Option Care Health Inc (OPCH) 2022 Q1 法說會逐字稿

Thank you for standing by, and welcome to the Option Care Health First Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, today's conference call is being recorded.

I would now like to turn the conference to your host, Mr. Mike Shapiro. Sir, you may begin.

Good morning. Before we begin, please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and our expectations, including those related to our future financial performance and industry and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release, as well as our Form 10-K filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements, except as required by law.

During the call, we will use non-GAAP financial measures when talking about the company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of the website.

With that, I'll turn the call over to John Rademacher, Chief Executive Officer.

Thanks, Mike, and Good morning, everyone. Overall, after initial sluggishness due to the widespread impacts of Omicron variant on our team members, customers and patients, the first quarter proved to be a very productive start to the year for the Option Care Health team. We continue to invest in our future growth strategy, while navigating a challenging economic environment to ensure we provide unsurpassed patient care. As Mike will review in a few minutes, our first quarter financial results were very strong, and I'm pleased by our performance across the spectrum of financial and operational metrics we use to manage the enterprise.

Specific to the first quarter of this year, note that the prior year comparable period was quite soft as we were just starting to see COVID vaccine distribution in the second half of the first quarter of 2021. We also benefited this year from a few one-time expense benefits that helped drive leverage in the P&L that we do not believe are likely to repeat. So while reported growth is very strong in the first quarter, as we anticipated, we believe the comps will balance out in the back half, and we anticipate our growth profile normalizing to a greater extent.

Nonetheless, based on our momentum coming out of the first quarter, we are raising our financial guidance for the year accordingly, as Mike will discuss shortly. As we entered the year, we were in the midst of the COVID resurgence related to the Omicron variant. This had a very disruptive impact on our referral patterns and local pharmacy operations. Given the resilience of our teams in the field, we were able to quickly respond after the Omicron cases subsided, and we saw a return to normal operations by the end of the first quarter.

While acute referral volumes continue to lag in certain geographies, we did see a gradual reopening in many of our referral sources. Our chronic revenue was especially strong in the quarter and was driven by our portfolio of chronic inflammatory therapies and newer therapies for multiple sclerosis, myasthenia gravis, muscular dystrophy and others. We also saw a few points of growth from therapies that were in short supply last year, but are now available, including therapies for thyroid eye disease.

As we discussed on our prior earnings call, we also entered the year with unprecedented inflationary pressures across the broad spectrum of goods and services we utilize. While the collective inflationary pressures was somewhat muted in the first quarter, we do see an increased impact in the balance of the year. We continue to thoroughly assess our labor competitiveness, and we adjust compensation primarily at the end of the first quarter as part of our annual cycle. So the compensation increases are not fully reflected until after Q1.

We are also seeing broad cost increases in key procurement categories, including transportation, medical plastics and key supplies, business services and others. As always, the team is focused on finding new sources of efficiency to mitigate the inflationary pressures to the greatest extent possible, while ensuring the highest level of quality and patient care. The labor situation remains challenging, but we continue to recruit our team members every day. And we are making investments to remain competitive, both from a compensation and career development perspective. I believe we will continue to weather the storm reasonably well, while maintaining focus on fielding the best clinical team in the industry.

Aside from the dynamics in the first quarter, we continue to invest in future growth initiatives. The team is making good progress on integrating the Wasatch Infusion acquisition, which we believe provides a tremendous platform in the growing Utah market, while also adding a unique patient infusion experience to our portfolio from which we can learn a great deal.

We recently also closed on our acquisition of Specialty Pharmacy Nursing Networks or SPNN, and we are excited about the national alternate site nursing platform we are establishing with our 2 recent acquisitions of Infinity Infusion Nursing and SPNN. We continue to believe this clinical platform will not only differentiate our nursing capabilities in the marketplace, but will also help enable future growth, especially amongst our chronic therapies.

Regarding the SPNN acquisition, this is a unique team that has created a very robust clinical model to serve a broad array of customers, including infusion pharmacies, specialty pharmacies, clinics and biopharmaceutical manufacturers. The Option Care Health team had a pre-existing and very constructive collaboration with SPNN, and it was a natural progression for us to seek a stronger integration of our capabilities. We believe their model is distinct and highly complementary to our capabilities of our Infinity organization, and we are just beginning to write the script on our unique national clinical platform, taking the best of both.

