Option Care Health, Inc (OPCH) Q4 2020 Earnings Call Transcript

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Option Care Health, Inc (OPCH 0.40%)
Q4 2020 Earnings Call
Mar 11, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Option Care Health Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the call over to Mike Shapiro. Please go ahead.

Mike Shapiro -- Chief Financial Officer

Good morning, and thank you for joining us for the Option Care Health fourth quarter earnings call. I'm joined this morning by John Rademacher, Chief Executive Officer.

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 filed 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.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Mike, and good morning, everyone. To say that 2020 was an unprecedented and extraordinary year is quite the understatement. And reflecting back, I have never been prouder to be a part of the Option Care Health team. We have risen to every challenge thrown our way and through it all emerged stronger and more focused than ever.

We delivered strong financial results ahead of our initial expectations, effectively completed the vast majority of the integration effort, and most importantly remained focused on the loved ones and trusting their care to our team. This would have been a strong accomplishment in ordinary times. So the fact that the team made all of this progress and delivered these results under the unexpected challenges presented by the pandemic is truly outstanding. With the performance and the results by the team, I have never been more confident in the road ahead as we emerge from the pandemic and focus on setting the standards in alternate site infusion therapy.

As Mike will highlight in a few minutes, the fourth quarter continued our track record of delivering robust topline growth, EBITDA expansion and an improved capital structure. As we sit here today, we have clearly executed on the strategy we outlined shortly after the merger in the fourth quarter of 2019. And I am extremely proud of how the Option Care Health team has performed in an extremely challenging environment.

As the severity of the COVID-19 crisis began to emerge in the first half of 2020, we quickly developed mitigation plans and migrated to a respond, recover and prosper mentality to ensure we adjusted quickly to the challenges, while also remaining focused on the long-term. As I've outlined previously, we have focused on four key tenants: accelerating topline growth, providing consistent high-quality care, strengthening our balance sheet, and converting every claim to cash. And in 2020, we clearly delivered across all four key priorities.

The Q4 double-digit growth is the result of a -- of tremendous collaboration in the field between our commercial and operational teams, who over the course of the year, ensured that Option Care Health could be dependent upon by payers, our referral sources, and most importantly, our patients to deliver unparalleled care in the face of adversity.

We continued to execute our strategy to increase reach and frequency, and our team responded even with the access restrictions caused by the pandemic. The chronic portfolio continued to grow in the mid-teens as we launched a number of new therapies and collaborated with payers to prioritize care outside the acute care setting. Our acute therapies, which are to a great extent correlated to hospital discharges and were effectively flat year-over-year through the third quarter, did post modest low single-digit growth in the fourth quarter, which is quite encouraging.

Our relentless focus on the patient and delivering high quality care in a cost-effective setting proved crucial throughout the disruption that COVID caused. Our ability to quickly pivot and utilize our technology platform more fully through telemedicine features like virtual visits and discharge support, team collaboration tools that allowed our clinical teams and remote workforce to continue to excel, and by enhancing our digital capabilities to enable predictive analytics, repetitive process automation and machine learning. All of these contributed to delivering consistent high-quality care, strong clinical outcomes and exceptional patient satisfaction.

We also took significant actions to improve the strength of our balance sheet by restructuring and paying down debt, efficiently managing working capital, expanding earnings generation and through strong conversion of claims to cash. We began 2020 with a leverage ratio of 6 times and exited the year at 4.8 times, with a clear glide path to getting below 4 times in short order.

With all of the great work done by the team throughout the year, we are entering the late innings of integration efforts with technology deployment and harmonization efforts continuing in the first half of 2021. The effective and efficient platform we have created is beginning to unlock operating leverage and allowing for a much stronger capacity utilization, as evidenced by our EBITDA margin expansion.

As we sit here today, a little over a year since the pandemic onset, we continue to manage through a very dynamic and challenging situation. We are by no means out of the woods, and we remain vigilant to ensure the safety of our team members and our patients. We continue to closely monitor drug and medical supply availability to help anticipate disruption in advance. And as new care models emerge, we are very well positioned to pivot based on our industry-leading technology suite.

