OPTION CARE HEALTH, INC. 
Unless the context requires otherwise, references in this report to "Option Care Health ," the "Company," "we," "us" and "our" refer toOption Care Health, Inc. and its consolidated subsidiaries. Management's discussion and analysis of financial condition and results of operations ("MD&A") is intended to assist the reader in understanding and assessing significant changes and trends related to our results of operations and financial condition. The following discussion and analysis should be read in conjunction with the Company's unaudited condensed consolidated financial statements and the related notes thereto included in Item 1 of Part I of this Quarterly Report on Form 10-Q (this "Form 10-Q"). Certain statements in this Item 2 of Part I of this Form 10-Q, and in Item 1A, "Risk Factors" of Part I of our Annual Report on Form 10-K for the year endedDecember 31, 2021 (our "Form 10-K"), may cause our actual results, financial position, and cash generated from operations to differ materially from these forward-looking statements. Business OverviewOption Care Health , and its wholly-owned subsidiaries, provides infusion therapy and other ancillary health care services through a national network of 161 locations aroundthe United States . The Company contracts with managed care organizations, third-party payers, hospitals, physicians, and other referral sources to provide pharmaceuticals and complex compounded solutions to patients for intravenous delivery in the patients' homes or other nonhospital settings. Our services are provided in coordination with, and under the direction of, the patient's physician. Our multidisciplinary team of clinicians, including pharmacists, nurses, dietitians and respiratory therapists, work with the physician to develop a plan of care suited to each patient's specific needs. We provide home infusion services consisting of anti-infectives, nutrition support, bleeding disorder therapies, immunoglobulin therapy, and other therapies for chronic and acute conditions.HC Group Holdings II, Inc. ("HC II") was incorporated under the laws of theState of Delaware onJanuary 7, 2015 , with its sole shareholder beingHC Group Holdings I, LLC . ("HC I"). OnApril 7, 2015 , HC I and HC II collectively acquiredWalgreens Infusion Services, Inc. and its subsidiaries fromWalgreen Co. , and the business was rebranded asOption Care, Inc. ("Option Care"). OnMarch 14, 2019 , HC I and HC II entered into a definitive agreement (the "Merger Agreement") to merge with and into a wholly-owned subsidiary ofBioScrip, Inc. ("BioScrip") (the "Merger"), a national provider of infusion and home care management solutions, which was completed onAugust 6, 2019 (the "Merger Date"). The Merger was accounted for as a reverse merger under the acquisition method of accounting for business combinations with Option Care being considered the accounting acquirer andBioScrip being considered the legal acquirer. Following the close of the transaction,BioScrip was rebranded asOption Care Health, Inc. and the combined company's common stock, par value$0.0001 , is listed on the Nasdaq Capital Market under the ticker symbol "OPCH". 24
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Update on the Impact of the COVID-19 Pandemic
The primary operations of the Company focus on providing infusion therapy services and based on the recent impact of the pandemic across the healthcare ecosystem, the Company began experiencing a related impact across a number of facets beginning inMarch 2020 . The Company has been disrupted by both positive and negative referral patterns, experienced challenges in our staffing, increased pricing and periodic inability to procure personal protection equipment, supplies and key drugs. The Company anticipates that the pandemic could affect its operations for an extended period; however, at this time it cannot confidently forecast the duration nor the ultimate financial impact on its operations. See Item 1A. "Risk Factors" under the caption "The COVID-19 pandemic and other pandemic events could adversely impact our business operations, results of operations, cash flows and financial position" included in our Form 10-K for further discussion of risks. 25
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Composition of Results of Operations
The following results of operations include the accounts ofOption Care Health and our subsidiaries for the three and nine months endedSeptember 30, 2022 and 2021. Gross Profit
Gross profit represents our net revenue less cost of revenue.
Net Revenue. Infusion and related health care services revenue is reported at the estimated net realizable amounts from third-party payers and patients for goods sold and services rendered. When pharmaceuticals are provided to a patient, revenue is recognized upon delivery of the goods. When nursing services are provided, revenue is recognized when the services are rendered. Due to the nature of the health care industry and the reimbursement environment in which the Company operates, certain estimates are required to record revenue and accounts receivable at their net realizable values at the time goods or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded. Cost of Revenue. Cost of revenue consists of the actual cost of pharmaceuticals and other medical supplies dispensed to patients. In addition to product costs, cost of revenue includes warehousing costs, purchasing costs, depreciation expense relating to revenue-generating assets, such as infusion pumps, shipping and handling costs, and wages and related costs for the pharmacists, nurses, and all other employees and contracted workers directly involved in providing service to the patient. The Company receives volume-based rebates and prompt payment discounts from some of its pharmaceutical and medical supplies vendors. These payments are recorded as a reduction of inventory and are accounted for as a reduction of cost of revenue when the related inventory is sold.
