Option Care Health Inc

Previous wording

Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 182 locations around the United States. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings. Our services are provided in coordination with, and under the direction of, the patient’s physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, and dietitians work with the physician to develop a plan of care suited to each patient’s specific needs. We provide home infusion services consisting of anti-infectives, nutrition support, bleeding disorder therapies, immunoglobulin therapy, and other therapies for chronic and acute conditions.

Current wording

Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 185 locations around the United States. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings. Our services are provided in coordination with, and under the direction of, the patient’s physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, and dietitians work with the physician to develop a plan of care suited to each patient’s specific needs. We provide home infusion services consisting of anti-infectives, nutrition support, bleeding disorder therapies, immunoglobulin therapy, and other therapies for chronic and acute conditions.

Previous wording

As of June 30, 2024, the Company has not identified any compromise or unauthorized access of its systems or networks due to this third party incident. As of the end of the second quarter of 2024, the Company reconnected to key applications maintained by Change Healthcare and resumed claims submission to payers, however, certain functionality remains disrupted. The Company continues to work through accumulated unprocessed billing and to establish full recovery from the Change Healthcare Cybersecurity Incident.

Current wording

As of September 30, 2024, the Company has not identified any compromise or unauthorized access of its systems or networks due to this third party incident. As of the end of the second quarter of 2024, the Company reconnected to key applications maintained by Change Healthcare and as of the end of the third quarter of 2024, the Company has substantially recovered operationally. The Company continues to work through accumulated patient payment obligations and to establish full recovery from the Change Healthcare Cybersecurity Incident.

Previous wording

During the second quarter of 2024, the Company did not experience a material financial impact from the Change Healthcare Cybersecurity Incident on the financial results as reported. The Company continues to maintain strong liquidity and, having resumed submission of a majority of claims to payers, has determined that the Change Healthcare Cybersecurity Incident is not reasonably likely to materially impact the Company, including its business operations, financial condition or results of operations.

Current wording

During the third quarter of 2024, the Company did not experience a material financial impact from the Change Healthcare Cybersecurity Incident on the financial results as reported. The Company continues to maintain strong liquidity and, having resumed submission of a majority of claims to payers, has determined that the Change Healthcare Cybersecurity Incident is not reasonably likely to materially impact the Company, including its business operations, financial condition or results of operations.

Previous wording

The following results of operations include the accounts of Option Care Health and our subsidiaries for the three and six months ended June 30, 2024 and 2023.

Current wording

The following results of operations include the accounts of Option Care Health and our subsidiaries for the three and nine months ended September 30, 2024 and 2023.

Previous wording

Change in Unrealized (Loss) Gain on Cash Flow Hedge, Net of Income Tax Benefit (Expense). Change in unrealized (loss) gain on cash flow hedge, net of income tax benefit (expense), consists of the (loss) gain associated with the changes in the fair value of derivatives designated as hedging instruments related to the interest rate cap hedge, net of income taxes.

Current wording

Change in Unrealized (Loss) Gain on Cash Flow Hedge, Net of Income Tax Benefit. Change in unrealized (loss) gain on cash flow hedge, net of income tax benefit, consists of the (loss) gain associated with the changes in the fair value of derivatives designated as hedging instruments related to the interest rate cap hedge, net of income taxes.

Previous wording

The following table presents Option Care Health’s consolidated results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands, except for percentages):

Current wording

The following table presents Option Care Health’s consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands, except for percentages):

Previous wording

The increase in net revenue was primarily driven by organic growth in the Company’s broad portfolio of acute and chronic therapies, consisting of acute revenue that had single-digit growth relative to the prior year while chronic revenue grew in the mid-teens. The increase in cost of revenue was primarily driven by the growth in revenue, therapy mix, and acute drug supply chain disruption, as well as the comparable impact of certain temporary favorable therapy procurement dynamics in the prior year. The decrease in gross profit margin was primarily due to the launch of certain new higher cost therapies included within chronic growth (including rare and orphan therapies) and to the same comparable impact of certain temporary favorable procurement dynamics in the prior year that did not continue into 2024.