Our recently announced partnership with Amedisys is a prime example of how quickly we can respond to market demands with innovative new model. Reflecting on our first full year as a combined enterprise and having completed the far majority of integration activities ahead of schedule, I have never been more confident in this team, our unique platform and the significant number of opportunities that lie ahead. We have persevered in the face of adversity to deliver across the spectrum. And as we shift from integration to acceleration, the unique platform we've created is clearly evident and poised to create sustainable value.

We are the only independent national provider of infusion services, with relationships with all national payers along with the broadest therapy portfolio across the industry. And as a parent in our 2021 guidance communicated this morning, momentum is clearly building in our revenue base, our margin expansion efforts, and our focus on cash flow generation, and we're just getting started.

With that, I will turn the call over to Mike to review the financial results in a bit more detail. Mike?

Mike Shapiro -- Chief Financial Officer

Thanks, John. Good morning, everyone. And as you can imagine, we are very pleased with the fourth quarter financial results. We are finally at a point where the prior year fourth quarter is a truly comparable period and growth rates represent apples-to-apples growth. A reminder, however, that the full-year results for 2019 reflect only legacy Option Care results up through the merger date of August 6 and the combined results for the merged enterprise thereafter.

Revenue in the fourth quarter of $805 million grew more than 11% year-over-year, driven by mid-teens chronic therapy growth and modest single-digit acute revenue growth. Site of care initiatives continue to resonate and directly benefit our chronic portfolio, while at the same time newer therapies introduced for conditions including myasthenia gravis and chronic inflammatory conditions contributed to strong growth as well. Acute referrals and revenue did improve modestly. And as mentioned, we did see some traction in acute therapies, which were effectively flat through the first nine months. We are clearly pleased with the overall revenue results for the quarter.

Gross profit represented 22.8% of revenue, which is the highest quarter reported for 2020 and illustrates our scale leverage, despite the mix headwinds from our chronic portfolio which is growing at a faster pace and carry the lower gross margin profile and spending of a $123 million was flat to Q3 spending levels and dropped to 15.3% of revenue, down from 20% in Q4 of the prior year.

Adjusted EBITDA of $67.7 million in the quarter represented 8.4% of net revenue and up approximately 28% over prior year. And the EBITDA margin of 8.4% was our strongest on record and expanded over 100 basis points over Q4 of the prior year. The expansion was in part due to accelerated integration efforts and our ability to capture cost synergies rapidly in 2020. And while we expect to continue driving spending leverage, we would not expect to realize EBITDA margin expansion at that same pace going forward, but for the year, we generated $221.7 million of adjusted EBITDA, which is almost $7 million above our initial guidance range for 2020.

In the fourth quarter, we generated over $25 million in cash flow from operations, which enabled us to voluntarily pay down $50 million of our outstanding second lien debt. We finished the year with over $99 million in cash after the debt pay down and more than a $0.25 billion of total liquidity.

While technically a 2021 event, I did want to take a moment to highlight the extinguishment of the entire second lien debt and repricing of our first lien debt shortly after year-end. Given the robust market conditions and the strength of our enterprise, we opportunistically retired the entire second lien debt in January and replaced it with incremental first lien debt under our existing credit facility. As part of the transaction, we repriced the entire first lien tranche of -- at LIBOR plus 3.75%, down from a spread of 425 basis points. The existing favorable covenant-lite terms and maturity of 2026 remain intact. So we entered 2021 with even more flexibility under our improved capital structure.

Shifting gears, I wanted to spend a minute on our guidance as communicated in this morning's press release. Our referral patterns across our broad portfolio therapies and geographies continues to be volatile, given the ongoing pandemic impact, but nonetheless, we see revenue growth of 6% to 7% incorporating a number of these dynamics. Additionally, we expect to deliver between $245 million and $258 million in adjusted EBITDA for the full year. Based on the scalable platform we established, we anticipate double-digit EBITDA growth and margin expansion.

We also expect to generate at least $140 million in cash flow from operations, which also represents double-digit growth over 2020. Since the merger, we have relentlessly focused on improving our capital structure and improving our leverage profile. As a reminder, at the time of the merger, we were 6.2 times levered on a net debt basis. We drove our leverage profile down to 4.8 times at year-end, and based on our guidance, we expect to be below 4 times by the end of the year. We will continue our focus on improving our capital structure, and are encouraged by our progress to date.