Operating Costs and Expenses
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist principally of salaries for administrative employees that directly and indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.
Depreciation and Amortization Expense. Depreciation within this caption includes infrastructure items such as computer hardware and software, office equipment and leasehold improvements. Depreciation of revenue-generating assets, such as infusion pumps, is included in cost of revenue.
Other Income (Expense)
Interest Expense, Net. Interest expense consists principally of interest payments on the Company's outstanding borrowings under the ABL Facility, the First Lien Term Loan and the Senior Notes, amortization of discount and deferred financing fees. Refer to the "Liquidity and Capital Resources" section below for further discussion of these outstanding borrowings.
Equity in Earnings of Joint Ventures. Equity in earnings of joint ventures consists of our proportionate share of equity earnings or losses from equity investments in two infusion joint ventures with health systems.
Other, Net. Other income (expense) primarily includes activity in the prior year loss on extinguishment of debt incurred in connection with theJanuary 2021 debt refinancing and miscellaneous non-operating expenses. Income Tax Expense. The Company is subject to taxation inthe United States and various states. The Company's income tax expense is reflective of the current federal and state tax rates. Change in Unrealized Gains (Losses) on Cash Flow Hedges, Net of Income Tax Expense (Benefit). Change in unrealized gains (losses) on cash flow hedges, net of income taxes, consists of the gains and losses associated with the changes in the fair value of derivatives designated as hedging instruments related to the interest rate caps and interest rate swaps, net of income taxes. 26
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Table of Contents Results of Operations
The following table presents
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue
NET REVENUE $ 1,020,918 100.0 % $ 891,937 100.0 % $ 2,917,522 100.0 % $ 2,511,446 100.0 %
COST OF REVENUE 802,917 78.6 % 688,969 77.2 % 2,281,685 78.2 % 1,944,037 77.4 %
GROSS PROFIT 218,001 21.4 % 202,968 22.8 % 635,837 21.8 % 567,409 22.6 %
OPERATING COSTS AND EXPENSES:
Selling, general and
administrative expenses 142,015 13.9 % 134,633 15.1 % 417,771 14.3 % 388,930 15.5 %
Depreciation and amortization
expense 15,268 1.5 % 15,452 1.7 % 46,027 1.6 % 48,410 1.9 %
Total operating expenses 157,283 15.4 % 150,085 16.8 % 463,798 15.9 % 437,340 17.4 %
OPERATING INCOME 60,718 5.9 % 52,883 5.9 % 172,039 5.9 % 130,069 5.2 %
OTHER INCOME (EXPENSE):
Interest expense, net (13,997) (1.4) % (16,000) (1.8) % (39,008) (1.3) % (52,717) (2.1) %
Equity in earnings of joint
ventures 1,472 0.1 % 1,676 0.2 % 4,065 0.1 % 4,567 0.2 %
Other, net 3,888 0.4 % 4 - % 3,891 0.1 % (12,392) (0.5) %
Total other expense (8,637) (0.8) % (14,320) (1.6) % (31,052) (1.1) % (60,542) (2.4) %
INCOME BEFORE INCOME TAXES 52,081 5.1 % 38,563 4.3 % 140,987 4.8 % 69,527 2.8 %
INCOME TAX EXPENSE 13,258 1.3 % 3,087 0.3 % 37,960 1.3 % 5,096 0.2 %
NET INCOME $ 38,823 3.8 % $ 35,476 4.0 % $ 103,027 3.5 % $ 64,431 2.6 %
OTHER COMPREHENSIVE INCOME, NET
OF TAX:
Change in unrealized gains on
cash flow hedges, net of income
tax expense of $1,398 , $0 ,
$5,917 and $0 , respectively $ 9,255 0.9 % $ 2,892 0.3 % $ 24,962 0.9 % $ 11,172 0.4 %
OTHER COMPREHENSIVE INCOME $ 9,255 0.9 % $ 2,892 0.3 % $ 24,962 0.9 % $ 11,172 0.4 %
NET COMPREHENSIVE INCOME $ 48,078 4.7 % $ 38,368 4.3 % $ 127,989 4.4 % $ 75,603 3.0 %
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Three Months Ended
The following tables present selected consolidated comparative results of
operations from
Gross Profit
Three Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Net revenue $ 1,020,918 $ 891,937 $ 128,981 14.5 %
Cost of revenue 802,917 688,969 113,948 16.5 %
Gross profit $ 218,001 $ 202,968 $ 15,033 7.4 %
Gross profit margin 21.4 % 22.8 %
The increase in net revenue was primarily driven by organic growth in the
Company's portfolio of therapies, consisting of acute revenue that had
mid-single-digit growth relative to the prior year while chronic revenue grew in
the mid-teens. Acute growth was driven primarily by the impact of shifts in the
competitive landscape, which increased the volume of patient service.