Current wording

The increase in net revenue was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of acute revenue that had single-digit growth relative to the prior year while chronic revenue grew in the low-twenties. The increase in cost of revenue was primarily driven by the growth in revenue and therapy mix, as well as the comparable impact of certain temporary favorable therapy procurement dynamics in the prior year. The decrease in gross profit margin was primarily due to the launch of certain new higher cost therapies included within chronic growth (including rare and orphan therapies) and to the same comparable impact of certain temporary favorable procurement dynamics in the prior year that did not continue into 2024. Future revenue and gross profit may be impacted by the supply chain disruption in the availability of certain IV fluids in the near term. Additionally, management anticipates that 2025 gross profit will be negatively impacted due to a manufacturer’s proposed significant reduction in the spread at which the Company procures a key therapy relative to drug reference prices beginning in early 2025.

Previous wording

Selling, general and administrative expenses during the three months ended June 30, 2024 was relatively consistent with prior year; however, these expenses have declined as a percentage of revenue to 12.5% for the three months ended June 30, 2024 compared to 14.4% for the three months ended June 30, 2023, due to the Company’s focus on leveraging existing infrastructure to control spending.

Current wording

Selling, general and administrative expenses during the three months ended September 30, 2024 was relatively consistent with prior year; however, these expenses have declined as a percentage of revenue to 12.3% for the three months ended September 30, 2024 compared to 14.5% for the three months ended September 30, 2023, due to the Company’s focus on leveraging existing infrastructure to control spending.

Previous wording

The decrease in interest expense, net during the six months ended June 30, 2024 was primarily attributable to additional interest income generated from our cash and cash equivalents, partially offset by an increase in the Company’s First Lien Term Loan variable interest rate, compared to the six months ended June 30, 2023. See Note 9, Indebtedness, of the unaudited condensed consolidated financial statements for further information.

Current wording

The increase in interest expense, net during the three months ended September 30, 2024 was primarily attributable to an increase in the Company’s First Lien Term Loan principal balance, compared to the three months ended September 30, 2023. See Note 9, Indebtedness, of the unaudited condensed consolidated financial statements for further information.

Previous wording

The Company recorded income tax expense of $31.2 million and $56.1 million for the six months ended June 30, 2024 and 2023, respectively, which represents an effective tax rate of 24.2% and 26.8%, respectively. The income tax expense for the six months ended June 30, 2023 includes $22.1 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. The variance in the Company’s effective tax rate of 24.2% for the six months ended June 30, 2024, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 26.8% for the six months ended June 30, 2023, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, as well as various non-deductible expenses.

Current wording

The Company recorded income tax expense of $19.7 million and $13.8 million for the three months ended September 30, 2024 and 2023, respectively, which represents an effective tax rate of 26.8% and 19.7%, respectively. The variance in the Company’s effective tax rate of 26.8% for the three months ended September 30, 2024, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 19.7% for the three months ended September 30, 2023, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 26.8% for the three months ended September 30, 2024, compared to 19.7% for the three months ended September 30, 2023 was primarily due to change in state valuation allowance. In September 2023, the Company released $5.8 million of state valuation allowance.

Previous wording

For the three months ended June 30, 2024 and 2023, the change in unrealized gain on cash flow hedges, net of income taxes was related to the change in fair market value of the $300.0 million interest rate cap hedge executed in October 2021.

Current wording

For the three months ended September 30, 2024 and 2023, the change in unrealized (loss) gain on cash flow hedges, net of income taxes was related to the change in fair market value of the $300.0 million interest rate cap hedge executed in October 2021.

Previous wording

Net comprehensive income decreased to $52.1 million for the three months ended June 30, 2024, compared to net comprehensive income of$117.7 million for the three months ended June 30, 2023, primarily as a result of the changes in net income discussed above.

Current wording

Net comprehensive income decreased to $47.7 million for the three months ended September 30, 2024, compared to net comprehensive income of$56.4 million for the three months ended September 30, 2023, primarily as a result of the changes in net income discussed above as well as the change in the fair market value of the cash flow hedge.

Previous wording

The following tables present selected consolidated comparative results of operations from Option Care Health’s unaudited condensed consolidated financial statements for the six months ended June 30, 2024 and 2023.

Current wording

The following tables present selected consolidated comparative results of operations from Option Care Health’s unaudited condensed consolidated financial statements for the nine months ended September 30, 2024 and 2023.

Previous wording

The increase in net revenue was primarily driven by organic growth in the Company’s broad portfolio of acute and chronic therapies, consisting of acute revenue that had single-digit growth relative to the prior year while chronic revenue grew in the mid-teens. The increase in cost of revenue was primarily driven by the growth in revenue, therapy mix, and acute drug supply chain disruption, as well as the comparable impact of certain temporary favorable therapy procurement dynamics in the prior year. The decrease in gross profit margin was primarily due to the launch of certain new higher cost therapies included within chronic growth (including rare and orphan therapies) and to the same comparable impact of certain temporary favorable procurement dynamics in the prior year that did not continue into 2024.

