Option Care Health, Inc. (NASDAQ:OPCH) Q4 2021 Earnings Conference Call February 23, 2022 8:30 AM ET Company Participants Mike Shapiro – Chief Financial Officer and Senior Vice President John Rademacher – Chief Executive Officer Conference Call Participants David Macdonald – Truist Joanna Gajuk – Bank of America Pito Chickering – Deutsche Bank Matt Larew – William Blair Lisa Gill – J.P. Morgan Jamie Perse – Goldman Sachs Mike Petusky – Barrington Research Operator Thank you for standing by, and welcome to t ...

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Option Care Health is the **largest independent provider** of home and alternate site infusion services, delivering patient-centered, cost-effective therapy nationwide - Option Care Health is the **largest independent provider** of home and alternate site infusion services, operating in **45 states** with **154 locations**[16](index=16&type=chunk) - The company's services include clinical management of infusion therapy, nursing support, and care coordination, provided by a team of approximately **4,300 clinicians**[16](index=16&type=chunk) - The company's operating model benefits patients (improved quality of life, home therapy), payers (cost-effective solutions), providers (timely clinical support), pharmaceutical manufacturers (broad distribution, clinical data), and health systems (post-acute care network)[20](index=20&type=chunk) [Quality](index=5&type=section&id=Quality) Quality is **central** to the company's mission, focusing on favorable outcomes and cost-effective care through comprehensive services - Quality is **central** to the company's mission, focusing on favorable outcomes and cost-effective care through comprehensive services[21](index=21&type=chunk) - The company holds national accreditations from ACHC, PCAB, ASHP, and URAC, indicating adherence to high healthcare and compounding standards (e.g., USP 797)[22](index=22&type=chunk)[23](index=23&type=chunk) [Services](index=6&type=section&id=Services) The company offers home and alternate site infusion services through **97 full-service pharmacies** and **57 stand-alone ambulatory infusion suites** - The company offers home and alternate site infusion services through **97 full-service pharmacies** and **57 stand-alone ambulatory infusion suites**[24](index=24&type=chunk) - Services include medication/supply administration, patient education, nursing support (approx. **2,500 employees**), clinical monitoring, and reimbursement assistance[24](index=24&type=chunk)[25](index=25&type=chunk) - Therapies cover Anti-Infectives, Nutrition Support, Immunoglobulin (IG), Chronic Inflammatory Disorders, Neurological Disorders, Bleeding Disorders, Women's Health, Heart Failure, and other conditions like pain management and chemotherapy[26](index=26&type=chunk) [Sales and Marketing](index=7&type=section&id=Sales%20and%20Marketing) Sales and marketing objectives include expanding managed care contracts, strengthening patient referral relationships, and developing ties with pharmaceutical manufacturers - Sales and marketing objectives include expanding managed care contracts, strengthening patient referral relationships, and developing ties with pharmaceutical manufacturers for new product distribution[27](index=27&type=chunk) - The sales structure leverages national managed care relationships with local field sales personnel to market services to physicians, hospital discharge planners, HMOs, and PPOs[28](index=28&type=chunk) [Competition](index=7&type=section&id=Competition) The home infusion market is **highly competitive** and fragmented, with competition based on quality of care, clinical outcomes, pricing, reputation, and service reliability - The home infusion market is **highly competitive** and fragmented, with competition based on quality of care, clinical outcomes, pricing, reputation, and service reliability[29](index=29&type=chunk) - Major competitors include Coram CVS/specialty infusion services, Accredo Health Group, Inc., and Briova[29](index=29&type=chunk) - The company believes its national presence, quality services, and marketing capabilities, enhanced by the Merger, provide a strong competitive advantage[29](index=29&type=chunk) [Intellectual Property](index=7&type=section&id=Intellectual%20Property) The company owns a variety of trademarks, licenses, and service marks, such as "Option Care Health" and "BioScrip" - The company owns a variety of trademarks, licenses, and service marks, such as "Option Care Health" and "BioScrip"[30](index=30&type=chunk) [Suppliers](index=8&type=section&id=Suppliers) The company purchases pharmaceuticals and medical supplies from manufacturers, distributors, and group purchasing organizations - Purchases pharmaceuticals and medical supplies from manufacturers, distributors, and group purchasing organizations[32](index=32&type=chunk) - Approximately **74%** of pharmaceutical and medical supply purchases in **2021** were from **four vendors**, posing a risk if supplier relationships change[33](index=33&type=chunk) - The company negotiates favorable terms, including volume purchase rebates and vendor administration fees, recorded as reductions to cost of revenue[34](index=34&type=chunk) [Billing & Significant Payers](index=8&type=section&id=Billing%20%26%20Significant%20Payers) Most revenue comes from third-party payers, with pharmaceutical reimbursement typically based on AWP minus a percentage or ASP plus a percentage - Most revenue comes from third-party payers (managed care, insurance, Medicare, Medicaid)[35](index=35&type=chunk) - Pharmaceutical reimbursement is typically based on AWP minus a percentage or ASP plus a percentage; nursing and other services are billed separately or per diem[35](index=35&type=chunk) Revenue Concentration by Payer (Year Ended December 31, 2021) | Payer Type | % of Revenue | | :----------- | :----------- | | Largest Payer | 16% | | Direct Governmental Programs (Medicare/Medicaid) | 12% | [Governmental Regulation](index=8&type=section&id=Governmental%20Regulation) The home infusion industry is subject to **extensive** and **complex** federal, state, and local governmental regulations - The home infusion industry is subject to **extensive** and **complex** federal, state, and local governmental regulations[37](index=37&type=chunk) - Failure to comply with regulations could result in civil/criminal penalties and exclusion from Medicare/Medicaid, adversely affecting the business[37](index=37&type=chunk) [Professional Licensure](index=8&type=section&id=Professional%20Licensure) Employees (nurses, pharmacists, etc.) require individual state licenses/certifications, and the company ensures compliance with licensure laws - Employees (nurses, pharmacists, etc.) require individual state licenses/certifications[38](index=38&type=chunk) - The company conducts background checks and ensures employees comply with licensure laws[38](index=38&type=chunk) [Pharmacy Licensing and Registration](index=9&type=section&id=Pharmacy%20Licensing%20and%20Registration) Pharmacy locations require in-state and out-of-state licenses, with DEA and state agencies mandating registrations for controlled substances - Pharmacy locations require in-state and, for out-of-state deliveries, out-of-state licenses[39](index=39&type=chunk) - DEA and state agencies mandate individual registrations for handling controlled substances, with strict labeling, reporting, and record-keeping[39](index=39&type=chunk) - Many states require home infusion companies to be licensed as home health agencies[40](index=40&type=chunk) [Matters Affecting Drug Prices](index=9&type=section&id=Matters%20Affecting%20Drug%20Prices) Reimbursement pricing is based on benchmarks like AWP and ASP, and changes to these could **significantly impact** profitability - Reimbursement pricing is based on benchmarks like AWP and ASP, which are periodically published by third parties and CMS[41](index=41&type=chunk) - Changes to these pricing benchmarks, particularly AWP, could **significantly impact** the company's profitability and contract economics[41](index=41&type=chunk) [Privacy and Security Requirements](index=9&type=section&id=Privacy%20and%20Security%20Requirements) The company is subject to HIPAA and HITECH regulations concerning protected health information (PHI) and continuously ensures compliance - Subject to HIPAA and HITECH regulations concerning protected health information (PHI) use, disclosure, confidentiality, and integrity[42](index=42&type=chunk) - The company continuously takes steps to ensure its policies and procedures comply with applicable HIPAA provisions[43](index=43&type=chunk) [Regulations](index=10&type=section&id=Regulations) The company is governed by FDCA and DQSA for pharmaceuticals, and subject to Anti-Kickback Statute, False Claims Act, and Stark Law - Governed by FDCA for pharmaceutical handling and distribution, and DQSA for compounded drugs, adhering to PCAB and USP **797** standards[45](index=45&type=chunk)[46](index=46&type=chunk) - Subject to the Anti-Kickback Statute, prohibiting payments to induce referrals, and the False Claims Act, prohibiting fraudulent claims for federal healthcare programs[48](index=48&type=chunk)[49](index=49&type=chunk) - Must comply with the Stark Law, which prohibits physician referrals for certain Designated Health Services (DHS) to entities with which they have a financial relationship, unless an exception applies[51](index=51&type=chunk)[52](index=52&type=chunk) [Human Capital Resources](index=11&type=section&id=Human%20Capital%20Resources) Business success relies on attracting and retaining skilled and licensed nursing staff, pharmacists, and other professionals Employee Count (as of December 31, 2021) | Employee Type | Count | | :------------ | :---- | | Full-time | 5,430 | | Part-time | 1,808 | | Total | 7,238 | - Business success relies on attracting and retaining skilled and licensed nursing staff, pharmacists, and other professionals through competitive compensation and engaging assignments[54](index=54&type=chunk) [Environment-Social-Corporate Governance Initiative](index=11&type=section&id=Environment-Social-Corporate%20Governance%20Initiative) The company is committed to ESG initiatives across four pillars: environmental impact reduction, patient community care, employee empowerment, and responsible enterprise management - The company is committed to ESG initiatives across **four pillars**: environmental impact reduction, patient community care, employee empowerment, and responsible enterprise