Acquisition related growth accounted for approximately 2% and 3% of the increase
in net revenue and gross profit, respectively. The increase in cost of revenue
and gross profit was primarily driven by the growth in revenue and also impacted
by inflationary pressures including labor, transportation, and medical supplies
costs.
Operating Expenses
Three Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Selling, general and administrative expenses $ 142,015 $ 134,633 $ 7,382 5.5 %
Depreciation and amortization expense 15,268 15,452 (184) (1.2) %
Total operating expenses $ 157,283 $ 150,085 $ 7,198 4.8 %
The increase in selling, general and administrative expenses is primarily due to
salaries and benefits as a result of acquired team members and inflationary
pressures, but has decreased as a percentage of revenue to 13.9% for the three
months ended September 30, 2022 as compared to 15.1% for the three months ended
September 30, 2021 , as our revenue has grown at a faster pace than our selling,
general and administrative expenses.
The decrease in depreciation and amortization expense is primarily attributed to certain intangible assets whose useful life expired partially offset by additional intangible assets due to acquisitions.
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Other Income (Expense)
Three Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Interest expense, net $ (13,997) $ (16,000) $ 2,003 (12.5) %
Equity in earnings of joint ventures 1,472 1,676 (204) (12.2) %
Other, net 3,888 4 3,884 97,100.0 %
Total other expense $ (8,637) $ (14,320) $ 5,683 (39.7) %
The decrease in interest expense during the three months ended September 30,
2022 was primarily attributable to the debt refinancing of the First Lien Term
Loan and issuance of the Senior Notes in October 2021 . See Note 10,
Indebtedness, of the consolidated financial statements for further information.
The decrease in equity in earnings of joint ventures was primarily attributable to the performance of the joint ventures.
The change in other, net is due to one-time non-operating income for the three months endedSeptember 30, 2022 related to income from a prior legacy acquisition. There was no comparable activity during the three months endedSeptember 30, 2021 . Income Tax Expense Three Months Ended September 30, 2022 2021 Variance (in thousands, except for percentages) Income tax expense $ 13,258$ 3,087 $ 10,171 329.5 % The Company maintains a valuation allowance of$13.1 million against certain state net operating losses ("NOLs"). The Company's tax expense for the three months endedSeptember 30, 2022 , consists of quarterly tax liabilities attributable to state tax returns as well as recognized deferred federal and state tax expense. These tax expense items resulted in an effective tax rate of 25.5% during the three months endedSeptember 30, 2022 . During the three months endedSeptember 30, 2021 , the effective tax rate was 8.0%. The variance in the Company's effective tax rate of 25.5% for the three months endedSeptember 30, 2022 , compared to the federal statutory rate of 21% is primarily attributable to current and deferred state taxes as well as various non-deductible expenses. The variance in the Company's effective tax rate of 8.0% for the three months endedSeptember 30, 2021 , compared to the federal statutory rate of 21% is primarily attributable to the Company only recognizing certain deferred federal and state tax expense and current state tax expense while any tax benefits that would have otherwise been recognized were offset by the Company's tax valuation allowance in effect during that period. The variance in the year-over-year effective tax rates is primarily attributable to the Company not recognizing any tax benefit for the period endedSeptember 30, 2021 , because it maintained a full tax valuation allowance reserve against such benefits. This reserve was subsequently reversed during the three months endedDecember 31, 2021 , except for the$13.1 million allowance noted above. Therefore, the reserve was not applicable in computing tax expense for the three months endedSeptember 30, 2022 , thus producing the effective tax rate variance year-over-year. 29
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Net Income and Other Comprehensive Income
Three Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Net income $ 38,823 $ 35,476 $ 3,347 9.4 %
Other comprehensive income, net of tax:
Changes in unrealized gains on cash flow
hedges, net of income taxes 9,255 2,892 6,363 220.0 %
Other comprehensive income $ 9,255 2,892 6,363 220.0 %
Net comprehensive income $ 48,078 $ 38,368 $ 9,710 25.3 %
The change in net income was primarily attributable to organic growth from additional revenue related to the factors described in the above sections.
