Option Care Health, Inc. (NASDAQ:OPCH) Q1 2024 Earnings Call Transcript

So I feel good about the performance of the team and the position that they put us in. But it’s a competitive environment. And as I said, it’s a hustle business and you got to be there every day. And you’ve got to be able to take patients on that consistent high-quality basis.

David MacDonald: I guess second question, just can you guys give us an update on percentage of nursing visits from ambulatory in the quarter? And if there’s anything further that you’re learning just as these continue to mature. And I guess just kind of the final piece of that is are any of those facilities now operating at north of 50% capacity?

John Rademacher: Yes. So I’ll take that, David, as well. We expanded the footprint even in the quarter. So we added 3 additional facilities on that. I would say that the percentage is in the same range that we were before. So picking up a little bit but in that 30% range on that. The team continues to utilize the facilities effectively and continue to look for opportunities to help influence the patients to utilize those facilities. So we feel really good about the progress that we’re making. It continues to be a focus. We do have some facilities that are at that 50% or higher range. We’ve seen in certain markets that tick higher and getting closer in some of those, that are longer in their vintages, if you want to think of it that way.

And so the team is making really good progress. It’s a great partnership between our commercial and operations team to help make that influence. And I think as we continue down the path and continue to build out our chronic census and execute around there, we will continue to see some upward movement in that. And again, we’re pleased because it brings both higher patient satisfaction, as well as operating efficiencies. And so it is a focus of our organization to make certain that we’re maximizing the value of those facilities.

David MacDonald: And then, John, I guess, just last question, more strategic. I realize this obviously wasn’t a focus in the quarter or maybe even in this quarter but a disruption in the market tends to potentially create some opportunity. So I’m just curious in terms of maybe some regionals, the Wasatches of the world, anything around the disruption that potentially creates opportunity or maybe a longer-term look in terms of capital deployment?

John Rademacher: Yes. Look, every disruption creates opportunities on that. And so we have been disciplined in our approach as we’re thinking about capital allocation as we’ve talked about before. We’re going to continue to be disciplined but opportunities will present themselves on that. The honesty is in the quarter, as Mike said in his prepared remarks, there were certain situations where when we weren’t able to drop claims, preservation of liquidity or preservation of capital was an important aspect of that as we’re emerging out of that and gaining confidence. I think the ability for us to think about capital deployment as we had before, as we get through the disruption will be something that we’ll continue to put in the mind space that Mike and I are spending time and looking at where the opportunities sit and where opportunities may exist to drive strategic and economic value for our shareholders.

Operator: Our next question comes from Lisa Gill of JPMorgan.

Lisa Gill: Mike, I want to go back to a comment that you made around gross profit where you talked about a meaningful gross profit growth in the back half. So can you maybe just talk through what’s going to drive that and then secondly, when you talked about the single-digit growth in acute and then you also talked on gross margin that there was a supply chain for acute disruption. Did that have an impact on the sales on the acute side in the quarter as well?

Mike Shapiro: Yes, Lisa, thanks for circling back again, as we tried to in our prepared remarks, hit head on what obviously were some interesting dynamics in the gross profit line. Our ability to onboard new patients in the acute portfolio of therapies was never affected. Again, you’ve probably seen some of the articles. There are some shortages with key antibiotics. Obviously, parenteral nutrition is meaningful component of our acute portfolio which is basically compounding different inputs. A number of those inputs have been challenging in the supply chain environment which again has led to higher cost. So not really a revenue impact, definitely left a mark in the quarter on our therapy cost. And as we think about moving throughout the year, look, what we’re expecting to see is some of those supply chain disruptions drop off, again, they’re still present here in the second quarter but our trade relations and procurement team are all over actively seeking additional sources.

Obviously, the expectation, as John articulated, as we sunset and get past some of the inefficiencies that the incident has tossed our way and as we’ve launched a number of newer, lower margin limited distribution in rare therapies, typically, what we see is over time, we can expand those margins. And then just ultimately, a lot of our bread-and-butter therapies. We’re continuing to see momentum coming out of the first quarter. And we think that, that’s a glide path that gives us confidence in the trajectory of margins in the back half.

Lisa Gill: And then just as a follow-up, when we think about the $300 million that you’re expecting for free cash flow for the year. I think John made the comment that you stopped or you did, Mike, you put on hold the share repurchase program after buying $40 million worth. How should we think about this year? You did talk about the cash flow is going to be more back half weighted, are you leaning more towards tuck-in acquisitions? Will we see you put back on the share repurchase program? How do we think about the use of the cash?