So in summary, we anticipate a very productive year both in terms of executing on our growth strategy, leveraging our infrastructure to expand profit margins and generating cash flow to further improve our capital structure and fuel further growth initiatives.

With that, we'll open the call for Q&A. Operator?

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Pito Chickering with Deutsche Bank. Your line is open.

Pito Chickering -- Deutsche Bank -- Analyst

Hi, good morning guys. Thanks for taking my questions. So, two quick ones right here. The first one is, can you give us an update on IVIG, just refresh us in the fourth quarter, what percent of revenue has come from IVIG, walk through any supply constraints due to positive corrections [Phonetic] and how we should think about IVIG throughout 2021?

Mike Shapiro -- Chief Financial Officer

Sure, Pito. Good morning, it's Mike. Obviously, this is a situation we've been very open with, and we've been monitoring closely. Again, we don't disclose product level specifically, but the way we've characterized it in the past is that it's approximately 20% of our revenue and that held firm and is an accurate statement for the fourth quarter.

I'd say, as it relates to the supply situation, we continue to monitor it closely, the fractionators have been very open around the trends in plasma collections, which is obviously the critical raw material for the therapy, but this is a situation where -- as we talked about, we have direct relationships which in times like this make -- really underscores the value of that supply chain strategy. And so, we've also been opportunistically adding to our inventory levels to buffer, but thus far, we're cautiously optimistic, but clearly, this is something that we've incorporated into our thoughts around 2021, and something that we will continue to monitor extremely closely.

Pito Chickering -- Deutsche Bank -- Analyst

Okay, fair enough. And then a question for you on gross margins. Fourth quarter was very strong, despite the mix headwinds. Is this the right starting point for you for 2021? And as mix improves, should gross margins continue to improve throughout 2021?

Mike Shapiro -- Chief Financial Officer

I mean our operations team is relentless on driving margin expansion. Again, we don't give quarterly guidance, and typically, the fourth quarter is our strongest quarter of the year. But nonetheless, we would expect gross margin expansion going into 2021. And again, I think you highlighted a number of the key variables. We are expecting that as the chronic portfolio continues to outpace the acute and given the relative margin profile, that would represent a headwind, but nonetheless, the team is relentlessly focused on spending leverage.

And as an aside, one of the things we're really pleased with in terms of our margin results is that despite a lot of headwinds in cost inefficiencies this year around PPE cost, just overall delivery and supply chain. So while I wouldn't anchor 22.8% as the new measuring stick for every quarter, I would say that for the year, we would expect to drive some gross margin expansion.

Pito Chickering -- Deutsche Bank -- Analyst

Okay.

John C. Rademacher -- President and Chief Executive Officer

Sorry, the only other thing I'd add is, look, as we've outlined the investments we've made into our technology platform as Mike said really give us an opportunity to continue to squeeze on our productivity and capacity to make certain that we're optimizing that. And as Mike said, also the operations team is relentless in their focus. And again, we feel as if there still is some opportunity as we're thinking about the road ahead.

Pito Chickering -- Deutsche Bank -- Analyst

Okay. And then, it's always tough to give -- you can ask for a look at your quarter trends. But I'm curious as this COVID spike has decreased and sort of Texas storms are behind us, just more curious how you guys are thinking about sort of the lessons learned from patients and hospitals in terms of pushing into home-based setting. I'm curious, obviously, a lot of noise in the last sort of 90 days. But do you see increase or macro moving into the home setting at this point?

John C. Rademacher -- President and Chief Executive Officer

Yeah, Pito, it's John again. I think we're trying to be balanced in our approach and I think what you saw as we provided in guidance is that we believe there is going to be some puts and takes. I think the acceptance of the home is being a safe and effective setting. It continues to increase than a lot of the referral sources have embraced that in ways that they may not have before the pandemic.

On the other side of that, as the economy opens back up, as restriction starts to diminish, we do expect that the hospital outpatient departments are going to try to hold some of the patients that were being transitioned on to care in the home, so we will expect some level of increased competition on that standpoint. We feel we're really well positioned based on the relationships we formed and the performance of the team to really weather a pretty challenging and dynamic environment, but that's kind of the balance that we're trying to put in there, as we're trying to be thoughtful about what 2021 is going to look like from that perspective.

