BioScrip Reports Second Quarter 2018 Financial Results

August 7, 2018 at 8:00 AM EDT

DENVER, Aug. 07, 2018 (GLOBE NEWSWIRE) -- BioScrip, Inc. (NASDAQ: BIOS) ("BioScrip" or the "Company"), the largest independent national provider of infusion and home care management solutions, today announced its second quarter 2018 financial results.

Second Quarter 2018 Highlights

Net revenue of $175.8 million, including core product mix of 75.1%, compared to 73.6% in the prior year quarter, reflecting the impact of the implementation of ASC 606^*, which resulted in the recognition of amounts previously reported as bad debt expense as a reduction to revenue
Net loss from continuing operations of $15.1 million, a $14.0 million improvement compared to the prior year quarter
Adjusted EBITDA of $11.4 million, 14% above the prior year quarter, driven by a 510 basis point improvement in gross profit margin and a $3.0 million reduction in operating expenses, reflecting ASC 606 pro forma adjustments
Net cash used in operating activities of $15.1 million, reflecting operational cash use of $7.8 million and interest payments of $7.3 million
Liquidity of $20.8 million at June 30, 2018, consisting of cash and equivalents
Operational cash flow and liquidity impacted by the timing of strategic inventory purchases related to product shortages and recalls, temporary decreases in cash collections of accounts receivable, as well as payment of 2017 incentive compensation; operational cash flow is expected to return to more normalized levels beginning in the third quarter of 2018

Daniel E. Greenleaf, President and Chief Executive Officer, commented, “BioScrip achieved record second quarter adjusted EBITDA of $11.4 million, up 14% compared to the prior year period, driven by improved core product mix, higher gross profit margin, and ongoing operating expense discipline. We commenced the third quarter with our best sales month of the year during July and are reaffirming our full year 2018 guidance for revenue between $688 million and $698 million*, and adjusted EBITDA between $54 million and $58 million.

“We remain increasingly confident that BioScrip can achieve at least $75 million in adjusted EBITDA in 2019 and are positioning the Company for revitalized longer-term revenue growth and enhanced profitability though key initiatives in sales force productivity, revenue cycle management, procurement and managed care relationships.”

^*Implementation of ASC 606 during the first quarter of 2018 resulted in the recognition of amounts previously recorded as bad debt expense as a reduction to revenue. The impact of the change in accounting principle reduced both revenue and bad debt expense by $5.4 million during the second quarter. The implementation of ASC 606 did not impact operating income or Adjusted EBITDA during the second quarter of 2018 and will not impact operating income or Adjusted EBITDA on a go-forward basis. The implementation of ASC 606 in the first quarter of 2018 resulted in a reduction of our 2018 revenue guidance by approximately $22 million but did not impact 2018 Adjusted EBITDA guidance.

Conference Call and Presentation

BioScrip will host a conference call and live webcast on August 7, 2018, at 9:00 a.m. Eastern Time, to discuss its second quarter 2018 financial results. Interested parties may participate by dialing 877-423-9820 (U.S.) or by accessing a link under the "Investors" section on the Company's website at www.bioscrip.com.

An audio webcast and archive will be available within two hours of the call’s completion under the “Investors" section of the Company's website.

About BioScrip, Inc.

BioScrip, Inc. is the largest independent national provider of infusion and home care management solutions, with approximately 2,100 teammates and nearly 70 service locations across the U.S. BioScrip partners with physicians, hospital systems, payors, pharmaceutical manufacturers and skilled nursing facilities to provide patients access to post-acute care services. BioScrip operates with a commitment to bring customer-focused pharmacy and related healthcare infusion therapy services into the home or alternate-site setting. By collaborating with the full spectrum of healthcare professionals and the patient, BioScrip provides cost-effective care that is driven by clinical excellence, customer service, and values that promote positive outcomes and an enhanced quality of life for those it serves.

