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 ~~March 31,~~June 30, 2022
			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

OPTION CARE HEALTH, INC.

(Exact name of registrant as specified in its charter)

Delaware

05-0489664

(State of incorporation)

(I.R.S. Employer Identification No.)

3000 Lakeside Dr.

Suite 300N,

Bannockburn,

60015

(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 Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	OPCH	Nasdaq 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 ~~April 26,~~July 25, 2022, there were ~~180,052,037~~181,861,467 shares of the registrant’s Common Stock outstanding.

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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, 2021 (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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PART I

FINANCIAL INFORMATION

Item 1.Financial Statements

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OPTION CARE HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)

(unaudited)
March 31, 2022 December 31, 2021
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents $ 145,600 $ 119,423
   Accounts receivable, net 366,285 338,242
   Inventories 217,184 183,095
   Prepaid expenses and other current assets 76,643 69,496
Total current assets 805,712 710,256
NONCURRENT ASSETS:
   Property and equipment, net 109,066 111,535
   Operating lease right-of-use asset 74,662 74,777
   Intangible assets, net 20,669 21,433
   Referral sources 337,882 344,587
   Goodwill 1,478,500 1,477,564
   Deferred income taxes 14,037 27,033
   Other noncurrent assets 37,748 23,733
Total noncurrent assets 2,072,564 2,080,662
TOTAL ASSETS $ 2,878,276 $ 2,790,918
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 356,118 $ 279,246
Accrued compensation and employee benefits 42,046 83,503
Accrued expenses and other current liabilities 85,286 71,857
Current portion of operating lease liability 18,689 19,089
Current portion of long-term debt 6,000 6,000
Total current liabilities 508,139 459,695
NONCURRENT LIABILITIES:
Long-term debt, net of discount, deferred financing costs and current portion 1,059,449 1,059,900
Operating lease liability, net of current portion 75,479 74,492
Other noncurrent liabilities 13,445 20,945
Total noncurrent liabilities 1,148,373 1,155,337
Total liabilities 1,656,512 1,615,032
STOCKHOLDERS’ EQUITY:
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of March 31, 2022 and December 31, 2021, respectively — —
Common stock; $0.0001 par value: 250,000,000 shares authorized, 180,429,758 shares issued and 180,046,036 shares outstanding as of March 31, 2022; 180,309,637 shares issued and 179,925,915 shares outstanding as of December 31, 2021 18 18
Treasury stock; 383,722 shares outstanding, at cost, as of March 31, 2022 and December 31, 2021, respectively (2,403) (2,403)
Paid-in capital 1,143,388 1,138,855
Retained earnings 70,142 39,867
Accumulated other comprehensive income (loss) 10,619 (451)
Total stockholders’ equity 1,221,764 1,175,886
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,878,276 $ 2,790,918

~~The notes to unaudited condensed consolidated financial statements are an integral part of these statements.~~

~~Table of Contents~~

~~OPTION CARE HEALTH, INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)~~

Three Months Ended
March 31,
2022 2021
NET REVENUE $ 915,784 $ 759,237
COST OF REVENUE 714,848 593,764
GROSS PROFIT 200,936 165,473
OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses 133,969 120,040
Depreciation and amortization expense 14,722 16,339
Total operating expenses 148,691 136,379
OPERATING INCOME 52,245 29,094
OTHER INCOME (EXPENSE):
Interest expense, net (12,246) (19,481)
Equity in earnings of joint ventures 1,267 1,205
Other, net 2 (12,401)
Total other expense (10,977) (30,677)
INCOME (LOSS) BEFORE INCOME TAXES 41,268 (1,583)
INCOME TAX EXPENSE 10,993 1,278
NET INCOME (LOSS) $ 30,275 $ (2,861)
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Change in unrealized gains on cash flow hedges, net of income tax expense of $3,763 and $0, respectively 11,070 4,081
OTHER COMPREHENSIVE INCOME 11,070 4,081
NET COMPREHENSIVE INCOME $ 41,345 $ 1,220
EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) per share, basic $ 0.17 $ (0.02)
Earnings (loss) per share, diluted $ 0.17 $ (0.02)
Weighted average common shares outstanding, basic 179,961 179,808
Weighted average common shares outstanding, diluted 181,681 179,808


	(unaudited)
	June 30, 2022		December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	204,046	$	119,423
Accounts receivable, net	362,772		338,242
Inventories	231,766		183,095
Prepaid expenses and other current assets	78,555		69,496
Total current assets	877,139		710,256

NONCURRENT ASSETS:
Property and equipment, net	105,210		111,535
Operating lease right-of-use asset	73,461		74,777
Intangible assets, net	23,161		21,433
Referral sources	352,368		344,587
Goodwill	1,512,246		1,477,564
Deferred income taxes	2,256		27,033
Other noncurrent assets	40,071		23,733
Total noncurrent assets	2,108,773		2,080,662
TOTAL ASSETS	$	2,985,912	$	2,790,918

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	380,516	$	279,246
Accrued compensation and employee benefits	58,307		83,503
Accrued expenses and other current liabilities	91,284		71,857
Current portion of operating lease liability	19,201		19,089
Current portion of long-term debt	6,000		6,000
Total current liabilities	555,308		459,695

NONCURRENT LIABILITIES:
Long-term debt, net of discount, deferred financing costs and current portion	1,059,017		1,059,900
Operating lease liability, net of current portion	73,148		74,492
Other noncurrent liabilities	13,445		20,945
Total noncurrent liabilities	1,145,610		1,155,337
Total liabilities	1,700,918		1,615,032

STOCKHOLDERS’ EQUITY:
Preferred stock; $0.0001 par value; 12,500,000 shares authorized, no shares outstanding as of June 30, 2022 and December 31, 2021, respectively	—		—
Common stock; $0.0001 par value: 250,000,000 shares authorized, 182,213,292 shares issued and 181,829,570 shares outstanding as of June 30, 2022; 180,309,637 shares issued and 179,925,915 shares outstanding as of December 31, 2021	18		18
Treasury stock; 383,722 shares outstanding, at cost, as of June 30, 2022 and December 31, 2021, respectively	(2,403)		(2,403)
Paid-in capital	1,168,052		1,138,855
Retained earnings	104,071		39,867
Accumulated other comprehensive income (loss)	15,256		(451)
Total stockholders’ equity	1,284,994		1,175,886
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,985,912	$	2,790,918

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 FLOWS~~COMPREHENSIVE INCOME

(IN ~~THOUSANDS)~~THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Months Ended March 31,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 30,275 $ (2,861)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization expense 15,979 17,716
Non-cash operating lease costs 3,884 3,810
Deferred income taxes - net 12,996 634
Loss on extinguishment of debt — 12,403
Amortization of deferred financing costs 1,049 1,253
Equity in earnings of joint ventures (1,267) (1,205)
Stock-based incentive compensation expense 4,178 1,205
Other adjustments 291 96
Changes in operating assets and liabilities:
Accounts receivable, net (28,766) 4,450
Inventories (34,089) (15,021)
Prepaid expenses and other current assets (6,241) 12,946
Accounts payable 76,872 8,026
Accrued compensation and employee benefits (41,481) (18,208)
Accrued expenses and other current liabilities 13,520 (2,357)
Operating lease liabilities (4,246) (5,160)
Other noncurrent assets and liabilities (10,273) 653
Net cash provided by operating activities 32,681 18,380
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (5,359) (3,123)
Net cash used in investing activities (5,359) (3,123)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, vesting of restricted stock, and related tax withholdings 355 (69)
Proceeds from issuance of debt — 355,200
Repayments of debt (1,500) (2,944)
Retirement of debt — (352,009)
Deferred financing costs — (2,880)
Debt prepayment fees — (2,458)
Net cash used in financing activities (1,145) (5,160)
NET INCREASE IN CASH AND CASH EQUIVALENTS 26,177 10,097
Cash and cash equivalents - beginning of the period 119,423 99,265
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 145,600 $ 109,362
Supplemental disclosure of cash flow information:
Cash paid for interest $ 5,104 $ 21,502
Cash paid for income taxes $ 61 $ 111
Cash paid for operating leases $ 6,242 $ 6,768


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
NET REVENUE	$	980,820	$	860,272	$	1,896,604	$	1,619,509
COST OF REVENUE	763,920		661,304		1,478,768		1,255,068
GROSS PROFIT	216,900		198,968		417,836		364,441

OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses	141,787		134,257		275,756		254,297
Depreciation and amortization expense	16,037		16,619		30,759		32,958
Total operating expenses	157,824		150,876		306,515		287,255
OPERATING INCOME	59,076		48,092		111,321		77,186

