Greetings. Welcome to the AdaptHealth Corp announces acquisition of AeroCare Holdings, Inc conference call. At this time all participants are in a listen only mode. A question-and-answer session will follow the formal presentation. If you would like to ask a question please press star one on your telephone keypad. If anyone should require operator assistance during the conference please press star zero on your telephone keypad. As a reminder this call is being recorded. It is now my pleasure to introduce your host, Mr. Chris Joyce, General Counsel. Thank you. You may begin.
Thank you, Donna. Good morning. I'd like to welcome everyone to today's AdaptHealth Corp conference call to discuss the acquisition of AeroCare Holdings, Inc, which we announced earlier this morning. The press release and supplemental investor presentation are available on our website. In a moment, we'll have some prepared comments from Luke McGee, Chief Executive Officer of AdaptHealth, Steve Griggs, Chief Executive Officer of AeroCare, Josh Parnes, President of AdaptHealth, and Jason Clemens, Chief Financial Officer of AdaptHealth. We'll open the call for questions. Before we begin, I'd like to remind everyone that statements included in this conference call and in our press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements include, but are not limited to, comments regarding our financial results for 2020 and beyond.
Actual results could differ materially from those projected in forward-looking statements because of a number of risk factors and uncertainties, which are discussed at length in our annual and quarterly SEC filings. AdaptHealth Corp shall have no obligation to update the information provided on this call to reflect such subsequent events. Additionally, on this morning's call, we'll reference certain financial measures such as EBITDA, adjusted EBITDA, and adjusted EBITDA less patient equipment CapEx, all of which are non-GAAP financial measures. This morning's call is being recorded, and a replay of the call will be available later today. I'm now pleased to introduce our Chief Executive Officer, Luke McGee.
Thanks, Chris, and thanks everyone for joining the call. We are pleased to announce the acquisition of AeroCare and the combination of what we believe is the best leadership in the industry. Josh and I have known Steve Griggs, the CEO of AeroCare, for nearly seven years. We've participated in industry panels together, shared meals at industry conferences, and swapped ideas on how to advance the home medical equipment business. We've gotten to know Steve and watch what he and his team have accomplished. Our respect for AeroCare and our relationship with its management has only grown. Both AdaptHealth and AeroCare have high growth profiles, including end markets indexed to an aging population, attractive geographies, and impressive track records of integrating numerous acquisitions every year.
Over the past five years, each company has focused on using technology to reduce costs and advance the patient and referral experiences in ordering home medical equipment and supplies. This transaction is highly strategic and a complementary fit with our vision, strategy, and platform. The combined company will maintain a long-term strategy of delivering connected healthcare in the home. That journey begins with engaging patients and referrals to interact with technology, and AeroCare's proprietary software and workflows will only accelerate AdaptHealth's existing trajectory. Turning to the key elements of the transaction on slide two of the investor presentation posted to our website this morning, we've agreed to acquire AeroCare for a total consideration of approximately $2 billion, consisting of $1.1 billion of cash and 31 million shares of AdaptHealth stock.
By structuring the acquisition of AeroCare in this manner, we have remained within our stated leverage targets and provided for dry powder to pursue additional accretive acquisitions. With the incremental debt for this transaction, our net leverage will be 3.6x pro forma adjusted EBITDA as of 9/30/2020. We expect the transaction to be immediately accretive to adjusted EBITDA and adjusted EBITDA less patient equipment CapEx. On an annual basis, we expect AeroCare to contribute adjusted EBITDA of $230 million and adjusted EBITDA less patient equipment CapEx of $115 million in 2021. This excludes expected cost synergies of approximately $50 million on an annual basis, of which we expect to realize approximately $25 million in 2021. As part of the transaction, the AdaptHealth Board of Directors will expand by two directors to 11 in total.
Steve Griggs will be joining the board, along with AeroCare shareholder designee, Ted Lundberg of Peloton Equity. Separately, AdaptHealth is pleased to announce its acquisition of Massachusetts-based New England Home Medical Equipment, furthering the growth and expansion of its Diabetes division. Founded in 2015, New England Home Medical Equipment is a leading supplier of CGM, and diabetes management supplies throughout New England and the Northeastern U.S. For the trailing 12 months ended 12/31/2019, New England Home Medical generated net revenues of approximately $31 million. Now, I'd like to turn the call over to my new Co-CEO, Steve Griggs, the Chief Executive Officer of AeroCare, to introduce the business he and his team have built over the last 20 years.