management[55](index=55&type=chunk)[56](index=56&type=chunk) - ESG initiatives include green packaging, expanding ambulatory infusion suites, increasing health access for patients, improving diversity/equity/inclusion, and strengthening data security and corporate governance[56](index=56&type=chunk) [Available Information](index=11&type=section&id=Available%20Information) Corporate headquarters is in Bannockburn, IL, and SEC filings are available on investors.optioncarehealth.com and www.sec.gov - Corporate headquarters: **3000 Lakeside Drive, Suite 300N, Bannockburn, IL 60015**[56](index=56&type=chunk) - SEC filings (**10-K, 10-Q, 8-K, Proxy Statements**) are available on investors.optioncarehealth.com and www.sec.gov[57](index=57&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) This section details various risks that could **materially** affect Option Care Health's business, including pharmaceutical, payer, regulatory, and financial factors [Company-Specific Risk Factors](index=13&type=section&id=Company-Specific%20Risk%20Factors) Revenue and profitability are **highly dependent** on pharmaceutical manufacturers, and disruptions could have a **material adverse effect** - Revenue and profitability are **highly dependent** on pharmaceutical manufacturers' ability to develop, supply, and market compatible drugs; disruptions (supply shortages, recalls, FDA changes) could have a **material adverse effect**[60](index=60&type=chunk)[61](index=61&type=chunk) - Loss of MCO relationships or reduced pricing from competitive bidding could **significantly reduce** patient access, revenue, and gross margins, as **88%** of **2021** revenue came from non-governmental payers[62](index=62&type=chunk) - The healthcare industry is **highly competitive**, with national, regional, and local providers, some of whom are vertically integrated or have more favorable supply arrangements, potentially limiting the company's **growth** and pricing power[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - Shortages of qualified nursing staff, pharmacists, and other professionals could **increase** operating costs and negatively impact service quality, patient retention, and referral sources[71](index=71&type=chunk)[72](index=72&type=chunk) - Operating in **highly regulated** environments (pharmacy licensing, FDA, DEA, HIPAA, Anti-Kickback, False Claims, Stark Law) means non-compliance or changes in regulations could **materially adversely affect** reputation and profitability[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) [Federal actions and legislation may reduce reimbursement rates from governmental payers and adversely affect our results of operations.](index=16&type=section&id=Federal%20actions%20and%20legislation%20may%20reduce%20reimbursement%20rates%20from%20governmental%20payers%20and%20adversely%20affect%20our%20results%20of%20operations.) Federal actions have historically reduced Medicare payments and drug costs, making the company vulnerable to changes in government programs - Federal actions (e.g., Budget Control Act, Affordable Care Act, **21st Century Cures Act**) have historically **reduced** Medicare payments and drug costs[83](index=83&type=chunk) - **12%** of **2021** revenue derived from government programs (Medicare, Medicaid) makes the company vulnerable to changes in statutory and regulatory requirements, administrative rulings, and funding restrictions[84](index=84&type=chunk) - State budgetary pressures may lead to **decreased** spending or spending **growth** for Medicaid programs, further impacting reimbursement[85](index=85&type=chunk) [Delays in reimbursement may adversely affect our liquidity, cash flows and operating results.](index=17&type=section&id=Delays%20in%20reimbursement%20may%20adversely%20affect%20our%20liquidity%2C%20cash%20flows%20and%20operating%20results.) Complex reimbursement processes lead to **significant delays** in payment, and inability to collect accounts receivable could **materially adversely affect** liquidity and cash flows - Complex reimbursement processes lead to **significant delays** in payment, requiring multiple claim resubmissions[87](index=87&type=chunk) - Inability to collect outstanding accounts receivable could **materially adversely affect** liquidity, cash flows, and operating results[87](index=87&type=chunk) [We are subject to pricing pressures and other risks involved with Third Party Payers.](index=17&type=section&id=We%20are%20subject%20to%20pricing%20pressures%20and%20other%20risks%20involved%20with%20Third%20Party%20Payers.) Competition and payer efforts to control costs have led to **reduced** reimbursement rates, and consolidation among MCOs could limit negotiation power - Competition and payer efforts to control costs have led to **reduced** reimbursement rates for home infusion and specialty pharmacy services[88](index=88&type=chunk) - Continued pricing pressures and consolidation among MCOs could limit the company's ability to negotiate favorable contract terms and **increase** competitive intensity[89](index=89&type=chunk) [We face periodic reviews and billing audits by governmental and private payers, and these audits could have adverse findings that may negatively impact our business.](index=17&type=section&id=We%20face%20periodic%20reviews%20and%20billing%20audits%20by%20governmental%20and%20private%20payers%2C%20and%20these%20audits%20could%20have%20adverse%20findings%20that%20may%20negatively%20impact%20our%20business.) The company is subject to periodic governmental and private payer reviews and billing audits, where adverse findings could lead to **significant costs** and reputational damage - Subject to periodic governmental and private payer reviews and billing audits to verify compliance with programs and regulations[90](index=90&type=chunk) - Adverse audit findings, including extrapolated billing errors, could lead to **significant costs**, required refunds, fines, exclusion from programs, or reputational damage[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [If any of our pharmacies fail to comply with the conditions of participation in the Medicare program, that pharmacy could be terminated from Medicare, which could adversely affect our consolidated financial statements.](index=18&type=section&id=If%20any%20of%20our%20pharmacies%20fail%20to%20comply%20with%20the%20conditions%20of%20participation%20in%20the%20Medicare%20program%2C%20that%20pharmacy%20could%20be%20terminated%20from%20Medicare%2C%20which%20could%20adversely%20affect%20our%20consolidated%20financial%20statements.) Pharmacies must comply with Medicare conditions of participation, as non-compliance could lead to termination and adversely affect financial statements - Pharmacies must comply with Medicare conditions of participation; non-compliance could lead to termination from the program[93](index=93&type=chunk) - Termination from Medicare for one or more pharmacies could adversely affect consolidated financial statements[93](index=93&type=chunk) [We cannot predict the impact of changing requirements on compounding pharmacies.](index=18&type=section&id=We%20cannot%20predict%20the%20impact%20of%20changing%20requirements%20on%20compounding%20pharmacies.) Compounding pharmacies are closely monitored by federal and state agencies, and reclassification or increased scrutiny could **significantly increase** costs - Compounding pharmacies are closely monitored by federal and state agencies[94](index=94&type=chunk) - Reclassification as an "outsourcing facility" under DQSA or **increased** scrutiny could **significantly increase** costs or affect operations[94](index=94&type=chunk) [Risks Relating to Our Indebtedness](index=19&type=section&id=Risks%20Relating%20to%20Our%20Indebtedness) The company's indebtedness could divert funds, impair liquidity, and restrict business opportunities, placing it at a competitive disadvantage Outstanding Indebtedness (as of December 31, 2021) | Debt Type | Amount (Millions USD) | | :-------------------- | :-------------------- | | First Lien Term Loan | $600 | | Senior Unsecured Notes | $500 | | **Total** | **$1,100** | - Indebtedness could divert funds, impair liquidity, limit additional debt, and restrict business opportunities, placing the company at a competitive disadvantage[97](index=97&type=chunk)[99](index=99&type=chunk) - Inability to generate sufficient cash flow to service debt may necessitate refinancing, asset disposal, or equity issuance, potentially on unfavorable terms, or lead to acceleration of indebtedness and asset foreclosure[100](index=100&type=chunk)[101](index=101&type=chunk) [Risks Relating to Our Common Stock](index=21&type=section&id=Risks%20Relating%20to%20Our%20Common%20Stock) Walgreens controls approximately **20.7%** of common stock, giving it **significant influence** over stockholder-approved decisions, and corporate governance provisions could hinder acquisitions - Walgreens controls approximately **20.7%** of common stock, giving it **significant influence** over stockholder-approved decisions like director elections and corporate transactions[103](index=103&type=chunk) - Corporate governance provisions (e.g., undesignated preferred stock, supermajority votes for director removal/charter amendments, no written consent) could hinder acquisitions or management changes, potentially depressing stock price[104](index=104&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk) - The certificate of incorporation designates Delaware's Court of Chancery as the exclusive forum for certain litigation, potentially limiting stockholders' ability to choose a favorable judicial forum[107](index=107&type=chunk) [General Risk Factors](index=23&type=section&id=General%20Risk%20Factors) The COVID-19 pandemic continues to create **significant volatility** and uncertainty, impacting operations, staffing, and supply chain - The COVID-19 pandemic continues to create **significant volatility** and uncertainty, impacting operations, staffing, supply chain, and financial position, with unpredictable future developments[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - Pending and future litigation (e.g., medical malpractice, breach of contract) could lead to **significant monetary damages**, substantial defense expenses, and required changes in business practices, potentially exceeding insurance coverage[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Cybersecurity risks (e.g., deliberate attacks, unintentional events) could compromise patient/customer/personnel information, leading to **significant liability**, regulatory penalties (HIPAA), reputational harm, and operational disruption[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Item 1B. Unresolved Staff Comments](index=25&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[130](index=130&type=chunk) [Item 2. Properties](index=26&type=section&id=Item%202.