OTHER INCOME (EXPENSE):
Interest expense, net	(12,765)		(17,236)		(25,011)		(36,717)
Equity in earnings of joint ventures	1,326		1,686		2,593		2,891
Other, net	1		5		3		(12,396)
Total other expense	(11,438)		(15,545)		(22,415)		(46,222)

INCOME BEFORE INCOME TAXES	47,638		32,547		88,906		30,964
INCOME TAX EXPENSE	13,709		731		24,702		2,009

NET INCOME	$	33,929	$	31,816	$	64,204	$	28,955

OTHER COMPREHENSIVE INCOME, NET OF TAX:
Change in unrealized gains on cash flow hedges, net of income tax expense of $756, $0, $4,519, and $0, respectively	4,637		4,199		15,707		8,280
OTHER COMPREHENSIVE INCOME	4,637		4,199		15,707		8,280
NET COMPREHENSIVE INCOME	$	38,566	$	36,015	$	79,911	$	37,235

EARNINGS PER COMMON SHARE:
Earnings per share, basic	$	0.19	$	0.18	$	0.36	$	0.16
Earnings per share, diluted	$	0.19	$	0.18	$	0.35	$	0.16

Weighted average common shares outstanding, basic	180,621		179,843		180,293		179,826
Weighted average common shares outstanding, diluted	181,618		181,037		181,176		180,975

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~~CASH FLOWS

(IN THOUSANDS)

Preferred Stock Common Stock Treasury Stock Paid-in Capital Retained 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
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


	Six Months Ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	64,204	$	28,955
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization expense	33,249		35,705
Non-cash operating lease costs	9,988		5,766
Deferred income taxes - net	24,777		907
Loss on extinguishment of debt	—		12,403
Amortization of deferred financing costs	2,117		2,512
Equity in earnings of joint ventures	(2,593)		(2,891)
Stock-based incentive compensation expense	8,576		3,730
Capital distribution from equity method investments	1,000		—
Other adjustments	506		261
Changes in operating assets and liabilities:
Accounts receivable, net	(22,950)		(9,866)
Inventories	(48,671)		(14,651)
Prepaid expenses and other current assets	(5,235)		4,627
Accounts payable	100,924		26,532
Accrued compensation and employee benefits	(26,384)		(907)
Accrued expenses and other current liabilities	18,900		6,425
Operating lease liabilities	(11,032)		(8,277)
Other noncurrent assets and liabilities	(10,422)		803
Net cash provided by operating activities	136,954		92,034

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment	(10,055)		(6,808)
Business acquisitions, net of cash acquired	(59,897)		(18,852)
Net cash used in investing activities	(69,952)		(25,660)

CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options, vesting of restricted stock, and related tax withholdings	523		(78)
Proceeds from warrant exercises	20,098		—
Proceeds from issuance of debt	—		355,200
Repayments of debt	(3,000)		(5,888)
Retirement of debt	—		(352,009)
Deferred financing costs	—		(2,880)
Debt prepayment fees	—		(2,458)
Net cash provided by (used in) financing activities	17,621		(8,113)
NET INCREASE IN CASH AND CASH EQUIVALENTS	84,623		58,261
Cash and cash equivalents - beginning of the period	119,423		99,265
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	204,046	$	157,526

Supplemental disclosure of cash flow information:
Cash paid for interest	$	21,793	$	37,405
Cash paid for income taxes	$	4,966	$	1,168
Cash paid for operating leases	$	12,435	$	12,909

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 Stock		Common Stock		Treasury Stock		Paid-in Capital		Retained 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

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

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, ~~LLC.~~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 (“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”), 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”) 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”). The combined Company’s stock is listed on the Nasdaq Global Select Market as of ~~March 31,~~June 30, 2022. HC I holds approximately ~~20.7%~~20.5% of the common stock of the Company.

Option Care Health, and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 97 full service pharmacies and 5760 stand-alone 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 1 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 2021 audited consolidated financial statements, including the notes thereto, as presented in ~~the Annual Report on~~our Form ~~10-K filed with the Securities and Exchange Commission on February 23, 2022.~~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 (loss).~~income. See Equity-Method Investments within Note 2, Summary of Significant Accounting Policies, for further discussion of the Company’s equity-method investments.

910

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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.

Prepaid expenses and other current assets — Included in prepaid expenses and other current assets are rebates receivable from pharmaceutical and medical supply manufacturers of ~~$47.6~~$47.0 million and $43.0 million as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. There were no other items included in prepaid expenses and other current assets that comprised 5% or more of total current assets.

Equity 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 ~~March 31,~~June 30, 2022 and December 31, 2021, the balance of the investments were ~~$21.4~~$21.7 million and $20.1 million, respectively. The balance of these investments ~~are~~is increased to reflect the Company’s capital contributions and equity in earnings of the investees. The balance of these investments ~~are~~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 ~~are~~is recorded in equity in earnings of joint ventures in the accompanying unaudited condensed consolidated statements of comprehensive ~~income (loss).~~income. The Company’s proportionate share of earnings was $1.3 million and ~~$1.2~~$2.6 million for the three and six months ~~March 31, 2022.~~ended June 30, 2022, respectively. The Company’s proportionate share of earnings was $1.7 million and $2.9 million for the three and six months ended June 30, 2021, respectively. Distributions from the investees are treated as cash inflows from operating activities within other adjustments in the unaudited condensed consolidated statements of cash flows. During the three months March 31, 2022 and 2021, the Company did not receive a distribution from the investees. See Footnote 16, Related-Party Transactions, for discussion of related-party transactions with these investees.

~~Immaterial Error Correction~~ — During the three months ended June 30, 2021, the Company identified prior period misstatements related to the net revenue earned by category of payer for the periods ended September 30, 2020, December 31, 2020, March 31, 2021, and June 30, 2021. Certain individual payers were improperly classified as direct government and instead should have been classified as commercial payers. This error over-stated the Company’s government revenues and under-stated the Company’s commercial revenues in those periods. The Company assessed the materiality of these misstatements both quantitatively and qualitatively and determined the correction of these errors to be immaterial to the prior consolidated financial statements taken as a whole. As a result, the Company has corrected the misstatements as disclosed in the following tables:

Three Months ended September 30, 2020 Nine Months ended September 30, 2020 Three Months ended December 31, 2020 Twelve Months ended December 31, 2020
Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue
Commercial:
As Previously
Reported $ 644,385 82.4 % $ 1,893,105 85.0 % $ 649,880 80.8 % $ 2,542,985 83.9 %
Adjustment 34,321 4.4 % 34,321 1.5 % 40,806 5.1 % 75,127 2.5 %
As Revised 678,706 86.8 % 1,927,426 86.5 % 690,686 85.9 % 2,618,112 86.4 %
Government:
As Previously Reported 127,435 16.3 % 308,830 13.9 % 141,237 17.6 % 450,067 14.8 %
Adjustment (34,321) (4.4) % (34,321) (1.5) % (40,806) (5.1) % (75,127) (2.5) %
As Revised 93,114 11.9 % 274,509 12.4 % 100,431 12.5 % 374,940 12.3 %

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Three Months ended March 31, 2021 Three Months ended June 30, 2021 Six Months ended June 30, 2021
Amount % of Revenue Amount % of Revenue Amount % of Revenue
Commercial:
As Previously Reported $ 611,434 80.5 % $ 703,429 81.8 % $ 1,314,862 81.2 %
Adjustment 37,073 4.9 % 43,218 5.0 % 80,292 4.9 %
As Revised 648,507 85.4 % 746,647 86.8 % 1,395,154 86.1 %
Government:
As Previously Reported 134,914 17.8 % 145,799 16.9 % 280,714 17.3 %
Adjustment (37,073) (4.9) % (43,218) (5.0) % (80,292) (4.9) %
As Revised 97,841 12.9 % 102,581 11.9 % 200,422 12.4 %

~~There was no impact to the Company’s consolidated balance sheets, consolidated statements of comprehensive income (loss) or the consolidated statements of cash flows for any of these periods.~~

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 15% and 15%, respectively, for the three and six months ended June 30, 2022. Revenue related to the Company’s largest payer was approximately 16% and 16% for the three and six months ~~March 31, 2022 and~~ended June 30, 2021. There were no other managed care contracts that represent greater than 10% of revenue for the periods presented.

For the three and six months ~~March 31,~~ended June 30, 2022, approximately 12% and 12%, respectively, of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid. For the three and six months ended June 30, 2021, approximately ~~13%~~12% and ~~13%~~12%, respectively of the Company’s revenue was reimbursable through direct government healthcare programs, such as Medicare and Medicaid. As of ~~March 31,~~June 30, 2022 and December 31, 2021, approximately 11% and 11%, 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 nor 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,~~care; however, Option Care Health offers a financial assistance program for patients that meet certain defined hardship criteria.