Current wording

The increase in net revenue was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of acute revenue that had single-digit growth relative to the prior year while chronic revenue grew in the mid-teens. The increase in cost of revenue was primarily driven by the growth in revenue, therapy mix, and acute drug supply chain disruption, as well as the comparable impact of certain temporary favorable therapy procurement dynamics in the prior year. The decrease in gross profit margin was primarily due to the launch of certain new higher cost therapies included within chronic growth (including rare and orphan therapies) and to the same comparable impact of certain temporary favorable procurement dynamics in the prior year that did not continue into 2024. Future revenue and gross profit may be impacted by the supply chain disruption in the availability of certain IV fluids in the near term. Additionally, management anticipates that 2025 gross profit will be negatively impacted due to a manufacturer’s proposed significant reduction in the spread at which the Company procures a key therapy relative to drug reference prices beginning in early 2025.

Previous wording

The increase in selling, general and administrative expenses during the six months ended June 30, 2024 was primarily due to an increase in salaries, benefits, and equity compensation; however, these expenses have declined as a percentage of revenue to 13.0% for the six months ended June 30, 2024 compared to 14.5% for the six months ended June 30, 2023, due to the Company’s focus on leveraging existing infrastructure to control spending.

Current wording

The increase in selling, general and administrative expenses during the nine months ended September 30, 2024 was primarily due to an increase in salaries, benefits, and equity compensation; however, these expenses have declined as a percentage of revenue to 12.7% for the nine months ended September 30, 2024 compared to 14.5% for the nine months ended September 30, 2023, due to the Company’s focus on leveraging existing infrastructure to control spending.

Previous wording

The decrease in interest expense, net during the three months ended June 30, 2024 was primarily attributable to additional interest income generated from our cash and cash equivalents, partially offset by an increase in the Company’s First Lien Term Loan variable interest rate, compared to the three months ended June 30, 2023. See Note 9, Indebtedness, of the unaudited condensed consolidated financial statements for further information.

Current wording

The decrease in interest expense, net during the nine months ended September 30, 2024 was primarily attributable to additional interest income generated from our cash and cash equivalents, partially offset by an increase in the Company’s First Lien Term Loan principal balance, compared to the nine months ended September 30, 2023. See Note 9, Indebtedness, of the unaudited condensed consolidated financial statements for further information.

Previous wording

The decrease in Other, net during the three months ended June 30, 2024 was due to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses during the three months ended June 30, 2023. There was no comparable activity during the three months ended June 30, 2024.

Current wording

The decrease in Other, net during the nine months ended September 30, 2024 was due to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses during the nine months ended September 30, 2023. There was no comparable activity during the nine months ended September 30, 2024.

Previous wording

The Company recorded income tax expense of $19.0 million and $41.1 million for the three months ended June 30, 2024 and 2023, respectively, which represents an effective tax rate of 26.4% and 26.4%, respectively. The income tax expense for the three months ended June 30, 2023 includes $22.1 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. The variance in the Company’s effective tax rate of 26.4% for the three months ended June 30, 2024, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 26.4% for the three months ended June 30, 2023, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, as well as various non-deductible expenses.

Current wording

The Company recorded income tax expense of $50.9 million and $69.9 million for the nine months ended September 30, 2024 and 2023, respectively, which represents an effective tax rate of 25.1% and 25.0%, respectively. The income tax expense for the nine months ended September 30, 2023 includes $22.1 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. The variance in the Company’s effective tax rate of 25.1% for the nine months ended September 30, 2024, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 25.0% for the nine months ended September 30, 2023, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance.

Previous wording

The change in net income was attributable to organic growth from additional revenue related to the factors described in the above sections in addition to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses during the three months ended June 30, 2023. There was no comparable activity during the three months ended June 30, 2024.

Current wording

The change in net income was attributable to the factors described in the above sections in addition to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses during the nine months ended September 30, 2023. There was no comparable activity during the nine months ended September 30, 2024.

Previous wording

For the six months ended June 30, 2024 and 2023, the change in unrealized gain on cash flow hedges, net of income taxes was related to the change in fair market value of the $300.0 million interest rate cap hedge executed in October 2021.

Current wording

For the nine months ended September 30, 2024 and 2023, the change in unrealized loss on cash flow hedges, net of income taxes was related to the change in fair market value of the $300.0 million interest rate cap hedge executed in October 2021.

