Earnings Call Transcript - OPCH Q4 2025

Operator, Operator

Good day, and thank you for standing by. Welcome to the Option Care Health Fourth Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Nicole Maggio, Senior Vice President of Finance. Please go ahead.

Nicole Maggio, Senior Vice President of Finance

Good morning. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to future financial performance 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 expectations. We encourage you to review the information in today's press release as well as in our Form 10-K filed with the SEC regarding the specific risks and uncertainties. We do not undertake any duty to update any forward-looking statements, except as required by law. During this 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 will turn the call over to John Rademacher, President and Chief Executive Officer.

John Rademacher, President and CEO

Thanks, Nicole, and good morning, everyone. Thank you for joining us, and we're excited to share updates on our productive year and the 2025 results today. Before I do this, I want to take a moment to say thank you to the entire Option Care Health team for their consistent execution and commitment to our mission of transforming health care by improving outcomes, lowering total cost of care and delivering hope to our patients and their families. Before I get into the details on our business and financial performance, I'd like to reinforce our critical role across the health care industry. Option Care Health is uniquely positioned as the nation's largest independent provider of home and alternate site infusion therapy. We built a strategy on a national scale that starts with putting the patient at the center, provides high-quality care with cost advantages and fosters clinical innovation with local responsiveness. Last year, we served over 315,000 unique patients across a range of therapeutic categories, ranging from IV antibiotics to some of the most sophisticated rare and orphan products in the marketplace. In fact, last year, we completed over 2.5 million infusion events. Our 50-state licensure, expansive footprint and comprehensive nursing team help us deliver consistent clinical outcomes and same-day service for large health systems and national payers across the country. This includes helping payers shift care into lower-cost settings and reduce inpatient utilization where clinically appropriate. With the ongoing economic pressures the health care industry is facing, we are on the right side of the health care cost curve, partnering to provide high-quality care at an appropriate cost in a setting in which patients want to receive it. As we reported this morning, our results were in line with what we preannounced in January. Meenal will provide more detail, but I wanted to highlight the solid execution that drove our performance this past year. In 2025, the Option Care Health team continued to capitalize on industry dynamics and made significant progress in our efforts to create a sustainable growth enterprise. We opened new infusion suites and pharmacies, deployed innovative technology, deepened our referral base and expanded our formulary, while navigating a dynamic environment and shifting economics on certain therapies. As we reaffirmed this morning, our current views on 2026 are also in line with the guidance that we communicated in January. The team continues to execute at a high level every single day and the strength of our platform, our clinicians, our local market operations and the consistency of clinical outcomes across our national infrastructure continue to differentiate us and provide value to our stakeholders. Our partnership with payers continues to deepen as we help them navigate affordability challenges and find opportunities to rightsize care. We understand the pressure our payer partners are facing with rising health care costs as well as rate pressure for those with Medicare Advantage exposure. We see strong alignment between our capabilities and the outcomes the payers are trying to achieve, and we expect that momentum to continue. We have active site of care programs with the largest national payers. And this year, we added 5 new programs with regional health plans and 2 additional with nontraditional payers. These programs are seeing traction, and we expect that number will continue to grow in 2026 and beyond. We remain committed to leveraging our platform to help manage the total cost of care while producing quality outcomes through clinical oversight and helping to ensure adherence to medication care plans. On the formulary front, we see a strong pipeline of infused and injectable drugs to treat clinically complex patients, and we're encouraged by the engagement with pharma manufacturers and innovators, who are seeking partners with our capabilities. Our comprehensive clinical competencies, including one of the nation's largest networks of infusion nurses as well as broad market access, national scale and local pharmacy resources positions us as a partner of choice to help new-to-market products reach their targeted patient cohorts. And our pharma partnerships also continue to expand, including earlier involvement through clinical trial support and enhanced service and data insight programs. We continue to invest in and strengthen our programs to create specialized service offerings, clinical effectiveness reporting and operational discipline to scale and configure programs with efficiency capture. Today, we are privileged to operate over 20 enhanced programs in service to pharma manufacturers, and we are excited about the pipeline of new programs we expect to launch in 2026 and beyond. Our referral source relationships remain strong as we have proven to be a reliable partner across health systems and specialty prescribers. Our consistent and disciplined approach helps us capture additional demand through increased reach and frequency with these referral sources. With the specialty prescriber base, we have aligned our commercial resources to improve focus on key call points. We see attractive growth vectors in neurology, autoimmune, dermatology, oncology and rare diseases, and we expect these therapeutic areas to play a larger role over time. The breadth of our portfolio continues to expand as additional therapies and indications are added, and we are excited about the opportunities ahead. We also continue to invest in growth across our platform throughout 2025. We added talent across commercial sales, operation and our clinical teams. We strengthened our technology stack to drive efficiency and scale. We continue to deploy artificial intelligence and automate key patient administration functions, including invoice processing and cash posting. Today, approximately 40% of our claims are processed without human intervention. We believe these initiatives will help us to grow without significant incremental labor within these functions, while improving the quality and productivity of our team members. Our ambulatory infusion clinic investments continue to progress well with over 25 centers offering advanced practitioner capabilities. These additional investments complement our home-based and alternate site model, expand patient choice and can support higher acuity therapies in cost-effective settings. To provide some context, on a pro forma basis for Intramed Plus, which we acquired in 2025, our infusion clinic visits grew over 25% in the fourth quarter over the prior year. We've seen continued momentum in both the Intramed Plus sites in South Carolina as well as within our other infusion clinic locations. We expect to further leverage our model as we navigate regulatory compliance and identify strategic locations for new clinics. Additionally, over 34% of our nursing visits this quarter occurred in one of our infusion suites or clinics, and we expect to continue to leverage the infrastructure we've built, which contributes to the results in both clinical capacity and efficiency. And with that, I will turn over to Meenal for a closer look at the financial results.