For the three and six months ~~March 31,~~ended June 30, 2022, approximately ~~75%~~72% and 73%, respectively, of the Company’s pharmaceutical and medical supply purchases were from four vendors. For the three and six months ~~March 31,~~ended June 30, 2021 approximately ~~67%~~64% 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 ~~March 31,~~June 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 Nursing LLC — In October 2021, pursuant to the equity purchase agreement dated October 1, 2021, the Company completed the acquisition of 100% ~~acquisition~~ of the equity ~~interest~~interests in Infinity Infusion Nursing, LLC ~~(“Infinity”)~~ for a purchase price, net of cash acquired, of $59.6 million. ~~As of March 31, 2022, the~~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 ~~(“Wasatch”)~~ for a purchase price of $19.5 million. As of March 31, 2022, the Company ~~has~~ 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
Inventories	2,038
Intangible assets	4,245
Other assets	769
Accounts payable	(6,686)
Other assumed liabilities	(965)
Fair value Identifiable assets and liabilities	2,089
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”) for a purchase price, net of cash acquired, of $59.9 million.

The allocation of the purchase price 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 and liabilities acquired based on the relative fair value 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 June 30, 2022 (in thousands):


	Amount
Accounts receivable	$	2,303
Intangible assets	25,580
Other assets	600
Accrued compensation	(1,164)
Accounts payable and other liabilities	(1,168)
Fair value identifiable assets and liabilities	26,151
Goodwill (1)	33,746
Cash acquired	661
Purchase Price	60,558
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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4. REVENUE

The following table sets forth the net revenue earned by category of payer for the three and six months ~~March 31,~~ended June 30, 2022 and 2021 (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Commercial payers	Commercial payers	$	786,278	$	648,507		Commercial payers	$	851,915	$	746,647	$	1,638,192	$	1,395,154
Government payers	Government payers	115,205		97,841			Government payers	119,385		102,581		234,590		200,422
Patients	Patients	14,301		12,889			Patients	9,520		11,044		23,822		23,933
Net revenue	Net revenue	$	915,784	$	759,237		Net revenue	$	980,820	$	860,272	$	1,896,604	$	1,619,509

5. INCOME TAXES

During the three and six months ended ~~March 31,~~June 30, 2022, ~~and 2021,~~ the Company recorded tax expense of ~~$11.0~~$13.7 million and ~~$1.3~~$24.7 million, respectively, which represents an effective tax rate of ~~26.6%~~28.8% and ~~negative 80.7%~~27.8%, respectively. The variance in the Company’s effective tax rate of ~~26.6%~~28.8% and 27.8% for the three and six months ended ~~March 31,~~June 30, 2022, respectively, compared to the ~~Company’s Federal~~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 six months ended June 30, 2021, the Company recorded tax expense of $0.7 million and $2.0 million which represents an effective tax rate of 2.2% and 6.5%, respectively. The variance in the Company’s effective tax rate of ~~negative 80.7%~~2.2% and 6.5% for the three and six months ended ~~March 31,~~June 30, 2021, compared to the ~~Company’s Federal~~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 ~~$13.2~~$13.0 million against certain state net operating ~~losses (“NOL”).~~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. 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. 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 six months ended ~~March 31,~~June 30, 2022 of ~~$11.0~~$13.7 million and $24.7 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~~Company’s tax expense for the three and six months ended ~~March 31,~~June 30, 2021 of ~~$1.3~~$0.7 million and $2.0 million, respectively, consists of quarterly tax liabilities attributed to specific state taxing authorities as well as recognized deferred tax expense.

The Company has accumulated ~~U.S.~~ 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 ~~U.S.~~ federal net operating ~~losses.~~losses.

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6. EARNINGS ~~(LOSS)~~ PER SHARE

The Company presents basic and diluted earnings ~~(loss)~~ per share for its common stock. Basic earnings ~~(loss)~~ per share is calculated by dividing the net income ~~(loss)~~ of the Company by the weighted average number of shares of common stock outstanding during the period. Diluted earnings ~~(loss)~~ 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 ~~(loss) is~~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 six months ~~March 31,~~ended June 30, 2022 and 2021 includes the effect of shares that would be issued in connection with warrants, stock options and restricted stock awards, as these common stock equivalents are dilutive to the earnings per share recorded in those periods. ~~The computation of diluted shares for~~For the three months ended ~~March 31, 2021 excludes the effect of these common stock equivalents as their inclusion would be anti-dilutive to the loss per share recorded in the period.~~ ~~As of~~ ~~March 31,~~June 30, 2022, there were ~~457,752 warrants, 770,303~~900,378 stock option awards and ~~269,670~~136,568 restricted stock awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive. ~~As of March 31, 2021~~For the six months ended , June 30, 2022, there were ~~2,285,784~~836,957 stock option awards and 389,831 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 June 30, 2021, there were 915,507 warrants ~~789,586~~and 547,310 stock ~~options~~option awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive. For the six months ended June 30, 2021, there were 915,507 warrants and ~~1,080,334 restricted~~433,440 stock option awards outstanding that were excluded from the calculation of earnings per share as they would be anti-dilutive.

The following table presents the Company’s basic earnings ~~(loss)~~ per share and shares outstanding (in thousands, except per share data):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Numerator:	Numerator:						Numerator:
Net income (loss)		$	30,275	$	(2,861)
Net income							Net income	$	33,929	$	31,816	$	64,204	$	28,955
Denominator:	Denominator:						Denominator:
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding	179,961		179,808			Weighted average number of common shares outstanding	180,621		179,843		180,293		179,826
Earnings (loss) per common share:
Earnings (loss) per common share, basic		$	0.17	$	(0.02)
Earnings per common share:							Earnings per common share:
Earnings per common share, basic							Earnings per common share, basic	$	0.19	$	0.18	$	0.36	$	0.16

The following table presents the Company’s diluted earnings ~~(loss)~~ per share and shares outstanding (in thousands, except per share data):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Numerator:	Numerator:						Numerator:
Net income (loss)		$	30,275	$	(2,861)
Net income							Net income	$	33,929	$	31,816	$	64,204	$	28,955
Denominator:	Denominator:						Denominator:
Weighted average number of common shares outstanding	Weighted average number of common shares outstanding	179,961		179,808			Weighted average number of common shares outstanding	180,621		179,843		180,293		179,826
Effect of dilutive securities	Effect of dilutive securities	1,720		—			Effect of dilutive securities	997		1,194		883		1,149
Weighted average number of common shares outstanding, diluted	Weighted average number of common shares outstanding, diluted	181,681		179,808			Weighted average number of common shares outstanding, diluted	181,618		181,037		181,176		180,975
Earnings (loss) per common share:
Earnings (loss) per common share, diluted		$	0.17	$	(0.02)
Earnings per common share:							Earnings per common share:
Earnings per common share, diluted							Earnings per common share, diluted	$	0.19	$	0.18	$	0.35	$	0.16

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7. LEASES

During the three and six months ~~March 31,~~ended June 30, 2022, ~~and 2021,~~ the Company incurred operating lease expenses of ~~$7.3~~$7.4 million and ~~$7.5~~$14.8 million, respectively, including short-term lease expense, which were included as a component of selling, general and administrative expense in the unaudited condensed consolidated statements of comprehensive ~~income (loss).~~income. During the three and six months ended June 30, 2021, the Company incurred operating lease expenses of $6.9 million and $14.5 million, respectively, including short-term lease expense, which were included as a component of selling, general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income. As of ~~March 31,~~June 30, 2022, the weighted-average remaining lease term was ~~6.9~~6.7 years and the weighted-average discount rate was ~~5.09%~~5.10%.