Thanks, Luke. Before I begin, I'd like to express the excitement of the AeroCare management team. We share a common vision and strategy with AdaptHealth, and we are excited to partner with a leader in the industry. Personally, I am excited to work with Luke and Josh to guide the combined business. Like AdaptHealth, we have built our business through a mix of organic growth and acquisitions, closing 155 acquisitions since inception and 50 of those since 2017. We've maintained a relentless focus on the patient experience that has enabled us to make key investments in technology and efficient operational workflows.
Our organic growth engine is built upon a sales team that is focused on the patient experience and committed to referring provider satisfaction. Our proprietary technology enables our operations and delivery teams to execute across the platform, and our patient satisfaction scores validate those efforts. We're particularly proud of our organic growth in key geographics, Florida, Georgia, Texas, Tennessee, Colorado, and the Carolinas, amongst others. I'm confident our growth will accelerate as a result of combining our best practices with those of AdaptHealth. With that, I'll turn it over to Josh to talk through our integration plans.
Thanks, Steve. We are extremely excited to be bringing together two very forward-thinking and technology-enabled companies to accelerate our combined growth and continue to transform the delivery of medical equipment and supplies to patients at home. In this combination, there are some very compelling synergies, as well as some complementary strengths that will help transform and improve the collective organizations.
Firstly, AdaptHealth is a leader in managing remote resources, particularly for non-patient facing functions, and we believe there is significant opportunity to bridge this capability across AeroCare's platform. AdaptHealth also maintains best-in-class CPAP resupply rates, and there is significant opportunity when bringing AeroCare's resupply rates in line with AdaptHealth. We also expect to be able to use our combined scale to achieve synergy in our direct and indirect cost structures. We intend to consolidate direct suppliers, renegotiate rebates, and restructure our indirect spending.
Although our geographic footprints are largely complementary, there is opportunity for lower spending across labor, fleet, and locations within close proximity. As with many acquisitions, there is duplicative spending in certain G&A functions, so we also expect to achieve benefit from centralizing core administrative functions over time. Finally, we believe that the combination of the businesses will leverage best in breed technology for both companies. AeroCare has developed technology that streamlines delivery and patient communication, and Adapt has made significant progress in the technology of e-prescribing and revenue cycle management.
Through combining our collective technology strategies, we anticipate being able to achieve both a better customer experience as well as a more efficient operating model. Although there is a lot of work ahead of us, the opportunity is truly exciting, and we can't wait to get started. At this point, I'll turn the call over to Jason.
Thanks, Josh. Good morning, and thanks for joining our call. As previously discussed, we expect the standalone AdaptHealth business to grow organically at 7%-10% in 2021, with our sleep and diabetes product lines growing at the top end of that range. AeroCare strengthens our already strong sleep business, specifically in the high-growth geographies that Steve mentioned earlier. As a result, we expect annual organic growth for the combined company to be 8%-10%.
The adjusted EBITDA less patient equipment CapEx margin is fairly similar for both companies, around 13%-14%, but we expect the combined company to achieve synergies that should push that margin to 15% or higher. Our previous 2021 full year outlook for revenue, adjusted EBITDA, and adjusted EBITDA less patient equipment CapEx was $1.30 billion-$1.40 billion, $260 million-$280 million, and $180 million-$200 million, respectively.
As announced this morning, as a result of this transaction, we are increasing our 2021 full year guidance for revenue, adjusted EBITDA, and adjusted EBITDA less patient equipment CapEx. We believe that the combined business will grow at the high end of 8%-10% organically. We believe we will achieve the full run rate of $50 million of synergy by the end of the fourth quarter, and we believe AeroCare will generate first year annualized revenue of $850 million, adjusted EBITDA of $230 million, and adjusted EBITDA less patient equipment CapEx of $115 million. Our guidance assumes the transaction will close on or before January 31st, 2021. This guidance adjusts the first year annualized targets just mentioned for the 11 months of contribution from AeroCare in 2021.