Meenal Sethna, CFO

Thanks, John, and good morning, everyone. As John noted, 2025 was a strong year for the organization, and our results reflect both the resilience of the business and the strength of our team. For the full year 2025, net revenue was $5.6 billion, up 13% over prior year, driven by balanced growth across acute and chronic therapies. Our teams continue to capitalize on evolving industry dynamics to capture volumes from both health systems and specialty prescribers. Acute revenue grew in the mid-teens, while chronic therapies grew in the low double digits. As discussed in our third quarter call, we began to see Stelara biosimilar adoption, which carries a lower reference price and reimbursement. For the full year 2025, we absorbed a company revenue headwind of 160 basis points from patient transitions to Stelara biosimilars impacting our chronic portfolio. Gross profit dollars grew 7.4% and our SG&A percent of sales declined 50 basis points versus last year to 12.1% as we continue to see the positive impact of our efficiency initiatives and leverage. Adjusted EBITDA of $471 million increased 6% over prior year, and our EBITDA margin was 8.3%. Adjusted diluted EPS was $1.72, growing 9% and reflecting the strength of our operating performance and the impact of repurchasing our shares over the course of the year. We generated $258 million in cash flow from operations for the full year 2025 and finished the year at a net debt to leverage ratio of 2.0x. As we shared in early January, we expected to finish below our prior guidance of $320 million. Consistent with prior years, we executed on some opportunities for strategic inventory buys, where we could achieve some favorable economics, including some opportunities that arose later in the fourth quarter. Additionally, we ramped up our working capital for certain limited distribution therapies more than we had estimated as clinical and operational investments are essential to support long-term growth. Overall, as we grew sales 13% this year, we naturally have some higher working capital carry to support the growth of our business. We are setting our 2026 operating cash flow guidance to be greater than $340 million, reflecting a 30-plus percent growth in cash generation versus last year. We are already executing on initiatives to reduce our working capital with a focus on inventory as we believe a significant portion is timing related. We are also taking a fresh look at our processes and practices around working capital management to continue driving our strong cash conversion cycle. Consistent with prior years, our cash generation is seasonal, with the first quarter historically being the low point and the majority of our cash being generated in the back half of the year. Turning to capital allocation. We executed on all fronts in 2025, and our priorities remain consistent. Our primary focus remains internal investment to support profitable growth, capacity and efficiency initiatives. In 2025, we added over 80 infusion chairs as we continue to build out our suite and clinic footprint, where we identified strategic geographic growth opportunities, but we remain focused on maximizing utilization within our current infrastructure. We also invested in adding key clinical and commercial resources to the team. On our second priority, M&A, we remain active on identifying complementary tuck-ins and adjacencies. We acquired Intramed Plus earlier in the year, and the business and financial performance beat our initial expectations. We will continue to exercise discipline as we evaluate potential acquisitions, ensuring they are both strategic and financially attractive. Finally, we will periodically buy back our shares. We repurchased over $300 million of our shares during 2025, and as we announced in early January, the Board expanded our share repurchase program authorization by $500 million. As we look forward to 2026, we are reaffirming the guidance we announced in January. We expect full year 2026 revenue of $5.8 billion to $6 billion, which reflects 4% growth at the midpoint and a 400 basis point revenue growth headwind driven by Stelara IRA and Stelara biosimilars conversion. We are guiding to adjusted EBITDA of $480 million to $505 million. This includes a $25 million to $35 million gross profit headwind related to Stelara and Stelara biosimilars conversion with the financial impact expected to be realized evenly over the year. We expect adjusted diluted EPS of $1.82 to $1.92, and as I noted earlier, expect to generate at least $340 million in operating cash flow. On some modeling items for the full year 2026, we're forecasting net interest expense to be in the range of $50 million to $55 million. We are estimating a full year tax rate in the range of 26% to 28%, and we are assuming a share count of 159 million shares for the first quarter. We are confident in the guidance we are putting forth and look forward to continuing our track record of execution. And with that, I'll turn it over to the operator to open up for questions.