Pito Chickering -- Deutsche Bank -- Analyst

Great. I thank you guys so much.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Pito.

Mike Shapiro -- Chief Financial Officer

Thanks, Pito.

Operator

Our next question comes from Matt Larew with William Blair. Your line is open.

Matt Larew -- William Blair -- Analyst

Hi. Good morning, guys. Two questions on the guidance, Mike. First, maybe just thinking about what you're contemplating for acute relative to chronic, you highlighted mid-teens chronic in the fourth quarter, which I think is even stronger than it was perhaps throughout the rest of the year and acute creeping back up into the low-single digits, but John, obviously, you just alluded to some of the dynamics with potentially hospitals trying to retain more patients as COVID is less of a capacity problem. Maybe the first would be on that.

Then the second relative to the guidance is, I think EBITDA margin guidance is about 20 basis points lower for the year relative to the second half of 2020. And so, maybe just help us understand, if there are any sort of cost coming back into the model or areas that maybe we should be thinking about in terms of EBITDA margin that we might have been thinking about?

Mike Shapiro -- Chief Financial Officer

Sure, Matt, it's Mike. I'll start and John can certainly jump in. I think the way that -- look as we try to handicap our topline expectations for the year, to state the obvious, there is quite a few things moving. I think we're encouraged with the reemergence of acute, which we've been candid around our expectations and how we characterize the growth in the low-single digits. I think that's a reasonable characterization for how we're thinking about this year. And with the chronic -- again remember, we did have some benefits in the mid-year with site of care shifts with HOPDs and outpatient clinics shifting site of care into the home. And so -- while we're thrilled with the fourth quarter results, we've characterized the chronic as high-single low-double digit growth profile. And again in response to the first question, obviously, we're being a little cautious around the IG growth profile, which is our largest therapy franchise.

The other thing I would say is the way we also characterize revenue and how we've oriented folks to think about the overall growth trends in the mid to high-single digit, that's on our constant pricing basis. There are a handful of therapies, not to get into specifics, but we do think that some ASP declines could have 1 point [Phonetic] or so of headwind from a topline reported growth perspective. That hasn't translated as much into the bottom line because again that also offsets with a lower cost to procure, but overall, we feel comfortable with lower acute, and obviously, a higher chronic portfolio growth profile for the year.

As it relates to the EBITDA margin, I mean, look, as I mentioned in my prepared comments, we're thrilled with the expansion. And based on our model, we expect that we will continue to expand EBITDA margin going forward. At our midpoint for the year, and again it gets a little bumpy with intra-quarter, but our EBITDA margin at the midpoint is in the neighborhood of 50 bps of expansion year-over-year. So, we're continuing to drive EBITDA margin expansion, and again at the midpoint, around 0.5 point of expansion for the full year with a revenue base that's increasingly skewed more toward the lower margin, chronic is something we feel really comfortable with.

Matt Larew -- William Blair -- Analyst

Yeah, that all makes sense. And then just maybe the second, obviously referral source changes, additions, what was the theme throughout the year? And John, you've highlighted urgent care as an area that they saw an increase in referral sources. You both have discussed telemedicine and your technology platform potentially is something that opens up to actual referrals in the future. Could you maybe give us a sense for what, if there is a number, you can put around the number of referral sources, if there is anything interesting thematically in terms of retention for new referral sources that you've seen here over the last several months, I think that will be interesting here?

John C. Rademacher -- President and Chief Executive Officer

Yeah, Matt, it's John. So as we've highlighted before, a great work by our commercial team really focusing around that reach and frequency as we had gone through a lot of the transformation of the team post-merger and part of the integration. I will tell you there -- they have done a lot of work over 2020 and continuing into 2021, focused around making certain that we have clear segmentation of our referral sources and identification of not only where we're getting referrals today, but who are the higher prescribers that we may not have relationships with. And so, a lot of work has been done on that and targeting to make certain that the team is focused around those opportunities.

