Earnings Call Transcript - OPCH Q3 2021

Operator, Operator

Good day and thank you for being here. Welcome to the Option Care Health Third Quarter 2021 Earnings Conference Call. At this moment, all participants are in listen-only mode. After the presentations, there will be a question-and-answer session. I will now hand the conference over to your host, Mike Shapiro. Please proceed.

Mike Shapiro, Host

Good morning. Before we begin, please note that during the call, we will make certain forward-looking statements that reflect our current views related to our future financial performance, future events, and industry and market conditions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our comments. We encourage you to review the information in the reports we file with the SEC regarding the specific risks and uncertainties. You should also review the section entitled forward-looking statements in this morning's press release. During the call, we will use non-GAAP financial measures when talking about the Company's performance and financial condition. You can find additional information on these non-GAAP measures in this morning's press release posted on the Investor Relations portion of our website. With that, I'll turn the call over to John Rademacher, Chief Executive Officer.

John Rademacher, CEO

Thanks, Mike, and thank you for joining us this morning. Let me start by stating how pleased we are with the performance of our business, our team and their ability to navigate very dynamic and challenging market conditions. Overall, the third quarter was very productive as we continue to deliver profitable growth, generate meaningful cash flow and reinvest back into the business to lay the groundwork for sustainable growth. We continue to translate strong revenue expansion into leveraged earnings growth on our scalable platform. Equally important, we continue to invest in strategic initiatives that enhance our service lines, expand access to critical resources and position us to win. As always, Mike will review the financials in a few minutes, but I wanted to share a few thoughts. As we announced in the release this morning, we have raised and tightened our adjusted EBITDA guidance range for the full year based on the continued momentum of our team. In the third quarter, we saw strong sequential and year-over-year growth. Our topline was very solid with revenue growth of nearly 14%. We saw robust growth across the portfolio and throughout the country while leveraging our national infrastructure to deliver our highest EBITDA margin on record. Adjusted EBITDA of $78 million was nearly 32% growth over the prior year and an 8.7% EBITDA margin. These results are only possible through the relentless focus of our team on delivering extraordinary care to more patients and through focused execution that continues to improve productivity in our operating platform. Overall, patient referrals continue to gain momentum across both our acute and chronic therapy portfolios with mid-single-digit acute growth driven by our collaborations with health systems to seamlessly transition patients out of the acute care setting and more robust high-teens growth in our chronic portfolio. We've seen improved supply chain dynamics for certain therapies, and we continue to actively collaborate with manufacturers as a channel partner of choice on newer therapies. Although we continue to see some sporadic constraints, our supply chain situation is clearly improved. We will continue to monitor the situation closely and will work in partnership with our suppliers and product manufacturers in order to reduce or eliminate any impact from supply chain disruption. Behind every dollar of revenue is an extraordinary team committed to unparalleled patient care, including a clinical team of over 3,000 nurses, pharmacists, pharmacy technicians, respiratory therapists and dieticians. Their dedication and expertise are, frankly, what makes us different, ensuring that we maintain a highly skilled team to deliver extraordinary care, thousands of times a day is our most critical priority. Although we are not immune to the challenging labor market that persists across the broader economy, thus far, we have been effective in ensuring we have the right disciplines resourced despite many challenges. We have seen wage pressure for certain job categories in certain geographies, and we continue to monitor market conditions and are taking action where necessary to ensure we remain competitive. But at the same time, we are aggressively focused on realizing labor efficiencies through our technology investments and footprint expansion. Streamlining workflows, minimizing administrative tasks and leveraging our network of more than 125 infusion centers are examples of how we are partially mitigating labor challenges with operational efficiency. We do not expect the challenges of the labor market to subside in the near term, and we continue to manage through the situation. On the topic of infusion suites, we remain on track to open more than a dozen new infusion centers, which will expand our capacity by over 50 chairs this year, and we'll continue to actively expand our network nationwide. Again, infusion suites are an integral part of our strategy to drive higher patient satisfaction and clinical labor efficiency, as I've mentioned, but also to support continued growth, especially within our chronic portfolio. We have a dedicated team focused on suite expansion, and this will continue well into 2022 and beyond. I'm also very excited to share a few thoughts on the recent acquisition of Infinity Infusion Nursing. As we pivot from integration to acceleration, one of the key areas we've highlighted is our increased focus on strategic M&A to further expand our capabilities and fuel growth. Prior to the acquisition, Option Care had a deep relationship with Infinity, which provided per diem nursing resources for us throughout the country to supplement our own team of infusion nurses. Based on our tremendous respect for the team and the cultural similarities, which placed patient care above all else, it became obvious that putting these two organizations together made a lot of sense. With a national network of more than 1,300 highly skilled infusion nurses, this acquisition takes our clinical capabilities to a new level. As we've articulated, we will maintain Infinity as a separate operation and support their focus on expanding their clinical resources and client portfolio, including clinical research organizations and biopharmaceutical manufacturers with therapies in clinical development. Infinity was established by infusion nurses for infusion nurses, and we intend to maintain their clinical focus and entrepreneurial culture. At the same time, we will leverage their expertise around building nursing networks on a national and regional level, and we've already begun leveraging their network to better serve Option Care Health patients. The Infinity acquisition also highlights that we are focused on deploying capital through M&A on a broad span of opportunities. While we will continue to keep an ear to the rail for infusion assets, we continue to believe there is a broader array of assets that complement our infrastructure and focus on clinical care in post-acute settings. So as we sit here a little over two years since completing the merger, I could not be prouder of the team in terms of their dedication to this enterprise we've collectively built or their unwavering focus on extraordinary patient care as we continue to increase momentum and the number of patients that we serve. With that, I'll turn the call over to Mike to review the results in a bit more detail.

