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BioScrip (NASDAQ:OPCH)
Q4 2019 Earnings Call
Mar 05, 2020, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by and welcome to the Option Care Health first-quarter 2019 earnings conference call. [Operator instructions] After the speakers' presentation, there'll be a question-and-answer session. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Mike Shapiro, chief financial officer.

Please go ahead.

Mike Shapiro -- Chief Financial Officer

Thank you. Good morning, everybody, and thank you for joining us for the Option Care Health first-quarter earnings call. I'm joined this morning by John Rademacher, chief executive officer. Before we begin, please note that during the call we'll make certain forward looking statements that reflect our current views related to our future financial performance, future events, 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 comments. We encourage you to review the information in the reports we filed with the Securities and Exchange Commission regarding the specific risks and uncertainty. You should also review the section entitled forward-looking statements in this morning's press release. During the call, we will use non gap 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 our website. And with that, I'll turn the call over to John.

John Rademacher -- Chief Executive Officer

Thanks, Mike. And good morning, everyone, and thank you for joining us to review our fourth-quarter results and provide an update on our progress. This morning, we issued our press release, providing highlights for the fourth quarter as well as our expectations for 2020. On behalf of the entire Option Care Health team, we're very excited to provide an update on our progress and share some key accomplishments since the merger closed.

Tomorrow marks the seventh-month anniversary since we bought the two organizations together. And while there remains considerable integration lift in front of us, we have made tremendous progress since August 6th. The fundamental value-creation thesis underlying the combination we articulated almost a year ago is stronger than ever. So this morning, I'd like to spend a few minutes reviewing the fourth-quarter financial results at a high level and share some thoughts on the progress we've made as an organization.

I will then turn it over to Mike, who will dive deeper into the fourth quarter financial results as well as articulate our full-year guide for 2020. Net revenue for the quarter was $720.8 million, representing a reported growth above 42% versus Q4 of 2018 or approximately 4.6% on a comparable basis, adjusting for timing of the merger. Recall that as we discussed on the third-quarter call, we quickly initiated a significant reorganization of our commercial team shortly after the merger was completed. This had an impact on our growth in the third quarter, which was 2.3% on a comparable basis.

As we discussed at that time, we expected the third quarter to be the low watermark for growth. And while we are encouraged by the higher growth in the fourth quarter, we continue to relentlessly focus on ensuring that we have the right commercial resources on the field. This focus includes a strong balance between our acute and chronic therapy portfolios, as we know the disruption to our commercial team in the realignment was more heavily weighted on the acute selling resources. We expect that it will take time for the benefits of the new assignments and new relationships to be fully realized, but early indications are positive.

Our commercial optimization effort continues, and we remain confident in our ability to accelerate top-line growth. Adjusted EBITDA for the fourth quarter was $53 million, representing earnings growth of 70% over the prior year on a reported basis. Again, despite considerable integration effort in front of us, we are encouraged by the earnings leverage we are starting to unleash. At a high level, our focus on cash continues to bear fruit.

Mike will unpack the flows in a few minutes. But at a high level, we generated over $14 million in free cash flow in the quarter despite continued vendor remediation efforts, increased capital expenditures to shore up the technology infrastructure, and outflows related to the integration efforts. I would like to recognize and thank our patient registration and revenue cycle management teams for the great work to improve our effectiveness and increase the velocity of cash collections. So it's early.

And even though the fourth quarter represents our first full quarter as a consolidated organization, I'm encouraged by the solid financial results and the earnings leverage we are starting to unlock. As mentioned previously, we remain confident in the growth potential of this enterprise. Today, as the only independent national provider of home and alternate site infusion therapy, we are aggressively engaging with payers in health systems to elevate the standards of infusion therapy. Concurrent to our integration and commercial alignment activities, we have initiated constructive dialogues with several payers in systems around broadening our relationships.