Operator, Operator

Our first question comes from David MacDonald of Truist.

David MacDonald, Analyst

Just a couple of quick questions. John, can you talk in a little bit more detail? I mean, it's hard to kind of get through a day without hearing about affordability. You talked a little bit in your prepared remarks about the payers. But can you also talk about not only just what you're seeing in terms of the payers? It sounds like those conversations are certainly incrementally ramping up. Let me know, if that's accurate. And then secondly, just what you're seeing in terms of conversations with potential hospital systems, just given some of the pressures that they're seeing and chatter around things potentially down the road in terms of maybe like site neutrality. Just any additional color there would be helpful.

John Rademacher, President and CEO

Yes, absolutely. Regarding affordability, as mentioned in my prepared remarks, we are collaborating closely with the payer community to help them focus on total care costs and find ways to reduce those costs moving forward. We have implemented site of care initiatives to identify opportunities for transitioning patients to our services, which helps lower the total cost of care, whether it’s at home, in our infusion suites, or clinics. The pace of these discussions has accelerated as payers concentrate on their medical loss ratios and seek ways to maintain quality while lowering costs. We are encouraged by these conversations and the opportunities they present for both us and the patients we serve. Similarly, on the hospital system front, we’ve established strong relationships with key hospital systems nationwide, focusing on safely and effectively transitioning patients to our care, especially when they have capitated payment plans. They are always looking for ways to ensure patients transition safely out of their facilities. We place registered nurses into those hospital systems to facilitate the transition of care. We believe this will continue to be a significant strength given our national presence coupled with local responsiveness. We often discuss the balance in our portfolio, which includes both acute and chronic care. Our ability to serve a wide range of products and patient populations positions us well to support hospitals and health systems, whether for an acute discharge on IV antibiotics or assistance with a 340B program for specialty drugs. We have various programs in place that help hospitals and health systems achieve the best outcomes.

David MacDonald, Analyst

Okay. John, I have a couple of quick questions. Regarding Advanced practitioners, I want to confirm something. Could you clarify whether those pro forma numbers applied to all 25 advanced practitioner locations or just Intramed? I just want to make sure I understand that correctly. Additionally, you mentioned increasing utilization of your existing footprint. Is it reasonable to expect that as some of these locations mature, the roughly 20% increase in nursing efficiency you’ve observed will improve further as you drive more utilization in those centers?

John Rademacher, President and CEO

Yes. So starting with the prepared remarks, the 25% increase was the Intramed sites as we took that over on a year-over-year basis just in the comparable, continuing to make investments into that marketplace as we went through the integration of that asset as being part of the Option Care Health family. So I'm really pleased about that. The rest of the sites are seeing the momentum. We didn't necessarily scale or call out the exact growth on that, David, but I just wanted to put it into perspective on the Intramed sites. On the overall efficiencies that we expect, yes, we continue to see growth in our patient census. I mean, as I called out in the prepared remarks, we served over 315,000 unique patients last year. That is an all-time high for this organization. It just shows the strength of the platform and our ability to reach into that. Continue to utilize the footprint, especially in the infusion suites and the infusion clinic, just allows us to drive both capacity and efficiency of the nursing network and continue to drive that forward. So we had called out before about a 20% improvement that we see in the nursing efficiencies over time. And that's part of that equation of where we're seeing the use of those sites to really help us drive the operating efficiency and leverage, but also to increase the capacity of our nursing community.

Operator, Operator

Our next question comes from Matt Larew of William Blair.

Unknown Analyst, Analyst

This is Jacob on for Matt. I just want to touch on the outlook to start. I appreciate you first guided about a month ago and today reiterated that guide. But just wondering, if you see anything that has made you maybe more cautious on the outlook for the year, whether that be updated numbers, expectations for Stelara. I know you reiterated the guide you had previously given for that. But just what kind of maybe early trends in the first quarter have showed you, maybe any ramping drugs or drug classes or anything from the recent IRA announcements as well as any upcoming biosimilar launches you'd highlight that could potentially affect numbers to the both ends of the guidance range this year?

Meenal Sethna, CFO

Sure. Jacob, I'll answer your question with a straightforward response: no, we haven't changed anything regarding our guidance provided in January. We are monitoring the situation and the various factors affecting it, as there's a lot of noise in the news currently. However, from our perspective and the plan we've established, we remain confident in the guidance we've set, both in terms of sales growth and profitability. We also included a cash flow guide in that. Therefore, we haven't encountered anything that prompts us to modify our guidance at this time. John, would you like to discuss any trends?