Mike Shapiro, Host

Thanks, John. As mentioned, the third quarter was very productive, and the results reflect the continued strength of the platform. Net revenue growth of 14% was led by our portfolio of chronic therapies, which collectively grew 18% and represented approximately 70% of the third quarter revenue. Acute therapies grew in the mid-single digits as we experienced a modest sequential increase over the second quarter and the acute comparisons from last year remain a favorable comparison. Gross margin dollars grew more than 16% in the quarter, outpacing topline as the gross margin rate expanded approximately 50 basis points over the prior year third quarter. Despite labor challenges and mixed pressure, efficiencies and procurement initiatives more than offset the headwinds. Again, we fight for every basis point, and we continue to modestly expand gross margins in a challenging environment. SG&A declined as a percent of revenue by 60 basis points to 15.1% despite absorbing some of the labor challenges and inflationary pressures John referred to. As we have repeatedly emphasized, we have a highly scalable platform and even though there are variable components within our spending base, we have a high degree of confidence that we can grow spending at a rate below gross margin dollar growth, thereby generating leveraged growth and an expanding EBITDA margin. On that note, we delivered $78 million of EBITDA in the quarter and expanded margins in the third quarter to 8.7%, roughly 30 basis points above Q2 and over 100 basis points over the prior year. We are also very encouraged by the cash flow generation and further capital structure improvements in the quarter. Year-to-date, we generated $140 million in cash flow from operations and exited the quarter at a net debt multiple of 3.5 times. On the heels of the strong quarter, I trust you've all seen our recent debt refinancing effort from two weeks ago, which further enhances our capital structure, provides additional flexibility and extends our maturity profile for 2028 and beyond. Our current cash interest burn rate is approximately $50 million, less than half our run rate of more than $100 million at the time of the merger. Finally, on the heels of a very solid quarter, we are narrowing and raising our full-year adjusted EBITDA guidance range as outlined in this morning's press release. For the full year, we now expect to generate adjusted EBITDA of $283 million to $288 million, representing approximately 28% full-year growth at the midpoint of our guidance range. We also expect to generate more than $180 million in cash flow from operations. Our revenue expectations of $3.35 to $3.5 billion remain unchanged. So overall, we're very excited that 2021 is shaping up to be a very productive year and is expected to continue our record of generating profitable growth and meaningful cash flow. And with that, we'll open the call for Q&A.

