UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 20222023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from     to             
Commission file number: 001-11993
OPCH_Logo.jpg
OPTION CARE HEALTH, INC.
(Exact name of registrant as specified in its charter)
Delaware05-0489664
(State of incorporation)(I.R.S. Employer Identification No.)
3000 Lakeside Dr.Suite 300N, Bannockburn, IL60015
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code:
312-940-2443
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par value per shareOPCHNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      Accelerated filer      Non-accelerated filer       Smaller reporting company Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No   

On October 25, 2022,23, 2023, there were 181,900,930177,130,539 shares of the registrant’s Common Stock outstanding.







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TABLE OF CONTENTS
  Page
Number
PART I
PART II 
 
 
32


Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q (this “Form 10-Q”) to "Option Care Health," the “Company,” “we,” “us” and “our” refer to Option Care Health, Inc. and its consolidated subsidiaries.

Forward-Looking Statements

This Form 10-Q includes forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including, without limitation, statements concerning our expectations regarding industry and macroeconomic trends and our operating performance. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “believe,” “project,” “estimate,” “expect,” “may,” “should,” “will” and similar references to future periods.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. If any of these risks materialize, or if any of our assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, those set forth in Item 1A, “Risk Factors,” of Part I of our Annual Report on Form 10-K for the year ended December 31, 20212022 (our “Form 10-K”) filed with the U.S. Securities and Exchange Commission (the “SEC”). Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this Form 10-Q. We caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this Form 10-Q. Any forward-looking statement made by us in this Form 10-Q speaks only as of the date hereof. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
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Table of Contents
PART I
FINANCIAL INFORMATION
Item 1.Financial Statements
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Table of Contents
OPTION CARE HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
(unaudited)(unaudited)
ASSETSASSETSASSETS
CURRENT ASSETS:CURRENT ASSETS:CURRENT ASSETS:
Cash and cash equivalents Cash and cash equivalents$255,468 $119,423 Cash and cash equivalents$386,489 $294,186 
Accounts receivable, net Accounts receivable, net364,187 338,242 Accounts receivable, net382,957 377,542 
Inventories Inventories236,020 183,095 Inventories251,366 224,281 
Prepaid expenses and other current assets Prepaid expenses and other current assets96,289 69,496 Prepaid expenses and other current assets95,473 98,330 
Total current assetsTotal current assets951,964 710,256 Total current assets1,116,285 994,339 
NONCURRENT ASSETS:NONCURRENT ASSETS:NONCURRENT ASSETS:
Property and equipment, net Property and equipment, net96,312 111,535 Property and equipment, net107,960 108,321 
Operating lease right-of-use asset Operating lease right-of-use asset72,369 74,777 Operating lease right-of-use asset83,732 72,424 
Intangible assets, net Intangible assets, net23,066 21,433 Intangible assets, net20,868 22,371 
Referral sources349,487 344,587 
Referral sources, netReferral sources, net323,126 341,744 
Goodwill Goodwill1,533,043 1,477,564 Goodwill1,540,246 1,533,424 
Deferred income taxes— 27,033 
Other noncurrent assets Other noncurrent assets47,022 23,733 Other noncurrent assets51,399 40,313 
Total noncurrent assetsTotal noncurrent assets2,121,299 2,080,662 Total noncurrent assets2,127,331 2,118,597 
TOTAL ASSETSTOTAL ASSETS$3,073,263 $2,790,918 TOTAL ASSETS$3,243,616 $3,112,936 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY  LIABILITIES AND STOCKHOLDERS’ EQUITY  
CURRENT LIABILITIES:CURRENT LIABILITIES:  CURRENT LIABILITIES:  
Accounts payableAccounts payable$409,737 $279,246 Accounts payable$429,536 $378,763 
Accrued compensation and employee benefitsAccrued compensation and employee benefits58,014 83,503 Accrued compensation and employee benefits81,159 76,906 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities93,803 71,857 Accrued expenses and other current liabilities88,921 84,302 
Current portion of operating lease liabilityCurrent portion of operating lease liability19,246 19,089 Current portion of operating lease liability18,468 19,380 
Current portion of long-term debtCurrent portion of long-term debt6,000 6,000 Current portion of long-term debt6,000 6,000 
Total current liabilitiesTotal current liabilities586,800 459,695 Total current liabilities624,084 565,351 
NONCURRENT LIABILITIES:NONCURRENT LIABILITIES:NONCURRENT LIABILITIES:
Long-term debt, net of discount, deferred financing costs and current portionLong-term debt, net of discount, deferred financing costs and current portion1,058,606 1,059,900 Long-term debt, net of discount, deferred financing costs and current portion1,057,016 1,058,204 
Operating lease liability, net of current portionOperating lease liability, net of current portion71,864 74,492 Operating lease liability, net of current portion85,423 71,441 
Deferred income taxesDeferred income taxes10,598 — Deferred income taxes33,921 22,154 
Other noncurrent liabilitiesOther noncurrent liabilities8,060 20,945 Other noncurrent liabilities3,089 9,683 
Total noncurrent liabilitiesTotal noncurrent liabilities1,149,128 1,155,337 Total noncurrent liabilities1,179,449 1,161,482 
Total liabilitiesTotal liabilities1,735,928 1,615,032 Total liabilities1,803,533 1,726,833 
STOCKHOLDERS’ EQUITY:STOCKHOLDERS’ EQUITY:STOCKHOLDERS’ EQUITY:
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of September 30, 2022 and December 31, 2021, respectively— — 
Common stock; $0.0001 par value: 250,000,000 shares authorized, 182,284,651 shares issued and 181,900,929 shares outstanding as of September 30, 2022; 180,309,637 shares issued and 179,925,915 shares outstanding as of December 31, 202118 18 
Treasury stock; 383,722 shares outstanding, at cost, as of September 30, 2022 and December 31, 2021, respectively(2,403)(2,403)
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of September 30, 2023 and December 31, 2022Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of September 30, 2023 and December 31, 2022— — 
Common stock; $0.0001 par value: 250,000,000 shares authorized, 182,901,785 shares issued and 177,129,378 shares outstanding as of September 30, 2023; 182,341,420 shares issued and 181,957,698 shares outstanding as of December 31, 2022Common stock; $0.0001 par value: 250,000,000 shares authorized, 182,901,785 shares issued and 177,129,378 shares outstanding as of September 30, 2023; 182,341,420 shares issued and 181,957,698 shares outstanding as of December 31, 202218 18 
Treasury stock; 5,772,407 and 383,722 shares outstanding, at cost, as of September 30, 2023 and December 31, 2022, respectivelyTreasury stock; 5,772,407 and 383,722 shares outstanding, at cost, as of September 30, 2023 and December 31, 2022, respectively(179,205)(2,403)
Paid-in capitalPaid-in capital1,172,315 1,138,855 Paid-in capital1,197,874 1,176,906 
Retained earningsRetained earnings142,894 39,867 Retained earnings400,336 190,423 
Accumulated other comprehensive income (loss)24,511 (451)
Accumulated other comprehensive incomeAccumulated other comprehensive income21,060 21,159 
Total stockholders’ equityTotal stockholders’ equity1,337,335 1,175,886 Total stockholders’ equity1,440,083 1,386,103 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITYTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,073,263 $2,790,918 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,243,616 $3,112,936 

The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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Table of Contents
OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
NET REVENUE$1,093,014 $1,020,918 $3,177,934 $2,917,522 
COST OF REVENUE838,748 802,917 2,443,834 2,281,685 
GROSS PROFIT254,266 218,001 734,100 635,837 
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses158,214 142,015 459,644 417,771 
Depreciation and amortization expense15,005 15,268 44,417 46,027 
Total operating expenses173,219 157,283 504,061 463,798 
OPERATING INCOME81,047 60,718 230,039 172,039 
 
OTHER INCOME (EXPENSE):
Interest expense, net(11,786)(13,997)(38,816)(39,008)
Equity in earnings of joint ventures1,273 1,472 4,107 4,065 
Other, net(449)3,888 84,487 3,891 
Total other (expense) income(10,962)(8,637)49,778 (31,052)
 
INCOME BEFORE INCOME TAXES70,085 52,081 279,817 140,987 
INCOME TAX EXPENSE13,783 13,258 69,904 37,960 
NET INCOME$56,302 $38,823 $209,913 $103,027 
 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Change in unrealized gain (loss) on cash flow hedges, net of income tax benefit (expense) of $8, $(1,398), $57 and $(5,917), respectively$53 $9,255 $(99)$24,962 
OTHER COMPREHENSIVE INCOME (LOSS)53 9,255 (99)24,962 
NET COMPREHENSIVE INCOME$56,355 $48,078 $209,814 $127,989 
 
EARNINGS PER COMMON SHARE:
Earnings per share, basic$0.31 $0.21 $1.17 $0.57 
Earnings per share, diluted$0.31 $0.21 $1.16 $0.57 
 
Weighted average common shares outstanding, basic178,826 181,884 179,956 180,829 
Weighted average common shares outstanding, diluted180,528 183,022 181,286 181,760 

The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMECASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)THOUSANDS)
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
NET REVENUE$1,020,918 $891,937 $2,917,522 $2,511,446 
COST OF REVENUE802,917 688,969 2,281,685 1,944,037 
GROSS PROFIT218,001 202,968 635,837 567,409 
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses142,015 134,633 417,771 388,930 
Depreciation and amortization expense15,268 15,452 46,027 48,410 
      Total operating expenses157,283 150,085 463,798 437,340 
OPERATING INCOME60,718 52,883 172,039 130,069 
OTHER INCOME (EXPENSE):
Interest expense, net(13,997)(16,000)(39,008)(52,717)
Equity in earnings of joint ventures1,472 1,676 4,065 4,567 
Other, net3,888 3,891 (12,392)
      Total other expense(8,637)(14,320)(31,052)(60,542)
INCOME BEFORE INCOME TAXES52,081 38,563 140,987 69,527 
INCOME TAX EXPENSE13,258 3,087 37,960 5,096 
NET INCOME$38,823 $35,476 $103,027 $64,431 
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Change in unrealized gains on cash flow hedges, net of income tax expense of $1,398, $0, $5,917, and $0, respectively9,255 2,892 24,962 11,172 
OTHER COMPREHENSIVE INCOME9,255 2,892 24,962 11,172 
NET COMPREHENSIVE INCOME$48,078 $38,368 $127,989 $75,603 
EARNINGS PER COMMON SHARE:
Earnings per share, basic$0.21 $0.20 $0.57 $0.36 
Earnings per share, diluted$0.21 $0.20 $0.57 $0.36 
Weighted average common shares outstanding, basic181,884 179,872 180,829 179,841 
Weighted average common shares outstanding, diluted183,022 181,430 181,760 181,055 
Nine Months Ended September 30,
 20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$209,913 $103,027 
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense46,423 49,723 
Non-cash operating lease costs14,610 14,451 
Deferred income taxes - net11,767 37,631 
Amortization of deferred financing costs3,312 3,206 
Equity in earnings of joint ventures(4,107)(4,065)
Stock-based incentive compensation expense22,908 12,581 
Capital distribution from equity method investments4,000 2,500 
Other adjustments1,769 695 
Changes in operating assets and liabilities:
Accounts receivable, net(5,075)(23,153)
Inventories(28,362)(52,749)
Prepaid expenses and other current assets3,197 (10,335)
Accounts payable50,726 129,859 
Accrued compensation and employee benefits4,197 (26,711)
Accrued expenses and other current liabilities9,829 19,495 
Operating lease liabilities(13,019)(15,372)
Other noncurrent assets and liabilities(11,762)(16,691)
Net cash provided by operating activities320,326 224,092 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment(21,981)(17,111)
Business acquisitions, net of cash acquired(12,855)(87,315)
Other investing activities(5,889)— 
Net cash used in investing activities(40,725)(104,426)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, vesting of restricted stock, and related tax withholdings(1,940)(37)
Proceeds from warrant exercises— 20,916 
Repayments of debt principal(4,500)(4,500)
Purchase of company stock(175,108)— 
Other financing activities(5,750)— 
Net cash (used in) provided by financing activities(187,298)16,379 
NET INCREASE IN CASH AND CASH EQUIVALENTS92,303 136,045 
Cash and cash equivalents - beginning of the period294,186 119,423 
CASH AND CASH EQUIVALENTS - END OF PERIOD$386,489 $255,468 
 