Operating leases mature as follows (in thousands):


Fiscal Year Ended December 31,	Fiscal Year Ended December 31,	Minimum Payments		Fiscal Year Ended December 31,	Minimum Payments
2022	2022	$	19,872	2022	$	14,539
2023	2023	20,992		2023	22,190
2024	2024	15,416		2024	16,215
2025	2025	12,682		2025	13,388
2026	2026	9,697		2026	10,416
Thereafter	Thereafter	34,371		Thereafter	34,835
Total lease payments	Total lease payments	$	113,030	Total lease payments	$	111,583
Less: Interest	Less: Interest	(18,862)		Less: Interest	(19,234)
Present value of lease liabilities	Present value of lease liabilities	$	94,168	Present value of lease liabilities	$	92,349

During the ~~three~~six months ~~March 31,~~ended June 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 $~~3.8~~8.4 million related to increases in the operating lease right-of-use ~~asset~~assets and operating lease liabilities, respectively. During the six months ended June 30, 2021, the Company commenced new leases, extensions and amendments, resulting in non-cash operating activities in the unaudited condensed consolidated statements of cash flow of $5.7 million related to increases in the operating lease right-of-use assets and operating lease liabilities, respectively. As of ~~March 31,~~June 30, 2022, 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 ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Infusion pumps	Infusion pumps	$	36,995	$	34,547	Infusion pumps	$	36,516	$	34,547
Equipment, furniture and other	Equipment, furniture and other	55,267		52,913		Equipment, furniture and other	58,557		52,913
Leasehold improvements	Leasehold improvements	96,477		92,229		Leasehold improvements	96,799		92,229
Computer software, purchased and internally developed	Computer software, purchased and internally developed	32,764		30,744		Computer software, purchased and internally developed	33,969		30,744
Assets under development	Assets under development	14,442		19,924		Assets under development	14,721		19,924
		235,945		230,357			240,562		230,357
Less: accumulated depreciation	Less: accumulated depreciation	126,879		118,822		Less: accumulated depreciation	(135,352)		(118,822)
Property and equipment, net	Property and equipment, net	$	109,066	$	111,535	Property and equipment, net	$	105,210	$	111,535

Depreciation expense is recorded within cost of revenue and operating expenses within the unaudited condensed consolidated statements of comprehensive income, ~~(loss),~~ 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 six months ~~March 31,~~ended June 30, 2022 and 2021 (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021				2022		2021		2022		2021
Depreciation expense in cost of revenue	Depreciation expense in cost of revenue	$	1,257	$	1,377		Depreciation expense in cost of revenue	$	1,233	$	1,369	$	2,491	$	2,747
Depreciation expense in operating expenses	Depreciation expense in operating expenses	7,188		7,598			Depreciation expense in operating expenses	7,371		7,589		14,559		15,188
Total depreciation expense	Total depreciation expense	$	8,445	$	8,975		Total depreciation expense	$	8,604	$	8,958	$	17,050	$	17,935

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9. GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill consists of the following activity for the three and six months ~~ended March 31,~~June 30, 2022 (in thousands):


Balance at December 31, 2021		$	1,477,564
Purchase accounting adjustments		936
Balance at March 31, 2022		$		1,478,500
Acquisitions		33,746
Balance at June 30, 2022
$
	1,512,246

There were no changes in the carrying amount of goodwill for the three or six months ~~March 31,~~ended June 30, 2021.

The carrying amount and accumulated amortization of intangible assets consists of the following as of ~~March 31,~~June 30, 2022 and December 31, 2021 (in thousands):


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Gross intangible assets:	Gross intangible assets:					Gross intangible assets:
Referral sources	Referral sources	$	482,407	$	482,200	Referral sources	$	504,812	$	482,200
Trademarks/names	Trademarks/names	47,718		47,718		Trademarks/names	38,172		47,718
Other amortizable intangible assets	Other amortizable intangible assets	830		1,037		Other amortizable intangible assets	634		1,037
Total gross intangible assets	Total gross intangible assets	530,955		530,955		Total gross intangible assets	543,618		530,955

Accumulated amortization:	Accumulated amortization:					Accumulated amortization:
Referral sources	Referral sources	(144,525)		(137,613)		Referral sources	(152,444)		(137,613)
Trademarks/names	Trademarks/names	(27,476)		(26,936)		Trademarks/names	(15,611)		(26,936)
Other amortizable intangible assets	Other amortizable intangible assets	(403)		(386)		Other amortizable intangible assets	(34)		(386)
Total accumulated amortization	Total accumulated amortization	(172,404)		(164,935)		Total accumulated amortization	(168,089)		(164,935)
Total intangible assets, net	Total intangible assets, net	$	358,551	$	366,020	Total intangible assets, net	$	375,529	$	366,020

Amortization expense for intangible assets was ~~$7.5~~$8.7 million and ~~$8.7~~$16.2 million for the three and six months ended ~~March 31,~~June 30, 2022, respectively. Amortization expense for intangible assets was $9.0 million and $17.6 million for the three and six months ended June 30, 2021, respectively.

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10. INDEBTEDNESS

Long-term debt consisted of the following as of ~~March 31,~~June 30, 2022 (in thousands):


		Principal Amount		Discount		Debt Issuance Costs		Net Balance			Principal Amount		Discount		Debt Issuance Costs		Net Balance
Asset-based-lending (“ABL”) facility	Asset-based-lending (“ABL”) facility	$	—	$	—	$	—	$	—	Asset-based-lending (“ABL”) facility	$	—	$	—	$	—	$	—
First Lien Term Loan	First Lien Term Loan	598,500		(9,288)		(12,892)		576,320		First Lien Term Loan	597,000		(8,966)		(12,443)		575,591
Senior Notes	Senior Notes	500,000		—		(10,871)		489,129		Senior Notes	500,000		—		(10,574)		489,426
		$	1,098,500	$	(9,288)	$	(23,763)	1,065,449			$	1,097,000	$	(8,966)	$	(23,017)	1,065,017
Less: current portion	Less: current portion							(6,000)		Less: current portion							(6,000)
Total long-term debt	Total long-term debt							$	1,059,449	Total long-term debt							$	1,059,017

Long-term debt consisted of the following as of December 31, 2021 (in thousands):


	Principal Amount		Discount		Debt Issuance Costs		Net Balance
ABL facility	$	—	$	—	$	—	$	—
First Lien Term Loan	600,000		(9,605)		(13,331)		577,064
Senior Notes	500,000		—		(11,164)		488,836
	$	1,100,000	$	(9,605)	$	(24,495)	1,065,900
Less: current portion							(6,000)
Total long-term debt							$	1,059,900

The interest rate on the First Lien Term Loan was 3.81% and 3.25% as of ~~March 31,~~June 30, 2022 and December 31, 2021, respectively. The weighted average interest rate incurred on the First Lien Term Loan was ~~3.25%~~3.52% and ~~3.97%~~3.39% for the three and six months ~~March 31,~~ended June 30, 2022, respectively. The weighted average interest rate incurred on the First Lien Term Loan was 3.85% and 3.91% for the three and six months ended June 30, 2021, respectively. The interest rate on the Senior Notes was 4.375% as of both ~~March 31,~~June 30, 2022 and December 31, ~~2021.~~2021, respectively. The weighted average interest rate incurred on the Senior Secured Notes was 4.375% for both the three and six months March 31, 2022. The weighted average interest rate incurred on the Second Lien Notes was 8.98% for the period January 1, 2021 through January 20, 2021, prior to the repayment of the outstanding balance.ended June 30, 2022, respectively.

Long-term debt matures as follows (in thousands):


Fiscal Year Ended December 31,	Fiscal Year Ended December 31,	Minimum Payments		Fiscal Year Ended December 31,	Minimum Payments
2022	2022	$	4,500	2022	$	3,000
2023	2023	6,000		2023	6,000
2024	2024	6,000		2024	6,000
2025	2025	6,000		2025	6,000
2026	2026	6,000		2026	6,000
Thereafter	Thereafter	1,070,000		Thereafter	1,070,000
Total	Total	$	1,098,500	Total	$	1,097,000

During the three and six months ~~March 31,~~ended June 30, 2022 and 2021, 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 ~~March 31,~~June 30, 2022 (in thousands):

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Financial Instrument	Financial Instrument	Carrying Value as of March 31, 2022		Markets for Identical Item (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Financial Instrument	Carrying Value as of June 30, 2022		Markets for Identical Item (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
First Lien Term Loan	First Lien Term Loan	$	576,320	$	—	$	592,515	$	—	First Lien Term Loan	$	575,591	$	—	$	571,628	$	—
Senior Notes	Senior Notes	489,129		—		472,500		—		Senior Notes	489,426		—		430,000		—
Total debt instruments	Total debt instruments	$	1,065,449	$	—	$	1,065,015	$	—	Total debt instruments	$	1,065,017	$	—	$	1,001,628	$	—

See Note 12, Fair Value Measurements, for further discussion.

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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 Facility’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.