Operator, Operator

And our first question comes from Matt Larew with William Blair.

Matt Larew, Analyst

So second straight quarter here of high-teens growth on the chronic side. Obviously, last year, you had called out some COVID benefits at some point. But there's also a high degree of recurring revenue here. In a sense, I think that there's a sustainable shift in the side of care for a lot of these patients. So could you maybe just give us a sense of where you're kind of seeing this momentum build and how sustainable you think it is?

John Rademacher, CEO

Matt, it's John. Yes, thanks for the question. Well, first and foremost, look, the comparisons on a year-over-year basis as we continue to say, they're a little bit choppy and hard to really zone in on given all of the disruption last year and what we're seeing. We did have some new therapies that were introduced that we continue to see traction on moving forward. And I'd also say, look, our team has been focused around reach and frequency and making certain that we are targeting our call patterns around where key referral sources and really the key targets from that standpoint. So I think it was strong execution. I think it was those new therapies as well as some favorable comparisons when we're looking at a year-over-year basis. We were pleased, though, with some of the sequential gains that we saw. And we know there's seasonality to this business, and it builds towards the second half of the year. And so I'm pleased with the momentum that we saw in the third quarter and expectations as we kind of outlined, are that we're going to continue to see that as we finish out the remainder of the year.

Matt Larew, Analyst

Okay. And then just on the ambulatory suites. Obviously, you mentioned you have over a dozen that are in the works. Has the pandemic changed at all what you think the upper end of the range of potential patients that might prefer or will be better off being seen in an ambulatory clinic? And then maybe just give us a sense of where that is today and remind us where you think that our brand is.

John Rademacher, CEO

Yes. So again, we are very bullish around the utilization of the infusion suite as we move forward. A couple of things with that, Matt, into consideration. One is we do think from a patient satisfaction standpoint and a patient choice. It fits in alignment with our goals around the overall patient experience. We do think that with COVID, it certainly has opened up the opportunity to utilize these facilities in a much more robust way. And we also are expanding our portfolio of therapies that align with service in the infusion suite. So I believe when we started this year, from previous conversations that we've had in earnings calls, I think we started the year in, let's call it, the mid-teens of utilization for our nursing visits in the infusion suites. Our expectations are right now, I think we ended the quarter about 20% of our nursing visits were done in our infusion suite. And our goal is that we would be pushing 25% or higher of our nursing visits in the infusion suites as we start to expand the footprint as well as the therapy set. I don't know, Mike, if you have additional comments.

Mike Shapiro, Host

Matt, I want to emphasize that the suites play a crucial role in our strategy for several reasons that we've discussed before. Primarily, it's about efficiency. As John pointed out, we currently have limitations on our clinical resources. Therefore, enhancing efficiencies within our nursing team, particularly by reducing travel time and enabling concurrent infusions, creates a much more effective workforce. This also gives us the confidence to introduce and support new therapies in chronic care where patients are more mobile. Many new therapies, such as Ocrevus, Tepezza, and Stelara, are well-suited for administration in a suite setting. Overall, this approach is an important aspect of our growth strategy moving forward.

Matt Larew, Analyst

All right. Appreciate the update. Congrats on the quarter.

Operator, Operator

And our next question comes from the line of Brooks O'Neil with Lake Street Capital Markets.

Brooks O'Neil, Analyst

Nice quarter. I guess I'd start with my sense from sort of the national media is a lot of disruption here in 3Q related to the Delta spike on postponable hospital procedures, but you guys seem to have navigated that pretty well. Can you comment on: A, how you did that and B, what you're seeing out there now?