Reflecting back over the past 12 months, the team has executed on 4 strategic and economic acquisitions that have built upon the foundation we've established. Funded solely through free cash flow generation, these transactions have added commercial capabilities to our chronic strategy, helped establish a national infusion nursing platform and expanded our infusion suite capabilities. And we're just getting started.

With our capital structure and strong cash flow, we continue to focus intensely on attractive acquisitions to further accelerate our growth. With our technology foundation and clinical expertise, I'm confident in our ability to find attractive opportunities that will help further expand our presence in the ambulatory setting and post-acute space.

So to wrap up my comments, while it is still early in the year, I'm quite encouraged by the momentum coming out of the first quarter, and the team is on track to deliver a very solid year. Despite a number of variables and risks that we continue to manage, we expect to perpetuate our track record of strong growth and accelerating cash flow in 2022.

With that, I'll turn the call over to Mike to review the results in a bit more detail. Mike?

Thanks, John. Before jumping into the specific results for the quarter, I want to provide a few high-level perspectives as there are a number of dynamics in the first quarter. First, recall that we do not provide quarterly guidance and the first quarter typically is a bit softer than subsequent quarters given modest seasonality in the business. Additionally, as John mentioned, the prior year first quarter was especially soft due to the continued pandemic impact with flat acute revenue growth and low double-digit chronic revenue growth in that quarter. So the softer prior year comp amplifies our year-over-year reported growth to an extent.

We believe those considerations are key as we review the growth profile in the first quarter. Revenue growth of 20.6% was the result of solid performance across the portfolio. The impact of our recently completed acquisitions, namely Infinity, Wasatch and BioCure, none of which were in our prior year numbers, represented approximately 250 basis points of revenue growth.

Acute revenue was up in the mid-single digits as we saw referral trends rebound throughout the first quarter and again, due to easier comps to last year. Chronic revenue growth of mid-20s was driven by a few factors. First, better supply chain dynamics enabled accelerated growth for certain therapies that were plagued by challenging supply chains and product shortages in the prior year, especially thyroid eye disease and immunoglobulin therapies.

As John mentioned, we also saw very strong execution across our chronic inflammatory portfolio, as well as from our newer chronic therapies. Gross margin dollars grew similarly at 21.4%, and gross margin rate was flat year-over-year as our continued focus on operational leverage offset the mix headwinds related to our faster-growing chronic portfolio. As we've consistently articulated, we fight for every basis point, but we do see gross margin rate pressure going forward given our revenue mix, as well as the ongoing labor and supply chain inflationary pressures.

Spending was well controlled in the first quarter, as we continue to aggressively manage SG&A in light of emerging inflationary pressures. Spending grew 11.6% and dropped as a percent of revenue to 14.6%. As John mentioned, we recognized approximately $5 million in one-time credit related to a variety of items, including reserve adjustments and vendor credits. This obviously benefited the first quarter, and I do not expect those to persist into the second quarter.

Adjusted EBITDA of $77.8 million represented 8.5% of revenue and grew 49% over the prior year, driven by factors previously discussed.

Shifting to the capital structure. We generated $32.7 million in cash flow from operations and cash balances increased over $145 million at quarter end. Our net debt to leverage ratio declined to 3.0x, less than half our leverage profile at the time of the merger with BioScrip less than 3 years ago. Additionally, I want to address some recent questions regarding our exposure to rising interest rates. Recall that last fall, we opportunistically refinanced and extended our entire capital structure under very favorable terms. As of the end of the first quarter, we had approximately $1.1 billion of total debt outstanding, $500 million consisting of fixed rate senior unsecured notes at 4.375%, and $600 million in term loans with a floating rate of 275 bps over LIBOR.

As outlined in our most recent 10-K in conjunction with the refinancing, we entered into $300 million in interest rate caps on the term loan. So effectively, $800 million of our $1.1 billion is fixed or approximately 70%. As a result, our exposure to elevated interest rates is relatively muted. So, we feel really good where we're sitting from a capital structure perspective, as well as our access to capital to continue investing in the enterprise.

Finally, based on a number of factors, including our first quarter results, the momentum of the business, our views on impending inflationary pressures, as well as the impact of the SPNN acquisition, we are increasing our expectations for the full year. For the year, we now expect to generate revenue of $3.75 billion to $3.9 billion. We have increased our adjusted EBITDA expectations to $320 million to $335 million. And while we do not provide quarterly expectations, given the tougher comps throughout the year, one-time spending benefits realized in the first quarter, combined with an increasing inflationary pressures, we would anticipate the quarterly trend to be relatively flatter as compared to previous years. So as John mentioned, we continue to anticipate delivering a very strong year in terms of growth and cash flow generation.