Supplemental disclosure of cash flow information:
Cash paid for interest$46,377 $29,578 
Cash paid for income taxes$53,699 $6,690 
Cash paid for operating leases$20,272 $18,964 

The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSSTOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Nine Months Ended September 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income$103,027 $64,431 
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense49,723 52,820 
Non-cash operating lease costs14,451 11,137 
Deferred income taxes - net37,631 1,180 
Loss on extinguishment of debt— 12,403 
Amortization of deferred financing costs3,206 3,821 
Equity in earnings of joint ventures(4,065)(4,567)
Stock-based incentive compensation expense12,581 6,246 
Capital distribution from equity method investments2,500 1,250 
Other adjustments695 1,372 
Changes in operating assets and liabilities:
Accounts receivable, net(23,153)(27,310)
Inventories(52,749)(31,472)
Prepaid expenses and other current assets(10,335)5,958 
Accounts payable129,859 35,648 
Accrued compensation and employee benefits(26,711)5,777 
Accrued expenses and other current liabilities19,495 18,353 
Operating lease liabilities(15,372)(14,620)
Other noncurrent assets and liabilities(16,691)832 
Net cash provided by operating activities224,092 143,259 
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment(17,111)(11,744)
Business acquisitions, net of cash acquired(87,315)(18,852)
Net cash used in investing activities(104,426)(30,596)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, vesting of restricted stock, and related tax withholdings(37)(93)
Proceeds from warrant exercises20,916 — 
Proceeds from issuance of debt— 355,200 
Repayments of debt(4,500)(8,832)
Retirement of debt— (352,009)
Deferred financing costs— (2,880)
Debt prepayment fees— (2,458)
Net cash provided by (used in) financing activities16,379 (11,072)
NET INCREASE IN CASH AND CASH EQUIVALENTS136,045 101,591 
Cash and cash equivalents - beginning of the period119,423 99,265 
CASH AND CASH EQUIVALENTS - END OF PERIOD$255,468 $200,856 
Supplemental disclosure of cash flow information:
   Cash paid for interest$29,578 $52,002 
   Cash paid for income taxes$6,690 $2,719 
Cash paid for operating leases$18,964 $19,631 
Preferred StockCommon StockTreasury StockPaid-in CapitalRetained EarningsAccumulated Other Comprehensive
Income (Loss)
Total Stockholders’ Equity
Balance - December 31, 2021$— $18 $(2,403)$1,138,855 $39,867 $(451)$1,175,886 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — 355 — — 355 
Stock-based incentive compensation— — — 4,178 — — 4,178 
Net income— — — — 30,275 — 30,275 
Other comprehensive income— — — — — 11,070 11,070 
Balance - March 31, 2022$— $18 $(2,403)$1,143,388 $70,142 $10,619 $1,221,764 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — 168 — — 168 
Exercise of warrants— — — 20,098 — — 20,098 
Stock-based incentive compensation— — — 4,398 — — 4,398 
Net income— — — — 33,929 — 33,929 
Other comprehensive income— — — — — 4,637 4,637 
Balance - June 30, 2022$— $18 $(2,403)$1,168,052 $104,071 $15,256 $1,284,994 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (560)— — (560)
Exercise of warrants— — — 818 — — 818 
Stock-based incentive compensation— — — 4,005 — — 4,005 
Net income— — — — 38,823 — 38,823 
Other comprehensive income— — — — — 9,255 9,255 
Balance - September 30, 2022$— $18 $(2,403)$1,172,315 $142,894 $24,511 $1,337,335 
 
Balance - December 31, 2022$— $18 $(2,403)$1,176,906 $190,423 $21,159 $1,386,103 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (1,902)— — (1,902)
Stock-based incentive compensation— — — 5,988 — — 5,988 
Purchase of company stock— — (75,735)— — — (75,735)
Net income— — — — 39,208 — 39,208 
Other comprehensive loss— — — — — (3,443)(3,443)
Balance - March 31, 2023$— $18 $(78,138)$1,180,992 $229,631 $17,716 $1,350,219 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (247)— — (247)
Stock-based incentive compensation— — — 7,685 — — 7,685 
Purchase of company stock, and related tax effects— — 32 — — — 32 
Net income— — — — 114,403 — 114,403 
Other comprehensive income— — — — — 3,291 3,291 
Balance - June 30, 2023$— $18 $(78,106)$1,188,430 $344,034 $21,007 $1,475,383 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — 209 — — 209 
Stock-based incentive compensation— — — 9,235 — — 9,235 
Purchase of company stock, and related tax effects— — (101,099)— — — (101,099)
Net income— — — — 56,302 — 56,302 
Other comprehensive income— — — — — 53 53 
Balance - September 30, 2023$— $18 $(179,205)$1,197,874 $400,336 $21,060 $1,440,083 

The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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OPTION CARE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Preferred StockCommon StockTreasury StockPaid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive (Loss)
Income
Total Stockholders’ Equity
Balance - December 31, 2020$— $18 $(2,403)$1,129,312 $(100,031)$(11,172)$1,015,724 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (69)— — (69)
Stock-based incentive compensation— — — 1,205 — — 1,205 
Net loss— — — — (2,861)— (2,861)
Other comprehensive income— — — — — 4,081 4,081 
Balance - March 31, 2021$— $18 $(2,403)$1,130,448 $(102,892)$(7,091)$1,018,080 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (9)— — (9)
Stock-based incentive compensation— — — 2,525 — — 2,525 
Net income— — — — 31,816 — 31,816 
Other comprehensive income— — — — — 4,199 4,199 
Balance at June 30, 2021$— $18 $(2,403)$1,132,964 $(71,076)$(2,892)$1,056,611 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (15)— — (15)
Stock-based incentive compensation— — — 2,516 — — 2,516 
Net income— — — — 35,476 — 35,476 
Other comprehensive income— — — — — 2,892 2,892 
Balance at September 30, 2021$— $18 $(2,403)$1,135,465 $(35,600)$— $1,097,480 
Balance - December 31, 2021$— $18 $(2,403)$1,138,855 $39,867 $(451)$1,175,886 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — 355 — — 355 
Stock-based incentive compensation— — — 4,178 — — 4,178 
Net income— — — — 30,275 — 30,275 
Other comprehensive income— — — — — 11,070 11,070 
Balance - March 31, 2022$— $18 $(2,403)$1,143,388 $70,142 $10,619 $1,221,764 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — 168 — — 168 
Exercise of warrants— — — 20,098 — — 20,098 
Stock-based incentive compensation— — — 4,398 — — 4,398 
Net income— — — — 33,929 — 33,929 
Other comprehensive income— — — — — 4,637 4,637 
Balance - June 30, 2022$— $18 $(2,403)$1,168,052 $104,071 $15,256 $1,284,994 
Exercise of stock options, vesting of restricted stock, and related tax withholdings— — — (560)— — (560)
Exercise of warrants— — — 818 — — 818 
Stock-based incentive compensation— — — 4,005 — — 4,005 
Net income— — — — 38,823 — 38,823 
Other comprehensive income— — — — — 9,255 9,255 
Balance - September 30, 2022$— $18 $(2,403)$1,172,315 $142,894 $24,511 $1,337,335 

The notes to unaudited condensed consolidated financial statements are an integral part of these statements.
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OPTION CARE HEALTH, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND PRESENTATION OF FINANCIAL STATEMENTS
Corporate Organization and Business — HC Group Holdings II, Inc. (“HC II”) was incorporated under the laws of the State of Delaware on January 7, 2015, with its sole shareholder being HC Group Holdings I, LLCLLC. (“HC I”). On April 7, 2015, HC I and HC II collectively acquired Walgreens Infusion Services, Inc. and its subsidiaries from Walgreen Co., and the business was rebranded as Option Care, Inc. (“Option Care”).
On March 14, 2019, HC I and HC II entered into a definitive agreement (the “Merger Agreement”) to merge with and into a wholly-owned subsidiary of BioScrip, Inc. (“BioScrip”) (the “Merger”), a national provider of infusion and home care management solutions, along with certain other subsidiaries of BioScrip and HC II. The merger contemplated by the Merger Agreement (the “Merger”)which was completed on August 6, 2019 (the “Merger Date”). The Merger was accounted for as a reverse merger under the acquisition method of accounting for business combinations with Option Care being considered the accounting acquirer and BioScrip being considered the legal acquirer. Following the close of the transaction, BioScrip was rebranded as Option Care Health, Inc. (“Option Care Health”, or the “Company”).Health. The combined Company’s stock is listed on the Nasdaq Global Select Market as of September 30, 2022.2023. During the three and nine months ended September 30, 2022,2023, HC I completed a secondary offeringsales of 11,000,00023,771,926 shares of common stock. Following this offering,In addition, the Company repurchased 2,475,166 shares from HC I holds approximately 14.4%on March 3, 2023 under the Company’s share repurchase program. See Note 15, Stockholders’ Equity, for further discussion of the common stockCompany’s share repurchase program. As of September 30, 2023, HC I no longer holds shares of the Company.Company’s common stock.
Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 9793 full service pharmacies and 6481 stand-alone ambulatory infusion suites. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings. The Company operates in one segment, infusion services.
Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States and contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for interim financial reporting. The results of operations for the interim periods presented are not necessarily indicative of the results of operations for the entire year. These unaudited condensed consolidated financial statements do not include all of the information and notes to the financial statements required by GAAP for complete financial statements and should be read in conjunction with the 20212022 audited consolidated financial statements, including the notes thereto, as presented in our Form 10-K.
Principles of Consolidation — The Company’s unaudited condensed consolidated financial statements include the accounts of Option Care Health, Inc. and its subsidiaries. All intercompany transactions and balances are eliminated in consolidation.
The Company has investments in companies that are 50% owned and are accounted for as equity-method investments. The Company’s share of earnings from equity-method investments is included in the line entitled “Equity in earnings of joint ventures” in the unaudited condensed consolidated statements of comprehensive income. See Equity-Method Investments within Note 2, Summary of Significant Accounting Policies, for further discussion of the Company’s equity-method investments.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents — The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of September 30, 2023, cash equivalents consisted of money market funds.
Prepaid Expenses and Other Current Assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of $46.4$51.0 million and $43.0$53.4 million as of September 30, 20222023 and December 31, 2021,2022, respectively. There were no other items included in prepaid expenses and other current assets that comprised 5% or more of total current assets. As of September 30, 2022, the Company determined that certain assets related to the respiratory therapy and durable medical equipment business met the applicable criteria as being held for sale. As of September 30, 2022, $9.5 million of assets held for sale and $2.0 million of liabilities held for sale were classified in prepaid expenses and other current assets and accrued expenses and other current liabilities, respectively, in the condensed consolidated balance sheets. The assets and liabilities were classified as held for sale at the lower of their carrying amount or fair values less cost to sell. In October 2022, the Company entered into a definitive agreement to sell these assets. The Company expects to close the transaction within the fourth quarter of fiscal year 2022.

