revenue and Adjusted EBITDA. The financing

activity I just discussed will impact interest expense and, obviously, free cash flow. We

will be refinancing our existing, lower coupon Notes and while we're satisfied with the

anticipated pricing of the new debt described above, we are estimating that annualized

cash interest will be higher by about $40 million dollars. We expect that approximately

half of this incremental impact will occur starting in the second half of 2026.

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271 Finally, as we look ahead quarter by quarter, we see greater revenue growth in the

272 latter months of the year resulting in at least 65% of adjusted EBITDA coming in the

273 third and fourth quarters. Following what we see as a decent in-line quarter, we remain

274 confident in the revenue growth ramping in the months ahead, better collection rates,

275 cost savings and consistently improving cash flow, and we will remain ever diligent on

276 deleveraging the balance sheet as quickly as possible

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

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280 Operator?

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Disclaimer

Accendra Health Inc. published this content on May 11, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 11, 2026 at 14:28 UTC.