And with that, we'll open the call for Q&A. Operator?

(Operator Instructions) Our first question comes from Matt Larew of William Blair.

Congrats on another impressive quarter here. Just on the growth in the quarter, I understand this is somewhat challenging, but curious if you could try to perhaps break out what was from easy comps or a return on the supply chain side versus just underlying growth. And I guess, specifically, I mentioned it in -- or do you like you are gaining even further traction with some of the payers you've signed agreements within recent years? And do you sense that you are grabbing even more market shares on these newer therapies that are launched, again, where companies are looking to derisk launches by looking for a reliable scale resource like yourself?

I'll start, and John can obviously provide some color. Yes. So, we tried to unpack it a little bit. Obviously, we're thrilled with the 20% growth headline. Again, I would say a couple of points of that were due to therapies that, frankly, weren't available or were -- had compromised supply chains and led to referral sources being reluctant to put new patients on service. About 250 basis points were from the 3 acquisitions that were closed going into the first quarter. Again, SPNN wasn't included since we closed on that.

So -- and again, as you know, there's a lot of moving pieces. But if you back those out, it would imply mid-teens growth. And frankly, I think a couple of factors. Obviously, as we mentioned, things definitely improved throughout the first quarter. And I think you hit on a couple of the themes, which is, number one, I think just our dependable presence allowed us to maintain and build upon our referral source relationships. And entering into the quarter, we had extended and renewed all of our major payer contracts. And I can assure you that the team is laser-focused on growing and fostering deeper relationships with our portfolio of payers.

Okay. And then you mentioned SPNN, so I'm curious now with SPNN and Infinity under the Option Care hood. Maybe just refresh us on how you envision incorporating those businesses in terms of servicing Option Care volume as well as the broader market? And if perhaps anything has changed with that thought process over the last 6-plus months as you've been stitching them together.

Matt, it's John. Yes. Look, really excited to close on SPNN and to start the process. As you would expect, it's early days, and we're really going to spend time working both with the Infinity and SPNN team to make certain that we maximize that platform as we move forward. A couple of things we had mentioned before, but bears repeating is, look, we think that the similarities of the platform are fantastic. It's complementary in nature. There are some unique things that both of those organizations bring, and we're going to capitalize on that as we move forward. When we did the work behind the SPNN acquisition, there wasn't a lot of overlap of the resources. So it really extends our access to a very critical clinical capability in the nursing community. And so to expand that network and the size of that network, we thought was a competitive advantage here moving forward.

To your broader question, look, we're going to continue to use this platform to not only support our growth and think about how we're going to continue to have the resources necessary and the capacity to continue to grow as we both take share and make share in the marketplace. But we're also going to continue to support the external market on that. We like the fact that we can use this platform as an aggregator in the marketplace. It gives us an opportunity for us to really capitalize on market demand to be able to bring those resources forward. And this is a unique differentiated national platform that really allows us to continue to extend our leadership position.

Our next question comes from Lisa Gill of JPMorgan. Your line is open.

Mike, I just wanted to go back to your comment around rate pressure. Was that specific to your comment on the faster-growing chronic portfolio? Or is it something that relates to the renewal of the payer contracts that you talked about? So maybe if you could just talk a little bit about what you're seeing on the reimbursement side.

Sure, Lisa. Actually, the reimbursement environment has been -- I'd characterize as relatively stable. Again, as we entered into those collaborative relationships, especially with the national folks, they understand the value-based components of how we arrange our -- and establish our relationships. Really, the rate pressure on gross margin that I was referring to is really around the mix shift of our revenue.

Going forward, we've been pretty open that we see that acute portfolio growing in the low single digits. Obviously, the chronic portfolio, which bears a considerably lower gross margin profile, we expect to grow in the double digits. And so over time, in the first quarter, we were around 72% chronic, around 28% acute. Over time, as we shift more towards that chronic portfolio, that will have considerable gross margin rate pressure, although we view the chronic gross margin dollar growth opportunity as very favorable.

