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Option Care Health, Inc. (OPCH)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net revenue was $1.346B, up 19.7% YoY; GAAP diluted EPS was $0.35 and adjusted EPS was $0.44, with adjusted EBITDA of $121.6M .
  • Supply chain constraints in IV solutions eased during the quarter, allowing high single-digit acute therapy growth; chronic mix was ~75% in Q4, supporting stability into Q1 seasonality .
  • 2025 guidance was raised on revenue ($5.3–$5.5B) and adjusted EBITDA ($450–$470M) versus January prelims, primarily due to the Intramed Plus acquisition; adjusted EPS held at $1.59–$1.69 and CFO highlighted at least $320M operating cash flow and 25–27% tax rate .
  • Management flagged a $60–$70M gross profit headwind in 2025 from less favorable STELARA economics but expects overall earnings growth via balanced portfolio, LDD/rare therapies, and suite efficiency; Board authorized a new $500M buyback in January following $90M repurchases in Q4 .

What Went Well and What Went Wrong

What Went Well

  • Supply chain normalization: “IV solution supply dynamics improved significantly throughout the quarter and is no longer a constraint with respect to onboarding new patients” .
  • Mix stability and margin leverage: Chronic revenues ~75% supported a steadier base; SG&A fell to 12.2% of revenue, with adjusted EBITDA up ~9% YoY to $121.6M and adjusted EPS rising 15.8% YoY to $0.44 .
  • Network and capacity investments: Two state-of-the-art compounding pharmacies opened (NYC, Tampa), expanding clean-room redundancy and regional coverage to drive efficiency and growth .

What Went Wrong

  • Gross margin rate pressure: Q4 gross profit margin was 19.9%, down from 22.0% in Q4 2023 due to revenue mix (LDD/rare) and prior procurement tailwinds absent in 2024 .
  • Operating cash flow decelerated sequentially: Q4 CFO was $36.1M versus $160.4M in Q3 and $195.7M in Q2, impacted by seasonal factors and working capital dynamics .
  • 2025 STELARA headwind: Management expects a $60–$70M gross profit reset due to reduced spread economics; biosimilars were not modeled to be a material 2025 tailwind, adding uncertainty to gross profit trajectory .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Revenue ($USD Billions)$1.227 $1.279 $1.346
Gross Profit ($USD Millions)$249.4 $256.7 $268.4
Gross Margin (%)20.3% 20.1% 19.9%
Operating Income ($USD Millions)$80.7 $85.1 $87.0
GAAP Diluted EPS ($)$0.30 $0.31 $0.35
Adjusted EPS ($)N/A$0.41 $0.44
Adjusted Net Income ($USD Millions)N/A$70.7 $75.5
Adjusted EBITDA ($USD Millions)$108.4 $115.6 $121.6
Cash Flow from Operations ($USD Millions)$195.7 $160.4 $36.1

Notes:

  • YoY detail: Net revenue +19.7%; gross profit +8.6%; diluted EPS +9.4%; adjusted EPS +15.8% (Q4 2024 vs Q4 2023) .
  • 2023 procurement benefits (~$8M in Q4 2023; $33–35M in FY 2023) were not present in 2024, impacting comparisons .

Segment/Mix Breakdown

Mix MetricQ2 2024Q3 2024Q4 2024
Chronic revenue share (%)~75% ~75% ~75%
Acute therapy growthLow single-digit (implied mature) Mature/competitive; IV bag shortage impact High single-digit growth as supply normalized

KPIs

KPIQ2 2024Q3 2024Q4 2024
Infusion suite usage (% of nurse events)~32% “Effectively doubled vs ~16–17% in 2021” (context) “Well over one-third”
Nurse productivity uplift in suites>20% >20% >20%
Infusion locations——>175 locations; 15 advanced practitioner sites
Share repurchases$78.1M in Q2 $41.9M in Q3 ~$90.0M in Q4; new $500M authorization in Jan 2025

Guidance Changes

MetricPeriodPrevious Guidance (Jan 13, 2025)Current Guidance (Feb 26, 2025)Change
Net Revenue ($USD Billions)FY 2025$5.2–$5.4 $5.3–$5.5 Raised
Adjusted EBITDA ($USD Millions)FY 2025$445–$465 $450–$470 Raised
Adjusted EPS ($)FY 2025$1.59–$1.69 $1.59–$1.69 Maintained
Cash Flow from Operations ($USD Millions)FY 2025≥$300 ≥$320 Raised
Effective Tax Rate (%)FY 202526–28 25–27 Lowered range midpoint
Net Interest Expense ($USD Millions)FY 2025$55–$60 $55–$60 Maintained

Management indicated revisions primarily reflect inclusion of Intramed Plus (closed late January) .