%20Properties) The company leases all its properties, including headquarters and **97 infusion pharmacies** across **45 states**, with terms through **2035** - All properties are leased, with terms extending through **2035**[131](index=131&type=chunk) - Corporate headquarters is in Bannockburn, IL[131](index=131&type=chunk) - Operates **97 infusion pharmacies** in **45 states**, many with clean room and compounding capabilities, some co-located with ambulatory infusion centers[131](index=131&type=chunk) [Item 3. Legal Proceedings](index=26&type=section&id=Item%203.%20Legal%20Proceedings) Material legal proceedings are referenced in Note 14, Commitments and Contingencies, within the consolidated financial statements in Item 8 - Material legal proceedings are summarized in Note **14**, Commitments and Contingencies, in Item **8**[132](index=132&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Item not applicable[133](index=133&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Option Care Health's common stock trades on Nasdaq under "OPCH"; the company has never paid cash dividends and shows **significant cumulative returns** [Common Stock](index=27&type=section&id=Common%20Stock) Common Stock trades on Nasdaq Global Select Market under symbol "OPCH" - Common Stock trades on Nasdaq Global Select Market under symbol "**OPCH**"[136](index=136&type=chunk) [Holders of Record](index=27&type=section&id=Holders%20of%20Record) Stockholders of Record | Date | Number of Holders | | :----------- | :---------------- | | Feb 18, 2022 | 122 | [Dividend Policy](index=27&type=section&id=Dividend%20Policy) The company has never paid cash dividends and does not anticipate doing so in the foreseeable future - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future[138](index=138&type=chunk) [Securities Authorized for Issuance under Equity Compensation Plans](index=27&type=section&id=Securities%20Authorized%20for%20Issuance%20under%20Equity%20Compensation%20Plans) Refer to Item 12 for information on securities authorized under equity compensation plans - Refer to Item **12** for information on securities authorized under equity compensation plans[139](index=139&type=chunk) [Recent Sale of Unregistered Securities and Use of Proceeds](index=27&type=section&id=Recent%20Sale%20of%20Unregistered%20Securities%20and%20Use%20of%20Proceeds) No recent sale of unregistered securities or use of proceeds was reported - No recent sale of unregistered securities or use of proceeds[139](index=139&type=chunk) [Stock Performance Graph](index=28&type=section&id=Stock%20Performance%20Graph) Option Care Health's stock achieved a cumulative return of **683.65%** from December 31, 2016, to December 31, 2021, **significantly outperforming** benchmark indices Cumulative Total Returns ($100 invested on Dec 31, 2016) | Index/Company | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | :-------------------------- | :----- | :----- | :----- | :----- | :----- | :----- | | Option Care Health, Inc. | $100.00 | $279.81 | $343.27 | $358.65 | $375.96 | $683.65 | | Nasdaq Composite Index | $100.00 | $128.24 | $123.26 | $166.68 | $239.42 | $290.63 | | Nasdaq Health Services Index | $100.00 | $121.30 | $116.25 | $146.28 | $190.22 | $183.47 | - Option Care Health's stock achieved a cumulative return of **683.65%** from December **31, 2016**, to December **31, 2021**, **significantly outperforming** benchmark indices[142](index=142&type=chunk) [Item 6. Reserved](index=29&type=section&id=Item%206.%20Reserved) This item is intentionally left blank - Item **6** is reserved[143](index=143&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Option Care Health's financial condition and results for **2021** and **2020**, highlighting key changes, COVID-19 impact, and accounting estimates [Business Overview](index=30&type=section&id=Business%20Overview) Option Care Health provides infusion therapy and ancillary healthcare services through a national network of **154 locations** - Option Care Health provides infusion therapy and ancillary healthcare services through a national network of **154 locations**[146](index=146&type=chunk) - The company contracts with managed care organizations, third-party payers, hospitals, and physicians to provide pharmaceuticals and compounded solutions in home or non-hospital settings[146](index=146&type=chunk) - The company was formed from the reverse merger of Option Care into BioScrip in August **2019** and is listed on the Nasdaq Global Select Market[148](index=148&type=chunk) [Update on the Impact of the COVID-19 Pandemic](index=31&type=section&id=Update%20on%20the%20Impact%20of%20the%20COVID-19%20Pandemic) The COVID-19 pandemic has impacted operations since March **2020**, affecting referral patterns, staffing, and procurement of PPE and key drugs - COVID-19 pandemic has impacted operations since March **2020**, affecting referral patterns, staffing, and procurement of PPE and key drugs[150](index=150&type=chunk) - The company cannot confidently forecast the duration or ultimate financial impact of the pandemic on its operations[150](index=150&type=chunk) [Composition of Results of Operations](index=32&type=section&id=Composition%20of%20Results%20of%20Operations) Gross profit is derived from net revenue less cost of revenue, while operating costs include selling, general, and administrative expenses and depreciation/amortization - Gross profit is derived from net revenue (estimated net realizable amounts from payers/patients) less cost of revenue (pharmaceuticals, medical supplies, warehousing, shipping, personnel, depreciation of revenue-generating assets)[153](index=153&type=chunk)[155](index=155&type=chunk) - Volume-based rebates and prompt payment discounts from vendors **reduce** inventory and are accounted for as a **reduction** of cost of revenue when inventory is sold[156](index=156&type=chunk) - Operating costs include selling, general, and administrative expenses (salaries, occupancy, marketing, insurance, professional fees) and depreciation/amortization (infrastructure items)[157](index=157&type=chunk)[158](index=158&type=chunk) - Other income/expense includes interest expense (on debt, amortization of fees, derivative changes), equity in joint ventures, and other non-operating items (e.g., loss on debt extinguishment)[159](index=159&type=chunk)[160](index=160&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Net revenue **increased** by **13.4%** in **2021**, **primarily** due to organic **growth** in chronic and acute therapies, leading to **increased** gross profit margin Consolidated Results of Operations (in thousands) | Metric | Year Ended Dec 31, 2021 (Amount) (in thousands USD) | Year Ended Dec 31, 2021 (% of Revenue) | Year Ended Dec 31, 2020 (Amount) (in thousands USD) | Year Ended Dec 31, 2020 (% of Revenue) | Variance (Amount) (in thousands USD) | Variance (%) | | :-------------------------------------- | :------------------------------------------------ | :----------------------------------- | :------------------------------------------------ | :----------------------------------- | :----------------------------------- | :----------- | | **NET REVENUE** | $3,438,640 | 100.0% | $3,032,610 | 100.0% | $406,030 | 13.4% | | COST OF REVENUE | 2,659,034 | 77.3% | 2,350,346 | 77.5% | 308,688 | 13.1% | | **GROSS PROFIT** | **779,606** | **22.7%** | **682,264** | **22.5%** | **97,342** | **14.3%** | | Selling, general and administrative expenses | 525,707 | 15.3% | 500,199 | 16.5% | 25,508 | 5.1% | | Depreciation and amortization expense | 63,058 | 1.8% | 71,310 | 2.4% | (8,252) | (11.6)% | | Total operating expenses | 588,765 | 17.1% | 571,509 | 18.8% | 17,256 | 3.0% | | **OPERATING INCOME** | **190,841** | **5.5%** | **110,755** | **3.7%** | **80,086** | **72.3%** | | Interest expense, net | (67,003) | (1.9)% | (107,770) | (3.6)% | 40,767 | (37.8)% | | Equity in earnings of joint ventures | 6,030 | 0.2% | 3,313 | 0.1% | 2,717 | 82.0% | | Other, net | (13,374) | (0.4)% | (11,541) | (0.4)% | (1,833) | 15.9% | | Total other expense | (74,347) | (2.2)% | (115,998) | (3.8)% | 41,651 | (35.9)% | | **INCOME (LOSS) BEFORE INCOME TAXES** | **116,494** | **3.4%** | **(5,243)** | **(0.2)%** | **121,737** | **(2321.8)%** | | INCOME TAX (BENEFIT) EXPENSE | (23,404) | (0.7)% | 2,833 | 0.1% | (26,237) | (926.1)% | | **NET INCOME (LOSS)** | **$139,898** | **4.1%** | **$(8,076)** | **(0.3)%** | **$147,974** | **(1832.3)%** | - Net revenue **increased** by **13.4% primarily** due to organic **growth** in chronic therapies (mid-teens **growth**) and acute therapies (mid-single-digits **growth**)[166](index=166&type=chunk) - Gross profit margin slightly **increased** to **22.7%** in **2021** (from **22.5%** in **2020**) due to a mix shift toward higher profit therapies[166](index=166&type=chunk) - Interest expense **decreased** by **37.8%** due to debt refinancings in January and October **2021**[170](index=170&type=chunk) - The company recorded a tax benefit of **$23.4 million** in **2021**, resulting in a negative **effective** tax rate of **20.1%**, **primarily** due to the release of a valuation allowance on deferred tax assets[172](index=172&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company's business strategy includes pursuing acquisitions, which may require additional capital beyond current availability Cash on Hand (in millions) | Year | Cash and Cash Equivalents (Millions USD) | | :--- | :--------------------------------------- | | 2021 | $119.4 | | 2020 | $99.3 | - The company's business strategy includes pursuing acquisitions, which may require additional capital beyond current availability[177](index=177&type=chunk) - In October **2021**, the company refinanced its First Lien Term Loan (**$600 million** at LIBOR + **2.75%**) and issued **$500 million** in **4.375%** Senior Notes due **2029**, extending maturities and **reducing** interest rates[180](index=180&type=chunk) [Cash Flows](index=39&type=section&id=Cash%20Flows) Operating cash flow **increased** due to higher net income and **decreased** interest expense, while investing cash flow **increased** due to acquisitions Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Year Ended Dec 31, 2021 (in thousands USD) | Year Ended Dec 31, 