John Rademacher, President and CEO

Yes. I think the overall trend is in alignment with our expectations. We had done a lot of planning heading into the year. And certainly, when we were formulating what was going to be that pre-release guide that we put forward, I think what we're seeing at this point in time is that things are trending in alignment with kind of our expectations. As you know, the first quarter is a very busy time with benefit verification and reauthorization and prior authorization for new patients coming on to service. And so there's always a bolus of activity that kind of comes at the beginning of the year. It really takes the quarter to fully shake a lot of that out. But at this point in time, we're very confident in the '26 guide and continue to believe that everything is patterning in line with our expectations. To your broader question, and as Meenal said, there is a lot of noise in the marketplace at this point in time. We're trying to separate the signal from the noise. And again, we don't see anything in '26 that really is changing our perspective around where we see the growth and where we see the opportunities that lie ahead. So I think the team is staying close to any of those developments. But at this point in time, we feel very good with the guidance that we have reaffirmed this morning.

Unknown Analyst, Analyst

Got it. And I want to go back just quickly on the advanced practitioner model. I think in last quarter, you mentioned 24 of your 175 total facilities were equipped with this model. I think I heard over 25 this quarter. So just wondering what your target pace for converting and opening new sites in 2026 and beyond this. And maybe as a follow-up to that, as you scale both the infusion and these advanced practitioner models, what are the key limiting factors for increasing the pace of the new site openings? And what does the plan to invest in those capabilities look like in the next couple of years versus what that looked like in the last couple?

John Rademacher, President and CEO

Yes. So as we've expressed before, I mean, we have a pretty big installed base of our infusion suite, and there's kind of a collective approach that we're taking on our infusion clinic build-out. Some of them are new sites that are greenfield that we are building, when we find strategic geographies in which we want to have that capability. And others are the conversion of our existing sites to transition them over and get the licensure, and there's a modest amount of refurb that needs to happen in order to make them an infusion clinic. So we're kind of going about it in both ways as we see the market opportunities and drive that forward. As we called out and as you heard, we have continued to grow that in the fourth quarter, and we expect that we're going to continue that conversion and growth into 2026. I don't know that I'm willing to put a target out there at this point in time. It moves in an interesting pace. I think as we've explained before, a lot of it has to do with corporate practice of medicine at a state level and the ability to get credentialing with the payers through that process. We're actively moving forward with that. One of the big aspects of where we really can drive the utilization is the investments that we also called out in investing in our commercial resources, having the sales team that is making the calls, and certainly investing in the clinical resources that are necessary to be able to oversee those clinics and operate within that environment. This balance of the operating model where a patient is best served under the practice of pharmacy or where a patient is better served under the advanced practitioner model and balancing those out. So we continue to make investments across all those dimensions. We believe this is additive to our overarching strategy of being a partner of choice and having a choice for patients to select the best site for their care. And so we're going to continue down the pace, and I would expect that you're going to continue to hear us talk about the growth that we're seeing in the existing installed base as well as continue to make additional investments to expand our capabilities and expand the network of advanced practitioner clinics.

Operator, Operator

Our next question comes from Pito Chickering of Deutsche Bank.

Pito Chickering, Analyst

I guess the first one here, just a quick housekeeping. Can you quantify the Stelara impact you guys saw in the fourth quarter? I just want to be able to model what gross profit growth year-over-year was excluding Stelara. Was that in line with your sort of $20 million to $22 million of EBITDA impact in the fourth quarter?

Meenal Sethna, CFO

Yes. The short answer is yes. In the end, for Stelara and the headwind that we talked about, which was close to $70 million or so, it patterned out exactly as we thought. And so if you assume about $20 million of an impact in the fourth quarter, maybe a little more, that's over a 100 basis point impact to gross profit.

Pito Chickering, Analyst

Okay, perfect. Looking at the growth split between acute and chronic for '26, I'm curious about your perspective on acute growth this year. It's been a significant year following the exit of competitors. What are your expectations for acute revenue growth in '26? Also, how do you view chronic growth in '26? Additionally, regarding margins, is there any reason to expect changes in margins for '26, excluding Stelara, compared to the last few years in those two segments?

John Rademacher, President and CEO

Yes. So we expect to continue to see strength in our acute offering. As you called out, Pito, the marketplace continues to be dynamic there, but we believe we're well positioned. The infrastructure that we have and the capability set really plays well to capture that market demand. I think we have characterized that the industry of those types of products is a low single digit. Our expectations is probably a mid-single digit on that, so that we will continue to capture the market demand as it moves forward. Again, that's a step down from the prior year, where we had the competitive closures, but it still is a strong result on that. I would say the profit contribution on the acute would be consistent with what we would expect and what we've seen in prior years. No major changes from that perspective. On the chronic, again, given some of the headwinds of the biosimilar and the Stelara, we still expect that to be in the high single-digit to low double-digit growth on the chronic standpoint. Again, as you had called out, certainly, we have the headwind of the biosimilar and Stelara impact on a year-over-year basis. The rest of the portfolio, I would say, is in alignment with kind of what the historical expectations or the historical performance has been from that. We're going to continue to have to fight through a little bit of a mix challenge in the sense we're going to be growing our chronic faster than the acute, and that's going to put some pressure on the gross margin as a percentage aspect. But again, we feel good about the strength and the breadth of the portfolio. As we called out, we're punching above our weight class in some of that aspect where you're working through the headwinds of Stelara and putting that behind us in 2026.