I can tell you that on a preliminary basis, I'd say there are easily a couple of hundred new referral sources that we generated at new starts from in the fourth quarter that were not part of our base heading into the fourth quarter. So the team is focused on that. We're, again, looking for those opportunities to expand into new settings and develop those new relationships. And we think that with the data and the data analytics team being able to really focus on that segmentation with not only augmenting our internal data with external data but then being much more prescriptive in the analytical response of the team, we feel that we will continue to see that trend as we head into 2021.

Matt Larew -- William Blair -- Analyst

Okay. Congrats on the great year.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Matt.

Mike Shapiro -- Chief Financial Officer

Thanks, Matt.

Operator

Our next question comes from Jamie Perse with Goldman Sachs. Your line is open.

Jamie Perse -- Goldman Sachs -- Analyst

Hey guys. Good morning.

John C. Rademacher -- President and Chief Executive Officer

Hey, Jamie. Good morning.

Jamie Perse -- Goldman Sachs -- Analyst

I wanted to ask a sales guidance question and focus on the cadence throughout the year. Maybe the way I'll ask it is, can you give us a sense of the typical 4Q to 1Q seasonality? Obviously, last year wasn't a clean year with the integration and COVID. This year won't be either, but just a typical seasonality measure that we can adjust prominent. Any reaction to how Street's modeling the first quarter around $750 million [Phonetic] would be great.

Mike Shapiro -- Chief Financial Officer

Hey, Jamie, it's Mike. I'll start, so I'll use our typical and air quotes, typically, the first quarter is the lightest of the year. There is some seasonality, you have benefit reauthorization, you have healthcare consumers that now face deductibles and higher co-pays. So, we do typically see coming out of the holidays that the velocity does lighten up a little bit in the first quarter. And then, you typically see a gradual ramp with the fourth quarter typically being the strongest of the year.

Good question, because I would caution folks thinking about the year-over-year growth that's starting really at the end of the first quarter of last year. Last year was anything but typical in terms of referral patterns and revenue patterns with some spikes midyear with especially chronic shifts from the acute care settings into the home. So I think the year-over-year could be a little choppy when you look at it on a quarter-to-quarter basis, but again, overall for the year, we obviously laid out what we think is some impressive growth expectations.

In terms of how -- commentary on the first quarter, I'm going to refrain from doing that. We typically don't -- applying on intra-year quarterly consensus models.

Jamie Perse -- Goldman Sachs -- Analyst

Okay, fair enough. Just one more on the guidance for the year. I mean 6% to 7% growth is a pretty narrow range, and a lot of your peers are guiding to much wider ranges, just given all that's going on. So the question is really just how do you get confidence if it's a precise range and also if you can just touch on how you're incorporating thoughts around procedure recovery in the acute business into your guidance. Thank you.

Mike Shapiro -- Chief Financial Officer

Yeah, Jamie. So one of the things that we talk about is the value of the balanced revenue portfolio that we have on the chronic side. Again this is a lower patient turnover. So when you look at our revenue based on the chronic side, the far majority of our revenue in any month or quarter is for pre-existing patients that are already on service. So, we have a very, what I would call, predictable referral-based revenue model that balances obviously with acute, which was a little bit more volatile. But as we look at the balanced portfolio, clearly there is a lot of undertones around IG, around AFP, around reemergence of the acute care setting, new therapies that are emerging. But as we risk-adjusted all of those, I take your point, a 1% range is a little bit tighter than most, but rest assured, we have a high degree of confidence that that's an applicable range for us, again taking into account the number of varying components.

Jamie Perse -- Goldman Sachs -- Analyst

Okay, that's great. Thank you.

Mike Shapiro -- Chief Financial Officer

Okay. Thank you, Jamie.

Operator

Our next question comes from Brooks O'Neil with Lake Street Capital. Your line is open.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Good morning. I have two questions. So recognizing that the integration efforts with BioScrip are pretty much complete or melding into your other actions, could you highlight the two or three key business optimization steps you hope to accomplish in 2021?

John C. Rademacher -- President and Chief Executive Officer

Good morning, Brooks, it's John. Yes. So I think as we've highlighted, we will have some follow-up activities in 2021, as we can see our path of integration. It's a smaller amount of effort, but we still have some of the technology deployment as well as harmonization efforts that will move through the year. So the team still focused there.

