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 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.

Current wording

Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 190 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, therapies for neurological disorders and chronic inflammatory disorders, immunoglobulin therapy, and other therapies for chronic and acute conditions. The Company operates in one reporting segment, infusion services.

Previous 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.

Current wording

The following results of operations include the accounts of Option Care Health and our subsidiaries for the three months ended March 31, 2025 and 2024.

Previous wording

Net Revenue. Infusion and related health care services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods. When nursing services are provided, revenue is recognized when the services are rendered.

Current wording

Net Revenue. Infusion and related healthcare services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods. When nursing services are provided, revenue is recognized when the services are rendered.

Previous wording

Due to the nature of the health care industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded.

Current wording

Due to the nature of the healthcare industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded.

Previous wording

Depreciation and Amortization Expense. Depreciation within this caption relates to fixed assets and amortization relates to intangibles. Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue.

Current wording

Depreciation and Amortization Expense. Depreciation within this caption relates to property and equipment and amortization relates to intangibles. Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue.

Previous wording

Interest Expense, Net. Interest expense consists principally of interest and fee payments on the Company’s outstanding borrowings under the First Lien Term Loan, Revolver Facility, Senior Notes, amortization of discount and deferred financing fees, payments associated with the interest rate cap, and interest income earned on cash and cash equivalents. Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings.

Current wording

Interest Expense, Net. Interest expense consists principally of interest payments on the Company’s outstanding borrowings under the First Lien Term Loan, Revolver Facility, Senior Notes, amortization of discount and deferred financing fees, payments associated with the interest rate cap, and interest income earned on cash and cash equivalents. Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings.

Previous wording

Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems.

Current wording

Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with healthcare systems.

Previous 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.

Current 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.

Previous 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):

Current wording

The following table presents Option Care Health’s consolidated results of operations for the three months ended March 31, 2025 and 2024 (in thousands, except for percentages):

Previous 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.

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 grew in the mid-teens relative to the prior year while chronic revenue grew in the high-teens. Acute growth was largely driven by the impact of shifts in the competitive landscape, which increased the volume of patient service. The increase in cost of revenue was primarily driven by the growth in revenue and therapy mix. The decrease in gross profit margin was primarily due to certain higher cost therapies included within chronic growth (including rare and orphan therapies). Additionally, the company executed on several initiatives to temporarily mitigate the impact of the previously disclosed reduction in procurement spread in the first quarter. The Company expects the full negative impact to gross profit to materialize in the second quarter through the remainder of the year.

Previous 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.

Current wording

The increase in selling, general and administrative expenses during the three months ended March 31, 2025 was primarily due to an increase in salaries, benefits, and general costs to support the business; however, these expenses have declined as a percentage of revenue to 12.6% for the three months ended March 31, 2025 compared to 13.5% for the three months ended March 31, 2024, due to the Company’s focus on leveraging existing infrastructure to control spending. The increase in depreciation and amortization expense was primarily due to the Intramed Plus acquisition. See Note 3, Business Combinations, of the unaudited condensed consolidated financial statements for further information.

Previous 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.

Current wording

The Company recorded income tax expense of $16.8 million and $12.2 million for the three months ended March 31, 2025 and 2024, respectively, which represents an effective tax rate of 26.5% and 21.4%, respectively. The variance in the Company’s effective tax rate of 26.5% for the three months ended March 31, 2025, compared to the federal statutory rate of 21%, was primarily attributable to the difference between federal and state tax rates, and various non-deductible expenses. The variance in the Company’s effective tax rate of 21.4% for the three months ended March 31, 2024, compared to the federal statutory rate of 21%, was also primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance.

Previous wording

Net Income and Other Comprehensive Income (Loss)

Current wording

Net Income and Other Comprehensive (Loss) Income

Previous 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.

Current wording

Net comprehensive income decreased to $44.3 million for the three months ended March 31, 2025, compared to net comprehensive income of $46.3 million for the three months ended March 31, 2024, primarily as a result of the changes in the fair market value of the cash flow hedge.

Previous 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.

Current wording

For the three months ended March 31, 2025 and the twelve months ended December 31, 2024, the Company’s primary sources of liquidity were cash and cash equivalents of $171.4 million and $412.6 million, respectively. As of March 31, 2025 and December 31, 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). During the three months ended March 31, 2025 and 2024, 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

The Company’s primary uses of cash and cash equivalents include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, the pursuit of acquisitions, and share repurchases. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on outstanding debt and cash taxes. Ongoing investing cash flows are primarily associated with capital projects related to business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the quarterly principal payments on our outstanding debt, along with potential future share repurchases.

Current wording

The Company’s primary uses of cash and cash equivalents include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, and the pursuit of acquisitions and share repurchases. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on outstanding debt and cash taxes. Ongoing investing cash flows are primarily associated with capital projects and business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the quarterly principal payments on our outstanding debt, along with potential future share repurchases.

