Good day and thank you for standing by. Welcome to the Option Care Health Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your host today, Mike Shapiro. Please go ahead.

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.

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. 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 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, who 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 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 on the 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?

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 modest sequential increase over the second quarter and the acute comps from last year remain a favorable comparison. Gross margin dollars grew more than 16% in the quarter, outpacing topline as 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 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 Instructions] And our first question comes from the line of Matt Larew with William Blair.

So second straight quarter here of high-teens growth on the chronic side. Obviously, last year, you had called out some covert benefit at some point. But there's also a high degree of recurring revenue here. And 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 for where you're kind of seeing this momentum build and how sustainable you think it is?

Matt, it's John. Yes, thanks for the question. Well, first and foremost, look, the comps 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 comps 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 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.

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 for where that is today and remind us where you think that our brand is.

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.

Matt, the only thing I'd add is, look, the suites are a really integral part of our strategy for a couple of reasons. I think you've heard us articulate this previously. First and foremost, is efficiency. As John mentioned, we have a very -- we have limitations on our clinical resources today. And so driving efficiencies within our nursing team, especially less windshield time, concurrent infusions, it just creates a much more efficient labor force. It also gives us the confidence to launch and support newer therapies on the chronic side where the patients are more ambulatory. Some of the new therapies, you see have been advertised on TV, like Ocrevus, Tepezza, Stelara, where those patient cohorts for new growing therapies are accommodated quite well in a sweet setting. So just a very good arrow in the quiver for driving growth going forward.

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

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

Yes. Brook, look, I do think the position we have of a national provider gives us a little bit broader view. Each market kind of operated differently when we went through the quarter. And certainly, we felt impact at a market level of some of the constraints that were put because of Delta and the impact that it had on the health care services ecosystem within those markets. What we've been able to navigate is, again, given the national footprint and given that not all markets operate the same way, we capitalized on where there was demand. We also, as you saw in the report that we filed today. Stronger chronic results that continue to be ones in which those patients are coming on to service are with us for months, years and in many instances, lifetime. So we're building up that patient census that allows us to continue to move that forward as we also are bringing new patients on board. So all in all, I think it was a strong quarter. The other thing I'll point out is that also -- there were implications from -- at a market level with some of the disruption from Hurricane Ida and other aspects, in which the team just did a fantastic job of helping to navigate around some of the disruptions that caused within the Louisiana market, but also leveraging the strength of our network and our platform in order to step around and continue to serve the patients and their needs. Brooks O'Neil: 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?

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: 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?

No. I think -- and thanks for bringing that up. We're thrilled because it really sets out a much more patient and flexible cap structure. Again, our cash interest has dropped from around $110 million down to around $50 million in two years. That's just additional free cash in addition to what we're generating out of the operations. So well, just because we're generating more cash, which is a relentless focus, it doesn't mean we're getting soft in terms of capital allocation. We still believe, getting back to John's comments, we think there's a robust pipeline of M&A opportunities that can really enhance the value creation and growth. And I think at this point, we're now at around 3.5 times levered. We're very comfortable with the leverage profile. I appreciate the affirmation from the agencies. And I think going forward, our primary focus at this point is on M&A. Brooks O'Neil: Great. Perfect. Keep up all the great stuff. I'm excited for you.

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

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?

Mike, it's John. Yes, first, thanks for the question. As an organization, I think we've mentioned before, we have a dedicated team in business development that really fosters those relationships upstream with biopharma and continue to cultivate those. We think we are well-positioned given the platform that we have. And where this fits into kind of the overall strategy is as we're building out the AIC network for our infusion centers. It also expands the ability to support their needs as they're thinking about opportunities moving forward. So areas now with -- that I mentioned in my comments, with the addition of the Infinity Infusion Nursing assets as part of our team, expansion into support of clinical trials and really those development items that can lead to either limited distribution or exclusive distribution relationships, we think is part of the longer-term strategy and opportunities that would present themselves as we move forward. So we're really excited about really the work that we've done and those direct relationships that we have today. But we think that with the platform and now with the expanded clinical capabilities with Infinity that we have a really important platform that can be utilized as we move forward. I don't know, Mike, if you have additional thoughts.

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, many instances, in a limited manner just gives us a strategic edge.

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?