In our prepared comments, a lot of our focus will be really around primarily moving from integration to acceleration, I think as we highlighted. Our goal is to really now start to focus on the use of the data and data analytics to drive a lot of the business performance. So from the commercial team standpoint, it's focusing around that targeting segmentation and really driving the referrals into the process. From an operation standpoint, it is really focusing around leveraging the technology to optimize the interoperability and continue to focus on the efficiencies that we know we can drive as we begin to harmonize and optimize the technology platform.

And I'd say the third area that we'll continue to focus on is just the patient experience. We're spending a lot of time right now making certain that we understand through journey mapping and other aspects to really capitalize on that patient's experience and making certain that we have a clear line of sight for the unique needs of the different patients based on chronic condition and or therapy that they will be receiving. So, we're really focused around those areas and we think that create sustainable long-term growth.

I'd be remiss if I didn't highlight that, look, we spent a lot of time on the culture. We are focused as a team to make certain that we took the best of both organizations as we move forward. And I would tell you that we still are focusing around that high performance culture to make certain that we're optimizing employee engagements, and we're really focusing our energy and efforts around diversity inclusion and other aspects that drive a high performance culture and continue to create a sustainable competitive advantage for Option Care Health.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

That's great. And then again recognize that no one knows the direction of interest rates as we move through 2021. But, Mike, as you continue to focus on strengthening the operating performance and lowering the debt, would you expect an opportunity to lower the rate on your debt as well as lower the absolute amount of debt you have in 2021?

Mike Shapiro -- Chief Financial Officer

Hey, Brooks. Yeah, I mean this is an area we're really pleased with the progress we've made a year ago. Again, we were around 6 times levered. Our cash interest run rate was around $110 million and we were at L plus 4.50% on the first lien with a lot of second lien. Right now, we're entering the year with a cash interest run rate of around $70 million to $75 million. So, we've taken $35 million, $40 million. It's more than $3 million a month in cash interest savings. And again, with the first lien structure we have right now at L plus 3.75%, we feel really comfortable around where we are from a leverage profile.

Having said that, improving our cap structure and debt reduction will continue to be the measuring stick. With $140 million plus in cash flow from operations, we expect capex to be, as we've talked about in that $30 million range and with cash interest coming down and integration cost coming down, the cash generation is expected to be robust this year. And so, that gives us the opportunity to evaluate how best to deploy that, and whether it's in further gross debt reduction or through strategic deployment, that's something that we're spending a lot of time thinking through.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Cool. Thank you very much. Looking forward to 2021.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Brooks.

Mike Shapiro -- Chief Financial Officer

Thanks, Brooks.

Operator

Our next question comes from Kevin Fischbeck with Bank of America. Your line is open.

Kevin Fischbeck -- BofA -- Analyst

Okay, great, thanks. So I guess, when we think about you guys, I think kind of the long-term building blocks for the growth is 5% to 7% topline and 12% to 15% EBITDA. I think you guys are looking to do this at the higher end of that revenue growth there, but EBITDA range starts off a little bit lower. So just wanted to see if there's anything that you're thinking about that might push you to the lower end of the range, even though the revenue growth looks pretty strong?

Mike Shapiro -- Chief Financial Officer

Sure, Kevin, it's Mike. I maybe start. Look, I mean, when you look at the midpoint, the midpoint of our EBITDA growth range is 13%, 14%. I think it's early in the year. I think as we've tried to establish an era of conservatism, obviously, John and I want to be conveying that numbers that we're outlining are very high confidence expectations for ourselves. I think we're entering the year, I'd say, with a number of things we're keeping an eye on, PPE costs remain inflated with a highly remote workforce, there is still some inefficiencies that we're managing through and how and when we emerge from the pandemic and how we manage through the IG supply situations. I think that just led us to a little bit more conservative on the EBITDA range. But there is no deviation from what we believe, which is this is a -- as a base case, a mid-teens earnings growth engine. Some years will be a little bit higher than that, some years might be a little bit lower than that.

Kevin Fischbeck -- BofA -- Analyst

Okay. Now certainly going back to that earlier question about wider range during COVID I think makes sense, want to make sure whether I'm missing something. I guess secondly, when -- you talked about I guess the long-term view of chronic could it be in the kind of the high-single digits, is -- what is the long-term growth rate do you think for acute and how close to that normal growth rate will you be by the end of the year and your guidance?

