Summary of Option Care Health Conference Call Company Overview - **Company**: Option Care Health (NasdaqGS: OPCH) - **Industry**: Home and alternate site infusion services - **Market Position**: Largest independent provider in the U.S., serving approximately 300,000 patients annually across all 50 states with a coverage of about 96% of the nation [5][6] Financial Performance - **2025 Guidance**: Adjusted EBITDA guidance raised by $15 million and adjusted EPS target increased by 6 cents, indicating a strong performance relative to expectations [4] - **Growth Metrics**: - Revenue growth since 2020: 13% CAGR - EBITDA growth: 19% - Operating cash flow growth: 26% [6] Long-term Growth Strategy - **Growth Projections**: Anticipated high single-digit revenue growth and low double-digit EBITDA growth in the long term, with EPS growth slightly higher [8][10] - **Headwinds**: Acknowledgment of challenges related to the Stelara drug, with expectations of recovery in 2026 and 2027 [8][10] Drug and Market Dynamics - **Stelara Impact**: Significant discussions around the drug's pricing drop of 66% due to IRA in 2026, leading to a projected gross profit headwind of $60 million to $70 million in 2025 [11][16] - **Biosimilars**: Introduction of biosimilars and next-generation drugs is expected to impact patient transitions and pricing strategies [12][13] Operational Insights - **Infusion Suite Expansion**: Currently operating 170 infusion suites, with plans to enhance capabilities through advanced practitioner models to attract a broader patient base [32][33] - **Capacity Management**: Existing infusion suites have capacity for growth, with potential for increased operational hours and additional patient accommodations [34] Market Trends and Competitive Landscape - **Acute vs. Chronic Care**: Projected mid-single-digit growth in the acute market and low double-digit growth in the chronic market, with stable pricing dynamics expected [37][38] - **Labor Trends**: Staffing levels have returned to pre-COVID conditions, with a focus on flexibility through the NAVEN nursing network [41] Financial Management and Capital Deployment - **Cash Flow Generation**: Strong cash flow management with a cash conversion cycle in the single days, allowing for strategic investments and inventory management [44][46] - **M&A Strategy**: Focus on tuck-in acquisitions within the home infusion space and potential investments in adjacent clinical capabilities [51] Conclusion - **Overall Outlook**: Confidence in long-term growth despite current headwinds, with a commitment to enhancing operational efficiency and expanding market presence through strategic initiatives and partnerships [27][52]

Financial Data and Key Metrics Changes - Surgery Partners reported Q2 2025 net revenue of $826 million, an increase of 8.4% compared to Q2 2024, and adjusted EBITDA of $129 million, reflecting a 9% growth year-over-year [6][25]. - The adjusted EBITDA margin improved to 15.6%, up 10 basis points from the previous year [25]. - The company ended the quarter with $250 million in cash and total liquidity of $645 million [25][26]. Business Line Data and Key Metrics Changes - Same facility revenue growth was 5.1%, driven by a 3.4% increase in surgical case volume and a 1.6% increase in rates [24][25]. - Total joint procedures grew by 26% year-over-year, indicating strong demand in orthopedic surgeries [9]. - The company performed nearly 173,000 surgical cases in Q2 2025, a 3.8% increase from the previous year [24]. Market Data and Key Metrics Changes - The total addressable market for Surgery Partners is estimated to exceed $150 billion, with a current market size of over $40 billion [21]. - The company has limited exposure to Medicaid, accounting for less than 5% of revenue, which mitigates risks from regulatory changes [17]. - Proposed changes by CMS could add 276 procedures to the ASC covered list, enhancing the company's market position [18]. Company Strategy and Development Direction - The company focuses on three growth pillars: organic growth, margin improvement, and M&A activities [5][14]. - Surgery Partners plans to deploy $200 million in acquisitions for 2025, with a disciplined approach to ensure long-term value [15][29]. - The company is actively evaluating its asset portfolio to optimize operations and reduce leverage [21][44]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current regulatory environment, with minimal exposure to tariff-related price increases [16][17]. - The company anticipates continued growth in same facility revenue, aiming for the high end of the 6% growth target for the full year [8][25]. - Management highlighted the importance of physician recruitment and the positive impact of new facilities on long-term growth [11][20]. Other Important Information - Surgery Partners opened eight de novo facilities in 2024 and has 10 more under construction, focusing on higher acuity specialties [12][20]. - The company recorded a 27% sequential decrease in transaction and integration costs, indicating improved efficiency in M&A activities [15][16]. - The strategic review process concluded with a reaffirmation of the company's value creation opportunities as a publicly traded entity [20][22]. Q&A Session Summary Question: What is the pace of acquisitions and how should it be modeled going forward? - Management indicated that while the pace of acquisitions has been slower, they remain confident in achieving the $200 million target for the year, emphasizing the importance of finding the best deals [32][34]. Question: What are the economics of de novo facilities and their impact on margins? - Management explained that de novo facilities take time to ramp up but are expected to contribute positively to margins as they focus on higher acuity procedures [35][39]. Question: Are there any service lines considered less core during portfolio optimization? - Management stated they are evaluating opportunities to maximize long-term shareholder value, which may include partnerships or sales in certain markets [42][44]. Question: What is the company's exposure to health exchange volume and its potential impact? - Management noted that their exposure to health exchange volume is limited and not a significant part of their business, indicating minimal risk from potential declines in exchange membership [97]. Question: What drove the increase in operating expenses and variability in other OpEx? - Management clarified that fluctuations in operating expenses are due to various miscellaneous items and that the increase in professional fees is related to newly acquired surgical facilities [84][86].