Yes. I mean, look, we aren't in a position to really provide much guidance as we're looking forward. I would say, look, we're really pleased with the third quarter. As we saw from a sequential basis, we continue to build the momentum. The team continues to execute extremely well, if there are some challenges as have been highlighted. And certainly, some of them are broader than just our business in the economy. I mean, we called out some of the wage pressures that are kind of broad across the economy. We are looking for ways through productivity and footprint expansion in order to mitigate some of the impacts there. But those are things that we'll navigate as we move forward. But all in all, look, we think we're well-positioned. We're hoping, as everyone is, that we can get back to some level of normalcy post-pandemic and get back to the rhythms that we had seen from some of the referral patterns on a historic basis. And as I said, I think we're well-positioned to capture that demand as it starts to return to its normal form. But there still are a lot of hits around anything that would happen in the colder months as we move back indoors and whether that's going to have impact around some spikes in the pandemic and within COVID. So Mike, I don't know if you have --

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.

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

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?

Yes, Adam. So again, we paid $50 million cash upfront for the enterprise we paid. They were generating in the neighborhood of $4 million of EBITDA. So we paid around $12 million, and they were low teens EBITDA margin. So you can kind of back into it. And from a -- both from a valuation multiple, it should be modestly accretive against smaller dollar amounts. But from an EBITDA margin in the low teens, that should be modestly helpful on the EBITDA margin.

Okay. Great. And then just kind of like looking at the motivation of the deal, have you had to rely more on contract labor? And so as those costs increase, you looked outside to kind of bring that in with the [indiscernible]? Is there any way to quantify the reliance on contract labor today versus maybe pre-pandemic?

Adam, it's John. Look, we've been -- we have a relationship with Infinity for a while now. So it wasn't really in response to an acute situation in the marketplace. What we truly believe is that access to the clinicians is going to be a critical success factor as we're looking at our growth trajectory. So we've talked about our strategy around nursing in previous calls where we have full-time, part-time per diem and then we use agencies to augment around that. So given the relationships that we had, given the alignment of culture and focus that we saw with them that really aligned with our mission and our purpose, and given the opportunity to really be well-positioned for the growth that we are seeing as a business by having expanded access to these clinical resources, were all the motivation behind why we did the deal. So it certainly expands our capability set and gives us access to those critical resources. But we continue to have a very robust team that's part of the Option Care Health enterprise, and we'll continue to do that as we move forward.

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?

Yes, Adam, look, we're -- we, like everyone else, are picking up the news on a daily basis and trying to understand the implications of that. At this point in time, it's really hard to really understand. I mean, the high level, there isn't a lot of detail around how this would be executed and -- or what would be the drug that would be included or excluded from it. So a little too early at this point in time to really even hazard a guess around the implications that it could have as we look at this moving forward. So look, we're still focused around the key areas that we are, and we continue to do our work as well as in alignment with the National Home Infusion Association, of making certain that we get fair reimbursement for the services and the value that we can provide and expand access to Medicare participants. At this point in time, beneficiaries don't have broad access to home infusion. And therefore, our focus is really around expanding that access and being paid fairly through it with calendar day definition as well as the service wrap around the product. So that's been our focus. That will continue to be our focus. And I think as legislative test and more details become available, we'll continue to assess and then identify risks and opportunities that may come out of any legislation that does actually get to pass.

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

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?

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?

Just on the partnerships you have with health systems and how that might impact their [indiscernible]?

Yes. Look, we really like the alignment that we have with the health systems. I think we've talked about before, we have dedicated team members that are part of the care transition within the hospital. And part of that care transition team, we've worked tirelessly throughout the pandemic to kind of navigate the challenges that they're having at the health system side and I believe have deepened our relationships, given the consistent high-quality care that we've been able to deliver even in the times of significant challenge. So the ability to help to identify those patients that can safely transition out of the hospital and moving them directly to the home. We think that, again, we've been able to demonstrate that and work collaboratively with the health systems really to drive that forward. So that, again, we think we'll continue to move forward. We think that as hospitals, and they've done a very good job of being able to navigate some of the challenging of being able to serve coded patients while they also continue to manage their operations for non-COVID care as we think that starts to -- that balance starts to move a little bit more towards that non-COVID care and go back to consistency around scheduled procedures and just the normal flows. We expect to be well-positioned to continue to be a partner of choice as they're looking at transitioning the patient into the post-acute care and into the post-acute service providers.

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 MLRs 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.

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?