John C. Rademacher -- President and Chief Executive Officer

Yeah. It's John, Kevin. I think when we're looking at the opportunities that are in the pipeline. So I'll start with that on the chronic is, look, we expect that high single-digits is something that's going to continue. There is a significant number of new therapies that are going through the FDA process to seek approval and many of them require healthcare professional oversight and our infused drugs. So we think we're really well positioned with our business development team to continue to participate within those launches as well as, as Mike said, build on the strong patient census that we have today within our existing chronic portfolio. So that we think is good. But there's always those move to either ASP adjustments or generic events that down the line could affect the revenue, but not necessarily have or would have a more muted impact on earnings and EBITDA given the lower acquisition costs.

On the acute side, look, we were encouraged by what we saw in emerging and coming out of the fourth quarter with low-single digit. From that standpoint, we hope that as the marketplace opens back up and people begins to return to normal for scheduled physician visits, scheduled procedures, then we'll start to see that rebound continue into the year.

I think the low-single digit is the right measure on the acute and again a lot of those products are generic today, a lot of those products are certainly in the shorter duration. And so, the acquisition of new patients will be a critical aspect, as we're thinking about the acute side as we move ahead, but we love the balance of the portfolio, we love the ability that we have to really offer a full spectrum therapy sets. We want to be the partner of choice to the referral sources, so they have that one stop and we think with the expansion and really the breadth of our payer relations, we think that with the breadth of our product portfolio and we think that with some of the new products coming into the pipeline that we will have access to. We think we're really well positioned for the growth that we've outlined.

Kevin Fischbeck -- BofA -- Analyst

Okay. And then maybe the last question. I think in your prepared remarks, you talked about exactly what the term was something along the lines of moving from integration to acceleration. I guess you guys are already growing pretty well. I just wanted to understand what acceleration means in your views? How should we think about that?

John C. Rademacher -- President and Chief Executive Officer

Yeah. As I outlined, we believe that our team is starting to get really well set from a commercial standpoint on the use of data analytics to guide them around segmentations as well as setting their force around targeting as we move forward. And so, our focus there is making certain that we continue to expand our recent frequency and that we're capturing demand that's in the marketplace. We also have the opportunity to -- on an organic basis to continue to optimize the performance of the business and in our operating model to be able to squeeze the operating leverage out to continue to expand and accelerate our bottom line growth.

So, we're maniacally focused on those opportunities. And I think as a team, we believe that coming out of a lot of heavy work and a lot of great work by the team on integration as well as a lot of dynamics in the marketplace with COVID, we now are more focused than ever on making certain that we are that partner of choice for our referral sources, and that should create additional opportunities to accelerate topline, bottom line. But as Mike said, look, we're trying to be thoughtful in the way that we're providing guidance and we're trying to be disciplined knowing that there's puts and takes in the environment that we're operating in.

Mike Shapiro -- Chief Financial Officer

Hey Kevin, it's Mike. The only thing I'd add is, look, as we continue to expand our access to capital, I think we've characterized the organic horsepower under the hood of being that mid-teens growth. I think we still feel confident in that, which we think is a quite attractive base organic case. And as we think about access to capital, that's where we can deploy to further collaborate with our payer partners around value-based relationships or are there other technology or service offerings to add additional branches of the tree. And so, part of the acceleration is beyond what I'd call the organic horsepower.

Kevin Fischbeck -- BofA -- Analyst

Okay. So, that's helpful. So, you're basically saying no change right now in kind of the growth outlook, but you're feeling good about doing better there and then layering on potentially deals on top of everything to be upside, and you're looking at that upside. Okay, perfect. Thank you.

John C. Rademacher -- President and Chief Executive Officer

Yeah. Thanks, Kevin.

Mike Shapiro -- Chief Financial Officer

Thanks, Kevin.

Operator

Our next question comes from Mike Petusky with Barrington Research. Your line is open.