And then just my second question would really just be around the referral trends that you saw in the first quarter. Obviously, you guys came out really well when we think about COVID having a strong impact overall in January kind of waning as we went into February and March. Was that the same that you saw in your business that there was some amount of impact with Omicron in January and it got better? Or were you still seeing referrals throughout the early parts of the virus in January?

Yes, Lisa. It's John. Look, as the quarter progressed, certainly, the referral patterns got stronger. There is a constant rhythm to the business in the referral patterns that we saw, but they were constrained. And look, I think everyone was dealing in early January through probably mid-February, challenges not only with their own staff and the infection rates of the Omicron variant, but it did disrupt from that path. But given the national scale that we have, the markets kind of act independently on that.

We saw probably a bigger impact in the coast in the December timeframe and then it started to wane by the time we got to the end of January and some of the Midwest lagged behind that. So it got stronger and stronger. And certainly, we saw, as I said in my prepared remarks, by the time we got to the end of March, things had gotten back to near normal or whatever the new normal is from our perspective, both in impacts on our own staffing and some of the challenges from a labor standpoint with folks being impacted, as well as the referral patterns starting to come back as we exited the quarter.

Our next question comes from David MacDonald of Truist.

A couple of questions. First, just a clarification. Mike, did you say that acute was -- excuse me -- and I realized that the comps were what they were, but acute was up mid-single digit in the first quarter. Is that correct?

Yes, that's right, Dave.

And is it -- and I assume it's fair to say that January was probably either flattish, modestly up or modestly down. So again, if I look at some of the referral disconnect that you guys were having early in the quarter, it suggests really strong numbers in the last 2 months or at least in March. I guess my question is, are you guys holding on to more volume in both businesses that may have used a different site of care pre-COVID? And what are you doing on the sales side to potentially make those referrals more sticky and keep them being driven towards a different site of care?

Yes, Dave. I think the way you characterized the progression throughout Q1 is right. I think, as John mentioned, clearly, January was pretty sluggish out of the gate just given the Omicron wave. And I think we definitely saw a rebound throughout the quarter. And again, we have a relentless focus on the acute referral sources. But again, that's a lower growth proposition. But in the first quarter, again, partially due to the easier comps last year, that definitely helped us post the mid-single-digit growth, which we're thrilled with. And again, I think throughout the year, as acute rebounded last year, the comps will become a little tougher, but nonetheless, very pleased with the acute portfolio in the quarter.

Yes. And Dave, to your question around the stickiness of the referrals and the patient base, look, we've spent a lot of time as an organization focusing around the quality of the care that we deliver, certainly with our commercial resources around the reach and frequency and that's the reliability that we've been able to demonstrate with those referral sources over the last 2-plus years throughout that process.

So, our focus as an organization has always been around the patient experience and that patient satisfaction. To the previous questions that we've received, and I think kind of to your question, we haven't seen a lot of movement back for patients that are on long-term care with us that are those chronic patients, reverting back to those other sites. Now, we understand competitive dynamics, and we don't take any of that for granted. We want to make certain that we're driving patient loyalty by the services that we're providing and the care that we're delivering. But as of this time, the retention rates of the patients seems to be solid and something that is a stable base from which we're building from.

Okay. And then just one other question, guys. You mentioned ongoing investment a couple of times in the prepared remarks. Just wondering if you could give a couple of what you view as the key areas of investment over the next 12 months to 18 months. And then I'm curious, as you guys were renewing with your major payers, just any conversation during those contractual updates around the ambulatory infusion suites, site of care redirection, just anything incremental you can add there?

Yes, Dave. As we've talked about previously, we're continuing down the path of building out a comprehensive network of infusion suites. And in the conversations that we are having kind of across the spectrum with the payer community, there is a high level of interest there, knowing that the ability to have high-quality care at an appropriate cost in a setting in which patients want to receive it, we're on the right side of that conversation, both in the home but also in the infusion suite. And so as we're looking at areas of investment as we move ahead, we're committed to continue to expand that out and to build out a comprehensive network in order to serve the needs of our patients and partner closely around site of care initiatives and other aspects from that standpoint.