John Rademacher, CEO

Yes, I believe our position as a national provider gives us a broader perspective. Each market operated differently during the quarter, and we certainly felt the impact of the constraints related to Delta and how it affected the health care services ecosystem in those areas. We managed to navigate through this by capitalizing on demand, as highlighted in our report today. Our chronic results are strong, with patients staying with us for extended periods, sometimes for a lifetime, which helps build our patient base as we continue to bring in new patients. Overall, I think it was a strong quarter. Additionally, we faced challenges from Hurricane Ida and other disruptions in the Louisiana market. However, our team did an excellent job managing these disruptions while leveraging our network and platform to continue meeting the needs of our patients.

Brooks O'Neil, Analyst

Great. And then I guess I observed sort of the end of an era as it relates to your relationship with MDP. I assume that's probably positive in the main. But can you comment on any changes you might expect or might see over the next year or two as a result of being untethered from that chain?

Mike Shapiro, Host

Brooks, it's Mike. Look, we have a great relationship, as you know, with Madison Dearborn. They were supportive from day one of all the investments that the leadership team outlined. As we've transitioned, we articulated at the time of the merger, one of our intentions was to, over time, transition to a truly public float company. And I think we did that quite efficiently. They still are quite active in terms of representation on our Board of Directors. We'd expect that to continue. And from the day-to-day and from articulating and executing on the strategy, the leadership team has been making it happen. And so with the full support of the Board and to a great extent, the Madison Dearborn team, and we really would expect it to be quite seamless. And from our perspective, we're excited because it's just that much more float. As you'll remember since you've been around since day one, one of the challenges was we didn't have a lot of public float out there. And so now it's just a more liquid security. So overall, I think it's generally very much a positive.

Brooks O'Neil, Analyst

Absolutely. That makes total sense. So the last question I have is with the refinancing of the debt, which I think is a huge positive. Are there any changes that you see with regard to the strong cash generation and your use of cash going forward?

Mike Shapiro, Host

No. I think we're thrilled because it establishes a much more patient and flexible capital structure. Our cash interest has decreased from about $110 million to around $50 million in two years, which means we have more free cash in addition to what we're generating from operations. Just because we're generating more cash, which is a strong focus for us, doesn’t mean our capital allocation has softened. We still believe there are many M&A opportunities ahead that can significantly enhance value creation and growth. Currently, we're at about 3.5 times leveraged, and we're very comfortable with that leverage profile. I appreciate the confirmation from the agencies. Moving forward, our main focus will be on M&A.

Brooks O'Neil, Analyst

Great. Perfect. Keep up all the great stuff. I'm excited for you.

Operator, Operator

And our next question comes from the line of Lisa Gill with J.P. Morgan.

Mike Minchak, Analyst

It's actually Mike Minchak on for Lisa this morning. Just two questions. One, with respect to your chronic therapy portfolio, just wanted to ask about manufacturer relationships. Given your scale, footprint and clinical capabilities, you're clearly well-positioned for preferred distribution relationships on new therapies that are approved. Are you seeing any increased willingness from manufacturers to utilize limited distribution panels? And perhaps, has there been any change in the composition of those panels or manufacturers looking to narrow them even more?

John Rademacher, CEO

Mike, it's John. Thanks for the question. We have a dedicated team in business development that builds and maintains relationships with biopharma, which we believe positions us well. As we develop the AIC network for our infusion centers, we also enhance our ability to meet their needs as they explore future opportunities. With the addition of the Infinity Infusion Nursing assets, we are expanding our support for clinical trials and initiatives that could lead to limited or exclusive distribution relationships. This aligns with our long-term strategy and the opportunities that may arise as we progress. We are excited about the work we have accomplished and the direct relationships we currently maintain. With our platform and enhanced clinical capabilities through Infinity, we have a significant opportunity as we look ahead. Mike, do you have any additional thoughts?