We've recently announced a few of those wins, including entering into multiyear extensions with both UnitedHealthcare and Aetna, that position Option Care Health very well in both payers' preferred networks. We have historically had very productive relationships with both United and Aetna and look forward to investing further in those relationships in 2020 and beyond. We have now established uniform contracts for each payer across the country that simplifies our relationship and opens access to all markets for their unique members on a consistent basis. We remain the only alternate site infusion provider that is in network for all major national payers across the country.

We also announced that Highmark Blue Cross Blue Shield selected Option Care Health as a preferred partner to support their hemophilia population. We are honored to collaborate with Highmark and bring our clinical expertise to help ensure their patients receive the very best care in a patient-centric and cost-effective manner. This relationship continues to validate our belief that our investments in quality and clinical differentiation can create a competitive advantage. As we've articulated many times, the merit of our merger were multifaceted with the obvious benefit of driving meaningful cost synergies and expanding our EBITDA margin.

But equally important, we're encouraged by these early wins on a commercial front as it reaffirms that national scale and clinical expertise are critically important and a key opportunity for us to differentiate, and again, elevate the standards of care. I'd like to provide an update from my perspective on the integration efforts to date. Every single day, we have the privilege of serving thousands of patients who rely on Option Care Health for life-saving and life-sustaining therapy, and it's a role we consider sacred. As we planned and executed the early stages of our integration efforts, the underlying tenet has always been to maintain the outstanding level of care our patients absolutely deserve.

We are spending a considerable amount of time making certain we get the softer aspects of the integration right. As the saying goes, "Culture will eat strategy for breakfast." So we have been working across the organization to define and communicate our purpose, mission, and values clearly and effectively. I'm pleased to report that we are making great progress in operating as one team with one goal, and the engagement levels of our team members across the organization are high. To date, we have made considerable progress on realizing procurement and supply chain savings, which is apparent in our Q4 results.

We've consistently messaged that the procurement effort would be quicker to realization, and we've made significant investments in our supplier relationships to get caught up with them and to establish new relationships going forward. Beyond procurement, we are on track with our spending reduction initiatives and field optimization efforts, which, as we've previously communicated, will take 12 to 24 months to fully realize. But overall, our confidence in generating at least $60 million in cost synergy remains very high, and we continue to overturn new rocks every day looking for additional opportunities. So overall, I am quite pleased with the integration progress to date despite considerable effort that lies ahead.

Finally, I would be remiss if I did not address the situation the world is facing with the spread of coronavirus, COVID-19. Needless to say, this is a very dynamic situation, and we are monitoring it closely through public sources and our infectious disease advisory council. Our first priority is to ensure that our employees and our patients are safe and informed about the best ways to reduce the spread of this disease. We are working closely with all of our vendors to secure adequate supply of personal protection devices: masks, gloves, gowns, cleaning solutions, and sanitizers as well as manage our strategic supply chain to mitigate product or medical supply shortages.

At this time, we have not encountered any material disruption to our operations. We will keep you advised if the situation should deteriorate. With that, I'll turn the call over to Mike to walk through the fourth quarter results and our 2020 guidance. Mike?

Mike Shapiro -- Chief Financial Officer

Thanks, John. As previously mentioned, overall, we're quite pleased with the progress achieved in the fourth quarter, which is evident in the financial results reported this morning. Before I dive into the results, note that Q4 is the first full quarter as a merged enterprise. And as a result, I'll be comparing results to the combined prior year results of the two stand-alone organizations.

Q4 revenue of $720.8 million represented comparable revenue growth in the fourth quarter of 4.6%, up from third-quarter growth rates as we saw improved commercial traction, mainly in our portfolio of chronic therapies. Underlying our revenue acceleration, we also drove our provision for bad debt and contractual adjustments below 3% on a combined basis despite headwinds from legacy BioScrip reserve levels, as discussed on the third-quarter call. Our cash velocity continues to steadily improve as cash collections are ultimately the best measure of our revenue cycle performance. Gross margin of $175.6 million represented 24.4% of revenue.