Equity MethodEquity-Method Investments — The Company’s investments in certain unconsolidated entities are accounted for under the equity method. The balance of these investments is included in other noncurrent assets in the accompanying condensed consolidated balance sheets. As of September 30, 20222023 and December 31, 2021,2022, the balance of the investments was $21.7$19.5 million and $20.1$19.4 million, respectively. The balance of these investments is increased to reflect the Company’s capital contributions and equity in earnings of the investees. The balance of these investments is decreased to reflect the Company’s equity in losses of the investees and for distributions received that are not in excess of the carrying amount of the investments. The Company’s proportionate share of earnings or losses of the investees is recorded in equity in earnings of joint ventures in the accompanying unaudited condensed consolidated statements of comprehensive income. The Company’s proportionate share of earnings was $1.3 million and $4.1 million for the three and nine months ended September 30, 2023, respectively. The Company’s proportionate share of earnings was $1.5 million and $4.1 million for the three and nine months ended September 30, 2022, respectively, and $1.7 million and $4.6 million forrespectively. Distributions from the investees are treated as cash inflows from operating activities in the unaudited condensed consolidated statements of cash flows. During the three and nine months ended September 30, 2021,2023, the Company received distributions from the investees of $1.5 million and $4.0 million, respectively. During the three and nine months ended September 30, 2022, the Company received distributions from the investees of $1.5 million and $2.5 million, respectively. See Note 16, Related-Party Transactions, for discussion of related-party transactions with these investees.
Concentrations of Business Risk — The Company generates revenue from managed care contracts and other agreements with commercial third-party payers. Revenue related to the Company’s largest payer was approximately 14% for the three and nine months ended September 30, 2023. Revenue related to the Company’s largest payer was approximately 14% and 15% for the three and nine months ended September 30, 2022, respectively. Revenue related to the Company’s largest payer was approximately 16% and 16% for the three and nine months ended September 30, 2021, respectively. There were no other managed care contracts that represent greater than 10% of revenue for the periods presented.
For the three and nine months ended September 30, 2022,2023, approximately 12%11% and 12%, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid. For the three and nine months ended September 30, 2021,2022, approximately 12% and 12%, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid.As of September 30, 20222023 and December 31, 2021,2022, approximately 11%and 11%13%, respectively, of the Company’s accounts receivable was related to these programs. Governmental programs pay for services based on fee schedules and rates that are determined by the related governmental agency. Laws and regulations pertaining to government programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates will change in the near term.

The Company does not require its patients or other payers to carry collateral for any amounts owed for goods or services provided. Other than as discussed above, concentration of credit risk relating to trade accounts receivable is limited due to the Company’s diversity of patients and payers. Further, the Company generally does not provide charity care; however, Option Care Health offers a financial assistance program for patients that meet certain defined hardship criteria.
For the three and nine months ended September 30, 2023, approximately 73% of the Company’s pharmaceutical and medical supply purchases were from four vendors. For the three and nine months ended September 30, 2022, approximately 74% and 73%, respectively, of the Company’s pharmaceutical and medical supply purchases were from four vendors. For the three and nine months ended September 30, 2021, approximately 65% and 65%, respectively, of the Company’s pharmaceutical and medical supply purchases were from three vendors. Although there are a limited number of suppliers, the Company believes that other vendors could provide similar products on comparable terms. However, a change in suppliers could cause delays in service delivery and possible losses in revenue, which could adversely affect the Company’s financial condition or operating results. Although there remains some uncertainty regarding the COVID-19 pandemic, as of September 30, 2022, the Company has been able to maintain adequate levels of supplies and pharmaceuticals to support its operations.

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3. BUSINESS COMBINATIONS AND ASSET ACQUISITIONS
Infinity Infusion NursingAmedisys, Inc. — On May 3, 2023, the Company entered into a definitive merger agreement (the “Merger Agreement”) with Amedisys, Inc. (“Amedisys”), a leading provider of healthcare in home health and hospice settings. Under the terms of the merger agreement, the Company would issue new shares of its common stock to Amedisys’s stockholders, which would result in the Company’s stockholders holding approximately 64.5% of the combined company.
On June 26, 2023, the Company entered into an agreement to terminate the Merger Agreement (the “Mutual Termination Agreement”). Under the terms of the Mutual Termination Agreement, the Company received a payment of $106.0 million in cash on behalf of Amedisys (“Termination Fee”). The Termination Fee is included in Other, net in the unaudited condensed consolidated statements of comprehensive income and in Net cash provided by operating activities in the unaudited condensed consolidated statements of cash flows.
During the nine months ended September 30, 2023, the Company incurred $21.1 million in merger-related expenses, which are included in Other, net in the unaudited condensed consolidated statements of comprehensive income and in Net cash provided by operating activities in the unaudited condensed consolidated statements of cash flows.
Revitalized, LLC — In October 2021,May 2023, pursuant to the equity purchase agreement dated OctoberMay 1, 2021,2023, the Company completed the acquisition of 100% of the equitymembership interests in Infinity Infusion Nursing,Revitalized, LLC for a purchase price, net of cash acquired, of $59.6 million. The Company has finalized the purchase price allocation of the acquisition and no purchase accounting adjustments were made.
Wasatch Infusion LLC Acquisition — In December 2021, pursuant to the executed asset purchase agreement on December 29, 2021, the Company completed the acquisition of Wasatch Infusion LLC for a purchase price of $19.5 million. As of March 31, 2022, the Company finalized the purchase price allocation of the acquisition. Certain adjustments were made to preliminary valuation amounts related to accounts receivable, other assets and other assumed liabilities. The following is a final allocation of the consideration transferred to acquired identifiable assets and assumed liabilities (in thousands):
Amount
Accounts receivable$2,688 
Inventories2,038 
Intangible assets4,245 
Other assets769 
Accounts payable(6,686)
Other assumed liabilities(965)
Fair value Identifiable assets and liabilities2,089 
Goodwill (1)17,366 
Purchase Price$19,455 
(1) Goodwill is attributable to cost synergies from procurement and operational efficiencies and elimination of duplicative administrative costs.
Specialty Pharmacy Nursing Network, Inc. — In April 2022, pursuant to the equity purchase agreement dated February 7, 2022, the Company completed the acquisition of 100% of the equity interests in Specialty Pharmacy Nursing Network, Inc. (“SPNN”Revitalized”) for a purchase price, net of cash acquired, of $59.9 million.
The allocation$12.5 million, inclusive of the purchase pricea $0.4 million non-cash receivable adjustment, which primarily consisted of SPNN was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations, with the total purchase price being allocated to the assets$6.7 million of goodwill and liabilities acquired based on the relative fair value$5.5 million of each asset and liability. The following is a preliminary estimate of the allocation of the consideration transferred, open for accounts receivable and accounts payable, to acquired identifiable assets and assumed liabilities, net of cash acquired, as of September 30, 2022 (in thousands):intangible assets.
Amount
Accounts receivable$2,303 
Intangible assets25,580 
Other assets600 
Accrued compensation(1,164)
Accounts payable and other liabilities(1,168)
Fair value identifiable assets and liabilities26,151 
Goodwill (1)33,746 
Cash acquired661 
Purchase Price60,558 
Less: cash acquired(661)
Purchase price, net of cash acquired$59,897 
(1) Goodwill is attributable to cost synergies from operational efficiencies and establishing a more comprehensive clinical platform through the Company’s national infrastructure and SPNN’s nursing network.
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Rochester Home Infusion, Inc. — In August 2022, pursuant to the stock purchase agreement dated June 10, 2022, the Company completed the acquisition of 100% of the equity interests in Rochester Home Infusion, Inc. (“RHI”) for a purchase price, net of cash acquired, of $27.4 million.
The allocation of the purchase price of RHI was accounted for as a business combination in accordance with ASC Topic 805, Business Combinations, with the total purchase price being allocated to the assets and liabilities acquired based on the relative fair value of each asset and liability. The following is a preliminary estimate of thefinal allocation of the consideration transferred open for accounts receivable and accounts payable, to acquired identifiable assets and assumed liabilities, net of cash acquired as of September 30, 2022 (in thousands):
Amount
Accounts receivable$1,212686 
Intangible assets5,449 
Other assets394 
Accounts payable and other liabilities(434)
Fair value Identifiableidentifiable assets and liabilities6,6216,095 
Goodwill (1)20,79721,323 
Cash acquired201 
Purchase Priceprice27,619 
Less: cash acquired(201)
Purchase price, net of cash acquired$27,418 
(1) Goodwill is attributable to cost synergies from procurement and operational efficiencies and elimination of duplicative administrative costs.
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4. REVENUE
The following table sets forth the net revenue earned by category of payer for the three and nine months ended September 30, 20222023 and 20212022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20222021202220212023202220232022
Commercial payersCommercial payers$888,162 $769,524 $2,526,354 $2,164,678 Commercial payers$957,601 $888,162 $2,765,513 $2,526,354 
Government payersGovernment payers122,793 106,645 357,383 307,067 Government payers124,122 122,793 370,648 357,383 
PatientsPatients9,963 15,768 33,785 39,701 Patients11,291 9,963 41,773 33,785 
Net revenueNet revenue$1,020,918 $891,937 $2,917,522 $2,511,446 Net revenue$1,093,014 $1,020,918 $3,177,934 $2,917,522 
5. INCOME TAXES
During the three months ended September 30, 2023, the Company recorded tax expense of $13.8 million. During the nine months ended September 30, 2023, the Company recorded tax expense of $69.9 million, which includes $22.1 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. The tax expense for the three and nine months ended September 30, 2023 represents an effective tax rate of 19.7% and 25.0%, respectively. The variance in the Company’s effective tax rate of 19.7% and 25.0% for the three and nine months ended September 30, 2023, respectively, compared to the federal statutory rate of 21%, is primarily attributable to the difference between federal and state tax rates, various non-deductible expenses, and a change in state valuation allowance. During the three months ended September 30, 2023, the Company released $5.8 million of state valuation allowance. During the three and nine months ended September 30, 2022, the Company recorded tax expense of $13.3 million and $38.0 million, respectively, which represents an effective tax rate of 25.5% and 26.9%, respectively. The variance in the Company’s effective tax rate of 25.5% and 26.9% for the three and nine months ended September 30, 2022, compared to the federal statutory rate of 21%, is primarily attributable to current and deferred state taxes as well as various non-deductible expenses. During the three and nine months ended September 30, 2021, the Company recorded tax expense of $3.1 million and $5.1 million, respectively, which represents an effective tax rate of 8.0% and 7.3%, respectively. The variance in the Company’s effective tax rate of 8.0% and 7.3% for the three and nine months ended September 30, 2021, compared to the federal statutory rate of 21%, is primarily attributable to the Company only recognizing certain deferred federal and state tax expense and current state tax expense while any tax benefits that would have otherwise been recognized were offset by the Company’s tax valuation allowance in effect during that period.

The Company maintains a valuation allowance of $13.1$7.2 million against certain state net operating losses. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. TheIn making this assessment, the Company considers the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income, and tax-planning strategies, in making this assessment.strategies. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.

The Company’s tax expense for the three and nine months ended September 30, 2023 of $13.8 million and $69.9 million, respectively, consists of quarterly federal and state tax liabilities as well as recognized deferred federal and state tax expense. The Company’s tax expense for the three and nine months ended September 30, 2022 of $13.3 million and $38.0 million, respectively, consists of quarterly tax liabilities attributable to specific state taxing authorities as well as recognized deferred federal and state tax expense. The Company’s tax expense for the three and nine months ended September 30, 2021 of $3.1 million and $5.1 million, respectively, consists of quarterly tax liabilities attributed to specific state taxing authorities as well as recognized deferred tax expense.