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

Derivative

Balance Sheet Caption

~~March 31,~~June 30, 2022

December 31, 2021

Interest rate cap designated as cash flow hedge

Prepaid expenses and other current assets

~~1,408~~4,853

—

Interest rate cap designated as cash flow hedge

Other noncurrent assets

~~12,824~~14,771

—

Fair value - Derivatives in liability position

Derivative

Balance Sheet Caption

~~March 31,~~June 30, 2022

December 31, 2021

Interest rate cap designated as cash flow hedge

Accrued expenses and other current liabilities

—

601

The gain ~~and loss~~ associated with the ~~changes~~change in the fair value of the effective portion of the hedging instrument are recorded into other comprehensive ~~(loss)~~ income. The following table presents the pre-tax gains ~~(losses)~~ from derivative instruments recognized in other comprehensive ~~(loss)~~ income in the Company’s unaudited condensed consolidated statements of comprehensive income ~~(loss)~~ (in thousands):


		Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
Derivative	Derivative	2022		2021			Derivative	2022		2021		2022		2021
Interest rate cap designated as cash flow hedge	Interest rate cap designated as cash flow hedge	$	14,833	$	—		Interest rate cap designated as cash flow hedge	$	5,393	$	—	$	20,226	$	—
Interest rate swaps designated as cash flow hedges	Interest rate swaps designated as cash flow hedges	—		4,081			Interest rate swaps designated as cash flow hedges	—		4,199		—		8,280

		$	14,833	$	4,081			$	5,393	$	4,199	$	20,226	$	8,280

The following table presents the amount and location of pre-tax income (loss) recognized in the Company’s unaudited condensed consolidated ~~statement~~statements of comprehensive income ~~(loss)~~ related to the Company’s derivative instruments (in thousands):

Three Months Ended March 31,
Derivative Income Statement Caption 2022 2021
Interest rate cap designated as cash flow hedge Interest expense $ 694 $ —
Interest rate swaps designated as cash flow hedges Interest expense — (4,149)
Interest rate swaps not designated as hedges Interest expense — (1)
$ 694 $ (4,150)


		Three Months Ended June 30,				Six Months Ended June 30,
Derivative	Income Statement Caption	2022		2021		2022		2021
Interest rate cap designated as cash flow hedge	Interest expense	$	491	$	—	$	1,184	$	—
Interest rate swaps designated as cash flow hedges	Interest expense	—		(4,246)		$	—	$	(8,395)
Interest rate swaps not designated as hedges	Interest expense	—		(1)		—		(2)

		$	491	$	(4,247)	$	1,184	$	(8,397)

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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~~Lien Term Loan: The fair value of the ~~first lien term loan~~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.~~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.

There were no other assets or liabilities measured at fair value at ~~March 31,~~June 30, 2022 and December 31, 2021.

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 Board of Directors. The Company had stock options, restricted stock and performance stock units outstanding related to the 2018 Plan as of ~~March 31,~~June 30, 2022. As of March 31, 2021, the Company also had incentive units outstanding related to the HC I equity incentive plan, which was implemented in October 2015, for certain officers and employees of the Company. During the three and six months ~~March 31,~~ended June 30, 2022, total stock-based incentive compensation expense recognized by the Company related to these plans was $4.4 million and $8.6 million, respectively. During the three and six months ended June 30, 2021, total stock-based incentive compensation expense recognized by the Company related to these plans was ~~$4.2~~$2.5 million and ~~$1.2~~$3.7 million, respectively.

15. STOCKHOLDERS’ EQUITY

2017 Warrants — During the three and six months ~~March 31,~~ended June 30, 2022, warrant holders elected to exercise 1,130,089 warrants to purchase shares of common stock. During the three and six months ended June 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common ~~stock..~~stock. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the remaining warrant holders are entitled to purchase ~~1.4 million~~240,188 and 1,370,277 shares of common stock, respectively.

2015 Warrants — ~~Warrant~~During the three and six months ended June 30, 2022, warrant holders ~~exercised an immaterial number of~~elected to exercise 868,304 warrants to purchase shares of common ~~stock during~~stock. During the three and six months ~~March 31, 2022. Warrant~~ended June 30, 2021, warrant holders did not elect to exercise any warrants to purchase shares of common ~~stock during the three months ended March 31, 2021.~~stock. As of ~~March 31,~~June 30, 2022 and December 31, 2021, the remaining warrant holders are entitled to purchase ~~0.9 million~~47,199 and 915,503 shares of common stock, respectively.

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 $0.9 million and ~~$0.8~~$1.8 million for the three and six months ~~March 31,~~ended June 30, 2022, respectively. The Company recorded management fee income of $0.9 million and $1.7 million for the three and six months ended June 30, 2021, respectively. Management fees are recorded in net revenues in the accompanying unaudited condensed consolidated statements of comprehensive ~~income (loss).~~income. During the three and six months ended June 30, 2022, the Company received $1.0 million in distributions from the investees. During the three and six months ended June 30, 2021, the Company did not receive a distribution from the investees.

The Company had ~~amounts due from its joint ventures of $1.1 million and~~ amounts due to its joint ventures of ~~$0.5~~$0.7 million as of ~~March 31,~~June 30, 2022. ~~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 million as of December 31, 2021. 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.

~~17. SUBSEQUENT EVENTS~~

~~The Company has evaluated whether any subsequent events occurred since March 31, 2022, and noted the following subsequent event:~~

On April 11, 2022, the Company closed the transaction to acquire Specialty Pharmacy Nursing Network, Inc. (“SPNN”) for $60 million in an all-cash transaction. SPNN is a national leader in providing highly skilled specialty nursing resources across a broad portfolio of healthcare providers with over 400 nurses across the country.

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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. ~~The following~~Management’s discussion and analysis of ~~the~~ 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 ~~Option Care Health, Inc. (“Option Care Health”, or the “Company”)~~operations and financial condition. The following discussion and analysis should be read in conjunction with ~~the audited consolidated financial statements and related notes, as presented in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2022, as well as~~ the Company’s unaudited condensed consolidated financial statements and the related notes thereto included ~~elsewhere~~ in Item 1 of Part I of this ~~report.~~

~~Forward-Looking Statements~~

~~This~~ Quarterly Report on Form 10-Q (this ~~“Quarterly Report”~~“Form 10-Q”) ~~contains~~. Certain statements ~~not purely historical~~in this Item 2 of Part I of this Form 10-Q, and which may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act’), including statements regarding our expectations, beliefs, future plans and strategies, anticipated events or trends concerning matters that are not historical facts or that necessarily depend upon future events. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions. Such forward-looking statements include, but are not limited to, the effect of the novel coronavirus (“COVID-19”) on our business, financial condition and results of operations. This Quarterly Report contains, among others, forward-looking statements based upon current expectations that involve numerous risks and uncertainties, including those described in Item 1A, “Risk Factors”.

~~Investors are cautioned that any such forward-looking statements are not guarantees~~ of ~~future performance, involve risks and uncertainties and that~~Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 (our “Form 10-K”), may cause our actual results, ~~may~~financial position, and cash generated from operations to differ materially from ~~those possible results discussed in the~~these forward-looking ~~statements as a result of various factors.~~

Do not place undue reliance on such forward-looking statements as they speak only as of the date they are made. Except as required by law, the Company assumes no obligation to publicly update or revise any forward-looking statement even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.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 ~~154~~157 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, 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”). 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, 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. and the combined company’s common stock, par value $0.0001, ~~was~~is listed on the Nasdaq Capital ~~Market. Effective February 3, 2020, the Company was listed on the Nasdaq Global Select~~ Market under the ticker symbol “OPCH”.

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Update on the Impact of the COVID-19 Pandemic

The primary operations of the Company focus on providing infusion therapy services and based on the recent impact of the pandemic across the healthcare ecosystem, the Company began experiencing 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 ability to procure ~~and ability to procure~~ personal protection equipment, supplies and key drugs. The Company anticipates that the pandemic could affect its operations for an extended period; however, at this time it cannot confidently forecast the duration nor the ultimate financial impact on its operations.

See Item 1A. “Risk Factors” under the caption “The COVID-19 pandemic and other pandemic events could adversely impact our business operations, results of operations, cash flows and financial position” included in our ~~Annual Report on~~ Form 10-K ~~for the year ended December 31, 2021~~ 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 six months ~~March 31,~~ended June 30, 2022 and 2021.

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 hardware and software, office equipment and leasehold improvements. 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~~First Lien Term Loan and ~~senior notes,~~Senior Notes, amortization of discount and deferred financing fees. 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 refinancing 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). Change in unrealized gains (losses) on cash flow hedges, net of income taxes, 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, 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 six months ended ~~March 31,~~

~~Table~~ ~~of Contents~~

June 30, 2022 and ~~March 31,~~June 30, 2021 (in ~~thousands)~~thousands, except for percentages):


		For the three months ended										For the three months ended								For the six months ended
		March 31, 2022				March 31, 2021				June 30, 2022				June 30, 2021				June 30, 2022				June 30, 2021
		Amount		% of Revenue		Amount		% of Revenue				Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue
NET REVENUE	NET REVENUE	$	915,784	100.0	%	$	759,237	100.0	%		NET REVENUE	$	980,820	100.0	%	$	860,272	100.0	%	$	1,896,604	100.0	%	$	1,619,509	100.0	%
COST OF REVENUE	COST OF REVENUE	714,848		78.1	%	593,764		78.2	%		COST OF REVENUE	763,920		77.9	%	661,304		76.9	%	1,478,768		78.0	%	1,255,068		77.5	%
GROSS PROFIT	GROSS PROFIT	200,936		21.9	%	165,473		21.8	%		GROSS PROFIT	216,900		22.1	%	198,968		23.1	%	417,836		22.0	%	364,441		22.5	%