Additionally, the 2021 EBITDA and adjusted EBITDA less patient equipment CapEx numbers include a cost synergy benefit of approximately $25 million delivered in 2021, driven by the timing associated with achieving it, with full run rate synergies expected in 2022 of $50 million. We also included a full year of New England Home Medical, the recent CGM and diabetes management supplies business that Luke announced earlier. As a result, we are revising our 2021 guidance to revenue to $2.05 billion to $2.20 billion, adjusted EBITDA to $480 million to $515 million, and adjusted EBITDA less patient equipment CapEx of $300 million to $330 million. With that, I'll turn it back to Luke.
Thanks, Jason. In conclusion, I'd like to reiterate our significant enthusiasm for our larger and more diversified AdaptHealth. We intend to leverage the best ideas across the combined company. We believe the future is very bright for our patients, our referring providers, our employees, and our shareholders. Operator, please open the line for questions.
Thank you. The floor is now open for questions. If you would like to ask a question please press star one on your telephone keypad a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove yourself from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star keys. Once again it's star one to register your questions. Our first question is coming from Brian Tanquilut of Jefferies. Please go ahead.
Hey, good morning, guys. Congrats to Steve and Luke and Josh. Looks like a really good deal. I guess my first question will be for Steve. If you don't mind just walking us through the strategies that you have employed over the years to drive the kind of organic growth that you've been delivering, because it's clear that you guys have been successful in delivering very robust growth over the last few years. I just want to hear, tell us more about AeroCare and what allows you to deliver that kind of performance.
Well, we've been in the business for many years. Started in the business in 1988, and AeroCare started in 2000. We've been sales driven from the very start, from the top down, and everybody's committed to driving that organic growth. We feel like that's the hallmark of our company and our sales force and the technology that we've been able to develop around our proprietary softwares has just enabled that sales growth to continue to grow. Really, our systems are great, but it's just a complete focus that we have in our organization day in, day out, every day of the year.
That's great. I guess, Josh, I'll turn it over to you. Obviously, a pretty sizable transaction here. You just did a good size deal as well mid-year with Solara. As we think about integration bandwidth, how are you thinking about that? Also, if you don't mind just giving us your thoughts on the buckets of integration that you have to focus on and maybe the pace, or the cadence as we think about that over the course of the year.
Sure. I'll hit your first question first. In terms of bandwidth on integrations, I think one of the really nice things with this transaction is there's a phenomenal and experienced management team coming from the AeroCare side that really, like I mentioned on previous calls, one of the nice things about being able to do more strategic deals is not just getting the capital contribution that comes from those organizations, but more about the human capital contribution that comes from those organizations, and particularly with AeroCare and the leadership team that comes there. We're going to get significant uplift in talent and some of the best in class employees and leaders that are going to join our team. From an integration perspective, that makes my job easier. I think that makes our collective efforts easier. Of course, there's coordination that has to go on.
Also, from a diabetes perspective, really, the diabetes part of our business doesn't really tax the same resources. We're confident that New England Home Medical and Solara and some of those other businesses that we've bought over the last couple of months can continue to scale without taxing the HME side of the business. The AeroCare transaction, in particular, will help us, I think, both accelerate our acquisition strategy by combining our M&A and integration teams together. Particularly excited about that.
I appreciate that. I guess my last question, Luke, you've given a $50 million synergy target. How are you thinking about your confidence in the achievability of that, and are there incremental synergies that are not included there, like any revenue capture and cross-sell that you're thinking about? I guess broadly speaking, just from a strategic perspective, maybe just want to hear your thoughts, why AeroCare? Why now? What attracted you to this asset specifically?
Yeah. I'm going to answer the second one first, and then we'll come back to the bucket synergies. As I mentioned in my prepared remarks, we've watched what Steve and Dan and the team at AeroCare have built over the last seven years and have been impressed. We've had off and on conversations about putting our businesses together, and the timing just wasn't right. With sort of rate stability on the horizon, with competitive bidding now being postponed, and our relative developments now being very complementary, us on the resupply side, Steve and his team on the customer centric and the setup side. We just looked and said, we think these are the two best platforms out there, and so let's put them together. I couldn't be more thrilled. On the revenue side, that $50 million is a cost synergy.