Investor Contacts

Stephen Deitsch Kalle Ahl, CFA
Chief Financial Officer & Treasurer The Equity Group
T: (720) 697-5200 T: (212) 836-9614
stephen.deitsch@bioscrip.com kahl@equityny.com

Forward-Looking Statements – Safe Harbor

This press release includes statements that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including the statements regarding guidance, projections of certain measures of the Company's results of operations, projections of future levels of certain charges and expenses, incremental cost structure improvements and other statements regarding the Company's financial improvement plan and strategy and anticipated effects of the Cures Act. You can identify these statements by the fact that they do not relate strictly to historical or current facts. In some cases, forward-looking statements can be identified by words such as "may," "should," "could," "anticipate," "estimate," "expect," "project," "outlook," "aim," "intend," "plan," "believe," "predict," "potential," "continue" or comparable terms. Because such statements inherently involve risks and uncertainties, actual future results may differ materially from those expressed or implied by such forward-looking statements. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those in the forward-looking statements as a result of various factors. Important factors that could cause actual results to differ materially from those in the forward-looking statement include but are not limited to risks associated with: the Company’s ability to make principal and interest payments on our debt and unsecured notes and satisfy the other covenants contained in its debt agreements; the Company’s ability to grow its core Infusion revenues; the Company's ability to continue to execute its financial improvement plan to reduce operating costs and focus its business on its Infusion Services segment; the Company’s ability to evaluate opportunities for improvement and implement solutions as part of its strategic review process; the success of the Company’s initiatives to mitigate the impact of the Cures Act on its business; reductions in federal, state and commercial reimbursement for the Company's products and services; increased government regulation related to the health care and insurance industries; as well as the risks described in the Company's periodic filings with the Securities and Exchange Commission. The Company does not undertake any duty to update these forward-looking statements after the date hereof, even though the Company's situation may change in the future. All of the forward-looking statements herein are qualified by these cautionary statements.

Note Regarding Use of Non-GAAP Financial Measures

In addition to reporting financial information in accordance with generally accepted accounting principles (GAAP), the Company is also reporting Adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be used in isolation or as a substitute or alternative to net income, operating income or any other performance measure derived in accordance with GAAP, or as a substitute or alternative to cash flow from operating activities or a measure of the Company’s liquidity. In addition, the Company's definition of Adjusted EBITDA may not be comparable to similarly titled non-GAAP financial measures reported by other companies. Adjusted EBITDA, as defined by the Company, represents net income before net interest expense, income tax expense, depreciation and amortization, impairment of goodwill, stock-based compensation expense, and restructuring, integration and other expenses. As part of restructuring, the Company may incur significant charges such as the write down of certain long−lived assets, temporary redundant expenses, retraining expenses, potential cash bonus payments and potential accelerated payments or terminated costs for certain of its contractual obligations. Management believes that Adjusted EBITDA provides useful supplemental information regarding the performance of BioScrip’s business operations and facilitates comparisons to the Company’s historical operating results. For a full reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure, please see the attachment to this earnings release.


Schedule 1
BIOSCRIP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share amounts)
(unaudited)

	June 30, 2018			December 31, 2017

ASSETS
Current assets
Cash and cash equivalents	$	20,820		$	39,457
Restricted cash		4,950			4,950
Receivables, less allowance for doubtful accounts of $0 and $37,912 as of June 30, 2018
and December 31, 2017, respectively		96,917			85,522
Inventory		25,286			38,044
Prepaid expenses and other current assets		8,583			18,620
Total current assets		156,556			186,593
Property and equipment, net of accumulated depreciation of $92,588 and $86,675 as of
June 30, 2018 and December 31, 2017, respectively		25,004			26,973
Goodwill		367,198			367,198
Intangible assets, net of accumulated amortization of $44,904 and $40,036 as of June 30, 2018
and December 31, 2017, respectively		14,247			19,114
Deferred income taxes		1,041			1,098
Other non-current assets		2,100			2,116
Total assets	$	566,146		$	603,092
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current portion of long-term debt	$	957		$	1,722
Accounts payable		49,264			65,963
Amounts due to plan sponsors		2,184			4,621
Accrued interest		6,728			6,706
Accrued expenses and other current liabilities		23,028			26,118
Total current liabilities		82,161			105,130
Long-term debt, net of current portion		492,309			478,866
Other non-current liabilities		21,151			21,769
Total liabilities		595,621			605,765
Series A convertible preferred stock, $.0001 par value; 825,000 shares authorized;
21,643 shares issued and outstanding as of June 30, 2018 and December 31, 2017;
and $3,084 and $2,916 liquidation preference as of June 30, 2018 and December 31, 2017,
respectively		3,022			2,827
Series C convertible preferred stock, $.0001 par value; 625,000 shares authorized;
614,177 shares issued and outstanding as of June 30, 2018 and December 31, 2017;
and $89,455 and $84,555 liquidation preference as of June 30, 2018 and December 31, 2017,
respectively		84,469			79,252
Stockholders' deficit
Preferred stock, $.0001 par value; 5,000,000 shares authorized; no shares issued and
outstanding as of June 30, 2018 and December 31, 2017, respectively		-			-
Common stock, $.0001 par value; 250,000,000 shares authorized; 128,046,122 and 127,634,012
shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively		13			13
Treasury stock, 110,496 and 5,106 shares outstanding, at cost, as of June 30, 2018 and
December 31, 2017, respectively		(327	)		(16	)
Additional paid-in capital		621,015			624,762
Accumulated deficit		(737,667	)		(709,511	)
Total stockholders' deficit		(116,966	)		(84,752	)
Total liabilities and stockholders' deficit	$	566,146		$	603,092