2020 (in thousands USD) | Variance (in thousands USD) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | | Net cash provided by operating activities | $208,569 | $127,392 | $81,177 | | Net cash used in investing activities | $(111,541) | $(26,334) | $(85,207) | | Net cash used in financing activities | $(76,870) | $(68,849) | $(8,021) | | Net increase in cash and cash equivalents | $20,158 | $32,209 | $(12,051) | | Cash and cash equivalents - end of period | $119,423 | $99,265 | $20,158 | - Operating cash flow **increased** due to higher net income and **decreased** interest expense from debt refinancings[184](index=184&type=chunk) - Investing cash flow **increased** due to acquisitions made in **2021**[185](index=185&type=chunk) [Critical Accounting Estimates](index=40&type=section&id=Critical%20Accounting%20Estimates) Financial statements require estimates and assumptions for revenue recognition, accounts receivable, goodwill impairment, business acquisitions, and income taxes - Financial statements require estimates and assumptions for revenue recognition, accounts receivable, goodwill impairment, business acquisitions, and income taxes[188](index=188&type=chunk)[189](index=189&type=chunk) - Revenue recognition involves estimating net realizable value, including adjustments for implicit price concessions based on insurance verification and historical data[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Goodwill is tested annually for impairment using a qualitative analysis, assessing macroeconomic conditions, industry factors, financial performance, and stock price changes. No impairment was found in **2021**, **2020**, or **2019**[199](index=199&type=chunk)[201](index=201&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's **primary** market risk is changing LIBOR-based interest rates on its variable-rate First Lien Term Loan, mitigated by derivatives [Interest Rate Risk](index=42&type=section&id=Interest%20Rate%20Risk) **Primary** market risk is changing LIBOR-based interest rates, affecting the **$600.0 million** variable-rate First Lien Term Loan - **Primary** market risk is changing LIBOR-based interest rates, affecting the **$600.0 million** variable-rate First Lien Term Loan[207](index=207&type=chunk) - The company uses interest rate derivative contracts, including a **$300.0 million** notional interest rate cap hedge (**effective** Nov **2021**), to **reduce** interest rate risk[208](index=208&type=chunk) Impact of Interest Rate Change on Interest Expense | Change in Market Interest Rates | Impact on Interest Expense (Annual) | | :------------------------------ | :---------------------------------- | | +100 basis points | +$1.8 million | | -100 basis points | -$1.8 million | [Item 8. Financial Statements and Supplementary Data](index=43&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for **2021-2019**, with an **unqualified opinion** from KPMG LLP on financial statements and internal controls [Report of Independent Registered Public Accounting Firm](index=43&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an **unqualified opinion** on the consolidated financial statements and the **effectiveness** of internal control over financial reporting - KPMG LLP issued an **unqualified opinion** on the consolidated financial statements for the three-year period ended December **31, 2021**[212](index=212&type=chunk) - KPMG LLP also issued an **unqualified opinion** on the **effectiveness** of the company's internal control over financial reporting as of December **31, 2021**[213](index=213&type=chunk) - Critical audit matters included the evaluation of transaction price adjustments related to revenue recognition and the realizability of deferred tax assets, both involving subjective and complex auditor judgment[217](index=217&type=chunk)[218](index=218&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) [Consolidated Balance Sheets](index=45&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show **increased** total assets and stockholders' equity, with a **decrease** in total liabilities and long-term debt in **2021** Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2021 (in thousands USD) | December 31, 2020 (in thousands USD) | Change (in thousands USD) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | :------------------------ | | Total Assets | $2,790,918 | $2,647,439 | +$143,479 | | Total Liabilities | $1,615,032 | $1,631,715 | -$16,683 | | Total Stockholders' Equity | $1,175,886 | $1,015,724 | +$160,162 | | Cash and cash equivalents | $119,423 | $99,265 | +$20,158 | | Accounts receivable, net | $338,242 | $328,340 | +$9,902 | | Inventories | $183,095 | $158,601 | +$24,494 | | Goodwill | $1,477,564 | $1,428,610 | +$48,954 | | Long-term debt, net of discount, deferred financing costs and current portion | $1,059,900 | $1,115,103 | -$55,203 | [Consolidated Statements of Comprehensive Income (Loss)](index=46&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Net income **significantly improved** to **$139.9 million** in **2021**, reversing losses in prior years, driven by revenue **growth** and operational efficiencies Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands, except per share amounts) | Metric | Year Ended Dec 31, 2021 (in thousands USD) | Year Ended Dec 31, 2020 (in thousands USD) | Year Ended Dec 31, 2019 (in thousands USD) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net Revenue | $3,438,640 | $3,032,610 | $2,310,417 | | Gross Profit | $779,606 | $682,264 | $512,999 | | Operating Income (Loss) | $190,841 | $110,755 | $(319) | | Income (Loss) Before Income Taxes | $116,494 | $(5,243) | $(78,194) | | Net Income (Loss) | $139,898 | $(8,076) | $(75,920) | | Earnings (Loss) Per Common Share, Diluted | $0.77 | $(0.04) | $(0.49) | - Net income **significantly improved** to **$139.9 million** in **2021**, reversing losses in prior years, driven by revenue **growth** and operational efficiencies[227](index=227&type=chunk) [Consolidated Statements of Cash Flows](index=47&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow **increased significantly** in **2021**, while investing cash flow **increased** due to acquisitions Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Year Ended Dec 31, 2021 (in thousands USD) | Year Ended Dec 31, 2020 (in thousands USD) | Year Ended Dec 31, 2019 (in thousands USD) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $208,569 | $127,392 | $39,467 | | Net cash used in investing activities | $(111,541) | $(26,334) | $(727,826) | | Net cash (used in) provided by financing activities | $(76,870) | $(68,849) | $719,024 | | Net increase in cash and cash equivalents | $20,158 | $32,209 | $30,665 | | Cash and cash equivalents - end of period | $119,423 | $99,265 | $67,056 | - Operating cash flow **increased significantly** in **2021**, while investing cash flow **increased** due to acquisitions[229](index=229&type=chunk) [Consolidated Statements of Stockholders' Equity](index=48&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity **increased** by **$160.2 million** in **2021**, **primarily** due to net income and other comprehensive income Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | December 31, 2021 (in thousands USD) | December 31, 2020 (in thousands USD) | December 31, 2019 (in thousands USD) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :----------------------------------- | | Total Stockholders' Equity | $1,175,886 | $1,015,724 | $906,827 | | Paid-in capital | $1,138,855 | $1,129,312 | $1,008,362 | | Retained earnings (Accumulated deficit) | $39,867 | $(100,031) | $(91,955) | | Accumulated other comprehensive loss | $(451) | $(11,172) | $(7,195) | - Total stockholders' equity **increased** by **$160.2 million** in **2021**, **primarily** due to net income and other comprehensive income[230](index=230&type=chunk) [Notes to Consolidated Financial Statements](index=50&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes supporting the consolidated financial statements, covering operations, accounting policies, acquisitions, revenue, and other financial aspects [Note 1. Nature of Operations and Presentation of Financial Statements](index=50&type=section&id=Note%201.%20Nature%20of%20Operations%20and%20Presentation%20of%20Financial%20Statements) Option Care Health provides infusion therapy and ancillary healthcare services through **97 full-service pharmacies** and **57 ambulatory infusion sites** - Option Care Health provides infusion therapy and ancillary healthcare services via **97 full-service pharmacies** and **57 ambulatory infusion sites**[235](index=235&type=chunk) - The company resulted from a reverse merger of Option Care into BioScrip on August **6, 2019**, with Option Care as the accounting acquirer[233](index=233&type=chunk)[234](index=234&type=chunk) - The company operates in a single segment: infusion services[235](index=235&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=51&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Accounts receivable are reported at net realizable value, and operating leases are recognized as right-of-use (ROU) assets and operating lease liabilities - Accounts receivable are reported at net realizable value, with no allowance for doubtful accounts as of December **31, 2021** and **2020**[240](index=240&type=chunk)[241](index=241&type=chunk) - Operating leases are recognized as right-of-use (ROU) assets and operating lease liabilities, with lease expense recognized on a straight-line basis[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - An immaterial error correction reclassified certain payers from direct government to commercial for prior periods, with no impact on consolidated financial statements[271](index=271&type=chunk)[272](index=272&type=chunk) Revenue Reclassification (December 31, 2020) | Payer Type | As Previously Reported (in thousands USD) | Adjustment (in thousands USD) | As Revised (in thousands USD) | | :----------- | :-------------------------------------- | :---------------------------- | :---------------------------- | | Commercial | $2,542,985 | $75,127 | $2,618,112 | | Government | $450,067 | $(75,127) | $374,940 | [Note 3. Business Acquisitions](index=56&type=section&id=Note%203.