And so what you’re hearing is largely timing in terms of meeting demand first half — I’m sorry, second half of ’22 into arguably first half of ’23. But overall, very, very strong patient demand, and we believe that we will deliver the previously guided sleep non-acquired growth for 2023.
Joanna Gajuk: Okay. So I guess the actual outlook for this year for ’23 was above that long-term guidance, right? somewhere like 11%, 13%.
Jason Clemens: That’s correct, Joanna. Another data — yes, that’s correct. Another data point for you is our PAP rental census, I mean our previous record for PAP rental patient census was set in the second quarter of 2021. That exactly coincided with the timing of the Respironics recall. . So since then, it has been an unusual environment, a challenging environment to continue to grow that census. However, in Q4 of ’22 we have set a new record of PAP rental census. You’ll see it in Slide 5 of our supplement. If you look at PAP rental category, bottomed out in terms of revenue in the first quarter of ’22. We had previously reported the low point of census was February of 2022, and we’ve continued to grow since then, albeit slower than we had expected based on patient demand due to the reasons discussed. But it is all systems go within the sleep business.
Joanna Gajuk: Okay. And I guess on the cash flow, so clearly, CapEx is higher. But how should we think about the operating cash flow for the year? And I guess, any change to kind of your long-term views that you previously outlined on free cash flow in general, that should be running in 7%, 8% of revenues.
Jason Clemens: Yes. Good question, Joanna. No change to the 2025 expectations for free cash flow. I would tell you for 2023, my current estimate is between 3% and 4% of revenue will convert to free cash flow, defined as cash flow from operations less capital expenditures. I would point you to the cash flow from operations growth over the full year 2021. We are very pleased with this growth. We’re particularly pleased with the investments that we made within the revenue cycle, people, process and technology. We’ve discussed our intake portals and our intake procedures regarding e-prescribe. They are continuing to improve. We’ve discussed our claims edit engines within the revenue cycle that continue to perform and are evolving and maturing every day.
And that has all resulted in DSOs coming down 5 days year-over-year. And so what you’re hearing is inflow, cash flow from ops, we are in very good shape. I mean in normal circumstance, no pandemic, no CARES Act refund and repayments and everything that’s happened over the last several years, we would expect cash flow from operations to represent a 2/3 flow-through from adjusted EBITDA. If you look at 2022, that is around 62% of adjusted EBITDA. And so you’re seeing the inflows improving, we’ve discussed the accounts payable transformation efforts and AP as a use of cash was sizable over the course of 2023 — I’m sorry, 2022. Those efforts are complete. And so based on current trends within rev cycle and current use of cash within our working capital we would expect to deliver about 2/3 of our adjusted EBITDA down to cash flow from operations for 2023.
From there, you’re left with CapEx. We’ve discussed our expectations. We’ve provided a range that we believe is appropriate. And for the full year, again, it is escalated versus our expectations of what the business would do in normal circumstances, which would be 10% of revenue. And so applying that the 2/3 conversion of adjusted EBITDA to cash flow from operations, less where we land on capital expenditures will result in between 3% and 4% of revenue converting free cash flow.