The Company has accumulated federal net operating loss carryovers that are subject to one or more Section 382 limitations. This may limit the Company’s ability to utilize its federal net operating losses.
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6. EARNINGS PER SHARE
The Company presents basic and diluted earnings per share for its common stock. Basic earnings per share is calculated by dividing the net income of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is determined by adjusting the profit or loss and the weighted average number of shares of common stock outstanding for the effects of all potentially dilutive securities.
The earnings are used as the basis of determining whether the inclusion of common stock equivalents would be anti-dilutive. The computation of diluted shares for the three and nine months ended September 30, 20222023 and 20212022 includes the effect of shares that would be issued in connection with warrants, stock options, and restricted stock awards and performance stock unit awards, as these common stock equivalents are dilutive to the earnings per share recorded in those periods.For
The following table presents the three months ended September 30, 2022, there were 520,944Company’s common stock option awards and 13,561 restricted stock awards outstandingequivalents that were excluded from the calculation of earnings per share as they would be anti-dilutive. For the nine months ended September 30, 2022, there were 794,887 stock option awards and 476,329 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.For the three months ended September 30, 2021, there were 457,754 warrants, 496,929 stock option awards, and 38,536 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive. For the nine months ended September 30, 2021, there were 915,507 warrants, 387,656 stock option awards, and 272,540 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.anti-dilutive:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Stock option awards984,567 520,944 1,180,376 794,887 
Restricted stock awards16,564 13,561 569,831 476,329 
Performance stock unit awards— — 288,680 — 
The following table presents the Company’s basic earnings per share and shares outstanding (in thousands, except per share data):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
20222021202220212023202220232022
Numerator:Numerator:Numerator:
Net income(1)Net income(1)$38,823 $35,476 $103,027 $64,431 Net income(1)$56,302 $38,823 $209,913 $103,027 
Denominator:Denominator:Denominator:
Weighted average number of common shares outstandingWeighted average number of common shares outstanding181,884 179,872 180,829 179,841 Weighted average number of common shares outstanding178,826 181,884 179,956 180,829 
Earnings per common share:Earnings per common share:Earnings per common share:
Earnings per common share, basicEarnings per common share, basic$0.21 $0.20 $0.57 $0.36 Earnings per common share, basic$0.31 $0.21 $1.17 $0.57 
(1) Net income for the nine months ended September 30, 2023 includes $62.8 million related to the termination payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses and taxes. See Note 3, Business Combinations, for further discussion.
The following table presents the Company’s diluted earnings per share and shares outstanding (in thousands, except per share data):
Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Numerator:  
Net income$38,823 $35,476 $103,027 $64,431 
Denominator:  
Weighted average number of common shares outstanding181,884 179,872 180,829 179,841 
Effect of dilutive securities1,138 1,558 931 1,214 
Weighted average number of common shares outstanding, diluted183,022 181,430 181,760 181,055 
Earnings per common share:
Earnings per common share, diluted$0.21 $0.20 $0.57 $0.36 
,
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Numerator:
Net income (1)$56,302 $38,823 $209,913 $103,027 
Denominator:
Weighted average number of common shares outstanding178,826 181,884 179,956 180,829 
Effect of dilutive securities1,702 1,138 1,330 931 
Weighted average number of common shares outstanding, diluted180,528 183,022 181,286 181,760 
Earnings per common share:
Earnings per common share, diluted$0.31 $0.21 $1.16 $0.57 

(1) Net income for the nine months ended September 30, 2023 includes $62.8 million related to the termination payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses and taxes. See Note 3,
Business Combinations, for further discussion.
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7. LEASES
During the three and nine months ended September 30, 2022,2023, the Company incurred operating lease expenses of $7.8 million and $22.7$22.3 million, respectively, including short-term lease expense,expenses, which were included as a component of selling, general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income. During the three and nine months ended September 30, 2021,2022, the Company incurred operating lease expenses of $7.8 million and $22.3$22.7 million, respectively, including short-term lease expense,expenses, which were included as a component of selling, general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income. As of September 30, 2022,2023, the weighted-average remaining lease term was 6.66.9 years and the weighted-average discount rate was 5.17%6.04%.
Operating leases mature as follows (in thousands):
Fiscal Year Ended December 31,Fiscal Year Ended December 31,Minimum PaymentsFiscal Year Ended December 31,Minimum Payments
2022$8,296 
2023202323,052 2023$9,410 
2024202416,878 202423,564 
2025202513,987 202521,350 
2026202611,170 202618,490 
2027202715,315 
ThereafterThereafter36,329 Thereafter44,262 
Total lease paymentsTotal lease payments$109,712 Total lease payments132,391 
Less: Interest(18,602)
Less: interestLess: interest(28,500)
Present value of lease liabilitiesPresent value of lease liabilities$91,110 Present value of lease liabilities$103,891 
During the nine months ended September 30, 2023, the Company commenced new leases, extensions and amendments, resulting in non-cash operating activities in the unaudited condensed consolidated statements of cash flow of $26.1 million related to increases in the operating lease right-of-use assets and operating lease liabilities. During the nine months ended September 30, 2022, the Company commenced new leases, extensions and amendments, resulting in non-cash operating activities in the unaudited condensed consolidated statements of cash flow of $13.6of $13.6 million related related to increases in the operating lease right-of-use assets and operating lease liabilities, respectively. During the nine months ended September 30, 2021, the Company commenced new leases, extensions and amendments, resulting in non-cash operating activities in the unaudited condensed consolidated statements of cash flows of $14.5 million related to increases in the operating lease right-of-use assets and operating lease liabilities, respectively.liabilities. As of September 30, 2022,2023, the Company did not have any significant operating or financing leases that had not yet commenced.

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8. PROPERTY AND EQUIPMENT
Property and equipment was as follows as of September 30, 20222023 and December 31, 20212022 (in thousands):
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Infusion pumpsInfusion pumps$36,221 $34,547 Infusion pumps$37,027 $34,942 
Equipment, furniture and otherEquipment, furniture and other29,924 52,913 Equipment, furniture and other35,955 31,929 
Leasehold improvementsLeasehold improvements94,664 92,229 Leasehold improvements101,283 99,085 
Computer software, purchased and internally developedComputer software, purchased and internally developed35,094 30,744 Computer software, purchased and internally developed47,878 34,922 
Assets under developmentAssets under development17,782 19,924 Assets under development26,915 29,411 
213,685 230,357 249,058 230,289 
Less: accumulated depreciationLess: accumulated depreciation(117,373)(118,822)Less: accumulated depreciation(141,098)(121,968)
Property and equipment, netProperty and equipment, net$96,312 $111,535 Property and equipment, net$107,960 $108,321 
Depreciation expense is recorded within cost of revenue and operating expenses within the unaudited condensed consolidated statements of comprehensive income, depending on the nature of the underlying fixed assets. The depreciation expense included in cost of revenue relates to revenue-generating assets, such as infusion pumps. The depreciation expense included in operating expenses is related to infrastructure items, such as furniture, computer and office equipment, and leasehold improvements. The following table presents the amount of depreciation expense recorded in cost of revenue and operating expenses for the three and nine months ended September 30, 20222023 and 20212022 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Depreciation expense in cost of revenue$1,205 $1,664 $3,696 $4,410 
Depreciation expense in operating expenses6,778 7,476 21,337 22,670 
Total depreciation expense$7,983 $9,140 $25,033 $27,080 

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Depreciation expense in cost of revenue$616 $1,205 $2,006 $3,696 
Depreciation expense in operating expenses6,365 6,778 18,665 21,337 
Total depreciation expense$6,981 $7,983 $20,671 $25,033 
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9. GOODWILL AND OTHER INTANGIBLE ASSETS
Changes in the carrying amount of goodwill consistsconsist of the following activity for the three and nine months ended September 30, 20222023 (in thousands):
Balance at December 31, 20212022$1,477,5641,533,424 
Purchase accounting adjustments936145 
Balance at March 31, 202220231,478,500$1,533,569 
Acquisitions33,7466,998 
Balance at June 30, 20222023$1,512,2461,540,567 
AcquisitionsPurchase accounting adjustments$20,797 (321)
Balance at September 30, 20222023$1,533,0431,540,246 
There were no changes in the carrying amount of goodwill for the three or nine months ended September 30, 2021.
The carrying amount and accumulated amortization of intangible assets consist of the following as of September 30, 20222023 and December 31, 20212022 (in thousands):
September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Gross intangible assets:Gross intangible assets:Gross intangible assets:
Referral sourcesReferral sources$509,646 $482,200 Referral sources$514,388 $509,646 
Trademarks/namesTrademarks/names38,508 47,718 Trademarks/names39,136 38,508 
Other amortizable intangible assetsOther amortizable intangible assets912 1,037 Other amortizable intangible assets1,003 912 
Total gross intangible assetsTotal gross intangible assets549,066 530,955 Total gross intangible assets554,527 549,066 
Accumulated amortization:Accumulated amortization:Accumulated amortization:
Referral sourcesReferral sources(160,159)(137,613)Referral sources(191,262)(167,902)
Trademarks/namesTrademarks/names(16,254)(26,936)Trademarks/names(18,973)(16,901)
Other amortizable intangible assetsOther amortizable intangible assets(100)(386)Other amortizable intangible assets(298)(148)
Total accumulated amortizationTotal accumulated amortization(176,513)(164,935)Total accumulated amortization(210,533)(184,951)
Total intangible assets, netTotal intangible assets, net$372,553 $366,020 Total intangible assets, net$343,994 $364,115 
Amortization expense for intangible assets was $8.6 million and $25.6 million for the three and nine months ended September 30, 2023, respectively. Amortization expense for intangible assets was $8.4 million and $24.6 million for the three and nine months ended September 30, 2022, respectively. Amortization expense for intangible assets was $7.9 million and $25.5 million for the three and nine months ended September 30, 2021, respectively.


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10. INDEBTEDNESS

Long-term debt consisted of the following as of September 30, 20222023 (in thousands):
Principal AmountDiscountDebt Issuance CostsNet BalancePrincipal AmountDiscountDebt Issuance CostsNet Balance
Asset-based-lending (“ABL”) facility$— $— $— $— 
Asset-based-lending (“ABL”) FacilityAsset-based-lending (“ABL”) Facility$— $— $— $— 
First Lien Term LoanFirst Lien Term Loan595,500 (8,638)(11,987)574,875 First Lien Term Loan589,500 (7,313)(10,149)572,038 
Senior NotesSenior Notes500,000 — (10,269)489,731 Senior Notes500,000 — (9,022)490,978 
$1,095,500 $(8,638)$(22,256)1,064,606 $1,089,500 $(7,313)$(19,171)1,063,016 
Less: current portionLess: current portion(6,000)Less: current portion(6,000)
Total long-term debtTotal long-term debt$1,058,606 Total long-term debt$1,057,016 
Long-term debt consisted of the following as of December 31, 20212022 (in thousands):
Principal AmountDiscountDebt Issuance CostsNet BalancePrincipal AmountDiscountDebt Issuance CostsNet Balance
ABL facility$— $— $— $— 
ABL FacilityABL Facility$— $— $— $— 
First Lien Term LoanFirst Lien Term Loan600,000 (9,605)(13,331)577,064 First Lien Term Loan594,000 (8,307)(11,529)574,164 
Senior NotesSenior Notes500,000 — (11,164)488,836 Senior Notes500,000 — (9,960)490,040 
$1,100,000 $(9,605)$(24,495)1,065,900 $1,094,000 $(8,307)$(21,489)1,064,204 
Less: current portionLess: current portion(6,000)Less: current portion(6,000)
Total long-term debtTotal long-term debt$1,059,900 Total long-term debt$1,058,204 
Effective June 30, 2023, the Company entered into an agreement, dated as of June 8, 2023, to amend the First Lien Term Loan (the “First Lien Credit Agreement Amendment”) solely to replace London Interbank Offered Rate (“LIBOR”) and related definitions and provisions with Secured Overnight Financing Rate (“SOFR”) as the new reference rate. The Company elected an optional expedient allowed under ASC Topic 848 such that we will account for the modification as a continuation of the existing contract.
The interest rate on the First Lien Term Loan was 5.27%8.20% and 3.25%6.82% as of September 30, 20222023 and December 31, 2021,2022, respectively. The weighted average interest rate incurred on the First Lien Term Loan was 8.11% and 7.71% for the three and nine months ended September 30, 2023, respectively. The weighted average interest rate incurred on the First Lien Term Loan was 4.94% and 3.90% for the three and nine months ended September 30, 2022, respectively. The weighted average interest rate incurred on the First Lien Term Loan was 3.84% and 5.87% for the three and nine months ended September 30, 2021, respectively. The interest rate on the Senior Notes was 4.375% as of both September 30, 20222023 and December 31, 2021.2022. The weighted average interest rate incurred on the Senior Secured Notes was 4.375% for both the three and nine months ended September 30, 2022.
2023, respectively. The weighted average interest rate incurred on the Senior Notes was 4.375% for the three and nine months ended September 30, 2022, respectively.
Long-term debt matures as follows (in thousands):
Fiscal Year Ended December 31,Minimum Payments
2022$1,500 
20236,000 
20246,000 
20256,000 
20266,000 
Thereafter1,070,000 
Total$1,095,500 

