Option Care(OPCH) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2018, net revenue grew by 7.8% compared to Q4 2017, despite a bad debt adjustment of $7.5 million that impacted both net revenue and adjusted EBITDA [21] - Adjusted EBITDA for Q4 2018 was $11.6 million, or $19.2 million before the bad debt adjustment, compared to $17.1 million in the prior year quarter, reflecting an approximate 12% increase [21] - For the full year 2018, adjusted EBITDA was $45.1 million, or $52.6 million before the bad debt adjustment, compared to $45 million in the prior year, marking a 16.8% increase [22] Business Line Data and Key Metrics Changes - The merger with Option Care is expected to create a combined company with pro forma annual revenue exceeding $2.6 billion and pro forma adjusted EBITDA exceeding $200 million, including synergies [13][52] - The combined company anticipates annual run-rate cost synergies of at least $60 million within two years [13][49] Market Data and Key Metrics Changes - The U.S. infusion industry is approximately $100 billion, with home and alternate site infusion accounting for about $12 billion, projected to grow at 5% to 7% per year [46] - The combined company will cover 96% of the U.S. population with facilities in 46 states, enhancing its market reach [38] Company Strategy and Development Direction - The merger aims to create a leading independent provider of home and alternate site infusion services, enhancing the ability to serve more patients with cost-effective care [10][14] - The combined company will focus on delivering high-quality, cost-effective solutions and will leverage its national footprint to capitalize on growth opportunities in a fragmented market [10][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the merger's potential to drive significant value for shareholders and improve the combined company's financial flexibility [12][41] - The leadership team emphasized the importance of maintaining a patient-centered approach and the ability to adapt to the evolving healthcare landscape, particularly in value-based care [64][68] Other Important Information - The transaction has been unanimously approved by the Boards of Directors of both BioScrip and Option Care and is subject to customary closing conditions [42] - The combined company's capital structure is expected to enhance cash flow and provide the capacity to pay down debt while investing in growth opportunities [55] Q&A Session Summary Question: How does the merger impact value-based care conversations with payers? - Management indicated that the scale and resources from the merger will enhance relationships with payers and support value-based care initiatives [64] Question: What are the top areas for investment with the new financial flexibility? - The focus will be on funding growth through people, technology, and quality systems, as well as implementing synergies from the merger [71] Question: Can you provide details on Option Care's historical financial performance? - Option Care has delivered above-market topline growth since its separation from Walgreens, with a focus on driving EBITDA growth faster than revenue [75][76] Question: Where will the $60 million in synergies come from? - Synergies are expected from procurement efficiencies, operational efficiencies, and streamlining administrative services [77] Question: What is the expected post-close share count and cash position of the combined company? - The post-close share count is expected to be approximately 682 million shares, with a strong liquidity profile due to committed financing [81] Question: What are the expected margins for Option Care moving forward? - Management noted that while some specialty products have lower margins, investments in operational efficiencies are expected to improve overall margins [88] Question: Will there be any revenue synergies from the merger? - While specific revenue synergies were not included in the initial estimates, management anticipates opportunities for revenue growth as the companies integrate [95][97]