Option Care(OPCH) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements 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 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) 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 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 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] - 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][27] - 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] - A loss on extinguishment of debt of $12.4 million was recognized in Q1 2021 related to the debt refinancing[45] - On April 7, 2021, the company acquired certain assets from BioCure, LLC for a purchase price of $18.5 million[66] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - In Q1 2021, acute revenues were flat YoY, while chronic revenue experienced low double-digit growth[75] - The company continued to face cost inefficiencies related to clinical labor and staffing challenges during the quarter[76] Results of Operations 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] - Other expense increased significantly due to a $12.4 million loss on extinguishment of debt incurred in Q1 2021 from the debt refinancing[96] Liquidity and Capital Resources 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][105] - 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] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - There were no changes in internal control over financial reporting during Q1 2021 that had a material effect[123] PART II - OTHER INFORMATION Legal Proceedings 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][126] Risk Factors 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] Exhibits 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]