Michael Petusky -- Barrington Research -- Analyst

Hey. Good morning, guys. Can I -- just a couple of questions. Mike, of the $23.7 million in interest expenses this quarter, how much of that was cash interest? I mean was there other stuff in there, or was that mostly all cash interest?

Mike Shapiro -- Chief Financial Officer

Yeah, no, it's a good point. There is a little bit of -- there is a couple of things, if you remember, we did pay down some of the second lien opportunistically in the closing innings of December. So there is some write-offs of deferred financing costs and there is amortization of OID etc. But I'd say the majority of it is cash. But if we...

Michael Petusky -- Barrington Research -- Analyst

Is this around $20 million [Phonetic], or roughly cash interest, roughly?

Mike Shapiro -- Chief Financial Officer

Yeah, I think that -- yeah, maybe a nudge below, but somewhere in that neighborhood.

Michael Petusky -- Barrington Research -- Analyst

Okay, all right. Great. And then just a much longer-term question. Looking beyond '21 and maybe even beyond '22 to where you guys maybe sort of closer to 3 times levered as opposed to 4.8 times levered, as you sort of look at capital allocation, obviously, you guys have sort of most of the map covered. So I would assume M&A of infusion businesses at least won't be a big part of it. You've made tons of investment in technology. How do you guys think about the capital allocation sort of over a three- to five-year period? I mean is it looking at adjacent businesses, or can you just speak sort of a longer-term strategic vision in terms of capital allocation? Thanks.

Mike Shapiro -- Chief Financial Officer

Sure, Mike. I'll start and will defer to John for his perspective as well. I think that's something that really gets us excited. As I mentioned earlier, capex is quite efficient in this business under 1% of revenue with interest declining and integration out-of-pocket expenses declining. We expect the cash generation to increase in through both earnings growth and cash generation. The leverage profile will continue to drift southward. And so, as we think about how to deploy capital, we take that very seriously.

With the footprint as you highlighted, we can reach 96% of the U.S. population today. So buying assets to shut the doors is probably not the most efficient use. Now we've said we will continue to look at opportunistic industry consolidations where there might be some unique aspects or regional strength that would be complementary to ours. But I do think there is a component. And again, I think we're going to be very thoughtful to make sure that any deployment is both economic and strategic. How do we leverage the technology in the clinical fabric which is inherent in everything we do, and are there services technologies or other capabilities that can further distinguish us and expand the value that we can bring to our referral sources, our physicians and our payer partners.

John C. Rademacher -- President and Chief Executive Officer

Yeah, the only other thing I'd add is -- look, we're spending time. And as we come out of now the integration effort and have the ability to put some more focus to this, I mean we're looking for those near adjacencies, right. As Mike said, there are certain aspects where we can deepen our -- the value that we deliver through the payers to our referral sources, to our hospital partners. And so, we are looking for those type of opportunities will -- again be opportunistic with some industry in kind ventures, taking a look at those type of opportunities, but we really think that augmenting our service model, looking for additional value drivers and then participating in a greater way in following patients on a longitudinal basis and providing those additional services, we think will be an opportunity for growth and new vectors of growth for us as we're thinking about the business ahead.

Michael Petusky -- Barrington Research -- Analyst

Okay. Thank you very much. Appreciate it.

John C. Rademacher -- President and Chief Executive Officer

Thanks, Mike.

Operator

There are no further questions. I'd like to turn the call back over to John Rademacher for any closing remarks.

John C. Rademacher -- President and Chief Executive Officer

Great. Thanks, Michelle. In closing, we are very pleased with the strong results in the face of a very challenging year. And we're very excited about the momentum we are carrying into 2021. We are well positioned to capitalize on the shifts that are happening in healthcare focused on the effective dispensing of specialty drug and the delivery of care in the home. We look forward to updating you throughout the year on the progress we are making. Take care and please stay safe.

Operator

[Operator Closing Remarks]

Duration: 33 minutes

Call participants:

Mike Shapiro -- Chief Financial Officer

John C. Rademacher -- President and Chief Executive Officer

Pito Chickering -- Deutsche Bank -- Analyst

Matt Larew -- William Blair -- Analyst

Jamie Perse -- Goldman Sachs -- Analyst

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Kevin Fischbeck -- BofA -- Analyst

Michael Petusky -- Barrington Research -- Analyst

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