The other aspect, as we said is, look, I'm not going to necessarily unveil our strategic playbook, but we're looking for other areas to augment what we're doing. We know that we have a privileged position of being able to provide care in the home or in one of our infusion suites. And we're always looking for the opportunities to expand service lines or to look for additional ways to increase the value that we're delivering to our patients, to our referral sources, to the payer community and really upstream to biopharma as well. And so we're going to continue to take a look. And as we've always committed, we'll be disciplined, but it's going to be both strategic and economic in any moves that we make. But we really feel fortunate about the position we're in from a capital structure, and we think that the opportunity is before us to continue to look for ways to enhance the role we play in ambulatory settings and post-acute care.

Our next question comes from Brooks O'Neil of Lake Street Capital.

I just have one question. I'm hoping you could just talk a little bit about labor pressures, labor shortages, particularly as it relates to nursing availability and pharmacists and whether you're seeing, having difficulty filling roles or whether you're in pretty good shape in those 2 key areas?

Brooks, yes, look, we're not immune to the pressures in the marketplace, but I would tell you that our sense is that we're faring pretty well through that standpoint. To your specific question, part of the reason for the acquisitions within Infinity and SPNN was to expand our nursing network. And at this point in time, we really don't have not run into capacity constraints or had to turn away patients on that.

The other thing is, look, we've increased our clinical team size just naturally through Q1 based on our recruiting and moving that forward. So on a positive basis, we've seen our time to fill moving downward. And so we continue to be able to attract talent to the organization as opportunities arrive with open positions. And from a clinical standpoint, the area, I think, that has got the biggest constraint is really around nursing and we feel that our model has that flexibility of our full-time nurses, our part-time nurses and then access to per diem and this network allows us to continue to meet market demand and continue to grow as we're looking forward.

Brooks, this is Mike. The other thing I'd add is just to put a little more granularity around it. Look, we have over 7,000 associates across the country. That's over $0.5 billion of labor costs. And so as John mentioned, just to remind and reiterate that we take most of our merit and adjustment actions at the end of the first quarter. And so I would characterize like most organizations, our adjustments are a couple of points higher than they have been in previous years. And so that labor-related inflationary action, which, again, as John says, we need to focus on recruiting our team every single day. That's going to start to impact us more in the second quarter.

Okay. And just to clarify and I appreciate all that color. No big problem finding pharmacists either?

No, no. We -- I mean, for the most part, look, I mean there's market nuances, as you would expect, from that standpoint. But in general, our ability to recruit and onboard the team members has been strong.

Our next question comes from Pito Chickering of Deutsche Bank.

This is Kieran Ryan on for Pito. So if I add back the $5 million -- yes, the $5 million in credits that you called out in 1Q, it looks like EBITDA margin came in around 7.9% adjusted for that. And then taking the midpoint of revenue guidance, it looks like we see about 8.6% through the rest of the year. So still some good sequential expansion, but that's about 30 basis points below 2Q through 4Q '21. So, I was wondering if you could kind of just talk about some of -- like what the biggest swing factor is between the low and high end of the guide as it relates to the cost side through the rest of the year?

Sure, Kieran. It's Mike. And I think you're thinking about it right. Look, we try to provide as much transparency as we can. And while we're thrilled with the $77 million that we delivered in the first quarter, again, there was -- in the first quarter, the stars aligned, the signs were going the same way and we always see some one-timers here and there. They typically net to nothing to write home about. But in the first quarter, we did have a net of around $5 million of benefits. We just wanted to underscore as folks think about that. So yes, if you back that off to kind of a normalized $72 million, and again, I'll use that [near] quote that there's always a lot of puts and takes.

Yes, the balance of the year would imply high single-digit earnings growth. And frankly, as John mentioned, we're seeing very strong momentum on the commercial side. But the reality is the best of our estimates, there's $10 million to $12 million a quarter of year-over-year inflationary pressures, which, collectively $30 million in the back half, that's quite impactful. And so we do see that with the labor adjustments emerging, the impact of crude oil derivatives on everything from medical plastics to mileage reimbursement for our clinical teams in the field, that really ramped up in the first quarter. And so to simplify really, what we see going forward is continued commercial momentum offset by what are unprecedented inflationary pressures. But yet we're still laser-focused on expanding the EBITDA margin to the extent possible.

Got it. That's helpful. And then just one quick follow-up. I know we've asked you guys this before, but I think this is now the fifth straight quarter of -- or the fourth straight quarter of gross margin expansion despite the outsized growth in chronic. And I know you guys are paying for every dollar there, like you said, but just wanted to make sure that none of those dynamics have changed. I think you called out, you expect the gross margin contraction to -- gross margin pressure to continue -- to return through the rest of the year. So just wanted to make sure, is there anything specific in 1Q that allowed for another quarter of expansion there? Or just still kind of just holding the line effectively?