Mike Shapiro, Host

Yes. Mike, the only thing I'd add is, look, one thing we've reiterated is because we have those direct supply chain relationships with manufacturers, we're not going through wholesalers for the most part. That gives us a much better position with them, both in terms of being able to articulate our clinical capabilities, move upstream, as John mentioned, with more nursing resources to support them in preclinical stages, but also in times of supply chain challenges like we've seen with the IG supply, having those direct relationships is absolutely vital because it just gives us a better ear to the rail of the supply chain dynamics. So we think those direct relationships and collaborations, in many instances, in a limited manner just gives us a strategic edge.

Mike Minchak, Analyst

Got it. Appreciate the color there. And then just as a follow-up, as we look ahead, I know you're not providing a preliminary outlook for fiscal '22 at this point. But just wondering if you could provide some broad color on whether there are any key headwinds or tailwinds that we should be thinking about for next year?

John Rademacher, CEO

Yes, we are not in a position to provide much guidance for the future. However, we are very pleased with our performance in the third quarter. We have maintained momentum, and the team has continued to execute extremely well, despite some challenges that have been noted. Some of these challenges are related to broader economic factors, including wage pressures present across the economy. We are actively seeking ways to improve productivity and expand our footprint to lessen the impact of these issues. We believe we are positioned well and are hopeful that we can return to a sense of normalcy after the pandemic, which will help us regain some of our historic referral patterns. We are also mindful of the potential challenges that colder months may bring as we transition back indoors and the possibility of increases in pandemic-related issues, including COVID-19.

Mike Shapiro, Host

Yes. The only thing I'd add, Mike, is, look, at this point, we're obviously trying to aggregate our thoughts on fiscal '22. We'll provide much more granular thoughts and guidance when we reconvene in the first quarter. The only thing I'll say because, again, as John said, we're just not in a position to provide anything substantive. As we've articulated, we see this as a mid-to-high single-digit topline low-to-mid-teens EBITDA enterprise. Again, aggregating all of the ASP moves and labor trends, we haven't seen anything yet that has bumped us from that base expectation, which, again, is kind of our longer-term thoughts on the growth trajectory of the business.

Operator, Operator

And our next question comes from the line of Kevin Fischbeck with Bank of America.

Adam Ron, Analyst

This is actually Adam on for Kevin. Quick question, I guess, around the Infinity Infusion Nursing asset, we kind of covered the staffing companies, and they generally have higher margins. So is it fair to assume next year, some slight accretion to EBITDA just given that your margins are kind of lower than the 10% to 15%, we'd expect?

Mike Shapiro, Host

Yes, Adam. We paid $50 million in cash upfront for the enterprise, which was generating around $4 million in EBITDA. This means we paid about $12 million, and they had an EBITDA margin in the low teens. You can infer from those figures that, in terms of valuation multiple, it should be modestly accretive considering the smaller amounts involved. Additionally, with an EBITDA margin in the low teens, that should be somewhat beneficial for the overall EBITDA margin.

Adam Ron, Analyst

Okay, great. Looking at the motivation behind the deal, have you had to rely more on contract labor? As those costs have increased, did you consider external sources to help with that? Can you quantify your reliance on contract labor now compared to before the pandemic?

John Rademacher, CEO

Adam, it's John. We have had a longstanding relationship with Infinity, so our decision wasn't a reaction to a specific market situation. We believe that access to clinicians will be crucial for our growth. We've previously discussed our nursing strategy that includes full-time, part-time, and per diem staff, supplemented by agencies. Our existing relationships, combined with a shared culture and focus, align with our mission and purpose. This opportunity positions us well for the growth we're experiencing by expanding our access to these clinical resources, which motivated the deal. It enhances our capabilities and provides crucial resources, while we still maintain a strong team within Option Care Health and will continue to do so in the future.