Previous wording

Net comprehensive income decreased to $98.5 million for the six months ended June 30, 2024, compared to net comprehensive income of $153.5 million for the six months ended June 30, 2023, primarily as a result of the changes in net income discussed above.

Current wording

Net comprehensive income decreased to $146.2 million for the nine months ended September 30, 2024, compared to net comprehensive income of $209.8 million for the nine months ended September 30, 2023, primarily as a result of the changes in net income discussed above as well as the change in the fair market value of the cash flow hedge.

Previous wording

For the six months ended June 30, 2024 and the twelve months ended December 31, 2023, the Company’s primary sources of liquidity were cash and cash equivalents of $376.9 million and $343.8 million, respectively. As of June 30, 2024, the Company had $395.9 million of borrowings available under its credit facilities (net of $4.1 million undrawn letters of credit issued and outstanding). As of December 31, 2023, the Company had $394.7 million of borrowings available under its credit facilities (net of $5.3 million undrawn letters of credit issued and outstanding). During the six months ended June 30, 2024, the Company’s cash flows from operations were impacted by the Change Healthcare Cybersecurity Incident. See the caption “Update on the Impact of the Change Healthcare Cybersecurity Incident” included in this Form 10-Q for further discussion. During the twelve months ended December 31, 2023, the Company’s cash flows from operations enabled investments in pharmacy, infusion suites, and information technology infrastructure to support growth and create additional capacity in the future, as well as to pursue acquisitions and share repurchases.

Current wording

For the nine months ended September 30, 2024 and the twelve months ended December 31, 2023, the Company’s primary sources of liquidity were cash and cash equivalents of $483.0 million and $343.8 million, respectively. As of September 30, 2024, the Company had $395.9 million of borrowings available under its credit facilities (net of $4.1 million undrawn letters of credit issued and outstanding). As of December 31, 2023, the Company had $394.7 million of borrowings available under its credit facilities (net of $5.3 million undrawn letters of credit issued and outstanding). During the nine months ended September 30, 2024, the Company’s cash flows from operations were impacted by the Change Healthcare Cybersecurity Incident. See the caption “Update on the Impact of the Change Healthcare Cybersecurity Incident” included in this Form 10-Q for further discussion. During the nine months ended September 30, 2023, the Company’s cash flows from operations enabled investments in pharmacy, infusion suites, and information technology infrastructure to support growth and create additional capacity in the future, as well as to pursue acquisitions and share repurchases.

Previous wording

Interest payments over the course of long-term debt obligations total an estimated $325.0 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on current rates as of June 30, 2024. Actual payments are based on changes in SOFR and exclude the interest rate cap derivative instrument.

Current wording

Interest payments over the course of long-term debt obligations total an estimated $305.1 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on current rates as of September 30, 2024. Actual payments are based on changes in SOFR and exclude the interest rate cap derivative instrument.

Previous wording

The decrease in cash provided in operating activities during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, and changes in accounts receivable, accrued compensation and employee benefits, changes in prepaid expenses, and other current liabilities, offset by purchasing of additional inventory and changes in accounts payable.

Current wording

The decrease in cash provided in operating activities during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, and changes in accounts receivable, accrued compensation and employee benefits, and changes in prepaid expenses, offset by changes in accounts payable.

Previous wording

The change in cash used in investing activities during the six months ended June 30, 2023 was primarily due to prior year acquisition activity with no comparable activity within the six months ended June 30, 2024.

Current wording

The change in cash used in investing activities during the nine months ended September 30, 2023 was primarily due to prior year acquisition activity with no comparable activity within the nine months ended September 30, 2024.

Previous wording

The decrease in cash used in financing activities was primarily related to the Company’s debt refinancing in May 2024, in which $50.0 million in proceeds from issuance of debt was received offset by $118.1 million in repurchase of common stock during the six months ended June 30, 2024, with no comparable activity during the six months ended June 30, 2023. The cash used in financing activities during the six months ended June 30, 2023 was primarily related to the Company’s $75.0 million repurchase of common stock.

Current wording

The decrease in cash used in financing activities was primarily related to the Company’s debt refinancing in May 2024, in which $50.0 million in proceeds from issuance of debt was received, which partially offset $160.0 million in repurchase of common stock during the nine months ended September 30, 2024. The cash used in financing activities during the nine months ended September 30, 2023 was primarily related to the Company’s $175.0 million repurchase of common stock.