Sure, Kieran. Yes, as I mentioned in my prepared remarks, gross margin was within 10 bps of where it was last year, so relatively flat year-over-year. Part of the tailwind in the first quarter was that nice year-over-year growth on the acute portfolio, which, again, is considerably higher gross margin profile. So that year-over-year growth definitely helped us on a year-over-year gross margin rate. The reality is -- and again, you've heard us talk about it several times. We're relentlessly focused on every basis point on growing those gross margin dollars. But again, with that seismic shift towards the chronic portfolio, nothing's changed around our conviction that over time, we will face some rate pressure.

Our next question comes from the Joanna Gajuk of Bank of America.

So couple follow-ups. So, when you were referring to, I guess, your guidance for the year, you are assuming -- but you expect quarterly trends to be flat versus prior year. So can you clarify that? Are you referring to margins or something else? So how should we think about that? Because I guess, you just kind of talk about the inflationary pressures picking up in the rest of the year. So, I wasn't quite sure what you were talking about when you said flat versus prior year?

Sure. Yes, Joanna. So typically, when we've articulated the seasonality in previous years, there was a more pronounced step from Q4, down to Q1, and then a considerable improvement throughout the year. I think with some of the dynamics, what I was trying to articulate is, with some of the benefits and the easy comps last year relative to, as John articulated, increasingly tougher comps throughout the year, we would expect, as we reflect on our outlook for this year that it would be a relatively flatter year from a successive revenue performance and EBITDA contribution. So a little bit of a flatter year relative to what we've seen in the past around seasonality.

Okay. No, that makes sense, especially after you kind of talk about those inflationary pressures. You said $10 million, $15 million, I guess, per quarter. So, just want to clarify that. And then another clarification. So the SPNN acquisition was closed in April. So it wasn't in Q1, obviously. And then -- so for the year, I guess, is it adding maybe $3 million or so to EBITDA?

Yes, that's about. Maybe a little bit lighter than that. We didn't -- we disclosed it, obviously. The purchase price was $60 million. We paid mid-teens. So think of it as a $4 million to $5 million contribution on an annualized basis. So with the transition, we'll realize around [$3.75 million]. So around $3 million, maybe a nudge less than that, but that's within a ballpark.

Okay. And I guess, also, when you were talking about these inflationary pressures, 10 months to 12 months, it sounds like that was labor, but then you also talk about these other supply or cost of supply, plastics and transportation, some other services. So are they included in this number? If not, I guess, are they also meaningful? Or I guess just compared to that labor pressure, it's a number that you're not willing to quantify?

Yes. When I use the ballpark range of 10% to 12%, that would include our higher than typical inflationary pressures on labor, as well as all of the -- whether it's medical supplies, transportation, et cetera. So that 10% to 12% is a rough estimation of the collective inflationary pressures.

Okay. That's helpful. And I guess also a last clarification. When you talk about the acquisitions, and obviously, you have a lot of free cash flow there and a solid balance sheet situation. And you mentioned something post-acute care. So can you expand on that? I mean, is there something you're looking at kind of outside of the core infusion? Because I guess, last time we talked, it sounded like you're still kind of more focused on infusion, but I don't know whether there's anything else you're kind of considering outside of the core home infusion.

Sure, Joanna. And look, I mean, as we reflect where we are, at the onset of the merger, obviously, one of the commitments John and I made was to rapidly delever and improve the capital structure. So as both of us mentioned, where we're sitting today, we feel very good that we're at 3x net levered and we have considerable access to capital. That obviously doesn't lower the bar in terms of how we're thinking about strategic and economic investments. And I think, look, as John mentioned, what we've really established is a differentiated national clinical platform now with one of the largest clinical teams in the field with the largest independent pharmacy footprint to really support the post-acute space.

I think as we reflect on the transactions that we've executed on, we built a national per-diem nursing network that's second to none. With Wasatch, we've expanded our patient experience in the infusion suite setting, which is going to provide learnings for years to come for the broader organization. So I think where we're trying to orient folks is with that differentiated national clinical platform. I think it gives us a broader array of opportunities how to be a relevant partner to our payer and referral partners or providers in the field, not just maybe around the infusion in the home but in the broader post-acute space.