Operator, Operator

Our next question comes from Brian Tanquilut of Jefferies.

Brian Tanquilut, Analyst

John, maybe to follow up on your points to Pito. As I listened to your prepared remarks and heard all the things you were talking about in terms of the drivers of the business going forward, your AI benefits and the fact that your business probably can't be AI. So when we think through all that and the fact that Stelara is behind us now, is it right to think that we should revert back to sort of a double-digit EBITDA trajectory once we get to 2027?

John Rademacher, President and CEO

Yes. I mean, look, Brian, we don't give '27 guidance on the day that we gave out '26, as you expect. But the fundamentals of the business, I guess, part of the prepared remarks were around the fundamentals of the business being strong. We believe we're on the right side of the cost-quality equation. We believe that we continue to partner with payers and pharma and really have a unique platform for our stakeholders to help achieve their goals as we're achieving our goals. There will continue to be opportunities as we see the portfolio of products that are entering the marketplace as well as the ability to use our clinical resources to the fullest across that. So I think things are setting up really well for us to continue to drive the business forward. I think we're extremely well positioned to capture that market demand and deepen the partnerships with those key stakeholders. I think as we move through the year and continue to make progress against the objectives that we've outlined, I am confident in the strength of the position that we hold and really confident in the opportunities that we have to continue to capture market demand and really drive around those new vectors of growth that I outlined.

Meenal Sethna, CFO

Yes, it's Meenal. When we discussed our 2026 guidance, we mentioned there are a couple of challenges, including a 400 basis point headwind regarding Stelara. This represents a 400 basis point impact on revenue. However, considering the $25 million to $35 million EBITDA effect we mentioned, removing that from the growth rate implied in the guidance keeps us on track for double-digit EBITDA. This is what we are working toward, aligning with everything John mentioned about our numerous initiatives and efforts. Our focus for 2026 is on executing various initiatives and investments we've made.

Brian Tanquilut, Analyst

That's very helpful, Meenal. Maybe my follow-up, as I think about your guidance for the year, what assumptions have you made in terms of biosimilar shifting within the Stelara portfolio or even through other therapies like Tremfya? Or question asked differently, maybe, is there upside opportunity as those things occur over the course of the year?

John Rademacher, President and CEO

We started the year with expectations regarding our portfolio and the overall landscape of chronic inflammatory diseases, including Stelara. We anticipated changes due to biosimilars and shifts within our product offerings, driven by pharmacy benefit managers and payers in their formulary management. As I mentioned in response to a previous question, the developments have been unfolding similarly to our expectations, which has allowed us to confidently reaffirm our guidance today. The first quarter is particularly significant due to the prior authorization processes and resets that occur. By the end of Q1, we should have a clearer understanding of how everything will unfold. Currently, things are aligning with our expectations. We do not foresee any major developments in 2026 that would significantly affect our portfolio, aside from the anticipated changes with Stelara.

Operator, Operator

Our next question comes from Lisa Gill of JPMorgan.

Lisa Gill, Analyst

John, I wanted to go back to your comments around the expanded formulary. You talked about a strong pipeline in infused and injectable products. Can you maybe just talk about any specific opportunities that you see? I know in the past, you've called out, for example, rare and orphan products and large dollar amounts, but smaller gross margin percentages. Anything that we should keep our eye on as we think about '26? And then just kind of dovetailing into that, when I think about the strategic inventory buys that you talked about, should we think about that also as more of a first quarter impact? Or is that also going to be spread throughout the year? How do I think about the cadence of some of this?

John Rademacher, President and CEO

Yes, I'll begin, Lisa, and I appreciate the question. When considering our formulary and the opportunities in our pipeline, I want to highlight our focus on rare products. We have a robust platform and clinical capabilities, and we previously announced two additional platforms launching in 2026. It’s challenging to predict the uptake of some products due to PDUFA dates and launch timing. However, we have two programs set to come online in 2026, alongside our existing portfolio. Our platform demonstrates strength in pharmacy, infusion suite, and clinic infrastructure, as well as the clinical expertise necessary for deep partnerships with pharmaceutical companies. We will provide more updates as developments occur, and these will be key areas of focus. Additionally, there are new products emerging in the chronic space that provide promising opportunities for expanded indications or new entries into our portfolio. While I won't specify individual products for various reasons, I want to emphasize the capability of our team to collaborate with pharmaceutical manufacturers to identify opportunities to ensure we are included in formularies. We also look for ways to utilize our infrastructure effectively and maintain strong partnerships with pharma, particularly as they seek channel partners to reach their patient populations.