For the three months endedSeptember 30, 2022 , the change in unrealized gains on cash flow hedges, net of income taxes, was primarily related to the increase in fair market value of the$300.0 million interest rate cap hedge executed inOctober 2021 . For the three months endedSeptember 30, 2021 , the change in unrealized gains on cash flow hedges, net of income taxes, primarily related to the increase in fair value on the$925.0 million notional swap; the swap expired inAugust 2021 . Net comprehensive income increased to$48.1 million for the three months endedSeptember 30, 2022 , compared to net comprehensive income of$38.4 million for the three months endedSeptember 30, 2021 , primarily as a result of the changes in net income, discussed above, further increased by the impact of the fair value of the interest rate cap hedge. 30
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Nine Months Ended
The following tables present selected consolidated comparative results of
operations from
Gross Profit
Nine Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Net revenue $ 2,917,522 $ 2,511,446 $ 406,076 16.2 %
Cost of revenue 2,281,685 1,944,037 337,648 17.4 %
Gross profit $ 635,837 $ 567,409 $ 68,428 12.1 %
Gross profit margin 21.8 % 22.6 %
The increase in net revenue was primarily driven by organic growth in the
Company's portfolio of therapies, consisting of acute revenue that had
mid-single-digit growth relative to the prior year while chronic revenue grew in
the high-teens. Acute growth was driven primarily by the impact of shifts in the
competitive landscape, which increased the volume of patient service.
Acquisition related growth accounted for approximately 2% and 3% of the increase
in net revenue and gross profit, respectively. The increase in cost of revenue
and gross profit was primarily driven by the growth in revenue and also impacted
by inflationary pressures including labor, transportation, and medical supplies
costs.
Operating Expenses
Nine Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Selling, general and administrative expenses $ 417,771 $ 388,930 $ 28,841 7.4 %
Depreciation and amortization expense 46,027 48,410 (2,383) (4.9) %
Total operating expenses $ 463,798 $ 437,340 $ 26,458 6.0 %
The increase in selling, general and administrative expenses is primarily due to
salaries and benefits as a result of acquired team members and inflationary
pressures, but has decreased as a percentage of revenue to 14.3% for the nine
months ended September 30, 2022 as compared to 15.5% for the nine months ended
September 30, 2021 , as our revenue has grown at a faster pace than our selling,
general and administrative expenses.
The decrease in depreciation and amortization expense is primarily attributed to certain intangible assets whose useful life expired partially offset by additional intangible assets due to acquisitions.
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Other Income (Expense)
Nine Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Interest expense, net $ (39,008) $ (52,717) $ 13,709 (26.0) %
Equity in earnings of joint ventures 4,065 4,567 (502) (11.0) %
Other, net 3,891 (12,392) 16,283 (131.4) %
Total other expense $ (31,052) $ (60,542) $ 29,490 (48.7) %
The decrease in interest expense during the nine months ended September 30, 2022
was primarily attributable to the debt refinancing of the First Lien Term Loan
and issuance of the Senior Notes in October 2021 . See Note 10, Indebtedness, of
the consolidated financial statements for further information.
The decrease in equity in earnings of joint ventures was primarily attributable to the performance of the joint ventures.