Okay. Great. And I guess one last one on cash flow. I guess you still have the NOLs. But when do you expect to start paying cash taxes?

We do not expect to be a meaningful cash tax -- to have a meaningful cash tax obligation this year. I mean, we'll revisit going into 2023. But for this year, we're quite confident that, that won't be a meaningful outflow for us.

Our next question comes from Jamie Perse of Goldman Sachs.

Two quick questions for me. Mike, you talked about aggressively managing SG&A, just given the environment. Can you talk about where you're finding sustainable or incremental opportunities to do that?

Sure. I mean, look, obviously, entering the year, there is some discretion around when, not, if we make certain investments for future growth, entering the year, frankly. The balance is maintaining the current operations as well as finding the funding for future investments. And frankly, entering the year, we were a little more thoughtful on the pacing of some of those more discretionary categories.

To your point, though, Jamie, I think we continue to push the team around finding ways to become more efficient, whether it's through technology, to utilize more automation on the patient registration and onboarding and support processes around our billing and collecting efforts. Like every other enterprise, we're looking at our bricks-and-mortar investment and looking at do we need all of the administrative facilities and capabilities that we need.

And so, look, I mean, through the technology, we continue to find value on the margin around how to become more efficient. And that doesn't let up, and that doesn't ever stop. And so I think that's -- we've articulated the value of this business and that gives John and I the confidence that going forward, despite inflationary pressures, we're still highly confident we'll grow spending considerably slower than the gross margin dollars.

Okay. And I want to follow up on the first part of your answer there, some of the investments that drive growth. Is that to say that at some point when the -- maybe macro environment is more stable, you can reinvest in some of those opportunities and accelerate growth. Am I thinking about that right? Just wanted to follow up on that comment.

Jamie, it's John. So a couple of things. One is Mike said, look, we have been investing in the technology infrastructure. And so we're utilizing some of the advanced tools around repetitive process automation. We're looking at machine learning and other aspects to really drive efficiency in the way that we're operating. To that, look, we continue to take a look at not only the structure and design, but the reach and frequency of our commercial team and our commercial resources, as well as thinking about different ways to partner up and down the value chain from biopharma manufacturers to the patients themselves and looking for those opportunities for efficiency.

Any of the things that we're doing on the SG&A side, just to be clear, we're not doing anything at this point in time that's constraining our ability to grow. Where we are prioritizing our investment is in areas of productivity, efficiency and expanding our reach into the marketplace. We understand the unique position that we're in, and we want to capitalize on that. But we're also disciplined.

I mean, there are things where we can be thoughtful around the way that we're adding overhead staff as opposed to production staff. There's ways that we can take a look at the needs of the business and reorient around it in a more efficient way. So, I don't want you walking away thinking that we're holding back on making investments or spending dollars to continue to capitalize on the privileged position that we hold and the unique position as the only national provider of infusion services.

Okay. Understood. My last question is just around your approach to guidance. It's a dynamic macro environment. Modeling these days is as hard as ever. How do some of these macro dynamics just impact your approach to guidance? Are you just incorporating more room for unknowns and things like that into guidance this year? Just any color on your approach would be helpful.

Sure, Jamie. Look, I mean, obviously, as you know, John and I would tend to be more conservative in how we approach our thoughts externally. We operate in a very robust forecasting mindset where every single quarter, we're looking at dozens of distinct therapies with -- each with their own growth and supply chain dynamics. No 2 metropolitan areas are created equally and/or operate equally. And so we model out several variables out of therapy level on a geography level, as well as on a cost component level.

And so you can imagine, we model out a significant number of scenarios. And what we're obviously focused on doing is handicapping those and providing you all with thoughts that represents a conservative view. But yet also, to your point, acknowledges the fact that there are considerable variability in a very dynamic environment that we're operating in right now, which -- that's part of the lore of this industry and what we love about it. But it also is something that we take to heart as we articulate. Obviously, we recognize our credibility is contingent on us doing what we say we're going to do. And so we're very, very thoughtful on how we model out a variety of the variables we're facing.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to John Rademacher for any closing remarks.

Yes. Thanks, Valerie. Thanks for joining us today. As we discussed, we had a very strong Q1. And we are looking forward to continuing with the momentum as we move through the year. I hope you have a wonderful day. And please stay safe. Thanks, everyone.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may now disconnect. Have a great day.