Given P&L geography differences for certain expenses in legacy financials, gross margin comparison to prior year is challenging. However, we estimate that gross margin dollars grew in excess of 6% on a comparable basis, implying an expansion of gross margin rate over the prior year. Margin expansion was driven by our continued focus on operational excellence and driving spending leverage as well as procurement synergies from our integration efforts. Spending of $144 million in the fourth quarter included approximately $19 million in integration and transaction-related expenses.

Excluding those items, SG&A represented approximately 17.4% of net revenue as we continue to aggressively manage spending levels and drive initial synergies from streamlining functions. Adjusted EBITDA of $53 million grew 70% over Q4 of 2018 on a reported basis or 24% on a comparable basis. Additionally, EBITDA margin was north of 7% in the quarter. As we aggressively integrate the organizations and focus on spending discipline, our ultimate measuring stick is EBITDA margin, and we're very encouraged by the leverage we drove in the fourth quarter.

Net loss of $0.09 per share reflects the ongoing integration expenses and higher interest expense relative to the prior year. As announced on February 3, we recently completed a one-for-four reverse stock split. And all per-share metrics, including those in our soon-to-be-filed 10-K, are reflected on a post-reverse-split basis as if the split were in effect for all reported periods as required under U.S. GAAP.

Shifting to cash flow. We generated over $22 million in cash flow from operations in the quarter despite funding ongoing integration efforts. Our cash performance in the quarter is very encouraging as it reaffirms our conviction in the cash generation potential for this enterprise. We remain relentlessly focused on cash collections and drove an $11 million reduction in net accounts receivable in the quarter, which helped improve our bad debt reserve levels.

In the fourth quarter, we also invested $15 million in capital expenditures to accelerate IT infrastructure and initial facility remediations, which are foundational to our integration efforts in 2020. Despite our higher level of investment, we still generated free cash flow of $14 million in the fourth quarter as cash balances increased to $67 million at year end. And with availability on our ABL, we exited the year with more than $200 million in total liquidity. Before I open the call to Q&A, I want to make a few comments regarding our 2020 full-year guidance as outlined in our press release this morning.

For the full year, we expect to generate net revenue of $2.83 billion to $2.9 billion, which represents comparable full-year growth of approximately 2.5% to 5%. Net revenue is inclusive of our bad debt and contractual adjustments, which we expect to be below 3% for the year. Also, we expect to generate between $200 million and $215 million in adjusted EBITDA, which reflects our ongoing growth and spending leverage along with the impact of synergies, which will contribute to our growth in 2020. Based on our guidance, this implies that we will drive adjusted EBITDA margins north of 7% in 2020 for the full year.

And while not in a position to provide granular synergy guidance, we exited December approximately 25% to 30% complete on our integration efforts and expect to be around 90% complete by the end of 2020. And we remain highly confident in delivering at least $60 million in net synergies upon completion. We also expect to generate cash flow from operations of at least $50 million in 2020. Translating earnings growth into cash and improving our leverage profile are critical priorities.

And based on our guidance, that translates into a net debt to adjusted EBITDA leverage ratio of approximately 5.5 times by the end of 2020 as defined by our credit agreement. In addition, as we've mentioned previously, we expect to generate positive free cash flow in 2020 even after our continued capital investments in facilities, technology, and quality initiatives. So overall, we expect to deliver strong earnings growth in 2020, translating into solid cash flow and an improved capital structure. And with that, I'll turn the call back over to the operator, and we'll open it up for Q&A.

Questions & Answers:


Operator

Thank you. [Operator instructions] Our first question comes from the line of Brooks O'Neil with Lake Street Capital. Your line is now open.

Brooks O'Neil -- Lake Street Capital -- Analyst

Good morning, guys. And I'm I'm happy to see your fully functioning publicly traded company and doing great. Congratulations.

Mike Shapiro -- Chief Financial Officer

Thanks.