It doesn't include any revenue synergy buckets that we do believe exist. You just look what Steve and his team have done on organic growth. We think that there's a lot we can learn there. Our sales force can learn from some of the training and sort of best practices from Steve and his team. We think we can just accelerate just the number of inbound orders on the resupply side. I believe there should be an uptick when we sort of migrate to our resupply platform in total for AeroCare. On the PAP adherence, there's a couple percentage points at minimum that if we just mirror AeroCare's best practices, should help us sort of raise revenue. We're being conservative for now. We're not including those in the synergy guide.
The synergy buckets that we put out there really just are, it's the purchasing savings, it's some back office consolidation, it's the G&A, and some location overlap. We feel very confident that we'll be able to achieve that. Coming into 2022, we'll have achieved the full $50 million. As Jason mentioned, 2021 should have $25 million of cost in the guide that we put out there.
Awesome. Congratulations again, guys. Thanks.
Thanks, Brian.
Thank you. Our next question is coming from Pito Chickering of Deutsche Bank. Please go ahead.
Good morning, guys. Thanks for taking my questions. Luke, I know that you and Josh have effectively been partners for many years running your companies. I was hoping I could hear from both Luke and Steve as to how the Co-CEO structure will work and why it's the best structure for this company.
Yeah. I'll start, and I'll turn it over to Steve. It starts with our shared history. I've known Steve. We've gotten to know each other, spent hours in meetings together, gone out to dinner together, and sort of studied and shared best practices. We believe at AdaptHealth that you need to be self-reflective of your strengths and your weaknesses to succeed here. We looked and said Steve has done a better job of really perfecting the patient experience, the patient onboarding, the Salesforce side.
Operationally, Steve will be more involved. He and Josh will work quite closely together on the technology side. Historically, I focused more strategically on the capital market side, and that's where I'm going to continue to spend my time. It's worked quite well for Josh and I historically. I have extreme confidence that Steve and I will work very well together and divide responsibilities. I'll also turn it over to Steve to give his thoughts.
Thanks, Luke. Like Luke said, we've been working together on industry things for several years. There just doesn't seem to be much daylight between his viewpoints and mine. We should be able to do this very well and complement each other's skills quite well. Like Luke said, he's done a great job with the capital composition of the company. I'll focus on the operations as much as I can. Together we'll probably cross up. Again, there just doesn't seem like there's a lot of daylight between our viewpoints. With that, we should be very confident that each of us will make the right decisions that the other one would've made.
Okay. Actually a segue into sort of the sleep side of the business. Can you guys quantify for us the differences between the new starts for each company versus resupply deltas between the two companies? Which technologies is each company using? Can we start thinking about revenue synergies by optimizing a combination of new starts with resupply optimization?
I think we're going to be a little bit reticent. Obviously, when you put two companies together, we need to be careful of antitrust and what can be shared in the diligence process. I think we're going to be reticent to share more specific details on the revenue side. What I can tell you is that when we look at the amount of orders per patient per year, most payers, and the manufacturers recommend sort of four replacements per year. We're doing whether it be a tenth or two-tenths of a point better than AeroCare on that side. Conversely, in terms of adherence, that new patient who gets set up on a PAP therapy, AeroCare has done a better job. It's not just one technology. If it was that easy, we would've done it years ago, and the entire industry would do it.
I think that AeroCare has started and built proprietary sort of workflows in onboarding the patient and making sure that they understand the therapy very well, and then using both internal and some of the manufacturer tools to drive that adherence. I'd comfortably say they're 5 percentage points better than us on the new start adherence.
Quick question on the synergy number you guys put out there. Any chance that that can be broken out into vendor savings versus SG&A? How fast do you guys can realize those savings?
I think as we achieve them, and we come into our first quarter, our sort of Q4 call in the first quarter and Q1 call in the second quarter, we'll be able to share more about the actual realization of those savings. Fully expect that we'll be fully realized by Q3 of next year. We obviously hope there are more, but $50 is the number we're comfortable putting out there.
Okay. Then last quick question here on Medicare, obviously, competitive bidding has been pushed back a number of years. AeroCare was more focused on Medicare revenues relative to Adapt. Just curious if you can help quantify how much exposure you guys think would've existed for AeroCare if competitive bidding had gone through for 2021. Thanks so much, guys.