%20Business%20Acquisitions) The **2019** reverse merger with BioScrip created an expanded national platform, and **2021** saw acquisitions of BioCure assets, Infinity Infusion Nursing LLC, and Wasatch Infusion LLC - The **2019** reverse merger with BioScrip (Option Care as accounting acquirer) created an expanded national platform and opportunities for economies of scale[281](index=281&type=chunk)[283](index=283&type=chunk) 2019 BioScrip Merger Consideration and Allocation (in thousands) | Item | Amount (in thousands USD) | | :------------------------------------------ | :------------------------ | | Total consideration transferred | $1,087,214 | | Total acquired identifiable assets and liabilities | $291,073 | | Goodwill | $796,141 | - In **2021**, the company acquired BioCure assets (**$18.9 million**), Infinity Infusion Nursing LLC equity (**$59.6 million**), and Wasatch Infusion LLC equity (**$19.5 million**)[287](index=287&type=chunk)[290](index=290&type=chunk)[292](index=292&type=chunk) - Goodwill from Infinity acquisition (**$32.5 million**) is attributable to cost synergies and establishing a more comprehensive clinical platform. Goodwill from Wasatch acquisition (**$16.4 million**) is attributable to cost synergies from procurement and operational efficiencies[291](index=291&type=chunk)[294](index=294&type=chunk) [Note 4. Revenue](index=59&type=section&id=Note%204.%20Revenue) Net revenue **increased** by **13.4%** from **2020** to **2021**, **primarily** driven by commercial payers Net Revenue by Payer Category (in thousands) | Payer Category | 2021 (in thousands USD) | 2020 (in thousands USD) | 2019 (in thousands USD) | | :--------------- | :---------------------- | :---------------------- | :---------------------- | | Commercial payers | $2,971,900 | $2,618,112 | $2,001,105 | | Government payers | $417,088 | $374,940 | $285,128 | | Patients | $49,652 | $39,558 | $24,184 | | **Net revenue** | **$3,438,640** | **$3,032,610** | **$2,310,417** | - Net revenue **increased** by **13.4%** from **2020** to **2021**, **primarily** driven by commercial payers[295](index=295&type=chunk) [Note 5. Employee Benefit Plans](index=59&type=section&id=Note%205.%20Employee%20Benefit%20Plans) The company offers a **401(k)** plan with a **100%** match up to **4%** of employee contributions - The company offers a **401(k)** plan with a **100%** match up to **4%** of employee contributions[296](index=296&type=chunk) Defined Contribution Plan Expense (in millions) | Year | Expense (Millions USD) | | :--- | :--------------------- | | 2021 | $11.6 | | 2020 | $9.7 | | 2019 | $6.4 | [Note 6. Income Taxes](index=59&type=section&id=Note%206.%20Income%20Taxes) The company recognized a **$23.4 million** income tax benefit in **2021**, **primarily** due to the **reversal** of a valuation allowance on deferred tax assets Income Tax (Benefit) Expense (in thousands) | Metric | 2021 (in thousands USD) | 2020 (in thousands USD) | 2019 (in thousands USD) | | :-------------------------- | :---------------------- | :---------------------- | :---------------------- | | Total income tax (benefit) expense | $(23,404) | $2,833 | $(2,274) | | Effective income tax rate | (20.1)% | (54.0)% | 2.9% | - The company recognized a **$23.4 million** income tax benefit in **2021**, **primarily** due to the **reversal** of a valuation allowance on deferred tax assets[297](index=297&type=chunk)[300](index=300&type=chunk) - The **reversal** of the valuation allowance was based on positive evidence including multi-year cumulative income, actual utilization of deferred tax assets, **reduced** interest expense from debt refinancings, and income from **2021** acquisitions[301](index=301&type=chunk) Deferred Tax Assets and Liabilities (in thousands) | Item | December 31, 2021 (in thousands USD) | December 31, 2020 (in thousands USD) | | :------------------------------------------ | :----------------------------------- | :----------------------------------- | | Deferred tax assets before valuation allowance | $174,903 | $237,126 | | Valuation allowance | $(13,151) | $(112,085) | | Deferred tax assets net of valuation allowance | $161,752 | $125,041 | | Deferred tax liabilities | $(134,719) | $(128,380) | | **Net deferred tax assets (liabilities)** | **$27,033** | **$(3,339)** | [Note 7. Earnings (Loss) Per Share](index=62&type=section&id=Note%207.%20Earnings%20(Loss)%20Per%20Share) Diluted EPS was **$0.77** in **2021**, reflecting net income and the inclusion of dilutive securities, while common stock equivalents were excluded in prior loss years Earnings (Loss) Per Common Share (in thousands, except per share data) | Metric | 2021 (in thousands USD) | 2020 (in thousands USD) | 2019 (in thousands USD) | | :------------------------------------------ | :---------------------- | :---------------------- | :---------------------- | | Net income (loss) | $139,898 | $(8,076) | $(75,920) | | Weighted average common shares outstanding, diluted | 181,205 | 180,971 | 156,280 | | Earnings (loss) per common share, diluted | $0.77 | $(0.04) | $(0.49) | - Diluted EPS was **$0.77** in **2021**, reflecting net income and the inclusion of dilutive securities[310](index=310&type=chunk) - Common stock equivalents were excluded from diluted EPS calculations in **2020** and **2019** as their inclusion would have been anti-dilutive due to net losses[307](index=307&type=chunk) [Note 8. Leases](index=64&type=section&id=Note%208.%20Leases) New leases, extensions, and amendments in **2021** led to a **$20.7 million increase** in operating lease ROU assets and liabilities Operating Lease Expenses and Terms | Metric | 2021 (Millions USD) | 2020 (Millions USD) | | :-------------------------------- | :------------------ | :------------------ | | Operating lease expenses (millions) | $29.8 | $30.8 | | Weighted-average remaining lease term | 6.6 years | N/A | | Weighted-average discount rate | 5.10% | N/A | Operating Lease Maturities (in thousands) | Year Ending December 31 | Minimum Payments (in thousands USD) | | :---------------------- | :---------------------------------- | | 2022 | $23,558 | | 2023 | $20,508 | | 2024 | $14,930 | | 2025 | $12,218 | | 2026 | $9,315 | | 2027 and beyond | $28,052 | | **Total lease payments** | **$108,581** | | Less: Interest | $(15,000) | | **Present value of lease liabilities** | **$93,581** | - New leases, extensions, and amendments in **2021** led to a **$20.7 million increase** in operating lease ROU assets and liabilities[313](index=313&type=chunk) [Note 9. Property and Equipment](index=65&type=section&id=Note%209.%20Property%20and%20Equipment) Depreciation expense is split between cost of revenue (revenue-generating assets) and operating expenses (infrastructure) Property and Equipment, Net (in thousands) | Asset Category | December 31, 2021 (in thousands USD) | December 31, 2020 (in thousands USD) | | :---------------------------------- | :----------------------------------- | :----------------------------------- | | Infusion pumps | $34,547 | $31,678 | | Equipment, furniture and other | $52,913 | $47,886 | | Leasehold improvements | $92,229 | $87,483 | | Computer software | $30,744 | $27,799 | | Assets under development | $19,924 | $10,793 | | Less: accumulated depreciation | $(118,822) | $(84,490) | | **Property and equipment, net** | **$111,535** | **$121,149** | Total Depreciation Expense (in thousands) | Year | Depreciation Expense (in thousands USD) | | :--- | :------------------------------------ | | 2021 | $35,611 | | 2020 | $42,766 | | 2019 | $31,808 | - Depreciation expense is split between cost of revenue (revenue-generating assets) and operating expenses (infrastructure)[314](index=314&type=chunk) [Note 10. Goodwill and Other Intangible Assets](index=66&type=section&id=Note%2010.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill is not amortized but is tested annually for impairment, with no impairment found in **2021**, **2020**, or **2019** Goodwill Carrying Amount (in thousands) | Year | Balance at December 31 (in thousands USD) | | :--- | :-------------------------------------- | | 2018 | $632,469 | | 2019 | $1,425,542 | | 2020 | $1,428,610 | | 2021 | $1,477,564 | - Goodwill is not amortized but is tested annually for impairment; no impairment was found in **2021**, **2020**, or **2019**[315](index=315&type=chunk)[317](index=317&type=chunk) Intangible Assets, Net (in thousands) | Asset Category | December 31, 2021 (in thousands USD) | December 31, 2020 (in thousands USD) | | :-------------------------- | :----------------------------------- | :----------------------------------- | | Referral sources | $344,587 | $327,623 | | Trademarks/names | $20,782 | $23,390 | | Other amortizable intangible assets | $651 | $39 | | **Total intangible assets, net** | **$366,020** | **$351,052** | Expected Future Amortization Expense for Intangible Assets (in thousands) | Year | Amortization Expense (in thousands USD) | | :--- | :------------------------------------ | | 2022 | $31,628 | | 2023 | $31,628 | | 2024 | $31,628 | | 2025 | $31,628 | | 2026 | $31,628 | | 2027 and beyond | $207,880 | | **Total** | **$366,020** | [Note 11. Indebtedness](index=68&type=section&id=Note%2011.%20Indebtedness) In October **2021**, the company refinanced its First Lien Term Loan to **$600 million** and issued **$500 million** in **4.375%** Senior Notes, extending maturities and **reducing** interest rates Long-term Debt (in thousands) | Debt Type | December 31, 2021 (Net Balance) (in thousands USD) | December 31, 2020 (Net Balance) (in thousands USD) | | :---------------------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | First Lien Term Loan | $577,064 | $888,787 | | Senior Notes | $488,836 | — | | Second Lien Notes | — | $235,566 | | **Total long-term debt, net of discount, deferred financing costs and current portion** | **$1,059,900** | **$1,115,103** | - In January **2021**, the company amended its First Lien Term Loan, issuing **$250 million** incremental debt to prepay Second Lien Notes and **reducing** the interest rate from LIBOR + **4.25%** to LIBOR + **3.75%**[329](index=329&type=chunk) - In October **2021**, the company refinanced its First Lien Term Loan to **$600 million** (LIBOR + **2.75%**, maturing Oct **2028**) and issued **$500 million** in **4.375%** Senior Notes (maturing Oct **2029**)[333](index=333&type=chunk) - The ABL Facility had **$167.9 million** net borrowing availability as of December **31, 2021**, with no outstanding borrowings[336](index=336&type=chunk) Long-term Debt Maturities (in thousands) | Year Ending December 31 | Minimum Payments (in thousands USD) | | :---------------------- | :---------------------------------- | | 2022 | $6,000 | | 2023 | $6,000 | | 2024 | $6,000 | | 2025 | $6,000 | | 2026 | $6,000 | | 2027 and beyond | $1,070,000 | | **Total** | **$1,100,000** | [Note 12. Derivative Instruments](index=71&type=section&id=Note%2012.