John Rademacher -- Chief Executive Officer

Thank you, Brooks. Good morning.

Brooks O'Neil -- Lake Street Capital -- Analyst

So one of the questions I had was if you, Mike, could give us just a little more color on how you get to that 5.5 times net debt to EBITDA by the end of 2020. I mean I'm decent at math but I'd love any color you could provide on what the equation looks like.

Mike Shapiro -- Chief Financial Officer

Yeah. Sure, Brooks. It's relatively simple. Obviously, when you look at where we are from a gross debt perspective, again in my prepared remarks, we expect to generate free cash.

We're not in a position to give specifics on the level of free cash flow. But based on our EBITDA margin, we think that that translates under the definition of the credit agreement into 5.5 times.

Brooks O'Neil -- Lake Street Capital -- Analyst

OK. That's good. As you think about the whole situation with corona virus, and I appreciate John's comments, are there any areas where you anticipate significant drug shortages at this time or you have significant exposure to say the key active ingredients being manufactured in China today?

John Rademacher -- Chief Executive Officer

Yeah. Thanks, Brooks. It's John. So on our coronavirus response, really focusing on three key areas.

First and foremost, making certain that our employees and our patients are safe and well informed around how to reduce the exposure to the disease, and that is under way. We've been working aggressively with our supply chain, as I said in my prepared comments. We're not seeing any disruption at this point in time and don't feel that there's broad exposure to product shortage on that. We are seeing, on some of the medical supplies, there are some runs on sanitizers and things of that nature.

But we feel that we're well positioned in order to do that, and we were very proactive in working on this the moment that this started to break to make certain that we understood where we were on our supply and doing anything we can to make certain we had safety stock on the shelves where appropriate. The only other thing I would say just is, look, we're monitoring this on a national basis but really looking at it on a market-by-market basis. And as you hear in the news, it's affecting localities different in the way that you know the disease is spreading and/or the number of patients within that. And so we have kind of a national response and managing it as part of a command center type environment but also looking at things that are very localized basis and responding to the local needs.

Mike Shapiro -- Chief Financial Officer

And, Brooks, the only thing I'd add it as we as we've invested considerable effort and resources over the last six months to remediate and build on our relationships with our suppliers, the benefit is, for the most part, our procurement relationships are domestic. However, we are proactively working with our supply chain partners to understand where they may have API that sourced overseas. And given the health of our overall working capital, we do have the flexibility, as John mentioned, to make some strategic investments both in med supplies as well as some some of the therapies. Again with the veil of absolutely ensuring continuity of care for our patients.

Brooks O'Neil -- Lake Street Capital -- Analyst

Absolutely. That's great. Let me just ask one more and then I'll turn it over. Can you just sort of handicap a little bit where you see the biggest uncertainties or and/or biggest opportunities in the synergy capture now that you're seven months into the integration effort?

John Rademacher -- Chief Executive Officer

Yeah, Brooks. From my perspective, we are still in the early innings. A lot of the work that we did to realign our commercial team. Again we're feeling positive about the momentum there.

But as I said in my comments, there is -- it does take time to restart relationships and and really to start to build that momentum behind it. And so I think we're trying to be very disciplined and thoughtful in the way that we're approaching that and building that ahead. The quicker we can accelerate that top line, I think is both a risk and opportunity as we're looking at it. And I think that's an area in which we are focused.

The other thing is we took a little bit of a fire break in our activities around integration efforts as we came to the end of the year, given all of the activities for a year-end close as well as preparation for benefit verification and reauthorization. And so we took a little bit of a pause to make certain that our teams could be very focused around all of the aspects there. We will start to ramp that back up as we move to the back half of Q1 and accelerate through the year. And so there's a little bit of slowness in realization, I'd say, in the first half accelerating into the back half.

Mike, anything else you'd add?

Mike Shapiro -- Chief Financial Officer

No.

Brooks O'Neil -- Lake Street Capital -- Analyst

That's perfect. Thank you very much. Keep up all the hard work.