Similar to Adapt, I don't think AeroCare has targeted payers before. They've targeted the referral source and done just a heck of a job building relationships with their prescribers, making sure that they were meeting their needs and the patient needs. In a lot of respects, they, like Adapt, would've been a basket taker from the payer side and wanted to be in network. You're going to see a bigger contribution on a relative basis for Medicare fee for service and Medicare Advantage.
That's just driven by their strength and oxygen in the respiratory categories that tend to have Medicare or Medicare Advantage as the payer. In terms of the competitive bid, we had estimated the high end of the net impact in the high single digits for us. Obviously, we're glad that's not coming to fruition. I would've tagged on similar assumptions, AeroCare's number to be very similar to Adapt.
Great. Thanks so much, guys.
Thank you. Our next question is coming from Mathew Blackman of Stifel. Please go ahead.
Good morning, everyone, and congrats. Just a couple of questions from me. I think to start, I just wanted to get a better handle on AeroCare's organic growth trajectory. There's a slide in the deck that talks about, I think, 12% same-store sales growth through August 2020 on a trailing basis. Is that the right way to think about AeroCare organic growth, or is there some COVID tailwind in there? Then a couple of follow-ups.
12% has been historic for like three or four years. I think we're pretty confident with that going forward. The COVID impact has helped in certain places and hurt in others and probably netted to the same percentage or darn close to it. I don't think the COVID impact is really to date has influenced us either positively or negatively. I think 12% is good.
Okay. Thank you. I appreciate that. Maybe for Jason, just give us a sense of the cost of debt you're putting on the balance sheet and maybe how we should think about debt paydown and target levels over the next several years. Again, assuming no more deals.
Sure. I'd be happy to. I'll reference you to slide 15 in the investor deck posted to our website. We believe debt's going to be about $1.865 post-transaction. Net of cash, we believe that the leverage ratio will be right about 3.6x . That's using a September 30, 2020, trailing pro forma EBITDA. I don't know that we see that going any further. Think of that as a hard cap. We do intend to have some dry powder and continue the tuck-in acquisition activity. We don't intend for that to stop in any way. As we continue to generate cash flow from operations, we'll see that leverage coming down over time.
Matt, let me hop in. I think you asked about the relative cost of debt. I think the best way to think about that, obviously, we'll see how the bond market reacts to our transaction today, but we do have a reference bond that trades. I think it was bid slightly below 5% yesterday or in the mid-4s, and we would hope that that would be once we're able to take out the Blue Mountain Capital note, that's the expensive piece of debt capital in our structure at 12% that's callable in the third quarter. I would think that where those bonds are being bid should be the outside bound of our interest cost.
All right. That's helpful. I appreciate that color. The final one, just on additional M&A, maybe conceptually how this combined platform potentially impacts your M&A outlook for here. Do you have to digest this for most of 2021, and does it also open more opportunities for M&A targets further down the line?
Yeah. I think that obviously in the near term, we have a pipeline, AeroCare had a pipeline. We intend to close on the transaction of the pipeline. Will we be a little more conservative until we have the integration well underway of aggressively building that pipeline? I think that's a fair way to look at things. I think we'll still hit the $100 million-$150 million of revenue acquired for 2021 that we put out there as our long-term target, updated in the investor presentation. Over the long term, I think if you look, AeroCare and AdaptHealth have been the most acquisitive companies over the last three or four years, sort of using our relative strengths and the businesses we've built in competitive bidding to be a magnet for folks looking to exit or join a larger platform.
I think the hope would be that only amplifies that over time. As Josh mentioned, the diabetes acquisitions, including the one we announced this morning, they put different stresses on the organization. Steve Foreman and the team at AdaptHealth Diabetes are doing a great job. We're excited about our Q4 there, and we're going to build a pipeline on diabetes and grow that business. As part of this transaction, our revenue drops to about 17% pro forma for diabetes. We're going to be working, and luckily, the market's going to help us. It's just growing organically quickly that we want to get that back into the 20s and hopefully over to 30% over the long term.
All right. Appreciate it. Thank you so much.
Thank you. Our next question is coming from Anton Hie of RBC Capital Markets. Please go ahead.
Thanks. Most of them have been asked and answered already. Just building off that last one, Luke, on getting back up to 30% diabetes mix, is that primarily a function of selling through into the AeroCare footprint, or do you think that's going to be a focus through M&A?