%20Derivative%20Instruments) The company uses derivative financial instruments (interest rate swaps and caps) to manage variable interest rate risk on debt - The company uses derivative financial instruments (interest rate swaps and caps) to manage variable interest rate risk on debt[340](index=340&type=chunk) - In October **2021**, an interest rate cap hedge of **$300 million** notional was initiated for a **5-year** term to partially offset First Lien Term Loan variable interest rate risk[344](index=344&type=chunk) - A **$925 million** notional interest rate swap expired in August **2021**. A **$400 million** notional swap was discontinued as a hedge in May **2020** due to a PIK election on Second Lien Notes, reclassifying **$3.7 million** accumulated comprehensive loss to interest expense[341](index=341&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk) Pre-tax Gains (Losses) from Derivative Instruments in OCI (in thousands) | Derivative | 2021 (in thousands USD) | 2020 (in thousands USD) | 2019 (in thousands USD) | | :------------------------------------------ | :---------------------- | :---------------------- | :---------------------- | | Interest rate caps designated as cash flow hedges | $(601) | — | $(1,103) | | Interest rate swaps designated as cash flow hedges | $11,172 | $(7,723) | $(7,195) | | Interest rate swaps that discontinued hedge accounting | — | $3,746 | — | | **Total** | **$10,571** | **$(3,977)** | **$(8,298)** | [Note 13. Fair Value Measurements](index=73&type=section&id=Note%2013.%20Fair%20Value%20Measurements) Fair value measurements **prioritize** observable inputs (Level **1** & **2**) over unobservable inputs (Level **3**) - Fair value measurements **prioritize** observable inputs (Level **1** & **2**) over unobservable inputs (Level **3**)[346](index=346&type=chunk) - Fair values for First Lien Term Loan, Senior Notes, and interest rate derivatives are derived from broker quotes and market interest rates (Level **2** inputs)[347](index=347&type=chunk)[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) - Second Lien Notes (prior to prepayment) were valued using a cash flow model based on market interest rates (Level **3** inputs)[348](index=348&type=chunk) [Note 14. Commitments and Contingencies](index=73&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) The company is involved in legal proceedings, investigations, and audits, where unanticipated verdicts or settlements could **materially impact** results - The company is involved in legal proceedings, investigations, and audits, some potentially involving large or indeterminate amounts[353](index=353&type=chunk) - While the company believes its defenses have merit, unanticipated verdicts or settlements could **materially impact** results of operations or cash flows[353](index=353&type=chunk) [Note 15. Stock-Based Incentive Compensation](index=74&type=section&id=Note%2015.%20Stock-Based%20Incentive%20Compensation) The **2018** Equity Incentive Plan authorizes various equity awards, with an additional **4,999,999 shares** authorized in May **2021**, totaling **9,101,734 shares** - The **2018** Equity Incentive Plan authorizes various equity awards; an additional **4,999,999 shares** were authorized in May **2021**, totaling **9,101,734 shares**[354](index=354&type=chunk) Stock-Based Compensation Expense (in millions) | Award Type | 2021 (Millions USD) | 2020 (Millions USD) | 2019 (Millions USD) | | :-------------------------- | :------------------ | :------------------ | :------------------ | | Stock options | $1.9 | $0.4 | $0.0 | | Restricted stock awards | $4.9 | $2.3 | $0.0 | | HC I incentive units | $0.1 | $0.2 | $1.9 | Unrecognized Compensation Expense (as of December 31, 2021) | Award Type | Unrecognized Expense (Millions USD) | Weighted-Average Period | | :-------------------------- | :-------------------------------- | :---------------------- | | Stock options | $13.9 | 2.3 years | | Restricted stock awards | $31.2 | 2.1 years | [Note 16. Stockholders' Equity](index=77&type=section&id=Note%2016.%20Stockholders%27%20Equity) A one-for-four reverse stock split was **effective** February **3, 2020**, changing the ticker to "OPCH" and moving to Nasdaq Global Select Market - A one-for-four reverse stock split was **effective** February **3, 2020**, changing the ticker to "**OPCH**" and moving to Nasdaq Global Select Market[365](index=365&type=chunk) - In **2020**, the company received **$118.9 million** in net proceeds from a public offering of **10 million** common shares[366](index=366&type=chunk) - HC I, the **largest** stockholder, held approximately **20.7%** of common stock as of December **31, 2021**, after completing secondary offerings[366](index=366&type=chunk) - All legacy BioScrip preferred stock was settled during the Merger, with no preferred stock outstanding as of December **31, 2021** or **2020**[371](index=371&type=chunk) [Note 17. Related-Party Transactions](index=77&type=section&id=Note%2017.%20Related-Party%20Transactions) Management Services Agreements with Madison Dearborn Partners and Walgreen Co. were terminated post-Merger, incurring no expense in **2021** or **2020** - Management Services Agreements with Madison Dearborn Partners and Walgreen Co. were terminated post-Merger, incurring no expense in **2021** or **2020**[372](index=372&type=chunk)[373](index=373&type=chunk) - The company provides management services to its joint ventures, generating **$3.5 million** in income in **2021**[376](index=376&type=chunk) - Balances due to/from joint ventures relate to cash collections and pharmaceutical purchases[377](index=377&type=chunk) [Item 18. Subsequent Events](index=79&type=section&id=Item%2018.%20Subsequent%20Events) In February **2022**, the company agreed to acquire Specialty Pharmacy Nursing Network, Inc., with the financial effect not yet estimated - In February **2022**, the company agreed to acquire Specialty Pharmacy Nursing Network, Inc., expected to close in **2022**[378](index=378&type=chunk) - The financial **effect** of the acquisition cannot yet be estimated[378](index=378&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=78&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure - No unresolved staff comments were reported[380](index=380&type=chunk) [Item 9A. Controls and Procedures](index=78&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were **effective** as of December **31, 2021** [Evaluation of Disclosure Controls and Procedures](index=78&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Disclosure controls and procedures were **effective** as of December **31, 2021**, ensuring timely and accurate reporting - Disclosure controls and procedures were **effective** as of December **31, 2021**, ensuring timely and accurate reporting[381](index=381&type=chunk) [Management Report on Internal Control over Financial Reporting](index=78&type=section&id=Management%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management concluded that internal control over financial reporting was **effective** as of December **31, 2021**, based on COSO criteria - Management concluded that internal control over financial reporting was **effective** as of December **31, 2021**, based on COSO criteria[383](index=383&type=chunk) - Internal control systems have inherent limitations and may not prevent or detect all misstatements[384](index=384&type=chunk) [Changes in Internal Controls over Financial Reporting](index=80&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) No **material changes** in internal controls over financial reporting occurred during **Q4 2021** - No **material changes** in internal controls over financial reporting during **Q4 2021**[385](index=385&type=chunk) [Report of Independent Registered Public Accounting Firm](index=81&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) KPMG LLP issued an **unqualified opinion** on the **effectiveness** of internal control over financial reporting as of December **31, 2021** - KPMG LLP issued an **unqualified opinion** on the **effectiveness** of internal control over financial reporting as of December **31, 2021**[388](index=388&type=chunk) - The audit was conducted according to PCAOB standards to obtain reasonable assurance about the maintenance of **effective** internal control[391](index=391&type=chunk) [Item 9B. Other Information](index=80&type=section&id=Item%209B.%20Other%20Information) The company reported no other information required by this item - No other information was reported[395](index=395&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=80&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[396](i

Option Care Health, Inc. (NASDAQ:OPCH) Q3 2021 Results Conference Call November 4, 2021 8:30 AM ET Company Participants John Rademacher - CEO Mike Shapiro - CFO Conference Call Participants Matt Larew - William Blair Brooks O Neil - Lake Street Capital Markets Mike Minchak - J.P. Morgan Adam Ron - Bank of America Jamie Perse - Goldman Sachs Kieran Ryan - Deutsche Bank Mike Petusky - Barrington Research Operator Good day and thank you for standing by. Welcome to the Option Care Health Third Quarter 2021 Earn ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-11993 OPTION CARE HEALTH, INC. (Exact name of registrant as specified in its charter) Delaware 05-0489664 (State of incorpo ...

Option Care Health, Inc. (NASDAQ:OPCH) Q2 2021 Earnings Conference Call August 3, 2021 8:30 AM ET Company Participants John Rademacher - CEO Michael Shapiro - CFO Conference Call Participants Pito Chickering - Deutsche Bank Matthew Larew - William Blair David MacDonald - Truist Securities Jamie Perse - Goldman Sachs Michael Minchak - JPMorgan Joanna Gajuk - Bank of America Michael Petusky - Barrington Research Richard Close - Canaccord Genuity Frank Takkinen - Lake Street Capital Markets Operator Ladies and ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-11993 OPTION CARE HEALTH, INC. (Exact name of registrant as specified in its charter) (State of incorporation) (I.R.S. Employer ...

Option Care Health, Inc. (NASDAQ:OPCH) Q1 2021 Earnings Conference Call May 6, 2021 8:30 AM ET Company Participants John Rademacher - CEO Michael Shapiro - CFO Conference Call Participants David MacDonald - Truist Securities Matthew Larew - William Blair & Company Brooks O'Neil - Lake Street Capital Markets Michael Petusky - Barrington Research Associates Jamie Perse - Goldman Sachs Operator Hello, and welcome to the Option Care Health First Quarter 2021 Earnings Conference Call. My name is Michelle, and I ...