Schedule 2
BIOSCRIP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Net revenue	$	175,789		$	218,106		$	344,373		$	435,916
Cost of revenue (excluding depreciation expense)		115,832			150,495			229,368			303,430
Gross profit		59,957			67,611			115,005			132,486
% of revenues		34.1	%		31.0	%		33.4	%		30.4	%

Other operating expenses		38,861			42,293			78,160			86,612
Bad debt expense		-			6,117			-			13,160
General and administrative expenses		10,931			9,654			21,600			18,920
Restructuring, acquisition, integration, and other expenses, net		2,024			4,147			3,906			7,370
Change in fair value of equity linked liabilities		3,064			-			(375	)		-
Depreciation and amortization expense		6,366			7,065			12,852			14,230
Interest expense		13,805			12,630			27,200			25,290
Loss on extinguishment of debt		-			13,453			-			13,453
(Gain) loss on dispositions		(13	)		685			(318	)		685
Loss from continuing operations, before income taxes		(15,081	)		(28,433	)		(28,020	)		(47,234	)
Income tax expense		43			718			91			1,337
Loss from continuing operations, net of income taxes		(15,124	)		(29,151	)		(28,111	)		(48,571	)
Loss from discontinued operations, net of income taxes		(15	)		(373	)		(45	)		(672	)
Net loss	$	(15,139	)	$	(29,524	)	$	(28,156	)	$	(49,243	)
Dividends on preferred stock		(2,756	)		(2,478	)		(5,413	)		(4,866	)
Loss attributable to common stockholders	$	(17,895	)	$	(32,002	)	$	(33,569	)	$	(54,109	)

Loss per common share:
Loss from continuing operations, basic and diluted	$	(0.14	)	$	(0.26	)	$	(0.26	)	$	(0.44	)
Loss from discontinued operations, basic and diluted		-			-			-			(0.01	)
Loss per common share, basic and diluted	$	(0.14	)	$	(0.26	)	$	(0.26	)	$	(0.45	)

Weighted average number of common shares outstanding,
basic and diluted		128,038			121,189			127,906			119,993


Schedule 3
BIOSCRIP, INC. AND SUBSIDIARIES
QUARTERLY RECONCILIATION BETWEEN GAAP AND NON-GAAP MEASURES
(in thousands)
(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Loss from continuing operations, net of income taxes		(15,124	)		(29,151	)		(28,111	)		(48,571	)

Interest expense		(13,805	)		(12,630	)		(27,200	)		(25,290	)
Change in fair value of equity linked liabilities		(3,064	)		-			375			-
Gain (loss) on dispositions		13			(685	)		318			(685	)
Loss on extinguishment of debt		-			(13,453	)		-			(13,453	)
Income tax expense		(43	)		(718	)		(91	)		(1,337	)
Depreciation and amortization expense		(6,366	)		(7,065	)		(12,852	)		(14,230	)
Stock-based compensation expense		(1,253	)		(433	)		(1,808	)		(1,027	)
Restructuring, acquisition, integration, and other expenses, net ⁽¹⁾		(2,024	)		(4,147	)		(3,906	)		(7,370	)
Consolidated Adjusted EBITDA	$	11,418		$	9,980		$	17,053		$	14,821