I certainly think we'll do future M&A on the diabetes side. I do think that obviously we're well-positioned to benefit from the market growth for CGM and insulin pumps. Steve has built a team of 200+ best-in-class sellers out in the field who have relationships with our referral sources, primarily in complementary geographies. We would be silly not to leverage that asset and to get those folks comfortable with selling diabetes. I think that can be an accelerant and a way for us to push our diabetes mix even higher.
Okay, that's great. I'm not sure I heard you specifically reference what you see this doing for your managed care relationships over time?
It's a big focus of ours. I think that Steve mentioned earlier, we've shared a lot of similarities, which is when we've both grown from small companies, we haven't had the most well-developed managed care relationships. This transaction cements us as the second largest provider, gets us darn close, we think, to being the first largest. That's an area that we think we need to invest in. I think, Steve, you can hop in there, too, but I think we believe that it's an area where the combined AdaptHealth should be investing.
Yeah, absolutely. I think the managed care entities are looking for more consolidated solutions for the home as things just move more and more to the home. COVID has proven that for everybody, the stresses on the healthcare system and the answers that we can provide for that. This combination really puts us in a position to have an offering for not only just the managed care patient population, but also our patients at home, and that it's pretty unique, and I think it's going to be very attractive to them. It's going to take a lot of work, a lot of selling, and a lot of getting in front of them. Everybody seems to be focused in on how can we take care of people at the home in a more cost-effective environment. That's not going to change anytime soon, so I think it'll just get accelerated.
Okay, great. Thanks, guys. Congrats.
Thank you. Our next question is coming from Richard Close of Canaccord Genuity. Please go ahead.
Yep. Thanks. The question, a lot of mine have been answered as well. I'm just curious with respect to, maybe this is for Steve, but with respect to AeroCare's organic growth drivers, I'm curious your thoughts on how easy or hard it would be to layer that onto Adapt's business, and the timing of where you would see the improvement in organic growth for Adapt.
Well, yeah, it's going to be a lot of work. We don't have a magic pixie dust that we can go over there and spread on them and just make this happen. It's going to be a lot of work, and it's just going to be that focus on it. A lot of it is, if you just think of AdaptHealth's past year, of what they've been able to accomplish, is pretty remarkable. It's just now time to hopefully put some resources into those same assets they bought to make them grow. It's just attention and work and all that stuff, but it's incremental.
If every day we improve, eventually we'll get to where we want to be. How soon that happens, there's a multitude of factors that roll into that. It will improve. We're confident in that. Our Salesforce is very capable and just utilizing some of our technology will help them immensely in the very beginning. It'll be a process, but it won't be, wow, geez, it automatically happens. It'll take a lot of work.
Thank you.
Thank you. Our next question is coming from Eric Coldwell of Baird. Please go ahead.
Thanks very much. Maybe a couple here. Steve, I'm curious. We've heard a lot about each company's strengths and weaknesses and what both parties liked about the other. I'm curious from your perspective, put an analyst hat on. When you look at AdaptHealth, what did you see as the most attractive attribute of Adapt? And then maybe on the flip side, the area where you thought there was the most room for improvement, or where you could add the single most value in terms of skill sets, technology, operations that you bring to the table. I'll start with that one.
Yeah. Both organizations pushed incredibly hard on technology and used that to their benefit over the past three, four, five years. Each of us has pursued it. When you look at it, Adapt, where they had the most success was in a little bit different places in technology than we had success in technology. If they would look at ours, it would just be stuff that, wow, they've done this stuff. That's stuff that we want to do, but they just haven't got to it. When we look at the tractions that they've made in technology, gee, that's great stuff that we want to do. We just haven't got to it. I think the combination brings much faster of each organization separate of where they want it to be. I think it moves it up in considerably speed.
Their back office and how they move information and data across into the most appropriate places is really remarkable. They're in the very beginnings of that. We see a lot of efficiencies coming around there. We've been focused more on the patient and the referral source centric, we'll be able to bring that to them fairly quickly, too. Those two combinations are powerful. It's all about data and information, because everybody wants it. The patient wants it, the referral sources want it, and managed care want it. They all want it desperately right now. We have the ability to do that.