Fiscal Year Ended December 31,Minimum Payments
2023$1,500 
20246,000 
20256,000 
20266,000 
20276,000 
Thereafter1,064,000 
Total$1,089,500 
During the three and nine months ended September 30, 20222023 and 2021,2022, the Company engaged in hedging activities to limit its exposure to changes in interest rates. See Note 11, Derivative Instruments, for further discussion.
The following table presents the estimated fair values of the Company’s debt obligations as of September 30, 20222023 (in thousands):
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Financial InstrumentFinancial InstrumentCarrying Value as of September 30, 2022Markets for Identical Item (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Financial InstrumentCarrying Value as of September 30, 2023Markets for Identical Item (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
First Lien Term LoanFirst Lien Term Loan$574,875 $— $579,124 $— First Lien Term Loan$572,037 $— $591,740 $— 
Senior NotesSenior Notes489,731 — 420,000 — Senior Notes490,979 — 430,000 — 
Total debt instrumentsTotal debt instruments$1,064,606 $— $999,124 $— Total debt instruments$1,063,016 $— $1,021,740 $— 
See Note 12, Fair Value Measurements, for further discussion.
Effective January 13, 2023, the Company entered into an agreement to amend the ABL Facility, to among other things, increase the amount of borrowing availability by $50.0 million to $225.0 million total borrowing availability and to replace LIBOR with SOFR as the new reference rate.
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11. DERIVATIVE INSTRUMENTS
The Company uses derivative financial instruments for hedging and non-trading purposes to limit the Company’s exposure to increases in interest rates related to its variable interest rate debt. Use of derivative financial instruments in hedging programs subjects the Company to certain risks, such as market and credit risks. Market risk represents the possibility that the value of the derivative financial instrument will change. In a hedging relationship, the change in the value of the derivative financial instrument is offset to a great extent by the change in the value of the underlying hedged item. Credit risk related to a derivative financial instrument represents the possibility that the counterparty will not fulfill the terms of the contract. The notional, or contractual, amount of the Company’s derivative financial instruments is used to measure interest to be paid or received and does not represent the Company’s exposure due to credit risk. Credit risk is monitored through established approval procedures, including reviewing credit ratings when appropriate.
In October 2021, the Company entered into an interest rate cap hedge with a notional amount of $300 million for a 5-year term beginning November 30, 2021. The hedge partially offsets risk associated with the First Lien Term Loan’s variable interest rate. The interest rate cap instrument perfectly offsets the terms of the interest rates associated with the variable interest rate of the First Lien Term Loan. As a result of the First Lien Credit Agreement Amendment, the Company elected an optional expedient allowed under ASC Topic 848 such that we will continue the hedging relationship for the interest rate cap hedge.
The following table summarizes the amount and location of the Company’s derivative instruments in the condensed consolidated balance sheets (in thousands):
Fair Value - Derivatives in Asset Position
DerivativeBalance Sheet CaptionSeptember 30, 2022December 31, 2021
Interest rate cap designated as cash flow hedgePrepaid expenses and other current assets$8,544 $— 
Interest rate cap designated as cash flow hedgeOther noncurrent assets21,733 — 
Fair Value - Derivatives in Liability Position
DerivativeBalance Sheet CaptionSeptember 30, 2022December 31, 2021
Interest rate cap designated as cash flow hedgeAccrued expenses and other current liabilities$— $601 

Fair Value - Derivatives in Asset Position
DerivativeBalance Sheet CaptionSeptember 30, 2023December 31, 2022
Interest rate cap designated as cash flow hedgePrepaid expenses and other current assets$5,927 $10,926 
Interest rate cap designated as cash flow hedgeOther noncurrent assets22,185 17,342 
Total derivative assets$28,112 $28,268 
The gain (loss) associated with the change in the fair value of the effective portion of the hedging instrument is recorded intoin other comprehensive income.income (loss). The following table presents the pre-tax gainsgain (loss) from derivative instruments recognized in other comprehensive income (loss) in the Company’s unaudited condensed consolidated statements of comprehensive income (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
DerivativeDerivative2022202120222021Derivative2023202220232022
Interest rate cap designated as cash flow hedgeInterest rate cap designated as cash flow hedge$10,653 $— $30,879 $— Interest rate cap designated as cash flow hedge$45 $10,653 $(156)$30,879 
Interest rate swaps designated as cash flow hedges— 2,892 — 11,172 
$10,653 $2,892 $30,879 $11,172 
The following table presents the amount and location of pre-tax income (loss) recognized in the Company’s unaudited condensed consolidated statements of comprehensive income related to the Company’s derivative instruments (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
DerivativeDerivativeIncome Statement Caption2022202120222021DerivativeIncome Statement Caption2023202220232022
Interest rate cap designated as cash flow hedgeInterest rate cap designated as cash flow hedgeInterest expense$(1,775)$— $(591)$— Interest rate cap designated as cash flow hedgeInterest expense, net$2,931 $(1,775)$8,002 $(591)
Interest rate swaps designated as cash flow hedgesInterest expense— (2,903)$— $(11,298)
Interest rate swaps not designated as hedgesInterest expense— — — (2)
$(1,775)$(2,903)$(591)$(11,300)

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12. FAIR VALUE MEASUREMENTS
Fair value measurements are determined by maximizing the use of observable inputs and minimizing the use of unobservable inputs. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurements) and gives the lowest priority to unobservable inputs (Level 3 measurements). The categories within the valuation hierarchy are described as follows:
Level 1 — Inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs to the fair value measurement include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
Level 3 — Inputs to the fair value measurement are unobservable inputs or valuation techniques.
While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
First Lien Term Loan: The fair value of the First Lien Term Loan is derived from a broker quote on the loans in the syndication (Level 2 inputs). See Note 10, Indebtedness, for further discussion of the carrying amount and fair value of the First Lien Term Loan.
Senior Notes: The fair value of the Senior Notes is derived from a broker quote (Level 2 inputs). See Note 10, Indebtedness, for further discussion of the carrying amount and fair value of the Senior Notes.
Interest Rate Cap: The fair value of the interest rate cap is derived from the interest rates prevalent in the market and future expectations of those interest rates (Level 2 inputs). The Company determines the fair value of the investments based on quoted prices from third-party brokers. See Note 11, Derivative Instruments, for further discussion of the fair value of the interest rate cap.
Money Market Funds: The fair value of the money market funds is derived from the closing price reported by the fund sponsor and classified as cash and cash equivalents on the Company’s condensed consolidated balance sheets (Level 1 inputs).
There were no other material assets or liabilities measured at fair value at September 30, 20222023 and December 31, 2021.2022.
13. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal proceedings and is subject to investigations, inspections, audits, inquiries, and similar actions by governmental authorities, arising in the normal course of the Company’s business. Some of these suits may purport or may be determined to be class actions and/or involve parties seeking large and/or indeterminate amounts, including punitive or exemplary damages, and may remain unresolved for several years. From time to time, the Company may also be involved in legal proceedings as a plaintiff involving antitrust, tax, contract, intellectual property, and other matters. Gain contingencies, if any, are recognized when they are realized.
The results of legal proceedings are often uncertain and difficult to predict, and the costs incurred in litigation can be substantial, regardless of the outcome. The Company believes that its defenses and assertions in pending legal proceedings have merit and does not believe that any of these pending matters, after consideration of applicable reserves and rights to indemnification, will have a material adverse effect on the Company’s condensed consolidated balance sheets.
However, substantial unanticipated verdicts, fines, and rulings may occur. As a result, the Company may from time to time incur judgments, enter into settlements, or revise expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on its results of operations in the period in which the amounts are accrued and/or its cash flows in the period in which the amounts are paid.

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14. STOCK-BASED INCENTIVE COMPENSATION
Equity Incentive Plans — Under the Company’s 2018 Equity Incentive Plan (the “2018 Plan”), approved at the annual meeting by the BioScrip stockholders on May 3, 2018 and amended and restated on May 19, 2021, the Company may issue, among other things, incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock grants, and performance units to key employees and directors, resulting in a total of 9,101,734 shares of common stock are authorized for issuance. The 2018 Plan is administered by the Company’s Compensation Committee, a standing committee of the Company’s Board of Directors. The Company had stock options, restricted stock units and performance stock units outstanding related to the 2018 Plan as of September 30, 2023 and 2022. During the three and nine months ended September 30, 2023, total stock-based incentive compensation expense recognized by the Company related to the 2018 Plan was $9.2 million and $22.9 million, respectively. During the three and nine months ended September 30, 2022, total stock-based incentive compensation expense recognized by the Company related to the 2018 Plan was $4.0 million and $12.6 million, respectively. During the three and nine months ended September 30, 2021, total stock-based incentive compensation expense recognized by the Company related to the 2018 Plan was $2.5$4.0 million and $6.2$12.6 million, respectively.
15. STOCKHOLDERS’ EQUITY
2017 Warrants During the three and nine months ended September 30, 2023, warrant holders elected to exercise 188,350 warrants to purchase shares of common stock. During the three months ended September 30, 2022, warrant holders did not elect to exercise any warrants to purchase shares of common stock. During the nine months ended September 30, 2022, warrant holders elected to exercise 1,130,089 warrants to purchase shares of common stock. During the three and nine months ended September 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common stock. As of September 30, 20222023 and December 31, 2021,2022, the remaining warrant holders are entitled to purchase 240,18851,838 and 1,370,277240,188 shares of common stock, respectively.
2015 Warrants — During the three and nine months ended September 30, 2022,2023, warrant holders elected to exercise 31,968 and 900,272exercised an immaterial number of warrants to purchase shares of common stock, respectively.stock. During the three and nine months ended September 30, 2021,2022, warrant holders did not electelected to exercise any31,968 and 900,272 warrants to purchase shares of common stock.stock, respectively. As of September 30, 20222023 and December 31, 2021,2022, the remaining warrant holders are entitled to purchase 15,23113,892 and 915,50315,231 shares of common stock, respectively.
Share Repurchase Program — On February 20, 2023, the Company’s Board of Directors approved a share repurchase program of up to an aggregate $250.0 million of common stock of the Company. Under the share repurchase program, repurchases may occur in any number of methods depending on timing, market conditions, regulatory requirements, and other corporate considerations. The share repurchase program has no specified expiration date.
During the three and nine months ended September 30, 2023, the Company purchased 2,913,520 and 5,388,686 shares of common stock for an average share price of $34.32 and $32.48, totaling $100.0 million and $175.0 million, respectively. All repurchased shares became treasury stock. As of September 30, 2023, the Company is authorized to repurchase up to a remaining $75.0 million of common stock of the Company.
16. RELATED-PARTY TRANSACTIONS
Transactions with Equity-Method Investees — The Company provides management services to its joint ventures such as accounting, invoicing and collections in addition to day-to-day managerial support of the operations of the businesses. The Company recorded management fee income of $1.3 million and $3.9 million for the three and nine months ended September 30, 2023, respectively. The Company recorded management fee income of $1.1 million and $2.9 million for the three and nine months ended September 30, 2022, respectively. The Company recorded management fee income of $0.9 million and $2.6 million for the three and nine months ended September 30, 2021, respectively. Management fees are recorded in net revenues in the accompanying unaudited condensed consolidated statements of comprehensive income. During the three and nine months ended September 30, 2023, the Company received distributions from the investees of $1.5 million and $4.0 million, respectively. During the three and nine months ended September 30, 2022, the Company received distributions from the investees of $1.5 million and $2.5 million, respectively. During the three and nine months ended September 30, 2021, the Company received $1.3 million in distributions from the investees.
The Company had an amounts due from its joint ventures of $0.8$0.2 million and due to its joint ventures of $0.6 million as of September 30, 2022. These receivables2023. Receivables were included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. Payables were included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. The Company also had amounts due to its joint ventures of $1.4$1.5 million as of December 31, 2021.2022. These payables were included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. These balances primarily relate to cash collections received by the Company on behalf of the joint ventures, offset by certain pharmaceutical inventories and other expenses paid for by the Company on behalf of the joint ventures.