Meenal Sethna, CFO

Yes, Lisa, I'll address the cash flow question. Generally, we expect to follow our usual practice of making strategic inventory purchases, as I mentioned in my prepared remarks. There were some decisions made late in the fourth quarter regarding this. As usual, we anticipate that the inventory will be utilized throughout the year. The cash flow might not be exactly even across the quarters, as it can fluctuate, but I expect it will be consistent throughout the year. Additionally, it's important to remember that historically, Q1 has been our weakest cash flow quarter, while the second half tends to be much stronger. Although it’s challenging to predict how inventory patterns will align, we will provide insights, and you can expect to see our inventory balances decrease as the year progresses.

Lisa Gill, Analyst

Just a follow-on to your capital allocation strategy. I've heard both you and John talk about Intramed being very successful. How should I think about '26? Do you see incremental opportunities for another Intramed or other types of tuck-in acquisitions in '26 versus share repurchase?

Meenal Sethna, CFO

Yes, I'll begin by discussing our M&A strategy, which is a significant focus for us. We have mentioned the importance of organic investment followed by M&A. We are adding more resources to concentrate on this area, and we are actively assessing various opportunities. It's important to remember that while you may see the visible aspects, there is much more happening behind the scenes. We are very active in M&A, and assets similar to Intramed have been incredibly beneficial for us in the past. This remains a key priority for us.

John Rademacher, President and CEO

Yes. And I would just echo that. I think that we're managing a pipeline of opportunities at this point in time. As Meenal said, we continue to invest in that team and the capabilities to assess and then do that. The only thing I will continue to remind everyone is it's got to be both strategic and financially accretive for us as we're looking forward. That's the discipline that we've demonstrated historically, and it's one that we'll continue to maintain as we look ahead.

Operator, Operator

Our next question comes from A.J. Rice of UBS.

Albert Rice, Analyst

Just to put a finer point on the seasonality, I'm interested in the income statement. You got the $25 million to $35 million gross profit headwind. I think the assumption with the way things played out last year was because you had forward buying that mitigated the impact of Stelara in the first quarter last year. The comp will be particularly tough in the first quarter this year and then get more normalized for the rest of the year. It sounds like you've got forward buying you're doing again this year. So should we think of that $25 million to $35 million headwind as being evenly distributed? Or is the first quarter still going to be a tougher comp than the rest of the year with respect to that?

Meenal Sethna, CFO

Yes. So let me answer both questions, A.J. So one, as it relates to 2026, and I talked about, and this hasn't changed, that the $25 million to $35 million headwind, we would expect to pattern out fairly evenly throughout the year. So there isn't that first quarter phenomenon that occurred last year. Having said that, when you look at the year-over-year comp, because of what happened in 2025, there is a bit of a year-over-year comp issue in Q1 where it was more favorable in Q1 last year, but not necessarily this year. So hopefully that answers what you were trying to get at.

Albert Rice, Analyst

Okay. No, I got it. I got it. And then I know John mentioned the application of AI and claims processing and things you're doing there. We're hearing providers talk about AI applications in various ways. I was curious when you go beyond that, is there any other applications that you're looking at for AI, whether clinician utilization staffing, other things that would be worth highlighting?

John Rademacher, President and CEO

Yes, A.J. I would highlight that we're doing work with some agentic aspects for, as you would expect, call center capabilities and the ability to help better support customer service. We're doing work around workforce optimization and making certain that we have the right resources in the right places. As part of the overarching comments that Meenal made around strengthening some of the things on working capital, we're looking at tools to help better manage inventory and things of that nature. So I'd say it's broader than just revenue cycle management at this point in time. The use cases that we have are expanding. These are all, I guess, tools that augment our team. They help our team work more efficiently, more effectively, and in instances, reinforce quality through that process. We have not done anything at this point in time to really put it in front of the clinician. We believe that the models are still a little bit immature in order to do that. We may look for opportunities to help support our clinicians in note capture and other aspects. But at this point in time, we have not done anything to put it in the pathway of the clinical protocol.

Meenal Sethna, CFO

Yes. I would also like to add that as AI becomes more mainstream, there are many options now available that we are considering. Additionally, when collaborating with other vendors and partners who are using AI and various tools to enhance our efficiencies, we are exploring those opportunities as well. This represents a much broader scope, as John mentioned, rather than just focusing on the revenue cycle management area.

Operator, Operator

Our next question comes from Joanna Gajuk of Bank of America.