OPERATING COSTS AND EXPENSES:	OPERATING COSTS AND EXPENSES:										OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses	Selling, general and administrative expenses	133,969		14.6	%	120,040		15.8	%		Selling, general and administrative expenses	141,787		14.5	%	134,257		15.6	%	275,756		14.5	%	254,297		15.7	%
Depreciation and amortization expense	Depreciation and amortization expense	14,722		1.6	%	16,339		2.2	%		Depreciation and amortization expense	16,037		1.6	%	16,619		1.9	%	30,759		1.6	%	32,958		2.0	%
Total operating expenses	Total operating expenses	148,691		16.2	%	136,379		18.0	%		Total operating expenses	157,824		16.1	%	150,876		17.5	%	306,515		16.2	%	287,255		17.7	%
OPERATING INCOME	OPERATING INCOME	52,245		5.7	%	29,094		3.8	%		OPERATING INCOME	59,076		6.0	%	48,092		5.6	%	111,321		5.9	%	77,186		4.8	%

OTHER INCOME (EXPENSE):	OTHER INCOME (EXPENSE):										OTHER INCOME (EXPENSE):
Interest expense, net	Interest expense, net	(12,246)		(1.3)	%	(19,481)		(2.6)	%		Interest expense, net	(12,765)		(1.3)	%	(17,236)		(2.0)	%	(25,011)		(1.3)	%	(36,717)		(2.3)	%
Equity in earnings of joint ventures	Equity in earnings of joint ventures	1,267		0.1	%	1,205		0.2	%		Equity in earnings of joint ventures	1,326		0.1	%	1,686		0.2	%	2,593		0.1	%	2,891		0.2	%
Other, net	Other, net	2		—	%	(12,401)		(1.6)	%		Other, net	1		—	%	5		—	%	3		—	%	(12,396)		(0.8)	%
Total other expense	Total other expense	(10,977)		(1.2)	%	(30,677)		(4.0)	%		Total other expense	(11,438)		(1.2)	%	(15,545)		(1.8)	%	(22,415)		(1.2)	%	(46,222)		(2.9)	%

INCOME (LOSS) BEFORE INCOME TAXES		41,268		4.5	%	(1,583)		(0.2)	%
INCOME BEFORE INCOME TAXES											INCOME BEFORE INCOME TAXES	47,638		4.9	%	32,547		3.8	%	88,906		4.7	%	30,964		1.9	%
INCOME TAX EXPENSE	INCOME TAX EXPENSE	10,993		1.2	%	1,278		0.2	%		INCOME TAX EXPENSE	13,709		1.4	%	731		0.1	%	24,702		1.3	%	2,009		0.1	%
NET INCOME (LOSS)		$	30,275	3.3	%	$	(2,861)	(0.4)	%
NET INCOME											NET INCOME	$	33,929	3.5	%	$	31,816	3.7	%	$	64,204	3.4	%	$	28,955	1.8	%

OTHER COMPREHENSIVE INCOME, NET OF TAX:	OTHER COMPREHENSIVE INCOME, NET OF TAX:										OTHER COMPREHENSIVE INCOME, NET OF TAX:
Change in unrealized gains on cash flow hedges, net of income tax expense of $3,763,and $0, respectively		11,070		1.2	%	4,081		0.5	%
Change in unrealized gains on cash flow hedges, net of income tax expense of $756, $0, $4,519, and $0, respectively											Change in unrealized gains on cash flow hedges, net of income tax expense of $756, $0, $4,519, and $0, respectively	$	4,637	0.5	%	$	4,199	0.5	%	$	15,707	0.8	%	$	8,280	0.5	%
OTHER COMPREHENSIVE INCOME	OTHER COMPREHENSIVE INCOME	$	11,070	1.2	%	$	4,081	0.5	%		OTHER COMPREHENSIVE INCOME	$	4,637	0.5	%	$	4,199	0.5	%	$	15,707	0.8	%	$	8,280	0.5	%
NET COMPREHENSIVE INCOME	NET COMPREHENSIVE INCOME	$	41,345	4.5	%	$	1,220	0.2	%		NET COMPREHENSIVE INCOME	$	38,566	3.9	%	$	36,015	4.2	%	$	79,911	4.2	%	$	37,235	2.3	%

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Three Months Ended ~~March 31,~~June 30, 2022 Compared to Three Months Ended ~~March 31,~~June 30, 2021

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 ~~ended March 31,~~June 30, 2022 and ~~March 31,~~ 2021.

Gross Profit


		For the three months ended											For the three months ended
		March 31, 2022			March 31, 2021								June 30, 2022			June 30, 2021
		(unaudited)			(unaudited)			Variance					(unaudited)			(unaudited)			Variance

		(in thousands, except for percentages)											(in thousands, except for percentages)
Net revenue	Net revenue	$	915,784		$	759,237		$	156,547	20.6	%	Net revenue	$	980,820		$	860,272		$	120,548	14.0	%
Cost of revenue	Cost of revenue	714,848			593,764			121,084		20.4	%	Cost of revenue	763,920			661,304			102,616		15.5	%
Gross profit	Gross profit	$	200,936		$	165,473		$	35,463	21.4	%	Gross profit	$	216,900		$	198,968		$	17,932	9.0	%
Gross profit margin	Gross profit margin	21.9		%	21.8		%					Gross profit margin	22.1		%	23.1		%

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~~low single digit growth relative to the prior year while chronic revenue grew in the ~~high-twenties. Additionally, acquisition~~mid-teens. Acquisition related growth accounted for approximately 2% and 3% of the increase in net revenue and gross ~~profit.~~profit, respectively. The increase in cost of revenue was driven by the growth in revenue. The increase in gross profit was primarily related to contribution margin from the increase in net revenue. Gross profit margin ~~was consistent with the~~decreased from prior year asdue to the ~~growth in the chronic portfolio was concentrated in higher profit therapies.~~impact of mix shift toward lower margin Chronic therapies and impact of inflation and rising fuel costs.

Operating Expenses


		For the three months ended									For the three months ended
		March 31, 2022		March 31, 2021							June 30, 2022		June 30, 2021
		(unaudited)		(unaudited)		Variance					(unaudited)		(unaudited)		Variance

		(in thousands, except for percentages)									(in thousands, except for percentages)
Selling, general and administrative expenses	Selling, general and administrative expenses	133,969		120,040		$	13,929	11.6	%	Selling, general and administrative expenses	$	141,787	$	134,257	$	7,530	5.6	%
Depreciation and amortization expense	Depreciation and amortization expense	14,722		16,339		(1,617)		(9.9)	%	Depreciation and amortization expense	16,037		16,619		(582)		(3.5)	%
Total operating expenses	Total operating expenses	$	148,691	$	136,379	$	12,312	9.0	%	Total operating expenses	$	157,824	$	150,876	$	6,948	4.6	%

The increase in ~~Selling,~~selling, general and administrative expenses is primarily due to salaries and benefits as a result of acquired team members and inflationary pressures, but has decreased as a percentage of revenue to ~~14.6%~~14.5% for the three months ended ~~March 31,~~June 30, 2022 as compared to ~~15.8%~~15.6% for the three months ended ~~March 31,~~June 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, which resulted in approximately $1.5 million decrease to amortization expense.~~expired.

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Other Income (Expense)


		For the three months ended									For the three months ended
		March 31, 2022		March 31, 2021							June 30, 2022		June 30, 2021
		(unaudited)		(unaudited)		Variance					(unaudited)		(unaudited)		Variance

		(in thousands, except for percentages)									(in thousands, except for percentages)
Interest expense, net	Interest expense, net	(12,246)		(19,481)		$	7,235	(37.1)	%	Interest expense, net	$	(12,765)	$	(17,236)	$	4,471	(25.9)	%
Equity in earnings of joint ventures	Equity in earnings of joint ventures	1,267		1,205		62		5.1	%	Equity in earnings of joint ventures	1,326		1,686		(360)		(21.4)	%
Other, net	Other, net	2		(12,401)		12,403		(100.0)	%	Other, net	1		5		(4)		(80.0)	%
Total other expense	Total other expense	$	(10,977)	$	(30,677)	$	19,700	(64.2)	%	Total other expense	$	(11,438)	$	(15,545)	$	4,107	(26.4)	%

The decrease in interest expense during the three months ended June 30, 2022 was primarily attributable to the debt refinancing of the ~~first lien term loan~~First Lien Term Loan and issuance of ~~senior notes~~Senior Notes in October ~~2021 during the three months ended March 31, 2022.~~2021. See Note 10, Indebtedness, of the consolidated financial statements for further information.

The ~~increase~~decrease in equity in earnings of joint ventures was primarily attributable to ~~organic growth in both~~ the ~~acute and chronic portfolio~~performance of ~~therapies.~~the joint ventures.

