Option Care Health, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This annual filing reports full-year results; it does not provide a clear standalone Q4 financial-results summary. Option Care Health operates one segment, infusion services, through 163 locations in 44 states, including 96 pharmacies and 67 ambulatory infusion suites.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net revenue | $3,944.7 million | $3,438.6 million | +14.7% |
| Gross profit / margin | $866.9 million / 22.0% | $779.6 million / 22.7% | Profit +11.2%; margin down 0.7 percentage points |
| Operating income / margin | $240.2 million / 6.1% | $190.8 million / 5.5% | +25.9%; margin up 0.6 percentage points |
| Net income | $150.6 million | $139.9 million | +7.6% |
| Diluted EPS | $0.83 | $0.77 | Up $0.06 |
| Operating cash flow | $267.5 million | $208.6 million | Up $59.0 million |
- Revenue growth was primarily organic: chronic therapy revenue grew in the mid-teens and acute revenue in the mid-single digits. Acquisitions contributed approximately 2% of revenue growth.
- Gross margin pressure reflected therapy mix and inflation in labor, transportation, and medical supplies. SG&A rose 7.7% in dollars but declined to 14.4% of revenue from 15.3% as revenue grew faster than overhead.
- Net income included a $10.3 million pretax gain on the December 2022 sale of respiratory therapy assets. The prior-year comparison included a tax benefit from releasing a federal valuation allowance; FY2022 had a 26.8% effective tax rate versus negative 20.1% in FY2021.
- Cash and equivalents were $294.2 million at year-end, versus $119.4 million a year earlier. Investing cash outflow was $108.1 million, including $87.4 million for acquisitions and $35.4 million of property and equipment purchases. Financing cash flow was positive $15.3 million, including $20.9 million from warrant exercises.
- Year-end debt principal was $1.094 billion: $594.0 million under the first-lien term loan and $500.0 million of 4.375% senior notes due 2029. The term loan’s year-end rate was 6.82%; a $300 million interest-rate cap partially hedges variable-rate exposure. Management estimated a 100-basis-point rate change would affect annual interest expense by about $3.0 million on unhedged variable-rate debt.
- The ABL facility had $168.3 million of net availability at year-end. An amendment effective January 13, 2023 increased total facility availability from $175 million to $225 million and replaced LIBOR with SOFR as the reference rate. Management stated existing cash and expected operating cash flows should cover operating requirements and planned capital expenditures for at least 12 months.
- Current assets were $994.3 million and current liabilities $565.4 million. Accounts receivable was $377.5 million, including $101.5 million earned but unbilled; inventory was $224.3 million.
Material changes, outlook, and risks
- FY2022 results improved in revenue, operating income, net income, and operating cash flow, while gross margin narrowed. Interest expense fell to $53.8 million from $67.0 million, primarily reflecting the 2021 debt refinancing.
- The company acquired Specialty Pharmacy Nursing Network and Rochester Home Infusion in 2022 for a combined net purchase price of approximately $87.4 million. The respiratory therapy asset sale generated $14.7 million of cash proceeds at closing, with another $3.7 million recorded as due within one year.
- No numeric earnings or revenue guidance is provided in the supplied filing text. Management’s stated liquidity outlook is that resources should meet operating needs for at least the next 12 months; additional financing may be needed for longer-term plans or acquisitions.
- Key risks include payer pricing and reimbursement changes, delayed collections and payer audits, reliance on a concentrated supplier base (four vendors represented about 73% of purchases), drug shortages, labor availability and wage inflation, and extensive healthcare regulation. The largest payer contributed about 14% of FY2022 revenue; direct government programs accounted for about 12%.
- The company reported pending legal proceedings in the ordinary course and said it did not expect them, after reserves and indemnification, to materially affect the balance sheet; outcomes remain uncertain. COVID-19-related referral, staffing, and supply-chain effects and cybersecurity/privacy risks were also identified.
- The board approved a share repurchase program of up to $250 million on February 20, 2023; the filing does not estimate the financial effect or commit to a specific amount or timing of repurchases. The company has not paid cash dividends and does not anticipate doing so in the foreseeable future.
- KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. The auditor identified evaluation of revenue transaction-price adjustments as a critical audit matter, citing the volume of data and IT systems involved.
Important facts for investors to verify
- Whether revenue growth and therapy mix support future margins, particularly amid labor, supply, and transportation inflation.
- Cash conversion and working-capital trends, including growth in unbilled receivables and inventory, and the timing of payer collections.
- Variable-rate debt exposure, the effectiveness and coverage of the interest-rate cap, and the impact of the ABL amendment and SOFR transition.
- Supplier and payer concentration, drug availability, reimbursement terms, and any material audit, regulatory, or litigation developments.
- Integration and returns from 2022 acquisitions, the remaining respiratory-sale proceeds, and any actual share repurchases under the authorized program.