Earnings Call Themes & Trends

TopicQ2 2024 (Jul 31)Q3 2024 (Oct 30)Q4 2024 (Feb 26)Trend
Supply chain (IV bags)Resolved late Q2; some inefficiencies persisted Hurricane Helene caused IV bag shortages; onboarding constrained; negative Q4 impact embedded in guidance Conditions improved; onboarding no longer constrained; acute growth resumed Improving
STELARA / IRA dynamicsSet stage for biosimilar transitions; portfolio risk awareness Flagged unprecedented spread compression and 2025 gross profit headwind; chronic mix ~75% Quantified $60–$70M gross profit reset; biosimilars not material to 2025 Headwind quantified
LDD/rare therapiesStrong contribution; margin rate lower but dollars attractive Continued strength; VYJUVEK collaboration noted Ongoing traction; economics mid-single-digit gross margin per management Ongoing growth with lower rate
Infusion suites & AP modelSuite usage ~32%; >20% productivity uplift Added 3 suites; targeting higher utilization >175 locations; 15 AP sites; >20% productivity uplift; payer site-of-care momentum Expanding
Technology/automationEfficiency and risk mgmt investments (Change Healthcare recovery) Highlighted Palantir/automation initiatives to drive efficiencies Continued tech investments; operational leverage (SG&A 12.2%) Efficiency focus sustained
Payers/site of careValue‑based dialog; 3 legs of reimbursement Acute exits by competitors seen as opportunity Uptick in payer site-of-care programs; constructive MA negotiations Tailwind building

Management Commentary

  • “IV solution supply dynamics improved significantly throughout the quarter and is no longer a constraint with respect to onboarding new patients.” — John Rademacher
  • “Q4 adjusted EBITDA of $121.6 million grew almost 9%… SG&A as a percentage of revenue continues to drop and represented 12.2% of revenue in the quarter.” — Mike Shapiro
  • “We closed on our acquisition of Intramed Plus in late January… our revised guidance… now includes the impact of the acquisition.” — John Rademacher
  • “Despite a meaningful gross profit reset due to less favorable economics for STELARA, which we estimate at $60–$70 million for the year, we expect to deliver overall earnings growth from 2024.” — John Rademacher
  • “We exhausted our prior share repurchase authorization, having repurchased $90 million of shares in the quarter… our Board… approved a new $500 million authorization.” — John Rademacher

Q&A Highlights

  • Acute therapy outlook: Supply chain back to normal; competitive exits create share opportunities; acute grew high single digits in Q4 .
  • Guidance and seasonality: Expect modest Q4→Q1 step down given benefit re-verifications; chronic (~75%) supports stability; Intramed addition raised revenue ~$100M and EBITDA ~$5M vs January prelims .
  • STELARA specifics: $60–$70M gross profit hit is spread-driven; biosimilars approved but not modeled as a material 2025 benefit; patient cohorts with medical necessity likely remain under HCP-administered care .
  • Infusion suite utilization: Well over one-third of nurse visits now in suites; >20% productivity uplift; payer site-of-care initiatives rising .
  • LDD/rare economics: VYJUVEK and other LDDs typically carry mid-single-digit gross margin rates; still attractive in dollar terms; margins can improve gradually as cohorts build .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of analysis due to data access constraints; as such, we cannot quantify beats/misses versus consensus at this time (S&P Global consensus unavailable).
  • Management’s 2025 guidance implies topline momentum despite STELARA headwinds; revisions versus January prelims reflect Intramed Plus inclusion .

Key Takeaways for Investors

  • Revenue and adjusted EBITDA momentum continued into Q4, aided by chronic mix and easing supply chain; margin rate remains pressured by LDD/rare mix but dollar gross profit grew sequentially and YoY .
  • Acute therapy growth is re-accelerating as IV bag supply constraints resolved; competitive exits and payer site-of-care initiatives create share opportunities into 2025 .
  • 2025 outlook was strengthened (revenue, EBITDA, CFO), primarily due to Intramed Plus; adjusted EPS maintained, reflecting balanced capital deployment (M&A + buybacks) .
  • STELARA gross profit reset ($60–$70M) is the core 2025 headwind; management plans to offset via portfolio breadth (biosimilars/generics stable), LDD/rare therapy launches, and suite/technology efficiencies .
  • Infusion suite strategy is a durable lever: >20% nurse productivity uplift and growing utilization (>1/3 of events), supporting margin resilience and capacity for growth .
  • Near-term trading: Watch for Q1 seasonal step-down and any updates on biosimilar adoption and payer policies; medium term: execution on M&A integration and rare/LDD pipeline should underpin EPS growth faster than EBITDA via buybacks .
  • Capital allocation remains shareholder-friendly: $90M Q4 repurchases and new $500M authorization provide downside support; leverage ~1.6x exiting 2024 supports further deployment .