Income Tax Expense

For the three months ended
March 31, 2022 March 31, 2021
(unaudited) (unaudited) Variance
(in thousands, except for percentages)
Income tax expense 10,993 1,278 $ 9,715 760.2 %


	For the three months ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)		Variance

	(in thousands, except for percentages)
Income tax expense	$	13,709	$	731	$	12,978	1,775.4	%

The Company maintains a valuation allowance of $13.0 million against certain state net operating losses (“~~NOL”~~NOLs”). The Company’s tax expense for the three months ended ~~March 31,~~June 30, 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 in an effective tax rate of ~~26.6%~~28.8% during the three months ended ~~March 31,~~June 30, 2022. During the three months ended ~~March 31,~~June 30, 2021, the effective tax rate was ~~negative 80.7%~~2.2%. The variance in the Company’s effective tax rate of ~~26.6%~~28.8% for the three months ended ~~March 31,~~June 30, 2022 compared to the ~~Company’s Federal~~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 ~~negative 80.7%~~2.2% for the three months ended ~~March 31,~~June 30, 2021 compared to the ~~Company’s Federal~~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~~Company not recognizing any tax benefit for the period ended ~~March 31,~~June 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.~~2021, with the exception of the $13.0 million allowance noted above. Therefore, the reserve was not applicable in computing tax expense for the three months ended ~~March 31,~~June 30, 2022, thus producing the effective tax rate variance year-over-year.

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Net Income and Other Comprehensive Income


		For the three months ended									For the three months ended
		March 31, 2022		March 31, 2021							June 30, 2022		June 30, 2021
		(unaudited)		(unaudited)		Variance					(unaudited)		(unaudited)		Variance

		(in thousands, except for percentages)									(in thousands, except for percentages)
Net income	Net income	$	30,275	$	(2,861)	$	33,136	(1,158.2)	%	Net income	$	33,929	$	31,816	$	2,113	6.6	%
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 taxes	Changes in unrealized gains on cash flow hedges, net of income taxes	11,070		4,081		6,989		171.3	%	Changes in unrealized gains on cash flow hedges, net of income taxes	4,637		4,199		438		10.4	%
Other comprehensive income	Other comprehensive income	$	11,070	4,081		6,989		171.3	%	Other comprehensive income	$	4,637	4,199		438		10.4	%
Net comprehensive income	Net comprehensive income	$	41,345	$	1,220	$	40,125	3,288.9	%	Net comprehensive income	$	38,566	$	36,015	$	2,551	7.1	%

The change in net income ~~(loss)~~ was primarily attributable to organic growth from additional revenue related to the factors described in the above sections.

~~The~~For the three months ended June 30, 2022, the change in unrealized gains on cash flow hedges, net of income taxes, was primarily related to the increase in fair market value of the $300.0 million interest rate cap hedge executed in October 2021. For the three months ended ~~March 31,~~June 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 ~~$41.3~~$38.6 million for the three months ended ~~March 31,~~June 30, 2022, compared to net comprehensive income of ~~$1.2~~$36.0 million for the three months ended ~~March 31,~~June 30, 2021, primarily as a result of the changes in net income, discussed above, further increased by the impact of the fair value of the interest rate cap hedge. ~~For~~

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Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Gross Profit


	For the six months ended
	June 30, 2022			June 30, 2021
	(unaudited)			(unaudited)			Variance

	(in thousands, except for percentages)
Net revenue	$	1,896,604		$	1,619,509		$	277,095	17.1	%
Cost of revenue	1,478,768			1,255,068			223,700		17.8	%
Gross profit	$	417,836		$	364,441		$	53,395	14.7	%
Gross profit margin	22.0		%	22.5		%

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 low-twenties. Acquisition related growth accounted for approximately 2% and 3% of the increase in net revenue and gross profit, respectively. The increase in cost of revenue was driven by the growth in revenue. The increase in gross profit was primarily related to contribution margin from the increase in net revenue. Gross profit margin decreased from prior year due to the impact of mix shift toward lower margin Chronic therapies and impact of inflation and rising fuel costs.

Operating Expenses


	For the six months ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)		Variance

	(in thousands, except for percentages)
Selling, general and administrative expenses	$	275,756	$	254,297	$	21,459	8.4	%
Depreciation and amortization expense	30,759		32,958		(2,199)		(6.7)	%
Total operating expenses	$	306,515	$	287,255	$	19,260	6.7	%

The increase in selling, general and administrative expenses is primarily due to salaries and benefits as a result of acquired team members and inflationary pressures, but has decreased as a percentage of revenue to 14.5% for the six months ended June 30, 2022 as compared to 15.7% for the six months ended June 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.

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Other Income (Expense)


	For the six months ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)		Variance

	(in thousands, except for percentages)
Interest expense, net	$	(25,011)	$	(36,717)	$	11,706	(31.9)	%
Equity in earnings of joint ventures	2,593		2,891		(298)		(10.3)	%
Other, net	3		(12,396)		12,399		(100.0)	%
Total other expense	$	(22,415)	$	(46,222)	$	23,807	(51.5)	%

The decrease in interest expense during the six months ended June 30, 2022 was primarily attributable to the debt refinancing of the First Lien Term Loan and issuance of 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, net is due to the loss on extinguishment of debt incurred in conjunction with the January 2021 debt refinancing and included in the results for the six months ended June 30, 2021. There was no comparable activity during the six months ended June 30, 2022.

Income Tax Expense


	For the six months ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)		Variance

	(in thousands, except for percentages)
Income tax expense	$	24,702	$	2,009	$	22,693	1,129.6	%

The Company maintains a valuation allowance of $13.0 million against certain state NOLs. The Company’s tax expense for the six months ended June 30, 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 in an effective tax rate of 27.8% during the six months ended June 30, 2022. During the six months ended June 30, 2021, the effective tax rate was 6.5%. The variance in the Company’s effective tax rate of 27.8% for the six months ended June 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 6.5% for the six months ended June 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 June 30, 2021 because it maintained a full tax valuation allowance reserve against such benefits. This reserve was subsequently reversed during the three months ended ~~March~~December 31, 2021, with the exception of the $13.0 million allowance noted above. Therefore, the reserve was not applicable in computing tax expense for the six months ended June 30, 2022, thus producing the effective tax rate variance year-over-year.

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Net Income and Other Comprehensive Income


	For the six months ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)		Variance

	(in thousands, except for percentages)
Net income	$	64,204	$	28,955	$	35,249	121.7	%
Other comprehensive income, net of tax:
Changes in unrealized gains on cash flow hedges, net of income taxes	15,707		8,280		7,427		89.7	%
Other comprehensive income	$	15,707	8,280		7,427		89.7	%
Net comprehensive income	$	79,911	$	37,235	$	42,676	114.6	%

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 six months ended June 30, 2022, the change in unrealized gains on cash flow hedges, net of income taxes, was related to the increase in fair market value of the $300.0 million interest rate cap hedge executed in October 2021. For the six months ended June 30, 2021, the change in unrealized gains on cash flow hedges, net ~~comprehensive~~of income ~~was~~taxes, primarily related to the increase in fair value on the $925.0 million notional swap; the swap expired in August 2021.

~~Table~~Net comprehensive income increased to $79.9 million for the six months ended June 30, 2022, compared to net comprehensive income of ~~Contents~~

$37.2 million for the six months ended June 30, 2021, primarily as a result of the changes in net income, discussed above, further increased by the impact of the fair value of the interest rate cap hedge.

Liquidity and Capital Resources

For the ~~three~~six months ended ~~March 31,~~June 30, 2022 and the twelve months ended December 31, 2021, the Company’s primary sources of liquidity were cash on hand of ~~$145.6~~$204.0 million and $119.4 million, respectively, as well as ~~the $167.9~~$168.3 million of borrowings available under its credit facilities (net of ~~$7.1~~$6.7 million undrawn letters of credit issued and outstanding). During the ~~three~~six months ended ~~March 31,~~June 30, 2022 and the year ended December 31, 2021, 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.

The Company’s primary uses of cash include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, and the pursuit of acquisitions. 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 ~~the~~ outstanding debt. 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.

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 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.

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

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ability to fund planned capital expenditures will depend on our ability to generate cash 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 balances and expected cash flows generated from operations will be sufficient to meet our operating requirements for at least the next 12 months. 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

The Company’s asset-based-lending ~~(“ABL”)~~ revolving credit facility provides for borrowings up to $175.0 million, which matures on October 27, ~~2026.~~2026 (the “ABL Facility”). The ABL Facility bears interest at a rate equal to, at the Borrowers’ 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) LIBOR (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 ~~$7.1~~$6.7 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the ABL ~~facility~~Facility of ~~$167.9~~$168.3 million as of ~~March 31,~~June 30, 2022.

