BioScrip, Inc. (NASDAQ:BIOS) today announced financial results for the third quarter 2016. For the third quarter, the Company reported revenue from continuing operations of $224.5 million, net loss from continuing operations of ($11.1) million and diluted EPS of ($0.12) loss per share.
Third Quarter Highlights
|·||Net revenue for the third quarter 2016 was $224.5 million, a decrease year over year partly as a result of lower than expected core sales volumes and partly as a result of anticipated revenue declines in connection with the ongoing shift in revenue mix to a greater percentage of core infusion revenue and less lower-margin chronic infusion revenue. Home Solutions experienced double digit year over year core revenue growth in 2016 prior to its acquisition. The core revenues of Home Solutions and its continued core growth will be accretive to the Company on a go forward basis;|
|·||Consolidated Loss from continuing operations, net of income taxes was $(11.1) million, an improvement of $13.4 million compared to the prior year third quarter consolidated loss from continuing operations, net of income taxes of $(24.5) million. The year over year reduction in loss was the result of a prior year third quarter 2015 non-cash goodwill impairment charge, which did not recur in 2016, partially offset by lower year over year revenues and higher year over year operating expenses during the third quarter of 2016; and|
|·||Consolidated Adjusted EBITDA was $3.5 million for the third quarter 2016, as compared to the $6.0 million consolidated Adjusted EBITDA in the prior year third quarter. The year over year $2.5 million decrease in consolidated Adjusted EBITDA resulted from lower than expected core sales volumes combined with higher than expected operating expenses during the third quarter of 2016. Preparations for the integration of the Home Solutions acquisition by the Company took a great deal of effort by management and staff and in some respects took attention away from certain operating processes of the Company leading up to the closing of the transaction thus adversely impacting its operating results.|
Daniel E. Greenleaf, President and Chief Executive Officer stated, “I have just completed my first few weeks with the Company and based on my initial review it is clear we have work ahead of us. We are acutely focused on continuing to improve our operating processes and deliver on our financial commitments. I believe there is tremendous opportunity at the Company for improved financial performance over the next 18 months. I have made it clear to my leadership team and to the overall organization that the top five priorities that we must deliberately execute upon are driving profitable growth, delivering customer-centric service excellence, enhancing employee effectiveness, optimizing operational efficiencies, and exceeding cash collection targets. Executing upon these five priorities drove the tremendous financial successes and increases to shareholder value at Coram and later at Home Solutions and I am confident that they will drive similar outcomes at BioScrip.”
Furthermore, Mr. Greenleaf commented on the company’s third quarter financial results stating, “We do not believe our third quarter financial results are indicative of the financial capability of the company and what we will achieve going forward. We have already implemented a number of cost reductions and performance changes at the Company in late September and October. Those implemented changes include a substantive workforce reduction to enhance our cost structure, renegotiated supply chain arrangements to improve gross margins and re-alignment of our sales organization which will result in core revenue growth. We are confident these recent adjustments will be beneficial to our fourth quarter financial results and will serve to help form a solid base for our continued restructuring and financial performance in 2017.”
The Company reconfirms its plan to achieve between $14 million to $17 million in Home Solutions cost synergies over the next 12 to 18 months. Additionally, the Company is in the process of finalizing its evaluation of an incrementally larger amount of additional synergies over and above the $14 million to $17 million of synergies initially identified which we also believe may be achievable as incremental additional cost savings over the next 12 to 18 months.
Results of Operations
Third Quarter 2016 versus Prior Year Third Quarter 2015
Revenue from continuing operations for the third quarter of 2016 was $224.5 million, compared to $247.2 million in the third quarter of 2015, a decrease of $22.7 million or 9.2%. This revenue decrease was due in part to lower than expected core sales volumes and in part the result of the Company’s previously announced shift in its revenue mix to a greater percentage of core infusion revenue and less lower-margin chronic infusion revenue.
Consolidated gross profit for the third quarter of 2016 was $62.6 million, or 27.9% of revenue, up 150 basis points as a percentage of revenue, compared to the prior year third quarter 2015 gross profit of $65.2 million, or 26.4% of revenue. The improvement in gross profit percentage was the result of the improved revenue mix year over year.
Consolidated Loss from continuing operations, net of income taxes for the third quarter of 2016 was $11.1 million, representing an improvement of $13.4 million versus the same period prior year Consolidated Loss from continuing operations, net of income taxes of $24.5 million. The year over year change was due to higher operating expenses in the third quarter of 2016, offset by the prior year third quarter 2015 non-cash goodwill impairment charge, which did not recur in 2016.
Consolidated Adjusted EBITDA from continuing operations for the third quarter of 2016 was $3.5 million, representing an decrease of $2.5 million versus the same period prior year Consolidated Adjusted EBITDA of $6.0 million. The decrease in Consolidated Adjusted EBITDA resulted from lower than expected core revenues and larger than expected year over year operating expenses incurred during the third quarter of 2016.
2016 Guidance Update and Preliminary Guidance for 2017
In light of the Company’s third quarter results, the ongoing integration work the Company is undertaking associated with the Home Solutions acquisition, and the Company’s new leadership, which has led to a comprehensive assessment of all operating processes, the Company is lowering the prior financial guidance as to the full year 2016 and the fourth quarter 2016 that it previously provided on August 8, 2016. The updated full year 2016 guidance is revenues in the range of $928 million to $934 million and adjusted EBITDA in the range of $27 million to $29 million.
The Company is also providing preliminary guidance for full year 2017. The full year 2017 guidance is preliminary in nature and subject to change given the new management team’s comprehensive assessment of all operating processes which is currently underway. Following the completion of this comprehensive assessment process the Company will further update the preliminary 2017 guidance. The preliminary full year 2017 guidance is revenues in the range of $940 million to $980 million and adjusted EBITDA in the range of $50 million to $60 million.
Liquidity and Capital Resources
As of September 30, 2016, the Company had $34.2 million of liquidity, which consists of $2.8 million of cash and $31.4 million of undrawn capacity available on its revolving credit facility.
The Company’s net Days Sales Outstanding (“DSO”) was 42 days at September 30, 2016, consistent with the year ago third quarter 2015 net DSO.
Through the first nine months of 2016, the Company’s cash flows from operations represent a net use of cash from operations totaling $32.5 million, significantly lower than the $70.7 million net use of cash during the same period last year. The $32.5 million use of cash from operations during the first nine months of 2016 includes the impact of over $8.3 million in cash used for acquisition and restructuring matters.
As of September 30, 2016 the Company is in full compliance with its bank covenants under the terms of the Amended Credit Agreement. We anticipate we will not comply with the more restrictive debt leverage covenant that will apply in the Amended Credit Agreement beginning in 2017. We are proactively working with our lenders and evaluating options for maintaining compliance, including further amending our Amended Credit Agreement.
Conference Call and Presentation
BioScrip will host a conference call and live webcast, November 8, 2016, at 11:00 a.m. Eastern Time, to discuss its third quarter 2016 financial results. Interested parties may participate by dialing 888-372-9592 (US) or by accessing a link on the Company’s website at www.bioscrip.com.
A replay of the conference call will be available for two weeks after the call’s completion by dialing 855-859-2056 (US) and entering conference call ID number 1061955. An audio webcast and archive will also be available for 30 days under the “Investor Relations” section of the Company’s website.
About BioScrip, Inc.
BioScrip, Inc. is a leading national provider of infusion and home care management solutions. BioScrip partners with physicians, hospital systems, skilled nursing facilities, healthcare payors, and pharmaceutical manufacturers 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.