Mike Shapiro -- Chief Financial Officer

Thanks, Brooks.

John Rademacher -- Chief Executive Officer

Thanks, Brooks.

Operator

Thank you. Our next question comes from the line of David MacDonald with SunTrust. Your line is now open.

David MacDonald -- SunTrust Robinson Humphrey -- Analyst

Good morning, guys.

Mike Shapiro -- Chief Financial Officer

Hi, Dave.

David MacDonald -- SunTrust Robinson Humphrey -- Analyst

Couple of quick questions. First, just can you talk a little bit about the payers? And in these conversations, just receptivity around narrowing of networks, talk a little bit about any opportunity and the receptivity of these payers to increasingly move some of the more expensive infused products out of the institutional setting into the ambulatory infusion suite. Just kind of a quick download on the conversations with payers.

John Rademacher -- Chief Executive Officer

Yeah. Thanks, Dave. Those conversations are happening in earnest. I think as we have talked about before, site-of-care initiatives are front and center for many of the payers, especially with the high priced chronic drugs and and being able to provide care in these alternate settings.

We are working through the programs as we had identified. And the thing I will identify with both the Aetna and the United contracts, just because we highlighted those, they are in a process of putting together a preferred network. And we are very honored to be part of that preferred network that they're putting together with that. But setting appropriate expectations, that's a fishing license in which we have to go out and hustle every day to make certain that we're getting those referrals and we're bringing those patients under service under the care of Option Care Health.

And so, we're working with them as they're narrowing their networks and helping to initiate their site-of-care initiatives. And we do it in a way in which -- again, we have to be out hustling every moment to make certain that we're capturing those referrals and that we're bringing those patients successfully on the service.

David MacDonald -- SunTrust Robinson Humphrey -- Analyst

OK. Mike, just a quick question on 2021. Is there anything you would call out in terms of in terms of working capital we should be thinking about for 2020? And when you look at some of the legacy bios challenges and some of the vendor trueups you guys have seen since the merger, are those largely are you kind of largely where you need to be in terms of in terms of that? I think just anything on the working capital side.

Mike Shapiro -- Chief Financial Officer

Yeah. Thanks, Dave. We feel really good where we exited the year from -- both from a supplier relationship perspective. I'd say in the fourth quarter, we really got caught up and really have been able to move into more constructive relationships with folks, not talking about IOUs and outstanding balances but really around collaborative supply chain management.

And we feel really good about where we exit the year from a working capital perspective. Just put a couple of our goal posts out there. When you look at the two stand-alone organizations at the end of 2018, there is $425 million in accounts receivable. We just reported this morning ending the AR balance of $324 million.

We literally took $100 million out of the AR balance. And at the same time, when you look at the payables balances year end to year end, we've reduced it more than $30 million. And so, we're we're entering 2020, we're in a very productive spot from a working capital perspective. And so, look, we clearly benefited from a cash flow generation with monetizing a lot of the AR and we'll never spike the football and say we're done on AR reduction but I think going forward, we've got a very efficient working capital position and gives us flexibility to respond to market factors such as some of the current supply chain dynamics.

David MacDonald -- SunTrust Robinson Humphrey -- Analyst

OK. And then just just last question for me. I think the number you had said is that you expect the integration to be roughly 90% complete exiting 2020. So as we think about kind of exiting 2020 with a lot of the integration left behind you, is there any reason to not think that we should see your organic growth rate accelerate to kind of at least in line with the industry and maybe a bit better as most of the integration lifting is done?

John Rademacher -- Chief Executive Officer

Yeah, Dave. I think is our view has been and again, through our work was done immediately post close to get that commercial team in place and moving forward. Our expectations are that we will continue to see that that acceleration as we move through the year. Remember, there is a lot of work that was done.

I think we had said on the third-quarter call about 45% of the team got new assignments with either new territories or new customer base. And so expectations are that will start to build as we move through the year, and we're thinking about how we would exit.