Adam Ron, Analyst

All right. And then one more for me. It's kind of early-stage, obviously, but the Democrats kind of announced a preliminary drug pricing deal. And it seems to be focused on the top 10 drugs negotiated through Medicare. And I think Remicade and Keytruda would be included in that. So just wondering if you have any initial thoughts on what that would look like for you?

John Rademacher, CEO

Yes, Adam, we are following the news closely and trying to understand its implications. Right now, it's difficult to make sense of it. At a high level, there isn't much detail on how this will be implemented or which drugs will be included or excluded. It's too early to speculate on the possible impacts as we move forward. Our main focus remains on key areas, and we are working in alignment with the National Home Infusion Association to ensure fair reimbursement for the services we provide and to expand access for Medicare participants. Currently, beneficiaries have limited access to home infusion. Therefore, our priority is to expand that access and ensure fair payment, including defining calendar days and providing service around the product. We will maintain this focus. As more legislative details emerge, we will evaluate and identify any risks and opportunities that may arise from any legislation that is passed.

Operator, Operator

And our next question comes from the line of Jamie Perse with Goldman Sachs.

Jamie Perse, Analyst

John, first, a couple for you. I just wanted to get a sense of what you think the growth in the chronic market is and if you're taking share? And potentially related to that, just would love your thoughts on kind of payer behavior? Are you seeing incrementally narrow networks that's helping you? Anything to call out on that front? And then would love any more color you can provide on some of the collaborations with health systems. I think you mentioned that on the acute side of the business. How should we think about that going forward?

John Rademacher, CEO

Yes. So I'll start with just the chronic. I think as we have defined the market, it's $100 billion of infused drugs or there so that is available. We do think that there's an opportunity for the part of the pie that is serviced by home infusion continues to expand. And in some of the comments that we've made, the expansion of additional products into our portfolio as well as our network for infusion suite kind of expands our opportunity to participate in that broad market. And so we think there's opportunities for that as we continue to move forward. As Mike had mentioned, products like Ocrevus and Stelara, just kind of highlight the ability for us to expand beyond kind of what were the traditional home infusion products. The second part of that is, look, we invested a lot into our commercial team to make certain that we increased reach and frequency, and we targeted where they were spending their time to make certain that we were getting the highest yield. And it was disrupted a bit through COVID and lockdowns and things of that nature. And so I think that they're finding their way, and we're building those relationships. And we have an opportunity to continue to focus around where that is. So look, we've defined it as really being a low double-digit type of growth trajectory. We like the broad portfolio that we have of therapies, and we think that expands and look, there's always going to be some puts and takes on that, right? There's going to be some areas that are going to advance and some that are going to decline. But all in all, we like that portfolio of products and the opportunities that it's going to bring us as we move forward. So from that perspective. I'm sorry, the second part of your question?

Jamie Perse, Analyst

Can you elaborate on the partnerships you have with health systems and how that might affect their growth?

Mike Shapiro, Host

We really value our alignment with the health systems. As we've mentioned before, we have dedicated team members involved in the care transition within hospitals. Throughout the pandemic, this team has worked tirelessly to address the challenges faced by health systems, which has strengthened our relationships. We have consistently delivered high-quality care, even during significant challenges. Our capability to identify patients who can safely transition out of the hospital to their homes has been vital, and we have worked collaboratively with health systems to facilitate this process. We believe this will continue to advance. Hospitals have effectively navigated the difficulties of treating COVID patients while managing non-COVID care. As the focus shifts back towards non-COVID care and regular procedures, we expect to be well-positioned as a partner of choice in transitioning patients to post-acute care and service providers.