Share Repurchase Agreement
— On February 28, 2023, we entered into a Share Repurchase Agreement (the “Share Repurchase Agreement”) with HC I, pursuant to which we agreed to repurchase, subject to the terms and conditions contained therein, up to $75.0 million of our common stock then held by HC I at the same purchase price per share as the underwriter in a concurrent underwritten public offering of our common stock held by HC I. On March 3, 2023, the transactions contemplated by the Share Repurchase Agreement closed, and we repurchased directly from HC I 2,475,166 shares of our common stock.
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise, references in this report to "Option Care Health," the “Company,” “we,” “us” and “our” refer to Option Care Health, Inc. and its consolidated subsidiaries. Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to assist the reader in understanding and assessing significant changes and trends related to our results of operations and financial condition. The following discussion and analysis should be read in conjunction with the Company’s unaudited condensed consolidated financial statements and the related notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Form 10-Q”). Certain statements in this Item 2 of Part I of this Form 10-Q, and in Item 1A, “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 20212022 (our “Form 10-K”), may cause our actual results, financial position, and cash and cash equivalents generated from operations to differ materially from these forward-looking statements.
Business Overview
Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 161174 locations around the United States. The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients’ homes or other nonhospital settings. Our services are provided in coordination with, and under the direction of, the patient’s physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists,dietitians work with the physician to develop a plan of care suited to each patient’s specific needs. We provide home infusion services consisting of anti-infectives, nutrition support, bleeding disorder therapies, immunoglobulin therapy, and other therapies for chronic and acute conditions.
HC Group Holdings II, Inc. (“HC II”) was incorporated under the laws of the State of Delaware on January 7, 2015, with its sole shareholder being HC Group Holdings I, LLC. (“HC I”). On April 7, 2015, HC I and HC II collectively acquired Walgreens Infusion Services, Inc. and its subsidiaries from Walgreen Co., and the business was rebranded as Option Care, Inc. (“Option Care”). Care.
On March 14, 2019, HC I and HC II entered into a definitive agreement (the “Merger Agreement”)the Merger Agreement to merge with and into a wholly-owned subsidiary of BioScrip, Inc. (“BioScrip”) (the “Merger”), a national provider of infusion and home care management solutions, which was completed on August 6, 2019 (the “Merger Date”). The Merger was accounted for as a reverse merger under the acquisition method of accounting for business combinations with Option Care being considered the accounting acquirer and BioScrip being considered the legal acquirer.2019. Following the close of the transaction, BioScrip was rebranded as Option Care Health, Inc. and the combined company’s common stock, par value $0.0001, is listed on the Nasdaq Capital Market under the ticker symbol “OPCH”.

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Update on the Impact of the COVID-19 Pandemic
The primary operationsOn May 11, 2023 the Department of Health and Human Services declared the Company focus on providing infusion therapy services and based on the recent impact of theCOVID-19 pandemic across the healthcare ecosystem, the Company began experiencingis no longer a related impact across a number of facets beginning in March 2020. The Company has been disrupted by both positive and negative referral patterns, experienced challenges in our staffing, increased pricing and periodic inability to procure personal protection equipment, supplies and key drugs.public health emergency. The Company anticipates that the pandemicnew variants could affect its operations for an extended period; however, at this time itwe cannot confidently forecast the duration noror the ultimate financial impact on itsour operations.
See Item 1A. “Risk Factors” under the caption “The COVID-19 pandemic and other potential pandemic events could adversely impact our business, operations, results of operations, cash flows and financial position” included in our Form 10-K for further discussion of risks.

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Composition of Results of Operations
The following results of operations include the accounts of Option Care Health and our subsidiaries for the three and nine months ended September 30, 20222023 and 2021.2022.
Gross Profit
Gross profit represents our net revenue less cost of revenue.
Net Revenue. Infusion and related health care services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods. When nursing services are provided, revenue is recognized when the services are rendered.
Due to the nature of the health care industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded.
Cost of Revenue. Cost of revenue consists of the actual cost of pharmaceuticals and other medical supplies dispensed to patients. In addition to product costs, cost of revenue includes warehousing costs, purchasing costs, depreciation expense relating to revenue-generating assets, such as infusion pumps, shipping and handling costs, and wages and related costs for the pharmacists, nurses, and all other employees and contracted workers directly involved in providing service to the patient.
The Company receives volume-based rebates and prompt payment discounts from some of its pharmaceutical and medical supplies vendors. These payments are recorded as a reduction of inventory and are accounted for as a reduction of cost of revenue when the related inventory is sold.
Operating Costs and Expenses
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist principally of salaries for administrative employees that directly and indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.
Depreciation and Amortization Expense. Depreciation within this caption includes infrastructure items such as computer hardwarerelates to fixed assets and software, office equipment and leasehold improvements.amortization relates to intangibles. Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue.
Other Income (Expense)
Interest Expense, Net. Interest expense consists principally of interest payments on the Company’s outstanding borrowings under the ABL Facility, the First Lien Term Loan, and the Senior Notes, amortization of discount and deferred financing fees.fees, payments associated with the interest rate cap, and interest income earned on cash and cash equivalents. Refer to the “Liquidity and Capital Resources” section below for further discussion of these outstanding borrowings.
Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems.
Other, Net. Other income (expense) primarily includes activity in the prior year loss on extinguishment of debt incurred in connection with the January 2021 debt refinancingrelated to non-operating income and miscellaneous non-operating expenses.
Income Tax Expense. The Company is subject to taxation in the United States and various states. The Company’s income tax expense is reflective of the current federal and state tax rates.
Change in Unrealized Gains (Losses) on Cash Flow Hedges, Net of Income Tax Expense (Benefit)Benefit (Expense). Change in unrealized gains (losses) on cash flow hedges, net of income taxes,tax expense consists of the gains and losses associated with the changes in the fair value of derivatives designated as hedging instruments related to the interest rate caps and interest rate swaps,cap hedge, net of income taxes.

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Results of Operations
The following table presents Option Care Health’s consolidated results of operations for the three and nine months ended September 30, 20222023 and September 30, 20212022 (in thousands, except for percentages):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021 2023202220232022
Amount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of RevenueAmount% of Revenue
NET REVENUENET REVENUE$1,020,918 100.0 %$891,937 100.0 %$2,917,522 100.0 %$2,511,446 100.0 %NET REVENUE$1,093,014 100.0 %$1,020,918 100.0 %$3,177,934 100.0 %$2,917,522 100.0 %
COST OF REVENUECOST OF REVENUE802,917 78.6 %688,969 77.2 %2,281,685 78.2 %1,944,037 77.4 %COST OF REVENUE838,748 76.7 %802,917 78.6 %2,443,834 76.9 %2,281,685 78.2 %
GROSS PROFITGROSS PROFIT218,001 21.4 %202,968 22.8 %635,837 21.8 %567,409 22.6 %GROSS PROFIT254,266 23.3 %218,001 21.4 %734,100 23.1 %635,837 21.8 %
OPERATING COSTS AND EXPENSES:OPERATING COSTS AND EXPENSES:OPERATING COSTS AND EXPENSES:
Selling, general and administrative expensesSelling, general and administrative expenses142,015 13.9 %134,633 15.1 %417,771 14.3 %388,930 15.5 %Selling, general and administrative expenses158,214 14.5 %142,015 13.9 %459,644 14.5 %417,771 14.3 %
Depreciation and amortization expenseDepreciation and amortization expense15,268 1.5 %15,452 1.7 %46,027 1.6 %48,410 1.9 %Depreciation and amortization expense15,005 1.4 %15,268 1.5 %44,417 1.4 %46,027 1.6 %
Total operating expenses Total operating expenses157,283 15.4 %150,085 16.8 %463,798 15.9 %437,340 17.4 %Total operating expenses173,219 15.8 %157,283 15.4 %504,061 15.9 %463,798 15.9 %
OPERATING INCOMEOPERATING INCOME60,718 5.9 %52,883 5.9 %172,039 5.9 %130,069 5.2 %OPERATING INCOME81,047 7.4 %60,718 5.9 %230,039 7.2 %172,039 5.9 %
OTHER INCOME (EXPENSE):OTHER INCOME (EXPENSE):OTHER INCOME (EXPENSE):
Interest expense, netInterest expense, net(13,997)(1.4)%(16,000)(1.8)%(39,008)(1.3)%(52,717)(2.1)%Interest expense, net(11,786)(1.1)%(13,997)(1.4)%(38,816)(1.2)%(39,008)(1.3)%
Equity in earnings of joint venturesEquity in earnings of joint ventures1,472 0.1 %1,676 0.2 %4,065 0.1 %4,567 0.2 %Equity in earnings of joint ventures1,273 0.1 %1,472 0.1 %4,107 0.1 %4,065 0.1 %
Other, netOther, net3,888 0.4 %— %3,891 0.1 %(12,392)(0.5)%Other, net(449)— %3,888 0.4 %84,487 2.7 %3,891 0.1 %
Total other expense(8,637)(0.8)%(14,320)(1.6)%(31,052)(1.1)%(60,542)(2.4)%
Total other (expense) incomeTotal other (expense) income(10,962)(1.0)%(8,637)(0.8)%49,778 1.6 %(31,052)(1.1)%
INCOME BEFORE INCOME TAXESINCOME BEFORE INCOME TAXES52,081 5.1 %38,563 4.3 %140,987 4.8 %69,527 2.8 %INCOME BEFORE INCOME TAXES70,085 6.4 %52,081 5.1 %279,817 8.8 %140,987 4.8 %
INCOME TAX EXPENSEINCOME TAX EXPENSE13,258 1.3 %3,087 0.3 %37,960 1.3 %5,096 0.2 %INCOME TAX EXPENSE13,783 1.3 %13,258 1.3 %69,904 2.2 %37,960 1.3 %
NET INCOMENET INCOME$38,823 3.8 %$35,476 4.0 %$103,027 3.5 %$64,431 2.6 %NET INCOME$56,302 5.2 %$38,823 3.8 %$209,913 6.6 %$103,027 3.5 %
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Change in unrealized gains on cash flow hedges, net of income tax expense of $1,398, $0, $5,917 and $0, respectively$9,255 0.9 %$2,892 0.3 %$24,962 0.9 %$11,172 0.4 %
OTHER COMPREHENSIVE INCOME$9,255 0.9 %$2,892 0.3 %$24,962 0.9 %$11,172 0.4 %
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Change in unrealized gain (loss) on cash flow hedges, net of income tax benefit (expense) of $8, $(1,398), $57, and $(5,917), respectivelyChange in unrealized gain (loss) on cash flow hedges, net of income tax benefit (expense) of $8, $(1,398), $57, and $(5,917), respectively53 — %9,255 0.9 %(99)— %24,962 0.9 %
OTHER COMPREHENSIVE INCOME (LOSS)OTHER COMPREHENSIVE INCOME (LOSS)53 — %9,255 0.9 %(99)— %24,962 0.9 %
NET COMPREHENSIVE INCOMENET COMPREHENSIVE INCOME$48,078 4.7 %$38,368 4.3 %$127,989 4.4 %$75,603 3.0 %NET COMPREHENSIVE INCOME$56,355 5.2 %$48,078 4.7 %$209,814 6.6 %$127,989 4.4 %

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Three Months Ended September 30, 20222023 Compared to Three Months Ended September 30, 20212022
The following tables present selected consolidated comparative results of operations from Option Care Health’s unaudited condensed consolidated financial statements for the three months ended September 30, 20222023 and 2021.2022.
Gross Profit
Three Months Ended September 30, Three Months Ended September 30,
20222021Variance20232022Variance
(in thousands, except for percentages)(in thousands, except for percentages)
Net revenueNet revenue$1,020,918 $891,937 $128,981 14.5 %Net revenue$1,093,014 $1,020,918 $72,096 7.1 %
Cost of revenueCost of revenue802,917 688,969 113,948 16.5 %Cost of revenue838,748 802,917 35,831 4.5 %
Gross profitGross profit$218,001 $202,968 $15,033 7.4 %Gross profit$254,266 $218,001 $36,265 16.6 %
Gross profit marginGross profit margin21.4 %22.8 %Gross profit margin23.3 %21.4 %
The increase in net revenue was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of acute revenue that had mid-single-digit growth relative to the prior year while chronic revenue grew in the mid-teens. Acute growth was driven primarily by the impact of shifts in the competitive landscape, which increased the volume of patient service. Acquisition related growth accounted for approximately 2% and 3% of thehigh-single-digits. The increase in net revenue was partially offset by the divestiture of respiratory therapy assets as well as therapies related to the treatment of ALS and gross profit, respectively.pre-term labor. The increase in cost of revenue and gross profit was primarily driven by the growth in revenue, which outpaced the increase in cost of revenue primarily due to our disciplined procurement strategies, certain temporary favorable therapy pricing dynamics, and also impacted by inflationary pressures including labor, transportation, and medical supplies costs.