Yes. John, it's a great question, Jamie. And it speaks to just the pride of the team in the field. I mean, the operations folks have taken this as a rally cry. I mean we've been very explicit that as we grow chronic faster, we will face a margin rate headwind. In addition to that, with the challenging labor market, which, again, has been universal across all disciplines in all geographies. But net-net, it's been a challenge in the third quarter, and the team took that as a challenge. And so a couple of things. We -- as we've always said, we fight for every basis point. And it's been through labor efficiencies, through utilizing our suites. It's been through procurement strategies to continue to work to shave every penny off of the drug and medical supply costs. And so even though we have that seismic shift over time towards chronic therapies, which are lower margin rate, the procurement and the sourcing teams are relentlessly focused on fighting for every basis point within each of those therapies. So net-net, we couldn't be more thrilled that we're continuing to offset and obviously, we're thrilled with the expansion. And we're going to continue to fight like how to keep every basis point the gross margin line.

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

This is Kieran Ryan on for Pito. I was hoping to dig into labor a little more. Could you just talk a little bit about kind of the pressure you saw there in 3Q? Obviously, margins came in pretty strong. So it looks like you handled it pretty well. But just kind of sequentially from 2Q, how that dynamic changed? And just -- are you having any issues staffing demand or is that kind of in a good spot?

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.

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?

Sure, Kieran. It's Mike. Look, we're effectively complete. I think that's one of the things that we loved about the transaction was. It was relatively modest in size. We were able to integrate it literally within a matter of weeks, given our technology infrastructure. So we've integrated the commercial resources, the patient cohort. Again, as we set up front, while it wasn't the biggest M&A transaction, it was highly complementary because they had some interesting IG go-to-market strategies that we've definitely integrated into our commercial strategies. And I think it's -- overall, again, while it's not the biggest headline from an earnings contribution perspective, it's been very seamless and very smooth.

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

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.

Yes. No, Mike, it's coming out later today. We're going to file our Q later. So there's no meaningful change in share count from the second quarter. But that detail -- you didn't miss it. It wasn't in the 8-K, but it will be in the Q that will close later today.

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?

Yes. So as we think about the fourth quarter, Mike, a couple of thoughts. One, obviously, you can back into that we're expecting a -- we're guiding to a modest sequential bump up from Q3. You typically see that in this industry where Q1 is admittedly the weakest quarter of the year. And usually, you see a gradual uptick throughout the year. So we'd expect that. The other thing, as you know, on the chronic portfolio, in any quarter, more than 3/4 of our chronic revenue are for patients that are on service because we have a lower turnover. That gives us the benefit of revenue visibility entering a quarter, not that we're on autopilot going into any quarter, but with that higher level of forward view on the chronic side, that gives us a little bit more confidence. With the acute portfolio, again, writing, as John mentioned, some interesting comps from the prior year. Typically, in this business, you'd see a modest uptick for reasons that you said a little bit colder out, people are hitting the physician a little more frequently, the flu and pneumonia season typically ramp up a little bit. But it's nothing overly dramatic, but we would expect to see that here in this fourth quarter as well.

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?

Yes. As I mentioned earlier, look, we are working collaboratively with NHIA as well as independently to get a fair reimbursement for Medicare beneficiaries based on what we know and the fact that the commercial market has adapted and really expanded use of the home and home infusion, especially in the MA space. So we're going to continue down that path of beating that drum. I mean it is frustrating, I think, for everyone involved, knowing that we're on the right side of that conversation in offering high-quality care at appropriate cost in a setting in which patients want to receive their care. And the Medicare beneficiaries, especially through the COVID pandemic, we're the most vulnerable, I mean, that had the least access to care in a setting that would have helped to isolate them from exposure to COVID. So look, hope springs eternal. We'll continue to have that -- the conversations. We have bipartisan support for legislation moving forward. We're trying to figure out how to attach it to the things going on in Washington, whether it's the infrastructure bill or the build back a better act and try to get it as part of that. But it's Washington, it's hard to hazard a guess on which way things are going to go, but we will be relentless because we know we're on the right side of that conversation.

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.

Yes. No, we didn't give any -- it's a good question, Mike. We didn't give any CapEx guidance. We've said that we would expect CapEx for the year to be around $25 million. No change in that guidance, admittedly with some of the challenges around construction and building materials. Some of our pharmacy initiatives have been a little more delayed, but we would expect a lot of that to catch up. So still in the same range that we've traditionally guided folks to.

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

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.

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