John Rademacher, CEO

On your question around payers, look, continue to have really strong relationships across the board. I think we watch the tape, as you guys do as well, knowing that a lot of the payers are struggling a little bit with her medical loss ratios right now. We know that we're on the right side of the cost/quality equation and are a meaningful value creation for them as they're trying to manage the overall total cost of care. And so we continue to have really good dialogue across the board. We keep thinking about innovative ways in which we can partner with them, focusing around their affordability efforts and making certain that they're achieving those goals as we continue to achieve ours. So I think we're really pleased about the relationships that we fostered and the deepening of that. And we think that things continue to move towards whether it's value-based or outcomes rewarded care, away from fee-for-service, we'll be very well-positioned to continue to partner and to be part of their network of service providers.

Jamie Perse, Analyst

All right. And Mike, one for you, just on the margin performance, that's been really strong. I think a new high watermark in the quarter despite the growth in chronic, which comes at a lower margin. So can you tease that apart for us, just what kind of margins are you kind of offsetting from that mix shift? Where is that coming from? I think you mentioned the better margins for infusion and the percentage of visits in infusion sites going up. Maybe that's part of it, but would just love any more color you can provide on how you're getting to these margin levels despite the chronic growth?

John Rademacher, CEO

Yes, Jamie, it's a great question that highlights the pride our team has in the field. The operations team has embraced this as a rallying point. We have clearly stated that as we grow in chronic services, we will experience a headwind with our margin rates. Additionally, the labor market presents challenges that are common across all areas and locations. However, the team has risen to these challenges in the third quarter. We continually strive to secure every basis point through labor efficiencies, optimizing our resources, and implementing procurement strategies to reduce costs for drugs and medical supplies. Although we are seeing a significant shift towards chronic therapies, which typically carry lower margins, our procurement and sourcing teams are committed to fighting for every basis point within these therapies. Overall, we are very pleased with our ability to offset challenges and are excited about our growth. We will keep working to maintain every basis point on our gross margin line.

Operator, Operator

And our next question comes from the line of Pito Chickering with Deutsche Bank.

Kieran Ryan, Analyst

This is Kieran Ryan standing in for Pito. I wanted to explore the labor situation in more detail. Can you discuss the pressures you experienced in the third quarter? Notably, margins were quite strong, indicating that you managed the situation well. How did the dynamics shift compared to the second quarter? Additionally, are you facing any challenges in meeting staffing demands, or is everything in a good position?

John Rademacher, CEO

Yes. Look, it's a challenging market. I mean, I think everyone kind of called that out through the process. And we're not immune to it. I do think that the team has done a tremendous job of making certain that we're recruiting every day, that we are focused around filling open positions as timely as possible when we have them and continue to be in a position to expand and grow the business through that process. As Mike mentioned previously in some of our prepared comments as well, look, certain disciplines and certain geographies are feeling pressure in different ways. It's not consistent across the country. We, as an organization, have been very active and, in some instances, proactive to make certain that we remain competitive. We continue to focus around the opportunities that exist to be an employer of choice in the markets and to continue to utilize the programs that we have to emphasize why being part of the Option Care health team is a great place to be. So look, we're going to continue to feel the pressures as we move forward. We're going to continue to be active and proactive where necessary. And we're going to continue to utilize the investments we've made into our technology, into our facilities, into the expansion of our footprint to help to mitigate and offset some of the pressures that we'll feel from wage inflation and/or other inflation in the marketplace like gasoline and medical supplies that could also feel some of the pressures of inflation.

Kieran Ryan, Analyst

Okay. Cool. And a quick follow-up. Could you just provide an update on the BioCare acquisition? Just wondering how integration has gone there? And if that's had any impact on your IVIG go-to-market strategy?

Mike Shapiro, Host

Sure, Kieran. It's Mike. We're effectively complete with the integration. One of the things we appreciated about the transaction was its relatively modest size. We managed to integrate it within just a few weeks, thanks to our technology infrastructure. We've combined the commercial resources and the patient cohort. While it wasn't the largest M&A deal, it was very complementary because they had some compelling IG go-to-market strategies that we've incorporated into our own strategies. Overall, even though it may not significantly impact earnings, the process has been very seamless and smooth.