efficient utilization of our infusion suite network.
Operating Expenses
Three Months Ended September 30, Three Months Ended September 30,
20222021Variance 20232022Variance
(in thousands, except for percentages)(in thousands, except for percentages)
Selling, general and administrative expensesSelling, general and administrative expenses$142,015 $134,633 $7,382 5.5 %Selling, general and administrative expenses$158,214 $142,015 $16,199 11.4 %
Depreciation and amortization expenseDepreciation and amortization expense15,268 15,452 (184)(1.2)%Depreciation and amortization expense15,005 15,268 (263)(1.7)%
Total operating expenses Total operating expenses$157,283 $150,085 $7,198 4.8 %Total operating expenses$173,219 $157,283 $15,936 10.1 %
The increase in selling, general and administrative expenses is primarily due to an increase in salaries, benefits and benefits as a result of acquired team members and inflationary pressures, but has decreased as a percentage of revenue to 13.9% for the three months ended September 30, 2022 as compared to 15.1% for the three months ended September 30, 2021, as our revenue has grown at a faster pace than our selling, general and administrative expenses.
The decrease in depreciation and amortization expense is primarily attributed to certain intangible assets whose useful life expired partially offset by additional intangible assets due to acquisitions.

equity compensation.
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Other Income (Expense)
 Three Months Ended September 30,
 20222021Variance
(in thousands, except for percentages)
Interest expense, net$(13,997)$(16,000)$2,003 (12.5)%
Equity in earnings of joint ventures1,472 1,676 (204)(12.2)%
Other, net3,888 3,884 97,100.0 %
      Total other expense$(8,637)$(14,320)$5,683 (39.7)%

 Three Months Ended September 30,
 20232022Variance
(in thousands, except for percentages)
Interest expense, net$(11,786)$(13,997)$2,211 (15.8)%
Equity in earnings of joint ventures1,273 1,472 (199)(13.5)%
Other, net(449)3,888 (4,337)(111.5)%
Total other expense$(10,962)$(8,637)$(2,325)26.9 %
The decrease in interest expense, net during the three months ended September 30, 20222023 was primarily attributable to the debt refinancing ofan increase in interest income generated from our cash and cash equivalents, partially offset by increases in the First Lien Term Loan and issuance of the Senior Notes in October 2021.Loan’s variable interest rate compared to three months ended September 30, 2022. See Note 10, Indebtedness, of the consolidated financial statements for further information.
The decrease in equity in earnings of joint ventures was primarily attributableOther, net during the three months ended September 30, 2023 as compared to the performance of the joint ventures.
The change in other, net is due to one-time non-operating income for the three months ended September 30, 2022 is primarily related to one-time non-operating income from a prior legacy acquisition.during the three months ended September 30, 2022. There was no comparable activity during the three months ended September 30, 2021.    
2023.
Income Tax Expense
 Three Months Ended September 30,
 20222021Variance
(in thousands, except for percentages)
Income tax expense$13,258 $3,087 $10,171 329.5 %


 Three Months Ended September 30,
 20232022Variance
(in thousands, except for percentages)
Income tax expense$13,783 $13,258 $525 4.0 %
The Company maintains a valuation allowancerecorded income tax expense of $13.1$13.8 million against certain state net operating losses (“NOLs”).and $13.3 million for the three months ended September 30, 2023 and 2022, respectively. The Company’s tax expense for the three months ended September 30, 2023 and 2022 consists of quarterly tax liabilities attributable to state tax returns as well as recognized deferred federal and state tax expense. These tax expense items resulted inrepresents an effective tax rate of 19.7% and 25.5% during, respectively. The variance in the Company’s effective tax rate of 19.7% for the three months ended September 30, 2022. During2023, compared to the three months ended September 30, 2021,federal statutory rate of 21%, is primarily attributable to the effectivedifference between federal and state tax rate was 8.0%.rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 25.5% for the three months ended September 30, 2022, compared to the federal statutory rate of 21%, is primarily attributable to current and deferred state taxes as well as various non-deductible expenses. The variance in the Company’s effective tax rate of 8.0% for the three months ended September 30, 2021, compared to the federal statutory rate of 21% is primarily attributable to the Company only recognizing certain deferred federal and state tax expense and current state tax expense while any tax benefits that would have otherwise been recognized were offset by the Company’s tax valuation allowance in effect during that period. The variance in the year-over-year effective tax rates is primarily attributable to the Company not recognizing any tax benefit for the period ended September 30, 2021, because it maintained a full tax valuation allowance reserve against such benefits. This reserve was subsequently reversed during the three months ended December 31, 2021, except for the $13.1 million allowance noted above. Therefore, the reserve was not applicable in computing tax expense for the three months ended September 30, 2022, thus producing the effective tax rate variance year-over-year.


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Net Income and Other Comprehensive Income
Three Months Ended September 30, Three Months Ended September 30,
20222021Variance 20232022Variance
(in thousands, except for percentages)(in thousands, except for percentages)
Net incomeNet income$38,823 $35,476 $3,347 9.4 %Net income$56,302 $38,823 $17,479 45.0 %
Other comprehensive income, net of tax:Other comprehensive income, net of tax:Other comprehensive income, net of tax:
Changes in unrealized gains on cash flow hedges, net of income taxes9,255 2,892 6,363 220.0 %
Changes in unrealized gain on cash flow hedges, net of income taxesChanges in unrealized gain on cash flow hedges, net of income taxes53 9,255 (9,202)(99.4)%
Other comprehensive incomeOther comprehensive income$9,255 2,892 6,363 220.0 %Other comprehensive income53 9,255 (9,202)(99.4)%
Net comprehensive incomeNet comprehensive income$48,078 $38,368 $9,710 25.3 %Net comprehensive income$56,355 $48,078 $8,277 17.2 %
The change in net income was primarily attributable to organic growth from additional revenue related to the factors described in the above sections.
For the three months ended September 30, 2023 and 2022, the change in unrealized gainsgain on cash flow hedges, net of income taxes was primarily related to the increasechange in fair market value of the $300.0 million interest rate cap hedge executed in October 2021. For the three months ended September 30, 2021, the change in unrealized gains on cash flow hedges, net of income taxes, primarily related to the increase in fair value on the $925.0 million notional swap; the swap expired in August 2021.
Net comprehensive income increased to $48.1$56.4 million for the three months ended September 30, 2022,2023, compared to net comprehensive income of $38.448.1 million for the three months ended September 30, 2021,2022, primarily as a result of the changes in net income discussed above further increasedand partially offset by the impact of the fair value of the interest rate cap hedge.
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Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
The following tables present selected consolidated comparative results of operations from Option Care Health’s unaudited condensed consolidated financial statements for the nine months ended September 30, 20222023 and 2021.2022.
Gross Profit
Nine Months Ended September 30, Nine Months Ended September 30,
20222021Variance 20232022Variance
(in thousands, except for percentages)(in thousands, except for percentages)
Net revenueNet revenue$2,917,522 $2,511,446 $406,076 16.2 %Net revenue$3,177,934 $2,917,522 $260,412 8.9 %
Cost of revenueCost of revenue2,281,685 1,944,037 337,648 17.4 %Cost of revenue2,443,834 2,281,685 162,149 7.1 %
Gross profitGross profit$635,837 $567,409 $68,428 12.1 %Gross profit$734,100 $635,837 $98,263 15.5 %
Gross profit marginGross profit margin21.8 %22.6 %Gross profit margin23.1 %21.8 %
The increase in net revenue was primarily driven by organic growth in the Company’s portfolio of therapies, consisting of acute revenue that had mid-single-digit growth relative to the prior year while chronic revenue grew in the high-teens. Acute growth was driven primarily by the impact of shifts in the competitive landscape, which increased the volume of patient service. Acquisition related growth accounted for approximately 2% and 3% of thelow-double-digits. The increase in net revenue was partially offset by the divestiture of respiratory therapy assets as well as therapies related to the treatment of ALS and gross profit, respectively.pre-term labor. The increase in cost of revenue and gross profit was primarily driven by the growth in revenue, which outpaced the increase in cost of revenue primarily due to our disciplined procurement strategies, certain temporary favorable therapy pricing dynamics, and also impacted by inflationary pressures including labor, transportation, and medical supplies costs.efficient utilization of our infusion suite network.

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Operating Expenses
Nine Months Ended September 30, Nine Months Ended September 30,
20222021Variance 20232022Variance
(in thousands, except for percentages)(in thousands, except for percentages)
Selling, general and administrative expensesSelling, general and administrative expenses$417,771 $388,930 $28,841 7.4 %Selling, general and administrative expenses$459,644 $417,771 $41,873 10.0 %
Depreciation and amortization expenseDepreciation and amortization expense46,027 48,410 (2,383)(4.9)%Depreciation and amortization expense44,417 46,027 (1,610)(3.5)%
Total operating expenses Total operating expenses$463,798 $437,340 $26,458 6.0 %Total operating expenses$504,061 $463,798 $40,263 8.7 %
The increase in selling, general and administrative expenses is primarily due to an increase in salaries, benefits, and benefitsequity compensation as a result of acquiredexpansion of team members and inflationary pressures, but has decreasedto adjust to current volumes, however, these expenses have remained relatively consistent as a percentage of revenue toat 14.5% and 14.3% for the nine months ended September 30, 2023 and 2022, as compared to 15.5% for the nine months ended September 30, 2021, as our revenue has grown at a faster pace than our selling, general and administrative expenses.
The decrease in depreciation and amortization expense is primarily attributed to certain intangible assets whose useful life expired partially offset by additional intangible assetsrespectively, due to acquisitions.








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the Company’s focus on controlling spending leverage.
Other Income (Expense)
Nine Months Ended September 30, Nine Months Ended September 30,
20222021Variance 20232022Variance
(in thousands, except for percentages)(in thousands, except for percentages)
Interest expense, netInterest expense, net$(39,008)$(52,717)$13,709 (26.0)%Interest expense, net$(38,816)$(39,008)$192 (0.5)%
Equity in earnings of joint venturesEquity in earnings of joint ventures4,065 4,567 (502)(11.0)%Equity in earnings of joint ventures4,107 4,065 42 1.0 %
Other, netOther, net3,891 (12,392)16,283 (131.4)%Other, net84,487 3,891 80,596 2,071.3 %
Total other expense$(31,052)$(60,542)$29,490 (48.7)%
Total other income (expense)Total other income (expense)$49,778 $(31,052)$80,830 (260.3)%
The decreaseincrease in interest expenseOther, net during the nine months ended September 30, 2022 was primarily attributable to the debt refinancing of the First Lien Term Loan and issuance of the Senior Notes in October 2021. See Note 10, Indebtedness, of the consolidated financial statements for further information.
The decrease in equity in earnings of joint ventures was primarily attributable to the performance of the joint ventures.
The change in other, net2023 is primarily due to the loss$106.0 million payment received on extinguishmentbehalf of debt incurred in conjunction withAmedisys, under the January 2021 debt refinancing and included interms of the results for the nine months ended September 30, 2021.Mutual Termination Agreement, net of merger-related expenses. There was no comparable activity during the nine months ended September 30, 2022. There was also one-time non-operatingSee Note 3, Business Combinations, for further discussion.
Income Tax Expense
 Nine Months Ended September 30,
 20232022Variance
(in thousands, except for percentages)
Income tax expense$69,904 $37,960 $31,944 84.2 %
The Company recorded income tax expense of $69.9 million and $38.0 million for the nine months ended September 30, 2023 and 2022, related torespectively. The income from a prior legacy acquisition.
Income Tax Expense
 Nine Months Ended September 30,
 20222021Variance
(in thousands, except for percentages)
Income tax expense$37,960 $5,096 $32,864 644.9 %

The Company maintains a valuation allowance of $13.1 million against certain state NOLs. The Company’s tax expense for the nine months ended September 30, 2022, consists2023 includes $22.1 million of quarterly tax liabilities attributable to state tax returns as well as recognized deferred federal and state tax expense. These tax expense items resulted in an effectiverelated to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. The tax rate of 26.9% duringexpense for the nine months ended September 30, 2022. During2023 and 2022 represents an effective tax rate of 25.0% and 26.9%, respectively. The variance in the Company’s effective tax rate of 25.0% for the nine months ended September 30, 2021,2023, compared to the effectivefederal statutory rate of 21%, is primarily attributable to the difference between federal and state tax rate was 7.3%.rates, various non-deductible expenses, and a change in state valuation allowance. The variance in the Company’s effective tax rate of 26.9% for the nine months ended September 30, 2022, compared to the federal statutory rate of 21%, is primarily attributable to current and deferred state taxes as well as various non-deductible expenses. The variance in the Company’s effective tax rate of 7.3% for the nine months ended September 30, 2021, compared to the federal statutory rate of 21% is primarily attributable to the Company only recognizing certain deferred federal and state tax expense and current state tax expense while any tax benefits that would have otherwise been recognized were offset by the Company’s tax valuation allowance in effect during that period. The variance in the year-over-year effective tax rates is primarily attributable to the Company not recognizing any tax benefit for the period ended September 30, 2021, because it maintained a full tax valuation allowance reserve against such benefits. This reserve was subsequently reversed during the three months ended December 31, 2021, except for the $13.1 million allowance noted above. Therefore, the reserve was not applicable in computing tax expense for the nine months ended September 30, 2022, thus producing the effective tax rate variance year-over-year.