David MacDonald -- SunTrust Robinson Humphrey -- Analyst

OK. Thanks very much, guys.

John Rademacher -- Chief Executive Officer

Yes. Thanks, Dave.

Mike Shapiro -- Chief Financial Officer

Thanks, Dave.

Operator

Thank you. Our next question comes from the line of Matt Larew with William Blair. Your line is now open.

Matt Larew -- William Blair and Company -- Analyst

Hi. Good morning. I actually one of the follow on that issue on growth, which is you're not coming off, obviously, a nice sequential improvement here in Q4. Can you kind of help us understand, Mike, maybe what would push you toward the higher or lower end of that 2.5% to 5%.

And how do you think about the pacing? I think you mentioned you might -- we should expect it to accelerate throughout the year. And as a component of that, is there additional territory, reallocation, personnel changes, etc. that you're expecting that might affect the pacing of the growth profile throughout the year?

John Rademacher -- Chief Executive Officer

So, Matt, let me start -- it's John -- on kind of answering that and then I'll turn to Mike for for some of the other details. So as we've talked about, we do have network consolidation that is part of the overall synergy. And we expect that -- again, we're doing everything we can as we look at those opportunities to optimize the network to minimize the amount of impact that that may have within the market but that is contemplated in the growth numbers that we provided. We know that there is an opportunity for disruption.

Again, we're doing everything we can to minimize that there, but that is contemplated in the way that we're approaching it, knowing that that work really will start to ramp up as we go through the year as we move past the firebreak.

Mike Shapiro -- Chief Financial Officer

Yeah, a couple of things I'd just add, Matt. First and foremost, there is some seasonality in this business, as you know watching this industry for for numerous years. We typically do see lower growth in the first quarter. Deductibles reset as people change insurance plans and care is adjusted.

What I would say from a from a the range perspective, a couple of things. As John mentioned, the fourth quarter, we're very encouraged. That was more driven on the portfolio of chronic therapies, which as you know can be a more dynamic portfolio of therapies relative to the acute. And I would say that we continue to refine the resources to ensure we've got the right coverage and reach into the health systems and referral sources.

The other thing I would just add real quick is you know that in our revenue that also encompasses the pharmaceutical costs. And given the magnitude of our chronic portfolio, those are mostly branded and subject to AFT variability throughout the year. And rather than try to explain you know why we're above or below given certain AFT shifts and try to reconcile after the fact, we try to put out a range that would accommodate variability in AFT for certain therapies along the way.

Matt Larew -- William Blair and Company -- Analyst

OK. Understood. That's helpful. And then just a follow up, I guess, on the pair dynamics. United on the lab side, their preferred network has talked about making benefit design changes that might incentivize both patients and doctors to participate in the network.

Just curious if that's something you discussed with respect to alternate site infusion. And then in any conversations with payers or systems that you're having, is there an opportunity to share in some of the cost savings through the site redirection initiatives?

John Rademacher -- Chief Executive Officer

So to, I guess, directly answer your question, look, we're we're in those conversations today. And that is the next frontier for a lot of the conversations with the payers is they are looking at benefit design change to provide appropriate alignment and incentives for patients to choose the right size the care to receive their therapy in that process. Nothing I could go into detail on that but those conversations are part of the broader discussions around how to deepen the partnership and provide a high-quality appropriate cost solution for the members. On the work with health systems and the conversations that we have there is, look, we have a significant number of different relationships across the country as we're thinking around how to better partner with them.

Certainly we have 340-B programs that provide savings back to the organizations, those entities, for patients that are served -- that qualify for the 340-B savings initiative. We have also quality management programs that we work with them on that provide performance guarantee as well as helping them look at things like admission, readmission avoidance, [Inaudible] management programs as part of that. So we're looking at across those -- the spectrum to really figure out how is the best way to provide a meaningful strategic partnership with both health systems as well as with the payer community.

