Option Care(OPCH) - 2022 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related disclosures for the period ended September 30, 2022 Financial Statements This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2022, including balance sheets, statements of comprehensive income, cash flows, and stockholders' equity, along with detailed notes Condensed Consolidated Balance Sheets This section presents the company's financial position as of September 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $255,468 | $119,423 | | Total current assets | $951,964 | $710,256 | | Goodwill | $1,533,043 | $1,477,564 | | Total Assets | $3,073,263 | $2,790,918 | | Liabilities & Equity | | | | Accounts payable | $409,737 | $279,246 | | Total current liabilities | $586,800 | $459,695 | | Long-term debt, net | $1,058,606 | $1,059,900 | | Total Liabilities | $1,735,928 | $1,615,032 | | Total Stockholders' Equity | $1,337,335 | $1,175,886 | Unaudited Condensed Consolidated Statements of Comprehensive Income This section details the company's financial performance, including net revenue, gross profit, operating income, and net income for the third quarter and first nine months of 2022 and 2021 Statement of Comprehensive Income Highlights (unaudited, in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $1,020,918 | $891,937 | $2,917,522 | $2,511,446 | | Gross Profit | $218,001 | $202,968 | $635,837 | $567,409 | | Operating Income | $60,718 | $52,883 | $172,039 | $130,069 | | Net Income | $38,823 | $35,476 | $103,027 | $64,431 | | Net Comprehensive Income | $48,078 | $38,368 | $127,989 | $75,603 | | EPS, diluted | $0.21 | $0.20 | $0.57 | $0.36 | Unaudited Condensed Consolidated Statements of Cash Flows This section outlines the cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022, and 2021 Statement of Cash Flows Highlights (unaudited, in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $224,092 | $143,259 | | Net cash used in investing activities | ($104,426) | ($30,596) | | Net cash provided by (used in) financing activities | $16,379 | ($11,072) | | Net increase in cash and cash equivalents | $136,045 | $101,591 | | Cash and cash equivalents - end of period | $255,468 | $200,856 | Unaudited Condensed Consolidated Statements of Stockholders' Equity This section details the changes in the company's stockholders' equity, including the impact of net income and other comprehensive income - Total stockholders' equity increased from $1.176 billion at December 31, 2021, to $1.337 billion at September 30, 2022, primarily driven by net income of $103.0 million and other comprehensive income of $25.0 million during the first nine months of 2022[18] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and context for the accounting policies, significant transactions, and financial position presented in the consolidated financial statements - The company provides infusion therapy and other ancillary health care services through a national network of 97 full-service pharmacies and 64 stand-alone infusion suites[21] - In 2022, the company completed the acquisition of Specialty Pharmacy Nursing Network, Inc. (SPNN) for a net purchase price of $59.9 million and Rochester Home Infusion, Inc. (RHI) for a net purchase price of $27.4 million[35][37] Net Revenue by Payer (in thousands) | Payer Category | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | | Commercial payers | $2,526,354 | $2,164,678 | | Government payers | $357,383 | $307,067 | | Patients | $33,785 | $39,701 | | Total Net Revenue | $2,917,522 | $2,511,446 | - As of September 30, 2022, the company had total long-term debt with a net balance of $1.06 billion, consisting of a First Lien Term Loan and Senior Notes[56] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the third quarter and first nine months of 2022, covering revenue growth, gross profit, operating expenses, and liquidity Business Overview This section provides an overview of the company's operations, including its services and national network of healthcare locations - Option Care Health provides infusion therapy and ancillary healthcare services through a national network of 161 locations across the United States, with services delivered in patients' homes or other non-hospital settings[78] Results of Operations This section analyzes the company's financial results for the third quarter and first nine months of 2022 compared to the prior year, focusing on revenue, gross profit, and net income drivers Q3 2022 vs Q3 2021 Performance (in thousands) | Metric | Q3 2022 | Q3 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenue | $1,020,918 | $891,937 | +14.5% | | Gross Profit | $218,001 | $202,968 | +7.4% | | Net Income | $38,823 | $35,476 | +9.4% | - Q3 revenue growth was driven by organic growth, with acute revenue showing mid-single-digit growth and chronic revenue growing in the mid-teens, while acquisitions contributed approximately 2% to revenue growth[97] Nine Months 2022 vs Nine Months 2021 Performance (in thousands) | Metric | Nine Months 2022 | Nine Months 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenue | $2,917,522 | $2,511,446 | +16.2% | | Gross Profit | $635,837 | $567,409 | +12.1% | | Net Income | $103,027 | $64,431 | +59.9% | - For the first nine months of 2022, revenue growth was driven by organic expansion, with chronic revenue growing in the high-teens, and gross profit margin declined from 22.6% to 21.8% due to inflationary pressures on labor, transportation, and medical supplies[109] Liquidity and Capital Resources This section discusses the company's cash position, credit facilities, cash flow from operations, and capital allocation strategy, including funding for acquisitions - As of September 30, 2022, the company's primary liquidity sources were $255.5 million in cash and $168.3 million available under its credit facilities[121] - Net cash provided by operating activities for the nine months ended September 30, 2022, increased to $224.1 million from $143.3 million in the prior-year period, driven by higher net income and timing of payments[131][132] - The company views acquisitions as a key part of its growth strategy and may require additional capital to fund future opportunities[123] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes to its exposure to market risk from the disclosures provided in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the company's market risk exposure since the 2021 Annual Report on Form 10-K[137] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2022, with no material changes to internal control over financial reporting - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of September 30, 2022[138] - There were no changes in internal control over financial reporting during the third quarter of 2022 that materially affected, or are reasonably likely to materially affect, internal controls[139] PART II - OTHER INFORMATION This section covers other important information, including legal proceedings, risk factors, exhibits, and signatures Legal Proceedings The company is involved in various legal proceedings arising in the normal course of business, with management not expecting a material adverse effect on financial condition - For a summary of legal proceedings, the company refers to Note 13, Commitments and Contingencies, of the unaudited condensed consolidated financial statements[142] - The company does not believe that any pending legal matters will have a material adverse effect on its condensed consolidated balance sheets[69] Risk Factors The company reports no material changes to the risk factors affecting its business, financial condition, or results of operations from those previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the risk factors from those set forth in the Annual Report on Form 10-K for the year ended December 31, 2021[143] Exhibits This section lists the exhibits filed with the Form 10-Q, including amended bylaws and certifications from the CEO and CFO - The exhibits filed with the report include amended bylaws and certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[145] Signatures The Form 10-Q report was officially signed and authorized by Michael Shapiro, the company's Chief Financial Officer, on October 27, 2022 - The report was signed on October 27, 2022, by Michael Shapiro, Chief Financial Officer[149]