Joanna Gajuk, Analyst

Just a couple of follow-ups. In the prepared remarks, when you talk about payers, you had mentioned 5 new programs with regional and 2 with nontraditional payers. Can you give us a little more color, especially the nontraditional payers, what exactly are you referring to?

John Rademacher, President and CEO

Yes, Joanna, it's John. So there are conveners in the marketplace that are either trying to create a better solution for payers themselves and/or direct to employers. So those are the nontraditional partners that we're working with that allow us to expand our reach into the marketplace, but also be a partner across the payer community at the national, regional and the convener level.

Joanna Gajuk, Analyst

So when you work with these conveners and I guess sounds like direct-to-employer relationships, I guess, are these rates comparable to what you negotiated with commercial base or maybe that's better because it sounds like these parties look for solutions and maybe they're willing to pay a little bit better rates. I don't know. Can you give us a little bit of flavor on that?

John Rademacher, President and CEO

Yes, I would say they are similar in terms of reimbursement. Some conveners and innovative organizations are exploring capitated programs and seeking ways to manage patients more comprehensively. They are focused on innovation in these areas, and we are collaborating with them on both new and existing models. Overall, we find that the reimbursement is comparable, and these relationships encourage us to innovate further while considering the total cost of care more holistically.

Joanna Gajuk, Analyst

Okay. That makes sense. If I may, another follow-up. So you were talking on multiple occasions, I guess, around cash flows, but also in terms of the products and portfolio around limited distribution drugs. Just can you give us a sense of, I guess, how many you have and how many, I guess, you added in '25, how many you're adding in '26? And I guess, are you seeing any increased competition for these limited distribution drugs in the marketplace right now or less competition for that matter, but just any additional, I guess, commentary will be helpful.

John Rademacher, President and CEO

Yes, we currently operate over 20 platforms that include rare or limited distribution drugs in our portfolio. We previously mentioned that we would be adding two more programs in 2026. These products, particularly the rare ones, typically come with a higher price point. This leads to an increase in working capital as we invest in inventory and support the commercialization of these products. This is part of the working capital that was referenced, and we anticipate using cash in 2025 and 2026 as we move forward. We are confident in our platform, considering our national reach, established access points, relationships with payers, and the clinical strengths of our organization. We believe we are well-prepared to compete in this space. While there are competitors, and the healthcare landscape is quite competitive, we trust that we are building a unique platform that positions us to capture a fair share of these programs as we progress.

Operator, Operator

Our next question comes from Charles Rhyee of TD Cowen.

Charles Rhyee, Analyst

Maybe a month ago, John and Meenal, when you provided the initial guidance for the year, there seemed to be an assumption that you were uncertain about what your Stelara metrics would look like. It appeared that you were adopting a conservative approach in your estimates. Fast forward about a month and a half, and you have reaffirmed the guidance. Has your perspective changed regarding what your estimates were compared to what you're actually observing now? Has anything improved or declined? Also, John, I believe you mentioned 340B in response to an earlier question. Can you elaborate on how you engage with the 340B program and what your exposure to it might be? I know there are occasional regulatory concerns surrounding it. I'm interested in understanding how you collaborate with your acute care partners within the 340B framework.

Meenal Sethna, CFO

Yes, Charles, I'll address the first part of your question regarding Stelara. As we mentioned earlier, the first quarter is always busy with New Year benefit verification and formulary changes, and this year has seen even more activity across the industry. However, when we assess everything that's happening, we don't see any significant changes from our assumptions a month ago regarding Stelara and the various formulary options available to patients. If there were any factors that would have led us to adjust our guidance, we would have included them. But, as John noted earlier, there really are no major differences. It will take another month or so, until the end of the quarter, to fully navigate through this New Year activity, which is typical, albeit somewhat more intense this year due to the broader industry dynamics.

John Rademacher, President and CEO

Yes. On the 340B side, this program supports our health system and hospital partners. We qualify as a pharmacy under the 340B criteria and pass the savings on to the hospital. We dispense the product and receive normal economics from that. Any savings from 340B is transferred back to the hospital, and we help facilitate that process. While it's not a significant part of our overall economics, we enjoy supporting hospitals and health systems by providing them with benefits and savings, especially for disproportionate hospitals. We collaborate with clearing houses to ensure that savings are effectively passed on to the hospitals.

Charles Rhyee, Analyst

So just to be clear, so that means if there were to be any changes in 340B pricing, that would have no impact for you guys because that's sort of a pass-through on your end?

John Rademacher, President and CEO

Correct.

Charles Rhyee, Analyst

That's really helpful. I have a quick follow-up regarding OpEx growth for this year. Last year, we experienced some higher expenses related to the Intramed acquisition and our business investments. Meenal, could you provide some insight on what we should anticipate for OpEx growth this year, particularly regarding any one-time costs or other factors that may influence this?