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Option Care Health reported a 7.6% increase in Q1 2021 net revenue to **$759.2 million**, reducing net loss to **$2.9 million** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2021, total assets were **$2.64 billion**, with liabilities decreasing and equity slightly increasing Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $664,734 | $657,012 | | **Total Assets** | **$2,640,470** | **$2,647,439** | | **Total Current Liabilities** | $420,164 | $434,023 | | **Total Liabilities** | **$1,622,390** | **$1,631,715** | | **Total Stockholders' Equity** | **$1,018,080** | **$1,015,724** | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Q1 2021 net revenue increased 7.6% to **$759.2 million**, operating income surged, and net loss significantly improved Q1 2021 vs Q1 2020 Performance (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | **Net Revenue** | $759,237 | $705,440 | | **Gross Profit** | $165,473 | $158,029 | | **Operating Income** | $29,094 | $8,648 | | **Net Loss** | $(2,861) | $(19,910) | | **Loss per Share (basic & diluted)** | $(0.02) | $(0.11) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was stable at **$18.4 million**, with decreased investing and increased financing outflows Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $18,380 | $18,403 | | **Net cash used in investing activities** | $(3,123) | $(5,353) | | **Net cash used in financing activities** | $(5,160) | $(2,862) | | **Cash and cash equivalents - end of period** | $109,362 | $77,244 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail infusion therapy business, revenue concentration, a **$12.4 million** debt extinguishment loss, and a subsequent acquisition - The company operates in a single segment, infusion services, through a national network of 98 full-service pharmacies[17](index=17&type=chunk) - Revenue from the company's largest payer was approximately **16%** for Q1 2021. Approximately **67%** of pharmaceutical and medical supply purchases were from three vendors[24](index=24&type=chunk)[27](index=27&type=chunk) - In January 2021, the company refinanced its debt, issuing an additional **$250.0 million** in First Lien Term Loan to prepay the remaining **$245.8 million** of Second Lien Notes, and reduced the interest rate on the First Lien Term Loan[43](index=43&type=chunk) - A loss on extinguishment of debt of **$12.4 million** was recognized in Q1 2021 related to the debt refinancing[45](index=45&type=chunk) - On April 7, 2021, the company acquired certain assets from BioCure, LLC for a purchase price of **$18.5 million**[66](index=66&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a 7.6% increase in Q1 2021 net revenue to **$759.2 million**, with improved net loss from reduced expenses and stable cash flow [Update on the Impact of the COVID-19 Pandemic](index=20&type=section&id=Update%20on%20the%20Impact%20of%20the%20COVID-19%20Pandemic) COVID-19 impacted referrals, offset by transfers; acute revenues flat, chronic grew, with clinical labor cost inefficiencies - The pandemic negatively affected new patient referrals but was offset by an increase in patient transfers from hospitals[75](index=75&type=chunk) - In Q1 2021, acute revenues were flat YoY, while chronic revenue experienced low double-digit growth[75](index=75&type=chunk) - The company continued to face cost inefficiencies related to clinical labor and staffing challenges during the quarter[76](index=76&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q1 2021 net revenue grew 7.6% to **$759.2 million**, operating expenses down 8.7%, improving net loss to **$2.9 million** Q1 2021 vs Q1 2020 Results of Operations (in thousands) | Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Revenue** | $759,237 | $705,440 | 7.6% | | **Gross Profit** | $165,473 | $158,029 | 4.7% | | **Total Operating Expenses** | $136,379 | $149,381 | (8.7)% | | **Operating Income** | $29,094 | $8,648 | 236.4% | | **Interest Expense, net** | $(19,481) | $(28,087) | (30.6)% | | **Net Loss** | $(2,861) | $(19,910) | (85.6)% | - The decrease in selling, general and administrative expenses was due to a full period of synergy realization from Merger integration activities[92](index=92&type=chunk) - Other expense increased significantly due to a **$12.4 million** loss on extinguishment of debt incurred in Q1 2021 from the debt refinancing[96](index=96&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2021, liquidity included **$109.4 million** cash and **$165.4 million** credit, with debt refinancing reducing rates - Primary liquidity sources as of March 31, 2021, were **$109.4 million** in cash and **$165.4 million** available under its credit facilities[101](index=101&type=chunk)[105](index=105&type=chunk) - In Q1 2021, the company used proceeds from an additional **$250.0 million** of First Lien Term Loan indebtedness to prepay the remaining **$245.8 million** balance of the Second Lien Notes[108](index=108&type=chunk) - The debt refinancing reduced the interest rate on all outstanding First Lien Term Loan indebtedness from LIBOR plus 4.25% to LIBOR plus 3.75%[108](index=108&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk exposure were reported since the year-end 2020 Form 10-K - No material changes to market risk exposure were reported since the year-end 2020 Form 10-K[121](index=121&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2021, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[122](index=122&type=chunk) - There were no changes in internal control over financial reporting during Q1 2021 that had a material effect[123](index=123&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in normal course legal proceedings, not expected to materially affect its financial condition - The company is involved in legal proceedings in the normal course of business but does not expect them to have a material adverse effect on its condensed consolidated balance sheets[58](index=58&type=chunk)[126](index=126&type=chunk) [Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors were reported since the Annual Report on Form 10-K for the year ended December 31, 2020[127](index=127&type=chunk) [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including credit agreement amendments and certifications - Exhibits filed include amendments to the First Lien Credit Agreement and ABL Credit Agreement, as well as Sarbanes-Oxley certifications[129](index=129&type=chunk)

Option Care Health, Inc. (NASDAQ:OPCH) Q4 2020 Earnings Conference Call March 11, 2021 8:30 AM ET Company Participants John Rademacher – Chief Executive Officer Mike Shapiro – Chief Financial Officer Conference Call Participants Pito Chickering – Deutsche bank Matt Larew – William Blair Jamie Perse – Goldman Sachs Brooks O'Neil – Lake Street Capital Kevin Fischbeck – Bank of America Mike Petusky – Barrington Research Operator Ladies and gentlemen, thank you for standing by, and welcome to the Option Care He ...

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Option Care Health is the largest independent provider of home and alternate site infusion services in the U.S. through a national network - Option Care Health is the largest independent provider of home and alternate site infusion services, with **145 locations in 45 states** and approximately **2,900 clinicians**[16](index=16&type=chunk) - Services are primarily provided in patients' homes, also at clinics, physician offices, or ambulatory infusion suites, through **99 full-service pharmacies** and **46 stand-alone ambulatory infusion suites**[25](index=25&type=chunk) - Sales and marketing focus on building relationships with managed care organizations, patient referral sources, and pharmaceutical manufacturers for product distribution[28](index=28&type=chunk)[29](index=29&type=chunk) - United Health Group is the largest payer, accounting for approximately **15% of revenue in 2020**, with government programs (Medicare and Medicaid) also accounting for approximately **15% of revenue in 2020**[37](index=37&type=chunk) - As of December 31, 2020, the company employed **5,146 full-time** and **706 part-time personnel**, relying on attracting and retaining qualified nursing staff, pharmacists, and other professionals[54](index=54&type=chunk)[55](index=55&type=chunk) [Item 1A. Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from pharmaceutical industry changes, payer relationships, competition, and extensive regulations - Revenue and profitability are highly dependent on pharmaceutical manufacturers' ability to develop, supply, and market compatible pharmaceuticals; supply shortages, recalls, or FDA approval changes could have a material adverse effect[60](index=60&type=chunk)[61](index=61&type=chunk) - **85% of 2020 revenue** came from managed care organizations and other non-governmental payers; loss of these relationships or reduced pricing from competitive bidding could significantly impact revenue and net income[62](index=62&type=chunk) - Approximately **70% of pharmaceutical and medical supply purchases in 2020** were from three vendors, posing a risk of supply disruption or cost increases if relationships change or shortages occur[70](index=70&type=chunk) Outstanding Indebtedness as of December 31, 2020 | Debt Type | Amount (millions USD) | | :------------------ | :-------------------- | | First Lien Term Loan| $915.8 | | Second Lien Notes | $245.8 | | **Total** | **$1,161.5** | - The COVID-19 pandemic negatively affected new patient referrals for acute and chronic conditions, caused cost inefficiencies in clinical labor and PPE procurement, but also led to increased patient transfers from hospitals[121](index=121&type=chunk)[122](index=122&type=chunk) [Item 1B. Unresolved Staff Comments](index=28&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - No unresolved staff comments were reported[140](index=140&type=chunk) [Item 2. Properties](index=29&type=section&id=Item%202.