I think, we've already kind of talked about what we think we can do to help Adapt, and that's going to be around the sales and marketing, around location operations, how we handle the patient and stuff like that. Mainly it's through our technology, it's just our focus on it every day, every week, every month, every year on that same process.
Thank you for that. Follow-up on the original Co-CEO questions. Is the vision here that this is a temporary situation, maybe a year, three years, as you get the two companies combined? Or is the current thinking that this is the long haul for the organization, and the long-term vision is to have the two CEO hats? Just any additional thoughts on that one.
The long-term vision is we're going to do the right thing. I think that there's no intent to change the structure. There's no time horizon on this. Right now, Steve and I think that we can grow this organization together. If and when that changes, we'll let you know. I think that this is going to work over the long term.
Yeah, I'd like to add to that. There's just a ton of work that we feel like we need to do. The titles are one thing, but come when this transaction closes, we're all going to go in to do our work that we need to get done. How that gets done and who gets done with that is probably more important than anything else. There's a lot to accomplish if we want to accomplish what we think we can do with these combined organizations, which is make a better platform for our patients, our employees, our referral sources, and managed care. It's a ton of work. There's plenty for everybody to do. We're not worried about that too much at this time. Again, like Luke said, we're going to do what's best for the organization, and what's best for the organization is to get this work accomplished.
Okay. Thanks very much, and congrats on the transaction.
Thanks, Eric.
Thank you. Our next question is coming from David Common of JPMorgan. Please go ahead.
Great. Thank you. A lot of good Q&A already. If I could, just a couple of mundane housekeeping. The 3.6 pro forma leverage ratio, it's footnoted as sort of LTM inclusive of $50 million synergies. Is that inclusive of today's AeroCare deal?
Yes, David, it is.
Very good. Your current mix, I think, is about 40% loans, 60% bonds. Should we just assume that's a reasonable proxy for what it might look like going forward? I think you specifically referenced sort of 5% being a decent placeholder for incremental bonds.
Yes. I think, David, obviously, we're going to work with our advisors. Jefferies has provided a fully backstop commitment here, and then we're going to work with our advisors to figure out exactly where in the fixed income capital markets we want to place our long-term structure. I do believe that that 5% should be the outside bound. Obviously, markets change day to day, and we'll look to get out to the fixed income markets prudently quickly. I think I wouldn't read too much into the mix. We're still having those discussions.
Okay. The weighted average may be significantly lower, I guess, is my point, if it's a mix of bank and bonds.
Yeah. It may be. We'll see. Obviously, markets are fickle things.
Very good. Thank you.
Thank you. Our next question is a follow-up coming from Pito Chickering of Deutsche Bank. Please go ahead.
Hey, thanks, guys. Taking a quick follow-up. Question for Steve on the cross-selling opportunity. Any chance you know what percent of your customers are on CGM or pumps for diabetes? As you look at Adapt's product portfolio, what do you think are the biggest cross-selling opportunities that exist for your customer base?
Obviously, diabetes is a huge one, and that's tricky, not easy to get. On the patient level, it's a little easier. On the referral sources, it takes a little bit more time to get that done. Obviously there. We at AeroCare focus predominantly on the respiratory side of the business, 96% of our business is respiratory related, where AdaptHealth has done a fantastic job on how to take the durable medical equipment, vent medical products, supply products, and run them efficiently through their system. We just didn't have that efficiency layer.
Obviously, we can pick up those, not just on our existing referral sources and our existing patients, but also explore some new referral sources that we've avoided in our current geographics. Their system for that stuff is just so superior to ours and the way they manage that through the e-prescribe and their connections with their suppliers and stuff like that. I think that's probably where it happens the quickest, fastest.
Great. Thanks so much. I appreciate the follow-up.
Thank you. At this time, I'd like to turn the floor back over to management for any additional or closing comments.
Thanks, everyone, for joining the call. Just to reiterate, to all the AdaptHealth and AeroCare employees out there, we appreciate all of you. We appreciate everything you've done to support our business, to support our patients, our referrals, our payers throughout the COVID-19 crisis. Sincerely, to Steve, welcome to the team. We're thrilled to have you, and we're looking forward to delivering results for all our shareholders. Thank you.
Thanks, Luke.
Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time, and have a wonderful day.