The change in other, net is primarily due to the loss on extinguishment of debt incurred in conjunction with theJanuary 2021 debt refinancing and included in the results for the nine months endedSeptember 30, 2021 . There was no comparable activity during the nine months endedSeptember 30, 2022 . There was also one-time non-operating income for the nine months endedSeptember 30, 2022 related to income from a prior legacy acquisition. Income Tax Expense Nine Months Ended September 30, 2022 2021 Variance (in thousands, except for percentages) Income tax expense $ 37,960$ 5,096 $ 32,864 644.9 % The Company maintains a valuation allowance of$13.1 million against certain state NOLs. The Company's tax expense for the nine months endedSeptember 30, 2022 , consists of quarterly tax liabilities attributable to state tax returns as well as recognized deferred federal and state tax expense. These tax expense items resulted in an effective tax rate of 26.9% during the nine months endedSeptember 30, 2022 . During the nine months endedSeptember 30, 2021 , the effective tax rate was 7.3%. The variance in the Company's effective tax rate of 26.9% for the nine months endedSeptember 30, 2022 , compared to the federal statutory rate of 21% is primarily attributable to current and deferred state taxes as well as various non-deductible expenses. The variance in the Company's effective tax rate of 7.3% for the nine months endedSeptember 30, 2021 , compared to the federal statutory rate of 21% is primarily attributable to the Company only recognizing certain deferred federal and state tax expense and current state tax expense while any tax benefits that would have otherwise been recognized were offset by the Company's tax valuation allowance in effect during that period. The variance in the year-over-year effective tax rates is primarily attributable to the Company not recognizing any tax benefit for the period endedSeptember 30, 2021 , because it maintained a full tax valuation allowance reserve against such benefits. This reserve was subsequently reversed during the three months endedDecember 31, 2021 , except for the$13.1 million allowance noted above. Therefore, the reserve was not applicable in computing tax expense for the nine months endedSeptember 30, 2022 , thus producing the effective tax rate variance year-over-year. 32
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Net Income and Other Comprehensive Income
Nine Months Ended September 30,
2022 2021 Variance
(in thousands, except for percentages)
Net income $ 103,027 $ 64,431 $ 38,596 59.9 %
Other comprehensive income, net of tax:
Changes in unrealized gains on cash flow
hedges, net of income taxes 24,962 11,172 13,790 123.4 %
Other comprehensive income $ 24,962 11,172 13,790 123.4 %
Net comprehensive income $ 127,989 $ 75,603 $ 52,386 69.3 %
The change in net income was primarily attributable to organic growth from additional revenue related to the factors described in the above sections.
For the nine months endedSeptember 30, 2022 , the change in unrealized gains on cash flow hedges, net of income taxes, was related to the increase in fair market value of the$300.0 million interest rate cap hedge executed inOctober 2021 . For the nine months endedSeptember 30, 2021 , the change in unrealized gains on cash flow hedges, net of income taxes, primarily related to the increase in fair value on the$925.0 million notional swap; the swap expired inAugust 2021 . Net comprehensive income increased to$128.0 million for the nine months endedSeptember 30, 2022 , compared to net comprehensive income of$75.6 million for the nine months endedSeptember 30, 2021 , primarily as a result of the changes in net income, discussed above, further increased by the impact of the fair value of the interest rate cap hedge.
Liquidity and Capital Resources
For the nine months endedSeptember 30, 2022 and the twelve months endedDecember 31, 2021 , the Company's primary sources of liquidity were cash on hand of$255.5 million and$119.4 million , respectively, as well as$168.3 million of borrowings available under its credit facilities (net of$6.7 million undrawn letters of credit issued and outstanding). During the nine months endedSeptember 30, 2022 and the year endedDecember 31, 2021 , the Company's positive cash flows from operations enabled investments in pharmacy and information technology infrastructure to support growth and create additional capacity in the future, as well as to pursue acquisitions. The Company's primary uses of cash include supporting our ongoing business activities, investment in capital expenditures in both facilities and technology, and the pursuit of acquisitions. Ongoing operating cash outflows are associated with procuring and dispensing drugs, personnel and other costs associated with servicing patients, as well as paying cash interest on outstanding debt. Ongoing investing cash flows are primarily associated with capital projects related to business acquisitions, the improvement and maintenance of our pharmacy facilities and investment in our information technology systems. Ongoing financing cash flows are primarily associated with the proceeds of warrant exercises, along with quarterly principal payments on our outstanding debt. Our business strategy includes the deployment of capital to pursue acquisitions that complement our existing operations. We continue to evaluate acquisition opportunities and view acquisitions as a key part of our growth strategy. The Company historically has funded its acquisitions with cash with the exception of the Merger. The Company may require additional capital in excess of current availability in order to complete future acquisitions. It is impossible to predict the amount of capital that may be required for acquisitions, and there is no assurance that sufficient financing for these activities will be available on acceptable terms. 33
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Short-Term and Long-Term Liquidity Requirements
The Company's ability to make principal and interest payments on any borrowings under our credit facilities and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based on our current level of operations and planned capital expenditures, we believe that our existing cash balances and expected cash flows generated from operations will be sufficient to meet our operating requirements over the next 12 months and beyond. We may require additional borrowings under our credit facilities and alternative forms of financings or investments to achieve our longer-term strategic plans.