Operator, Operator

And our next question comes from the line of Mike Petusky with Barrington Research.

Mike Petusky, Analyst

So Mike, I've looked at the release five times, and I still can't find shares outstanding. Do you have shares outstanding? I also don't think the Q is out yet.

Mike Shapiro, Host

Yes, Mike, the information will be released later today. We are going to file our quarterly report later. There hasn't been a significant change in share count since the second quarter. You didn't overlook it; it wasn't included in the 8-K, but it will be in the quarterly report released later today.

Mike Petusky, Analyst

Okay. Perfect. And then I guess on Q4, when you guys think about sort of flu and maybe the heavier flu season, maybe a lighter COVID season? I don't think I should be predicting that, but maybe how do you just think about sort of that combination of how that may affect you guys in Q4 relative to historic fourth quarters?

Mike Shapiro, Host

Yes. As we look ahead to the fourth quarter, I have a couple of thoughts. First, we are anticipating a modest sequential increase from Q3, which is typical in this industry since Q1 tends to be the weakest quarter of the year, followed by a gradual rise throughout the year. We expect to see that trend again. Additionally, regarding our chronic portfolio, over 75% of our chronic revenue comes from patients currently receiving our services, thanks to our lower turnover. This provides us with improved revenue visibility as we enter each quarter. Although we are not complacent, this higher level of insight on the chronic side boosts our confidence. For the acute portfolio, as John mentioned, we are facing some interesting comparisons from the previous year. Generally, we anticipate a modest increase during this season due to colder weather leading to more physician visits and a slight uptick in the flu and pneumonia season. While it may not be significant, we do expect to see this trend in the fourth quarter as well.

Mike Petusky, Analyst

Okay. Great. And then just one more, I guess, maybe more longer term. I mean, historically, and I understand that most of your business is reimbursed commercially non-government pay. But when you think about CMS and how they've sort of priced infusion services historically, do you feel like anything is getting through in terms of maybe a fair way of pricing sort of government pay infusion services longer term?

John Rademacher, CEO

Yes. As I mentioned earlier, we are working together with NHIA and also on our own to secure fair reimbursement for Medicare beneficiaries based on what we know and the growth of home and home infusion services, particularly in the Medicare Advantage space. We will keep pursuing this goal. It can be frustrating for everyone involved because we believe we are having the right discussions about providing high-quality care at reasonable costs in environments that patients prefer. Medicare beneficiaries, especially during the COVID pandemic, were among the most vulnerable and had the least access to care that could have protected them from exposure to COVID. We remain hopeful and will continue these discussions. We have bipartisan support for upcoming legislation and are looking for ways to connect it with ongoing initiatives in Washington, whether that involves the infrastructure bill or the Build Back Better Act. However, it's unpredictable in Washington, and it's challenging to forecast outcomes, but we will remain steadfast in our efforts because we know we are advocating for the right cause.

Mike Petusky, Analyst

Absolutely. Just a quick one for Mike. I may have missed this, but did you update CapEx guidance or do you have any comments around CapEx for this year? It seems like it's trending lower than I anticipated.

Mike Shapiro, Host

Yes, we did not provide any CapEx guidance. However, we expect CapEx for the year to be around $25 million. There has been no change in that guidance, despite some challenges related to construction and building materials. Some of our pharmacy initiatives have experienced delays, but we anticipate they will catch up. Thus, we are still in the same range that we've traditionally provided.

Operator, Operator

I'm showing no further questions, and I would like to turn the conference back over to John Rademacher for any further remarks.

John Rademacher, CEO

Yes. Thanks, Michelle. Thank you for joining us this morning. As we outlined, a very strong and productive third quarter, we continue to feel the momentum of the business building, certainly recognize the hard work of our team members across the country that continue to navigate some challenging times, but also serve more patients. So really excited about where we are, but more importantly, excited about where we're going. So thanks for your attendance this morning, and take care.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.