) recently declared its fourth-quarter 2013 results. Adjusting
for certain one-time expenses, BioScrip reported net loss from
continuing operations of 7 cents per share in the quarter, a
massive decline from the year-ago adjusted earnings per share
(EPS) of 2 cents. The results also considerably lagged the Zacks
Consensus Estimate of earnings of 2 cents. Following the
announcement on Feb 26, stock price of BioScrip declined 12.3% to
$7.40 till yesterday's closing.
On a reported basis, BioScrip's net loss from continuing
operation was $15.4 million or loss of 23 cents per share -
a huge slash from the year-ago loss of $1.4 million or loss of 3
cents per share. For the full year, adjusted net loss was 9 cents
a share, wider than the loss of a penny in the year-ago
Revenues in Detail
Total revenues in the reported quarter rose 34.8% year over
year to $243.5 million, beating the Zacks Consensus Estimate of
$238 million. Revenues from continuing operations for the full
year came in at $842.2 million, up 27.1% from the year-ago
The company operates through three main segments, viz.
Infusion Services (87% of total revenue in fourth quarter), Home
Health Services (7.4%) and PBM Services (5.6%).
Segments in Detail
The company reported revenues of $212.0 million in Infusion
Services, recording impressive growth of 56.3% year over year.
Robust organic growth and the acquisitions of HomeChoice and
CarePoint were the major revenue drivers in this segment.
On the other hand, revenues in the Home Health Services
segment declined 1.5% to $18.0 million. Notably, in order to
retain its strong presence and competitive advantage in the
infusion industry, in Feb 2014, the company entered into a
definitive agreement to sell its Home Health business - Deaconess
HomeCare - to LHC Group for $60 million. According to the
company, this transaction will enhance BioScrip's financial
flexibility to further benefit from the large scale of operations
the company created through its three recent infusion
Revenues in the PBM Services segment came in at $13.5 million,
reflecting a substantial 49.6% downfall from the prior-year
quarter. The decline was due to lower discount cards revenue and
termination of a large contract with a PBM client.
While the cost of product revenues shot up 54.3% to $142.3
million, the cost of service revenues declined 6.5% to $26.3
million in the quarter.
Gross profit during the quarter increased 23.9% year over year
to $74.9 million on account of greater volume of business
generated from Infusion Services, offset by decline in the
company's non-core segment revenues. However, gross margin
contracted 266 basis points (bps) to 30.8% owing to the business
mix. The downfall resulted from the Infusion Services segment
growing more rapidly than the higher-margin PBM Services
Selling, general and administrative (SG&A) expenses
escalated 34.2% to $65.9 million. The rise in expenditure
resulted in a drag of 255 bps in adjusted operating margin, which
settled at 3.7% for the reported quarter.
The company ended the fiscal with cash and cash equivalents of
$1 million, compared to $62.1 million at the end of fiscal 2012.
The long-term debt was $435.6 million as on Dec 31, 2013 against
$223.3 million on Dec 30, 2012.
BioScrip initiated its 2014 guidance. The company expects
revenues at its Infusion Services segment to grow at the rate of
20% with double-digit organic growth. However, similar to this
recently completed fiscal, even in 2014, growth in Infusion
Services revenues will be offset by a decline in the PBM Services
segment and the sale of the Home Health Services business. Total
gross margin is anticipated to suffer due to the sale of Home
Health, growth in the low-margin Infusion business and decline in
the high-margin PBM Services segment's gross margin.
We believe Bioscrip's Infusion franchise should continue to
grow via organic and inorganic means. We are encouraged to note
that the company has been taking several steps to emphasize more
on areas with long-term growth potential and high returns.
We believe that the recent acquisitions and sellouts will be
significantly accretive to Bioscrip's top line. In this regard,
we are highly optimistic about the CarePoint buyout that should
improve BioScrip's long-term growth profile. Also, the recent
agreement to sell its Home Health business reinforces the
company's strategy to strengthen its Infusion Services business.
The company has significant opportunities for growth in these
three operating areas with several catalysts to accelerate growth
However, we are rather disappointed with the poor
fourth-quarter bottom-line performance at BioScrip. Although
Infusion Services business continues to grow at a healthy pace,
the poor performance at the PBM Services segment is weighing on
the margin. Furthermore, the poor fiscal 2014 guidance fails to
show any near-term catalyst that could hoist the bottom line
Currently, the stock carries a Zacks Rank #5 (Strong Sell).
Some of the better-ranked stocks in the broader medical space
that warrant a look include
). All these stocks carry a Zacks Rank #2 (Buy).
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