⁽¹⁾ Restructuring, acquisition, integration and other expenses, net include costs associated with restructuring, acquisition, and integration initiatives such as employee severance costs, certain legal and professional fees, redundant wage costs, impacts recorded from the change in contingent consideration obligations, and other costs related to contract terminations and closed locations.


							Schedule 4
BIOSCRIP, INC AND SUBSIDIARIES
CONSOLIDATED CONDENSED CASH FLOWS
(in thousands)
(unaudited)

	Three Months Ended						Six Months Ended
	March 31, 2018			June 30, 2018			June 30, 2018
Cash flows from operating activities:
Net loss	$	(13,017	)	$	(15,139	)	$	(28,156	)
Less: Loss from discontinued operations, net of income taxes		(30	)		(15	)		(45	)
Loss from continuing operations, net of income taxes		(12,987	)		(15,124	)		(28,111	)
Adjustments to reconcile net loss from continuing operations, net of income taxes to net cash used in operating activities:
Depreciation and amortization		6,486			6,366			12,852
Amortization of deferred financing costs and debt discount		2,023			2,048			4,071
Change in fair value of equity linked liabilities		(3,439	)		3,064			(375	)
Change in deferred income taxes		31			25			56
Stock-based compensation		556			1,253			1,809
Gain on dispositions		(305	)		(13	)		(318	)
Changes in assets and liabilities:
Receivables		(2,663	)		(8,734	)		(11,397	)
Inventory		(3,505	)		16,264			12,759
Prepaid expenses and other assets		8,807			1,247			10,054
Accounts payable		2,872			(19,574	)		(16,702	)
Amounts due to plan sponsors		(969	)		(1,468	)		(2,437	)
Accrued interest		(4,487	)		4,510			23
Accrued expenses and other liabilities		2,418			(4,984	)		(2,566	)
Net cash used in operating activities from continuing operations		(5,162	)		(15,120	)		(20,282	)
Net cash used in operating activities from discontinued operations		(30	)		(15	)		(45	)
Net cash used in operating activities		(5,192	)		(15,135	)		(20,327	)
Cash flows from investing activities:
Purchases of property and equipment		(2,646	)		(4,300	)		(6,946	)
Net cash used in investing activities		(2,646	)		(4,300	)		(6,946	)
Cash flows from financing activities:
Borrowing of long-term debt		-			10,000			10,000
Repayments of capital leases		(967	)		(218	)		(1,185	)
Net activity from exercises of employee stock awards		(300	)		121			(179	)
Net cash (used in) provided by financing activities		(1,267	)		9,903			8,636
Net change in cash and cash equivalents		(9,105	)		(9,532	)		(18,637	)
Cash and cash equivalents - beginning of period		44,407			35,302			44,407
Cash and cash equivalents - end of period	$	35,302		$	25,770		$	25,770


Schedule 5

BIOSCRIP, INC AND SUBSIDIARIES
FULL YEAR 2018 GUIDANCE
(dollars in millions, except EPS)
(unaudited)
	Low End			High End
	of Range			of Range

Revenues	$	688.0		$	698.0

Loss from continuing operations, net of income taxes		(51.2	)		(43.2	)

Stock Compensation		4.0			3.5
Depreciation & Amortization		27.0			26.0
Interest Expense, net		56.0			55.0
Restructuring Costs		6.0			5.0
Income Tax Expense		1.0			0.5
Preferred Stock Dividends		11.2			11.2
Adjusted EBITDA	$	54.0		$	58.0
*Adjusted EBITDA Margin*		*7.8*	%		*8.3*	%

Diluted Loss Per Common Share	$	(0.40	)	$	(0.34	)

Weighted-Average Diluted Shares		128.0			128.0

Source: BioScrip, Inc.

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News Release

BioScrip Reports Second Quarter 2018 Financial Results