The principal balance of the ~~first lien term loan~~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. Interest on the ~~first lien term loan~~First Lien Term Loan is payable monthly on either (i) LIBOR (or a comparable successor rate, with a floor of 0.50% per annum) plus an applicable margin of 2.75% for Eurocurrency Rate Loans and (ii) a base rate determined in accordance with the new ~~first lien term loan~~First Lien Term Loan agreement, plus 1.75% for Base Rate Loans.

The ~~senior notes~~Senior Notes bear interest at a rate of 4.375% per annum, which are payable semi-annually in arrears on October 31 and April 30 of each year, ~~commencing~~and which began on April 30, 2022. The ~~senior notes~~Senior Notes mature on October 31, 2029.

Interest payments over the course of long-term debt obligations total an estimated ~~$293.8~~$304.1 million based on final maturity dates of the Company’s credit facilities. Interest payments are calculated based on the LIBOR rate as of ~~March 31,~~June 30, 2022. Actual payments are based on changes in LIBOR and exclude the interest rate cap derivative instrument.

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Cash Flows

~~Three~~Six Months Ended ~~March 31,~~June 30, 2022 Compared to ~~Three~~Six Months Ended ~~March 31,~~June 30, 2021

The following table presents selected data from Option Care Health’s unaudited condensed consolidated statements of cash flows:


		Three Months Ended March 31,							Six Months Ended June 30,
		2022		2021					2022		2021
		(unaudited)		(unaudited)		Variance			(unaudited)		(unaudited)		Variance

		(in thousands)							(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	32,681	$	18,380	$	14,301	Net cash provided by operating activities	$	136,954	$	92,034	$	44,920
Net cash used in investing activities	Net cash used in investing activities	(5,359)		(3,123)		(2,236)		Net cash used in investing activities	(69,952)		(25,660)		(44,292)
Net cash used in financing activities		(1,145)		(5,160)		4,015
Net cash provided by (used in) financing activities								Net cash provided by (used in) financing activities	17,621		(8,113)		25,734
Net increase in cash and cash equivalents	Net increase in cash and cash equivalents	26,177		10,097		16,080		Net increase in cash and cash equivalents	84,623		58,261		26,362
Cash and cash equivalents - beginning of period	Cash and cash equivalents - beginning of period	119,423		99,265		20,158		Cash and cash equivalents - beginning of period	119,423		99,265		20,158
Cash and cash equivalents - end of period	Cash and cash equivalents - end of period	$	145,600	$	109,362	$	36,238	Cash and cash equivalents - end of period	$	204,046	$	157,526	$	46,520

Cash Flows from Operating Activities

The increase in cash flows provided by operating activities is primarily due to higher net income, decrease in interest expense due to the October 2021 debt ~~refinancing, and~~refinancings, timing of vendor payments, and deferred income taxes, which were partially offset by changes in accounts receivable, inventory, and certain accruals during the ~~three~~six months ended ~~March 31,~~June 30, 2022 as compared to the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Cash Flows from Investing Activities

The increase in cash flows used in investing activities is primarily due to the ~~amount~~acquisition of ~~investments in our pharmacies and infrastructure.~~SPNN made within the six months ended June 30, 2022, as compared to the acquisition of Biocure made within the six months ended June 30, 2021.

Cash Flows from Financing Activities

The ~~decrease~~increase in cash ~~used~~provided in financing activities is related to the ~~current year repayments of the first term lien notes, which resulted in repayments of $1.5 million. The remaining change in financing activities was related to net~~ proceeds from warrant exercises during the ~~January 2021 refinancing in the three~~six months ended ~~March 31, 2021~~June 30, 2022, with no comparable activity induring the ~~three~~six months ended ~~March 31,~~June 30, 2021. Additionally, the cash used in financing activities for the six months ended June 30, 2021 is related to the January 2021 debt refinancing, with no comparable activity during the six months ended June 30, 2022.

Critical Accounting Policies and Estimates

The Company prepares its unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles (“GAAP”), which requires the Company to make estimates and assumptions. The Company evaluates its estimates and ~~judgments~~assumptions on an ongoing basis. Estimates and ~~judgments~~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 ~~judgments~~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.

~~The company’s~~There have been no material changes to the Company’s critical accounting policies and estimates as presented in our ~~Annual report on~~Form 10-K, ~~for the year ended December 31, 2021~~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 ~~March 31,~~June 30, 2022. 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 ~~March 31,~~June 30, 2022.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended ~~March 31,~~June 30, 2022 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 ~~report.~~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~~Form 10-K for the year ended December 31, 2021. 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 6.Exhibits

(a) Exhibits.


Exhibit Number			Description
31.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of Chief Executive Officer pursuant to 18 ~~U.S. C.~~U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of Chief Financial Officer pursuant to 18 ~~U.S. C.~~U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document
101.SCH			XBRL Taxonomy Extension Schema Document
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB			XBRL Taxonomy Extension Labels Linkbase Document
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document
104			XBRL 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: ~~April 28,~~July 27, 2022			/s/ Michael Shapiro
Michael Shapiro
Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)

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		Page Number
PART I

Item 1.	Financial Statements	45
	Condensed Consolidated Balance Sheets	56
	Unaudited Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~	67
	Unaudited Condensed Consolidated Statements of Cash Flows	78
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	89
	Notes to Unaudited Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3235
Item 4.	Controls and Procedures	3235

PART II

Item 1.	Legal Proceedings	3336
Item 1A.	Risk Factors	3336
Item 6.	Exhibits	3336

SIGNATURES		3336


	Three Months Ended March 31,
	2022		2021
NET REVENUE	$	915,784	$	759,237
COST OF REVENUE	714,848		593,764
GROSS PROFIT	200,936		165,473

OPERATING COSTS AND EXPENSES:
Selling, general and administrative expenses	133,969		120,040
Depreciation and amortization expense	14,722		16,339
Total operating expenses	148,691		136,379
OPERATING INCOME	52,245		29,094

OTHER INCOME (EXPENSE):
Interest expense, net	(12,246)		(19,481)
Equity in earnings of joint ventures	1,267		1,205
Other, net	2		(12,401)
Total other expense	(10,977)		(30,677)

INCOME (LOSS) BEFORE INCOME TAXES	41,268		(1,583)
INCOME TAX EXPENSE	10,993		1,278

NET INCOME (LOSS)	$	30,275	$	(2,861)

OTHER COMPREHENSIVE INCOME, NET OF TAX:
Change in unrealized gains on cash flow hedges, net of income tax expense of $3,763 and $0, respectively	11,070		4,081
OTHER COMPREHENSIVE INCOME	11,070		4,081
NET COMPREHENSIVE INCOME	$	41,345	$	1,220

EARNINGS (LOSS) PER COMMON SHARE:
Earnings (loss) per share, basic	$	0.17	$	(0.02)
Earnings (loss) per share, diluted	$	0.17	$	(0.02)

Weighted average common shares outstanding, basic	179,961		179,808
Weighted average common shares outstanding, diluted	181,681		179,808


	Three Months ended September 30, 2020				Nine Months ended September 30, 2020				Three Months ended December 31, 2020				Twelve Months ended December 31, 2020
	Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue
Commercial:
As Previously Reported	$	644,385	82.4	%	$	1,893,105	85.0	%	$	649,880	80.8	%	$	2,542,985	83.9	%
Adjustment	34,321		4.4	%	34,321		1.5	%	40,806		5.1	%	75,127		2.5	%
As Revised	678,706		86.8	%	1,927,426		86.5	%	690,686		85.9	%	2,618,112		86.4	%

Government:
As Previously Reported	127,435		16.3	%	308,830		13.9	%	141,237		17.6	%	450,067		14.8	%
Adjustment	(34,321)		(4.4)	%	(34,321)		(1.5)	%	(40,806)		(5.1)	%	(75,127)		(2.5)	%
As Revised	93,114		11.9	%	274,509		12.4	%	100,431		12.5	%	374,940		12.3	%


	Three Months ended March 31, 2021				Three Months ended June 30, 2021				Six Months ended June 30, 2021
	Amount		% of Revenue		Amount		% of Revenue		Amount		% of Revenue
Commercial:
As Previously Reported	$	611,434	80.5	%	$	703,429	81.8	%	$	1,314,862	81.2	%
Adjustment	37,073		4.9	%	43,218		5.0	%	80,292		4.9	%
As Revised	648,507		85.4	%	746,647		86.8	%	1,395,154		86.1	%

Government:
As Previously Reported	134,914		17.8	%	145,799		16.9	%	280,714		17.3	%
Adjustment	(37,073)		(4.9)	%	(43,218)		(5.0)	%	(80,292)		(4.9)	%
As Revised	97,841		12.9	%	102,581		11.9	%	200,422		12.4	%