Previous wording

Our business strategy includes the deployment of capital to pursue acquisitions that complement our existing operations. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company historically has funded its acquisitions with cash and cash equivalents with the exception of the BioScrip merger. The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms.

Current wording

Our business strategy includes the deployment of capital to pursue acquisitions that complement our existing operations. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company has generally funded its acquisitions with cash and cash equivalents. The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms.

Previous wording

The principal balance of the First Lien Term Loan is repayable in quarterly installments of $1.6 million plus interest, with a final payment of all remaining outstanding principal due on October 27, 2028. The quarterly principal payments commenced in March 2022. Under the Third Amendment, interest on the First Lien Term Loan is payable monthly on either (i) SOFR (with a floor of 0.50% per annum) plus an applicable margin of 2.25% for Term SOFR Loans (as such term is defined in the Third Amendment); or (ii) a base rate determined in accordance with the Third Amendment, plus 1.25% for Base Rate Loans (as such term is defined in the Third Amendment).

Current wording

The principal balance of the First Lien Term Loan is repayable in quarterly installments of $1.6 million plus interest, with a final payment of all remaining outstanding principal due on October 27, 2028. Interest on the First Lien Term Loan is payable monthly on either (i) the Secured Overnight Financing Rate (“SOFR”) (with a floor of 0.50% per annum) plus an applicable margin of 2.25% for Term SOFR Loans; or (ii) a base rate, plus 1.25% for Base Rate Loans.

Previous wording

The Senior Notes bear interest at a rate of 4.375% per annum and are payable semi-annually in arrears on October 31 and April 30 of each year, which began on April 30, 2022. The Senior Notes mature on October 31, 2029.

Current wording

The Senior Notes bear interest at a rate of 4.375% per annum and are payable semi-annually in arrears on October 31 and April 30 of each year. The Senior Notes mature on October 31, 2029.

Previous wording

The Company’s Revolver Facility provides for borrowings up to $400.0 million. The Revolver Facility matures on the date that is the earlier of (i) December 7, 2028 and (ii) the date that is 91 days prior to the stated maturity date applicable to any Term B Loans. Borrowings under the Revolver Facility will bear interest at a rate equal to, at the option of the Company, either (i) the Term SOFR applicable thereto plus the Applicable Rate or (ii) the then-applicable Base Rate plus the Applicable Rate, which Applicable Rate shall be, subject to certain caveats thereto, as follows (i) until delivery of financial statements and related Compliance Certificate for the first full fiscal quarter ending after the effective date of the Second Amendment, (A) for Term SOFR Loans, 1.75%, or (B) for Base Rate Loans, 0.75% and (ii) thereafter, the Applicable Rate for Term SOFR Loans and Base Rate Loans, based upon the Total Net Leverage Ratio as set forth in the most recent compliance certificate received by the Administrative Agent pursuant to the terms of the credit agreement. As of September 30, 2024, the Company had $4.1 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the Revolver Facility of $395.9 million.

Current wording

The Company’s Revolver Facility provides for borrowings up to $400.0 million. The Revolver Facility matures on the date that is the earlier of (i) December 7, 2028 and (ii) the date that is 91 days prior to the stated maturity date applicable to any Term B Loans. Borrowings under the Revolver Facility will bear interest at a rate equal to, at the option of the Company, either (i) the Term SOFR applicable thereto plus the Applicable Rate or (ii) the then-applicable Base Rate plus the Applicable Rate, which Applicable Rate shall be, subject to certain caveats thereto, as follows (i) until delivery of financial statements and related Compliance Certificate for the first full fiscal quarter ending after the effective date of the First Lien Credit Agreement Amendment, (A) for Term SOFR Loans, 1.75%, or (B) for Base Rate Loans, 0.75% and (ii) thereafter, the Applicable Rate for Term SOFR Loans and Base Rate Loans, based upon the Total Net Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to the terms of the credit agreement. As of March 31, 2025, the Company had $4.1 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the Revolver Facility of $395.9 million.

Previous 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.

Current wording

Interest payments over the course of long-term debt obligations total an estimated $249.2 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on current rates as of March 31, 2025. Actual payments are based on changes in SOFR and exclude the interest rate cap derivative instrument.

Previous 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.

Current wording

The increase in cash used in investing activities during the three months ended March 31, 2025 was primarily related to the Intramed Plus acquisition with no comparable activity during the three months ended March 31, 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, 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.

Current wording

The increase in cash used in financing activities is primarily related to the Company’s $100.0 million repurchase of common stock during the three months ended March 31, 2025, whereas the three months ended March 31, 2024 activity primarily related to the Company’s $40.0 million repurchase of common stock.