%20Properties) The company leases all its properties, including its corporate headquarters and numerous infusion pharmacies, with terms extending through 2035 - All properties are leased from third parties, with terms extending through 2035[142](index=142&type=chunk) - Properties consist mainly of infusion pharmacies with clean room and compounding capabilities, some co-located with ambulatory infusion centers[142](index=142&type=chunk) [Item 3. Legal Proceedings](index=29&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding material legal proceedings is incorporated by reference from Note 14 of the consolidated financial statements - Material legal proceedings are detailed in Note 14, Commitments and Contingencies, within Item 8 of the report[143](index=143&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Item 4, Mine Safety Disclosures, is not applicable[144](index=144&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq, has 142 stockholders, and has not paid cash dividends, with performance detailed - Common Stock symbol changed from 'BIOS' to 'OPCH' and moved to Nasdaq Global Select Market on February 3, 2020[146](index=146&type=chunk) - As of March 8, 2021, there were **142 stockholders of record**[147](index=147&type=chunk) - The company has never paid cash dividends and does not anticipate doing so in the foreseeable future[148](index=148&type=chunk) Stock Performance (2015-2020) | Years Ended December 31, | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | | :----------------------- | :------ | :---- | :------ | :------ | :------ | :------ | | Option Care Health, Inc. | $100.00 | $59.43 | $166.29 | $204.00 | $213.14 | $223.43 | | Nasdaq Composite Index | $100.00 | $107.50| $137.86 | $132.51 | $179.19 | $257.38 | | Nasdaq Health Services Index | $100.00 | $83.09 | $100.79 | $96.59 | $121.54 | $158.04 | [Item 6. Selected Financial Data](index=32&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected consolidated financial data for 2016-2020 reflects new accounting standards and the BioScrip merger, impacting comparability Selected Consolidated Balance Sheets Data (thousands USD) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :---------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Working capital | $222,989 | $228,650 | $227,428 | $226,535 | $227,763 | | Total assets | $2,647,439 | $2,589,547 | $1,428,211 | $1,429,542 | $1,405,285 | | Total debt, net | $1,124,353 | $1,286,496 | $539,375 | $540,346 | $541,500 | | Stockholders' equity | $1,015,724 | $906,827 | $602,825 | $606,105 | $600,770 | Selected Consolidated Statements of Comprehensive Income (Loss) (thousands USD, except EPS) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------------------ | :---------- | :---------- | :---------- | :---------- | :---------- | | Net revenue | $3,032,610 | $2,310,417 | $1,939,791 | $1,828,046 | $1,711,438 | | Gross profit | $682,264 | $512,999 | $422,215 | $445,999 | $449,307 | | Operating income (loss) | $110,755 | $(319) | $38,269 | $27,279 | $52,448 | | Net (loss) income | $(8,076) | $(75,920) | $(6,115) | $3,878 | $3,910 | | Net comprehensive (loss) income | $(12,053) | $(83,959) | $(5,341) | $3,936 | $3,910 | | Net (loss) earnings per share, basic and diluted | $(0.04) | $(0.49) | $(0.04) | $0.03 | $0.03 | | Weighted average common shares outstanding, basic and diluted | 180,971 | 156,280 | 142,614 | 142,614 | 142,614 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section reviews Option Care Health's business, COVID-19 impact, merger integration, financial performance, liquidity, and critical accounting policies - The Merger of Option Care and BioScrip on August 6, 2019, created an expanded national platform, driving cost synergies through procurement savings, facility rationalization, and administrative cost streamlining, achieving at least **$60 million in net cost synergies in 2020**[170](index=170&type=chunk) - The COVID-19 pandemic negatively impacted new patient referrals for acute and chronic conditions but saw an increase in patient transfers from hospital settings, with acute revenues flat year-over-year and chronic revenue growing in the mid-teens in 2020[167](index=167&type=chunk) - In January 2021, the company amended its First Lien Term Loan, issuing an additional **$250.0 million** to prepay the remaining **$245.8 million of Second Lien Notes**, reducing the interest rate on the First Lien Term Loan from LIBOR plus **4.25% to LIBOR plus 3.75%**[208](index=208&type=chunk)[401](index=401&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on variable debt, mitigated by swaps, with inflation having no material effect - Primary market risk exposure is to changing LIBOR-based interest rates on variable rate debt[234](index=234&type=chunk) - To minimize interest rate risk, the company entered into two interest rate swap contracts: one for **$925.0 million notional** on the First Lien Term Loan (effective through August 2021) and another for **$400.0 million notional** on the Second Lien Notes (discontinued hedge accounting in May 2020 and matured in November 2020)[235](index=235&type=chunk) - A **100-basis point** increase or decrease in market interest rates would result in a **$6.4 million change** to interest expense over a twelve-month period[236](index=236&type=chunk) - Inflation has not had a material effect on operating results[237](index=237&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=47&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2018-2020, including balance sheets, income statements, cash flows, and notes, with a critical audit matter on revenue recognition - KPMG LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2020[240](index=240&type=chunk)[241](index=241&type=chunk) - A critical audit matter identified was the evaluation of transaction price adjustments related to revenue recognition, requiring subjective and complex auditor judgment[247](index=247&type=chunk)[248](index=248&type=chunk) Consolidated Balance Sheets Data (thousands USD) | ASSETS | December 31, 2020 | December 31, 2019 | | :------------------------------ | :---------------- | :---------------- | | Cash and cash equivalents | $99,265 | $67,056 | | Accounts receivable, net | $328,340 | $324,416 | | Inventories | $158,601 | $115,876 | | Prepaid expenses and other current assets | $70,806 | $51,306 | | Total current assets | $657,012 | $558,654 | | Property and equipment, net | $121,149 | $133,198 | | Operating lease right-of-use asset | $68,795 | $63,502 | | Intangible assets, net | $351,052 | $385,910 | | Goodwill | $1,428,610 | $1,425,542 | | Other noncurrent assets | $20,821 | $22,741 | | Total noncurrent assets | $1,990,427 | $2,030,893 | | **TOTAL ASSETS** | **$2,647,439** | **$2,589,547** | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $282,913 | $221,060 | | Accrued compensation and employee benefits | $58,899 | $45,765 | | Accrued expenses and other current liabilities | $64,075 | $33,538 | | Current portion of operating lease liability | $18,886 | $20,391 | | Current portion of long-term debt | $9,250 | $9,250 | | Total current liabilities | $434,023 | $330,004 | | Long-term debt, net | $1,115,103 | $1,277,246 | | Operating lease liability, net | $70,776 | $58,242 | | Deferred income taxes | $3,339 | $2,143 | | Other noncurrent liabilities | $8,474 | $15,085 | | Total noncurrent liabilities | $1,197,692 | $1,352,716 | | Total liabilities | $1,631,715 | $1,682,720 | | Total stockholders' equity | $1,015,724 | $906,827 | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | **$2,647,439** | **$2,589,547** | Consolidated Statements of Comprehensive Income (Loss) (thousands USD, except per share amounts) | Metric | 2020 | 2019 | 2018 | | :------------------------------ | :---------- | :---------- | :---------- | | NET REVENUE | $3,032,610 | $2,310,417 | $1,939,791 | | COST OF REVENUE | $2,350,346 | $1,797,418 | $1,517,576 | | GROSS PROFIT | $682,264 | $512,999 | $422,215 | | Selling, general and administrative expenses | $500,199 | $459,628 | $345,884 | | Depreciation and amortization expense | $71,310 | $53,690 | $38,062 | | Total operating expenses | $571,509 | $513,318 | $383,946 | | OPERATING INCOME (LOSS) | $110,755 | $(319) | $38,269 | | Interest expense, net | $(107,770) | $(73,724) | $(45,824) | | Equity in earnings of joint ventures | $3,313 | $2,840 | $1,020 | | Other, net | $(11,541) | $(6,991) | $(2,233) | | Total other expense | $(115,998) | $(77,875) | $(47,037) | | LOSS BEFORE INCOME TAXES | $(5,243) | $(78,194) | $(8,768) | | INCOME TAX EXPENSE (BENEFIT) | $2,833 | $(2,274) | $(2,653) | | NET LOSS | $(8,076) | $(75,920) | $(6,115) | | OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX | $(3,977) | $(8,039) | $774 | | NET COMPREHENSIVE LOSS | $(12,053) | $(83,959) | $(5,341) | | Net loss per share, basic and diluted | $(0.04) | $(0.49) | $(0.04) | | Weighted average common shares outstanding, basic and diluted | 180,971 | 156,280 | 142,614 | Consolidated Statements of Cash Flows (thousands USD) | CASH FLOWS FROM... | 2020 | 2019 | 2018 | | :------------------------------ | :---------- | :---------- | :---------- | | Operating Activities | $127,392 | $39,467 | $24,428 | | Investing Activities | $(26,334) | $(727,826) | $(37,003) |\ | Financing Activities | $(68,849) | $719,024 | $(4,150) |\ | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $32,209 | $30,665 | $(16,725) |\ | Cash and cash equivalents - end of period | $99,265 | $67,056 | $36,391 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=81&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[403](index=403&type=chunk) [Item 9A. Controls and Procedures](index=81&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management assessed disclosure controls and internal control over financial reporting as effective, noting significant changes due to the BioScrip merger integration - Management concluded that disclosure controls and procedures were effective as of December 31, 2020[404](index=404&type=chunk) - Internal control over financial reporting was assessed as effective as of December 31, 2020, based on COSO criteria[406](index=406&type=chunk) - The merger with BioScrip in August 2019 led to significant changes and integration activities in internal controls, particularly in areas like business combinations, income taxes, treasury, and compensation[408](index=408&type=chunk) [Item 9B. Other Information](index=83&type=section&id=Item%209B.%20Other%20Information) The company reported no other information required by this item - No other information was reported[419](index=419&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=83&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company has a Code of Ethics for all personnel, with additional information incorporated by reference from the 2021 proxy statement - A Code of Ethics applies to all directors, officers, and employees, available on the company's website[421](index=421&type=chunk) - Additional information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[422](index=422&type=chunk) [Item 11. Executive Compensation](index=83&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information on executive compensation is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[423](index=423&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=83&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and related stockholder matters is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information on security ownership and related stockholder matters is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[424](index=424&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=83&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2021 proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[425](index=425&type=chunk) [Item 14. Principal Accounting Fees and Services](index=83&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information on principal accounting fees and services is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[426](index=426&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=86&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements from Item 8 and provides an index of exhibits, including agreements and corporate governance documents - Financial statements are listed as appearing in Part II, Item 8, including the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Comprehensive Income (Loss), Stockholders' Equity, Cash Flows, and Notes[429](index=429&type=chunk) - An index of exhibits is provided, detailing various agreements (e.g., merger, stock purchase, credit), corporate documents (e.g., certificate of incorporation, bylaws), and certifications (e.g., CEO/CFO certifications)[431](index=431&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk) [Item 16. Form 10-K Summary](index=88&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reported no summary for Form 10-K - No Form 10-K Summary was provided[434](index=434&type=chunk) SIGNATURES [SIGNATURES](index=87&type=section&id=SIGNATURES) The report was duly signed on March 11, 2021, by authorized representatives of Option Care Health, Inc., affirming compliance with the Securities Exchange Act of 1934 - The report was signed on March 11, 2021, by the Chief Financial Officer, Chief Executive Officer, and other directors and officers[437](index=437&type=chunk)[438](index=438&type=chunk)[439](index=439&type=chunk)