Credit Facilities
The Company's asset-based-lending revolving credit facility provides for borrowings up to$175.0 million , which matures onOctober 27, 2026 (the "ABL Facility"). The ABL Facility bears interest at a rate equal to, at the Borrowers' election, either (i) a base rate determined in accordance with the ABL Credit Agreement plus an applicable margin, which is equal to between 0.25% and 0.75% based on the historical excess availability as a percentage of the Line Cap (as such term is defined in the ABL Credit Agreement) and (ii) LIBOR (or a comparable successor rate, with a floor of 0.00% per annum) plus an applicable margin, which is equal to between 1.25% and 1.75% based on the historical excess availability as a percentage of the Line Cap. The Company had$6.7 million of undrawn letters of credit issued and outstanding, resulting in net borrowing availability under the ABL Facility of$168.3 million as ofSeptember 30, 2022 . The principal balance of the First Lien Term Loan is repayable in quarterly installments of$1.5 million plus interest, with a final payment of all remaining outstanding principal due onOctober 27, 2028 . The quarterly principal payments commenced in March of 2022. Interest on the First Lien Term Loan is payable monthly on either (i) LIBOR (or a comparable successor rate, with a floor of 0.50% per annum) plus an applicable margin of 2.75% for Eurocurrency Rate Loans and (ii) a base rate determined in accordance with the new First Lien Term Loan agreement, plus 1.75% for Base Rate Loans.
The Senior Notes bear interest at a rate of 4.375% per annum, which are payable
semi-annually in arrears on
Interest payments over the course of long-term debt obligations total an estimated$344.7 million based on final maturity dates of the Company's credit facilities. Interest payments are calculated based on the LIBOR rate as ofSeptember 30, 2022 . Actual payments are based on changes in LIBOR and exclude the interest rate cap derivative instrument. 34
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Cash Flows
Nine Months Ended
The following table presents selected data from
Nine Months Ended
2022 2021 Variance
(in thousands)
Net cash provided by operating activities $ 224,092 $ 143,259 $ 80,833
Net cash used in investing activities (104,426) (30,596) (73,830)
Net cash provided by (used in) financing activities 16,379 (11,072) 27,451
Net increase in cash and cash equivalents 136,045 101,591 34,454
Cash and cash equivalents - beginning of period 119,423 99,265 20,158
Cash and cash equivalents - end of period $ 255,468 Cash Flows from Operating Activities
The increase in cash flows provided by operating activities is primarily due to higher net income, decrease in interest expense due to theOctober 2021 debt refinancings, timing of vendor payments and deferred income taxes, which were partially offset by changes in inventory and certain accruals during the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 .
Cash Flows from Investing Activities
The increase in cash flows used in investing activities is primarily due to the acquisitions of SPNN and RHI made within the nine months endedSeptember 30, 2022 , as compared to the acquisition of Biocure made within the nine months endedSeptember 30, 2021 .
Cash Flows from Financing Activities
The increase in cash provided in financing activities is primarily related to the proceeds from warrant exercises during the nine months endedSeptember 30, 2022 , with no comparable activity during the nine months endedSeptember 30, 2021 . Additionally, the cash used in financing activities for the nine months endedSeptember 30, 2021 is related to theJanuary 2021 debt refinancing, with no comparable activity during the nine months endedSeptember 30, 2022 .
Critical Accounting Policies and Estimates
The Company prepares its unaudited condensed consolidated financial statements in accordance withUnited States generally accepted accounting principles ("GAAP"), which requires the Company to make estimates and assumptions. The Company evaluates its estimates and assumptions on an ongoing basis. Estimates and assumptions are based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making assumptions about the carrying values of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the period presented. The Company's actual results may differ from these estimates, and different assumptions or conditions may yield different estimates.
There have been no material changes to the Company's critical accounting policies and estimates as presented in our Form 10-K, which are hereby incorporated by reference.
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