Meenal Sethna, CFO

When I look ahead to 2025, our selling, general and administrative expenses for print appear to be slightly higher than gross profit, which is something we're monitoring. After excluding Intramed and certain GAAP-only charges in SG&A, our SG&A growth is either in line with or slightly lower than the growth of gross profit. That’s the trend we anticipate moving forward. Additionally, we expect to increase our investments in 2026, which could result in SG&A growth being somewhat higher than gross profit. Overall, we're aiming for a model that leverages gross profit as we look ahead.

Operator, Operator

Our next question comes from Erin Wright of Morgan Stanley.

Erin Wilson Wright, Analyst

I just have kind of one bigger picture, just higher-level question just on the competitive landscape and just thinking about some of the historical tailwinds with competitors exiting the market. I guess, can you talk a little bit about the runway left on that front? How much does that continue in terms of a tailwind for you? And are there other dynamics, I guess, to call out in terms of looking at the landscape and your ability to take advantage of some of those opportunities?

John Rademacher, President and CEO

Erin, I think as we're looking ahead, we certainly don't see as big of a significant shift that we've seen over the last couple of years with 2 major competitors kind of resetting their network design and the product portfolio that they were serving. We still believe there's opportunities to take share in the market. We're well positioned. We like the infrastructure that we've built. We love the breadth of the network, but also understand health care is very local, and we have to win at the local level. So we're doing everything we can to be that reliable and consistent partner to be able to help with the transition of care for patients or be able to help them live their best life through the activities of our clinical teams in support of those care plans. The market in general, I mean, if you take a look at some of the data, the market for infused products is over $100 billion. We're $6 billion of that. We think there's still continued runway for us to be that partner of choice and to compete vigorously, but know that this is a hustle business, and you got to do it every single day.

Operator, Operator

Our last question comes from Raj Kumar of Stephens.

Raj Kumar, Analyst

Maybe just kind of thinking about the kind of investment thesis around kind of just the internal spend and kind of the opportunity set that you've talked about around oncology and neuro. As we think about the kind of investment spend in 2026 and the capturing us that opportunity, is that more so that there needs to be internal capabilities that still need to be built out or potentially acquired to capture oncology in the home-based care setting? Or is it kind of more on the sites of care initiatives front in terms of just payer or hospital partner, acute partner education? And then maybe kind of on the AI initiative front and thinking about what was realized in 2025, any way to frame the benefit in terms of, if it drove increased throughput or any cost efficiencies, that would be kind of helpful.

John Rademacher, President and CEO

Yes. So let me start with maybe the AI first. So as we had called out, I think the measurable response is when you're able to do 40% of your claim processing without actually having human intervention, you can see the benefits that are driven on that. Again, that allows our team to focus on the higher complexity claims, those that need additional support in order for us to get fair reimbursement for the services that we rendered. Our focus has been around there, but we're seeing those tangible results. And I think you see it in both cost of service as well as SG&A over time, knowing that you've got to invest a little bit ahead of benefit on some of those to be able to drive that forward. On the overall investments in our business, I think we remain a capital-light enterprise. I mean, I think for the next year, we'll be in that $40 million to $50 million range of CapEx as we're looking at the range of opportunities to deploy capital to grow our business. We'll go about your call-out on oncology or others. That's a two-pronged approach. There are investments that are required in the commercial team and being able to reach into the call points. There are some capabilities around the clinical protocols and the clinical programs that need to be developed in support of that. There's certainly the utilization of our infusion suites and our infusion clinics as part of that comprehensive view, as well as the ability to transition patients to the home. So I'd say it's across all of those dimensions. As we're looking at where we deploy our capital and the return we expect on those, we have a disciplined approach that Meenal and the team lead to help us to really assess the value that can be created there. We think there's a significant amount of opportunities for us to look at those new vectors and continue to invest in the people, process, technology, and facilities that will be required for us to win.

Meenal Sethna, CFO

And the last comment I'll add on that is with all the investments John is talking about, we definitely have made investments in 2025, and you can see that. So you're going to see an annualization of that into '26. Plus like on the commercial resources side, that's an area that we're really leaning into, and there are some additional investments we're making. That's part of the comments that I was addressing previously on still a little bit more SG&A growth that's going in ahead of the growth and the benefits we expect to achieve.

Operator, Operator

I am showing no further questions at this time. I would now like to turn it back to the President and CEO, John Rademacher for closing remarks.

John Rademacher, President and CEO

Yes. Thanks, Amber. In closing, I want to highlight the resilience of our platform and strength of our team and the underlying fundamentals of the business. We're well positioned to take advantage of the opportunities ahead of us, and I've never been more confident in the team's ability to capture demand for the extraordinary care and hope we deliver to patients and their loved ones. Thank you, and take care.

Operator, Operator

This concludes today's participation in the conference today. You may now disconnect.