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Net Income and Other Comprehensive (Loss) Income

 Nine Months Ended September 30,
 20222021Variance
(in thousands, except for percentages)
Net income$103,027 $64,431 $38,596 59.9 %
Other comprehensive income, net of tax:
Changes in unrealized gains on cash flow hedges, net of income taxes24,962 11,172 13,790 123.4 %
Other comprehensive income$24,962 11,172 13,790 123.4 %
Net comprehensive income$127,989 $75,603 $52,386 69.3 %

 Nine Months Ended September 30,
 20232022Variance
(in thousands, except for percentages)
Net income$209,913 $103,027 $106,886 103.7 %
Other comprehensive (loss) income, net of tax:
Changes in unrealized (loss) gain on cash flow hedges, net of income taxes(99)24,962 (25,061)(100.4)%
Other comprehensive (loss) income(99)24,962 (25,061)(100.4)%
Net comprehensive income$209,814 $127,989 $81,825 63.9 %
The change in net income was primarily attributable to organic growth from additional revenue related to the factors described in the above sections. Additionally, the change in net income was attributable to the $106.0 million payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses. There was no comparable activity during the nine months ended September 30, 2022.
For the nine months ended September 30, 2022,2023, the change in unrealized gains(loss) gain on cash flow hedges, net of income taxes was related to the increasechange in fair market value of the $300.0 million interest rate cap hedge executed in October 2021. For
Net comprehensive income increased to $209.8 million for the nine months ended September 30, 2021, the change in unrealized gains on cash flow hedges,2023, compared to net of income taxes, primarily related to the increase in fair value on the $925.0 million notional swap; the swap expired in August 2021.
Net comprehensive income increased toof $128.0 million for the nine months ended September 30, 2022, compared to net comprehensive income of $75.6 million for the nine months ended September 30, 2021, primarily as a result of the changes in net income discussed above further increasedand partially offset by the impact of the fair value of the interest rate cap hedge.

Liquidity and Capital Resources
For the nine months ended September 30, 20222023 and the twelve months ended December 31, 2021,2022, the Company’s primary sources of liquidity were cash on handand cash equivalents of $255.5$386.5 million and $119.4$294.2 million, respectively, as well asrespectively. As of September 30, 2023, the Company had $219.7 million of borrowings available under its credit facilities (net of $5.3 million undrawn letters of credit issued and outstanding). As of December 31, 2022, the Company had $168.3 million of borrowings available under its credit facilities (net of $6.7 million undrawn letters of credit issued and outstanding). During the nine months ended September 30, 20222023 and the yeartwelve months ended December 31, 2021,2022, the Company’s positive cash flows from operations enabled investments in pharmacy and information technology infrastructure to support growth and create additional capacity in the future, as well as to pursue acquisitions.acquisitions and share repurchases.
The Company’s primary uses of cash and cash equivalents include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, and the pursuit of acquisitions.acquisitions, and share repurchases. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on outstanding debt.debt and cash taxes. Ongoing investing cash flows are primarily associated with capital projects related to business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the proceeds of warrant exercises, along with quarterly principal payments on our outstanding debt.debt, along with potential future share repurchases.
Our business strategy includes the deployment of capital to pursue acquisitions that complement our existing operations. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company historically has funded its acquisitions with cash and cash equivalents with the exception of the Merger. The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms.









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Short-Term and Long-Term Liquidity Requirements
The Company’s ability to make principal and interest payments on any borrowings under our credit facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash and cash equivalents in the future, which to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based on our current level of operations and planned capital expenditures, we believe that our existing cash and cash equivalents balances and expected cash flows generated from operations will be sufficient to meet our operating requirements over the next 12 months and beyond. We may require additional borrowings under our credit facilities and alternative forms of financings or investments to achieve our longer-term strategic plans.
Credit Facilities
Effective January 13, 2023, the Company entered into an agreement to amend the ABL Facility, to among other things, increase the amount of borrowing availability by $50.0 million to $225.0 million total borrowing availability and to replace LIBOR with SOFR as the new reference rate. The Company’s asset-based-lending revolving credit facilityABL Facility provides for borrowings up to $175.0$225.0 million whichand matures on October 27, 2026 (the “ABL Facility”).2026. The ABL Facility bears interest at a rate equal to, at the Borrowers’Company’s election, either (i) a base rate determined in accordance with the ABL Credit Agreement plus an applicable margin, which is equal to between 0.25% and 0.75% based on the historical excess availability as a percentage of the Line Cap (as such term is defined in the ABL Credit Agreement) and (ii) LIBORSOFR (or a comparable successor rate, with a floor of 0.00% per annum) plus an applicable margin, which is equal to between 1.25% and 1.75% based on the historical excess availability as a percentage of the Line Cap. The Company had $6.7$5.3 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the ABL Facility of $168.3$219.7 million as of September 30, 2022.2023.

Effective June 30, 2023, the Company entered into an agreement, dated as of June 8, 2023, to amend the First Lien Term Loan to replace LIBOR and related definitions and provisions with SOFR as the new reference rate. The principal balance of the First Lien Term Loan is repayable in quarterly installments of $1.5 million plus interest, with a final payment of all remaining outstanding principal due on October 27, 2028. The quarterly principal payments commenced in March of 2022. InterestUnder the First Lien Credit Agreement Amendment, interest on the First Lien Term Loan is payable monthly on either (i) LIBOR (or a comparable successor rate, withSOFR (with a floor of 0.50% per annum) plus an applicable margin of 2.75% for Eurocurrency RateTerm SOFR Loans and(as such term is defined in the First Lien Credit Agreement Amendment); or (ii) a base rate determined in accordance with the new First Lien Term Loan agreement,Credit Agreement Amendment, plus 1.75% for Base Rate Loans.

Loans (as such term is defined in the First Lien Credit Agreement Amendment).
The Senior Notes bear interest at a rate of 4.375% per annum whichand are payable semi-annually in arrears on October 31 and April 30 of each year, and which began on April 30, 2022. The Senior Notes mature on October 31, 2029.

Interest payments over the course of long-term debt obligations total an estimated $344.7$377.4 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on the LIBOR ratecurrent rates as of September 30, 2022.2023. Actual payments are based on changes in LIBORSOFR and exclude the interest rate cap derivative instrument.
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Cash Flows
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
The following table presents selected data from Option Care Health’s unaudited condensed consolidated statements of cash flows:
Nine Months Ended September 30, Nine Months Ended September 30,
20222021Variance 20232022Variance
(in thousands)(in thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$224,092 $143,259 $80,833 Net cash provided by operating activities$320,326 $224,092 $96,234 
Net cash used in investing activitiesNet cash used in investing activities(104,426)(30,596)(73,830)Net cash used in investing activities(40,725)(104,426)63,701 
Net cash provided by (used in) financing activities16,379 (11,072)27,451 
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(187,298)16,379 (203,677)
Net increase in cash and cash equivalentsNet increase in cash and cash equivalents136,045 101,591 34,454 Net increase in cash and cash equivalents92,303 136,045 (43,742)
Cash and cash equivalents - beginning of periodCash and cash equivalents - beginning of period119,423 99,265 20,158 Cash and cash equivalents - beginning of period294,186 119,423 174,763 
Cash and cash equivalents - end of periodCash and cash equivalents - end of period$255,468 $200,856 $54,612 Cash and cash equivalents - end of period$386,489 $255,468 $131,021 
Cash Flows from Operating Activities
The increase in cash flows provided by operating activities is primarily due to higher net income, decreasethe Termination Fee received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses and taxes, changes in interest expense due to the October 2021 debt refinancings,accrued compensation and employee benefits, and changes in inventory, partially offset by cash paid for taxes, prepaid expenses, other current assets, certain accruals and timing of vendor payments and deferred income taxes, which were partially offset by changes in inventory and certain accruals during the nine months ended September 30, 20222023 as compared to the nine months ended September 30, 2021.2022.
Cash Flows from Investing Activities
The increasedecrease in cash flows used in investing activities is primarily due to the acquisitions of SPNN and RHI made withinduring the nine months ended September 30, 2022,2023 is primarily due a decrease in acquisition activity as compared to the acquisition of Biocure made within the nine months ended September 30, 2021.2022.
Cash Flows from Financing Activities
The increase in cash providedused in financing activities is primarily related to the proceeds from warrant exercisesCompany’s repurchase of common stock during the nine months ended September 30, 2022, with no comparable activity during2023, whereas the nine months ended September 30, 2021. Additionally, the cash used in financing activities for the nine months ended September 30, 2021 is2022 activity primarily related to the January 2021 debt refinancing, with no comparable activity during the nine months ended September 30, 2022.


proceeds of warrant exercises.
Critical Accounting Policies and Estimates
The Company prepares its unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”),GAAP, which requires the Company to make estimates and assumptions. The Company evaluates its estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making assumptions about the carrying values of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period presented. The Company’s actual results may differ from these estimates, and different assumptions or conditions may yield different estimates.
There have been no material changes to the Company’s critical accounting policies and estimates as presented in our Form 10-K, which are hereby incorporated by reference.
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Item 3.Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to our exposure to market risk from those included in our Annual Report on Form 10-K, for the year ended December 31, 2021, which is hereby incorporated by reference.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2022.2023. Based on that evaluation, the Company’s Chief Executive Officer and its Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022.2023.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended September 30, 20222023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1.Legal Proceedings
 For a summary of legal proceedings, refer to Note 13, Commitments and Contingencies, of the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.
Item 1A.Risk Factors
There have been no material changes to the risk factors affecting our business, financial condition or results of operations from those set forth in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021.10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition and/or operating results.
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
On February 20, 2023, the Company’s Board of Directors approved a share repurchase program of up to an aggregate $250.0 million of common stock of the Company. This program has no specified expiration date.
The following table provides certain information with respect to the Company’s repurchases of common stock from July 1, 2023 through September 30, 2023:
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2023 - July 31, 2023— $— — $174,999,995 
August 1, 2023 - August 31, 20231,833,677 34.35 1,833,677 112,015,417 
September 1, 2023 - September 30, 20231,079,843 34.28 1,079,843 75,000,067 
2,913,520 $34.32 2,913,520 $75,000,067 
Item 5.    Other Information
Adoption, Modification and Termination of Rule 10b5-1 Plans and Certain Other Trading Arrangements
No director or officer of the Company has adopted, modified or terminated a Rule 10b5-1 plan or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2023.
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Item 6.Exhibits
(a) Exhibits.
Exhibit Number Description
3.1
31.1
31.2
32.1
32.2
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104XBRL Formatted Cover Page
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 OPTION CARE HEALTH, INC.
 
Date: October 27, 202225, 2023 /s//s/ Michael Shapiro
Michael Shapiro
Chief Financial Officer and Executive Vice President (Principal Financial Officer and Duly Authorized Officer)
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