Matt Larew -- William Blair and Company -- Analyst

OK. Thanks for the updates.

John Rademacher -- Chief Executive Officer

Thanks, Matt.

Operator

Thank you. [Operator instructions] Our next question comes from the line of Mike Petusky with Barrington Research. Your line is now open.

Mike Petusky -- Barrington Research Associates -- Analyst

Hey. Good morning, guys. Mike, did you say that you guys generated $14 million of free cash flow in the fourth quarter?

Mike Shapiro -- Chief Financial Officer

Yeah. Basically, we just define that as the change in cash flow. So $14.3 million.

Mike Petusky -- Barrington Research Associates -- Analyst

OK. So when I look at cash flow from ops of $22.9 million and then I look at capex of $15 million and change, typically that's how I would think a free cash flow. What am I what am I missing?

Mike Shapiro -- Chief Financial Officer

Yeah, you'll see in the in the cash flow statement attached to the press release this morning, there was a deferred financing adjustment of approximately $6 million flowing through financing but it effectively offset within the opex activities.

Mike Petusky -- Barrington Research Associates -- Analyst

OK. OK. Gotcha. Gotcha.

And I may have missed this earlier, did you guys give any kind of range or guide or guide on capex for 2020? No, look, going forward, off of the $50 million of cash flow from ops, we've previously said that we think that in the first year 2020 that capex would be around $40 million to $45 million. I would expect it to come in below that in the fourth quarter. Given the strength of some of the cash flow, we accelerated some of the I.T. infrastructure investments.

So we've pulled forward some of the investments, and those are really a conduit to some of the integration activities in 2020. So we feel feel very good about the investments to date. And I think relative to what we've socialized previously, I think capex for the year will be somewhere in the $35 million to $40 million range.

OK. Super helpful. And then you can't give any guidance -- I mean I think I may have missed it, but around the sort of restructuring integration charges expected for '20?

Mike Shapiro -- Chief Financial Officer

Yeah, we would expect that the one-time cost to be approximately $30 million this year. That's consistent with we've talked previously around the cost to achieve the synergies of being roughly around 1 time. We've made good progress and there's still considerable work but I think a reasonable assumption for 2020 is about $30 million.

Mike Petusky -- Barrington Research Associates -- Analyst

OK. Last one, you guys said that the -- to this point, no material disruption due to coronavirus. Does your guide include any kind of sort of cushion in there for some potential impact either in Q1 or going forward or essentially, no aspect of guidance includes any disruption there?

Mike Shapiro -- Chief Financial Officer

No. We haven't come to anything specifically. As John mentioned, we've been trying to stay ahead of the curve. We feel very good right now about where we are from a supply chain and a business continuity perspective, so we haven't dialed in any any shocks specifically for corona.

Mike Petusky -- Barrington Research Associates -- Analyst

OK. Great. Thank you.

Mike Shapiro -- Chief Financial Officer

Thanks, Mike.

Operator

Thank you. This concludes today's question-and-answer session. I would now like to turn the call back to John Rademacher for closing remarks.

John Rademacher -- Chief Executive Officer

Yeah. Thanks, Sarah. Thank you again for joining us this morning. As I hope you've heard in our voices in our commentary, we are very pleased with the progress we are making and more importantly about the potential of this business as we look forward.

There is a significant amount of work ahead ahead of us to fully integrate the businesses. However, we have a dedicated team, detailed plans, and a disciplined approach that provides us with confidence. We look forward to providing further updates on our progress in the second quarter. Take care and thank you very much.

Operator

[Operator signoff]

Duration: 39 minutes

Call participants:

Mike Shapiro -- Chief Financial Officer

John Rademacher -- Chief Executive Officer

Brooks O'Neil -- Lake Street Capital -- Analyst

David MacDonald -- SunTrust Robinson Humphrey -- Analyst

Matt Larew -- William Blair and Company -- Analyst

Mike Petusky -- Barrington Research Associates -- Analyst

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